Solar Imports From Circumventing Countries Surge, Raising Stockpiling Questions
Trade lawyers and importers are wondering how the anti-stockpiling element of a two-year pause on trade remedy circumvention deposits will be enforced.
Tim Brightbill, a partner at Wiley, the firm that originally brought the antidumping and countervailing duties against China at the heart of the circumvention case, spoke on a webinar about the trade case and other trade policies affecting solar cell and solar panel imports, such as the global safeguards, the Section 301 tariffs and the Uyghur Forced Labor Prevention Act.
The two-year pause on circumvention deposits ends in June 2024 (see 2206060036). The decision was an unprecedented White House intervention in the quasi-judicial trade remedy process.
The rule on stockpiling says that the solar panels must be installed or used by Dec. 3, 2024, 180 days after the emergency pause on collections terminates (see 2308180044). The Commerce Department defines "used" as in operation, and "installed" as affixed to the structure where it will operate, even if it hasn't yet been connected to the grid.
“The mere sale of solar modules to a party for a specific project, incorporating solar cells into a solar module in the United States, dedicating solar cells or solar modules to a particular project, or delivering solar cells or solar modules to a project site do not constitute being ‘used’ or ‘installed,’” Commerce said.
Brightbill said, "That is to prevent a surge of cells and modules coming in and being put into inventory for use years down the road." He expects the government will start paying closer attention to the issue as the end of the waiver approaches.
In response to a viewer of the Oct. 10 webinar, he said: "It is not yet clear how that (stockpiling) enforcement will happen or who the burden is on. Does someone have to complain to Commerce or Customs that stockpiling is happening?"
Brightbill noted that while advocates for solar installations emphasized sky-high tariffs -- a combined antidumping and countervailing duty of above 250% -- most of the imports from Malaysia, Vietnam, Cambodia and Thailand that were found to be circumventing the Chinese AD/CVD will owe far less. In many instances, it will be just under 52% in combined AD/CVD once the emergency ends.
Lack of cooperation from companies in those countries influenced the finding of circumvention (see 2212020064). The findings were nuanced, with four companies excluded, and panels made from Chinese cells are not considered to be circumventing the Chinese trade remedies so long as no more than two of the following components were sourced from China: silver paste, aluminum frames, glass, backsheets, ethylene-vinyl-acetate or junction boxes.
Brightbill said five companies have appealed the circumvention findings.
Imports of solar cells and panels have skyrocketed from the countries covered by the circumvention case. Globally, these imports are up 154% year to date in 2023 compared with the same period in 2022. But the biggest increases are from Vietnam, Thailand, Cambodia and Malaysia, Brightbill said.
Vietnam's exports were $2.2 billion, more than double the amount in the same period in 2022, and was the top exporting country. Thailand sent more than $2 billion, also more than doubling its exports in these categories. Cambodian solar exports were up fivefold, to $1.3 billion.
Brightbill noted that when domestic solar manufacturers first filed antidumping cases against China, that country's solar exports were below $3 billion.
The pause on deposits could be extended -- though the proclamation said it would not be -- or could end early, he said. "We don't have any indication either will occur," he added.
There is a global safeguard tariff of 14.5% on solar panels and on solar cells above the tariff rate quota, but Brightbill said that with a much larger TRQ, cells are not affected, and most imported panels aren't being affected either, since there is a bifacial panel exemption. He said importers say the panels they are bringing in are bifacial.
There will be a hearing at the International Trade Commission on Nov. 14 on whether the safeguards should continue through the end of 2025; Brightbill noted this was the first time the ITC has extended safeguards for a second four-year period.
There is also a 25% tariff on solar imports from China under Section 301. Brightbill said, "I don’t expect there will be major changes to these tariffs -- of course, I could be wrong." But, he said, lawyers that represent the industry are hearing that solar panel manufacturers that import inputs for their production lines that are subject to the Section 301 tariffs have been asked by the Offce of the U.S. Trade Representative staff how those tariffs are affecting their businesses.
"It wouldn’t surprise me if there were some adjustment to those types of tariffs," he said.
The presumption that inputs from Xinjiang are produced with forced labor has also affected solar panel importers, as solar panels and cells have been the top product detained under the Uyghur Forced Labor Prevention Act, with suspicion that the polysilicon in the products was produced in Xinjiang.
"It has proven to be a very important factor for companies to consider," he said. "As many companies have been learning, it is a difficult process to try to comply. The clear and convincing standard is a very high one."
Malaysian exports were 60% of the electronics shipments detained, by value, he said. Electronics is the broad category covering solar.
He said that as of Sept. 12, there had been $1.3 billion worth of electronics shipments detained, across 3,817 shipments. Of those, 1,457 were denied entry, 1,453 were released, and the rest were pending.
A recent House Ways and Means Committee letter questioned CBP on its enforcement of UFLPA against solar products (see 2310030008), asking if some ports' staff are more likely to detain shipments.
Brightbill said, "My view, I do think that Customs and Border Protection is doing the best they can to enforce this law -- to enforce it strictly."