On January 23, 2018, President Trump issued Proclamation 96931 (the “Proclamation”), which, effective February 7, 2018, imposes global safeguard tariffs on imported solar cells and modules. The Proclamation was in response to the U.S. International Trade Commission (“ITC”) finding on September 22, 2017 that increased imports of certain crystalline silicon photovoltaic cells (“CSPCs”) are a substantial cause of serious injury to domestic manufacturers.

Specifically, the Proclamation calls for safeguard tariffs on imports of CSPCs for the next four years, which includes a tariff of 30 percent in the first year, 25 percent in the second year, 20 percent in the third year, and 15 percent in the fourth year. These tariffs are intended to apply to CSPC imports worldwide (except from developing countries that are World Trade Organization (“WTO”) members, under certain conditions). However, the first 2.5 gigawatts of imported solar cells will be exempt from the safeguard tariff in each of those four years.

ITC’s determination was made in the context of a global safeguard investigation initiated on May 17, 2017, under Section 201 of the Trade Act of 1974 (the “Act”) in response to a petition filed by Suniva, Inc., and supported by SolarWorld Americas, Inc. Section 201 authorizes the President to take action, in the form of tariffs, tariff-rate quotas, quantitative restrictions or other actions, in response to an ITC determination that increased imports are a substantial cause of serious injury to domestic producers.

Under the Act, if a majority of ITC Commissioners reach an affirmative determination of serious injury in a Section 201 investigation, the Commissioners voting in the affirmative must make a recommendation as to what action the President should take. Although the Commissioners unanimously made an injury determination in the CSPC proceeding, they could not agree on a single remedy to recommend to the President. However, most of the Commissioners favored an increase in duties with a carve-out for a specified quantity of imported cells, which the President ultimately favored.

It should be noted that the President’s decision to impose global safeguard tariffs on imported CSPCs does not impact separate antidumping and countervailing duty measures currently imposed on Chinese solar products. In a January 22, 2018 press release on the President’s decision, U.S. Trade Representative (“USTR”) Robert Lighthizer noted that the USTR intends to engage in discussions among interested parties that could lead to a positive resolution of those measures.

Given that both the ITC and the President have broad discretion in exercising their authority under Section 201, judicial review of the President’s decision in the U.S. is unlikely. However, the day after the President’s announcement, South Korea submitted a request for consultations with the United States pursuant to the WTO Agreement on Safeguards and General Agreement on Tariffs and Trade 1994, thereby initiating the process for challenging the safeguard measures at the WTO. Taiwan also requested consultations with the United States under the Agreement on Safeguards on January 29, and it is likely that other countries will also follow suit. Assuming that the challenge results in a full dispute, adjudication of the matter could take three years or more, during which time the tariffs would remain in effect.