Chinese Solar Tariffs: The Implications

china solar workers Chinese Solar Tariffs: The Implications

The US Department of Commerce is imposing duties on Chinese solar manufacturers who are unfairly benefiting from China’s export subsidies. The countervailing duties (CVD) is 3 to almost 5 percent. These modest duties were arrived at by the math done by the Department of Commerce in their ruling. Based on the Department of Commerce’s numbers, Chinese companies aren’t as heavily subsidized as many believed.

This is a preliminary decision by the Department of Commerce, its final ruling is currently scheduled for June 4. If on July 19, the US International Trade Commission (ITC) also decides on an injury impact of Chinese solar cells, the Department of Commerce will issue the CVD order on July 26.

A decision on antidumping (AD) penalties is expected on May 17. The AD and the CVD may be related but they’re officially two different investigations with different rules and principles. Typically AD penalties tend to be higher than the CVD. Which means when the CVD and AD are combined we could see the 20 to 30 percent levels that many industry insiders were expecting.

China has warned that it might move ahead with investigations of its own into US imports of solar materials. Lower tariffs against Chinese solar may decrease the likelihood of retaliation against US companies which have also received government incentives. There are also ongoing efforts to revive both the 1603 Treasury grant and Investment Tax Credit [ITC].

In anticipation of the ruling Chinese firms have radically increased their exports to the US in late 2011 and they’ve also been preparing ways to get around the tariff by sending some production to other countries before exporting to the US, a practice called “tolling.”

The DOC decision specifically excludes products coming from China that were made from cells produced anywhere else. Thus, tolling is a means by which Chinese firms could outsource production and avoid tariffs.

However, with a CVD of only 3 to 5 percent, the additional costs of tolling (extra shipping, manufacturing, and requalification of the products) do not warrant sending production to other countries. According to Maxim’s Chew tolling adds about 6.5 percent to module production costs (about $0.05/W). However, AD penalties of 10 percent to 100 percent makes tolling much more likely.

The Chinese and the rest of the world want access to the US solar market which is significant (US installations more than doubling in 2011 http://www.seia.org/cs/news_detail?pressrelease.id=2000 to 1.8 gigawatts). As stated by Robert Petrina, Managing Director of Yingli Green Energy Americas “Regardless of the outcome of this proceeding, we remain dedicated to the US solar market.”

Tariffs against the Chinese solar industry would help expand American manufacturing and jobs in the renewable energy sector. However, the US accounts for only 3 percent of global solar PV cell and module manufacturing. Whereas China and Taiwan constitute a 74 percent market share of global solar cell production in 2011, up from 63 percent in 2010.

The global solar markets is having a tough time and a trade war does not benefit the industry as a whole. Duties will cause the costs for Chinese companies to rise and this will affect pricing all the way down the chain

Fatima Toor from Lux Research. “Everybody recognizes that it won’t be a good idea for the US Department of Commerce to put huge tariffs on modules.” In the final analysis trade barriers are not in anyones interest as they will further delay our transition away from fossil fuels.

Original Article on The GREEN MARKET Blog