What happened?

On December 2, 2022, the US Department of Commerce issued its long-awaited preliminary determinations in the circumvention inquiries on solar cell and module imports triggered by the petition that was filed by Auxin Solar on February 8, 2022. The Department has preliminarily determined that four of the eight Southeast Asian producers investigated are circumventing antidumping and countervailing duties by utilizing Chinese parts and components and doing only minor processing of solar products in Southeast Asia in an effort to evade duties. Accordingly, their products will be subject to the antidumping and countervailing duties applicable to solar cell and module imports from China. Commerce made a country-wide determination of circumvention as to each of the four countries investigated, which means that there will be increased scrutiny of their US imports. 

The Department’s decision has many dimensions and additional analysis will be necessary after a full review of the specific bases for the preliminary determinations, but some of the key points are as follows:

  • The Department concluded that four of the eight companies investigated—BYD Hong Kong (Cambodia), Canadian Solar (Thailand), Trina (Thailand), and Vina Solar (Vietnam) -- are circumventing duties and therefore their US imports will potentially be subject to additional duties.
  • Other companies were found not to be circumventing – New East Solar (Cambodia), Hanwha (Malaysia), Jinko (Malaysia), and Boviet (Vietnam) – and their imports will not be subject to additional duties unless they modify their supply chains. 
  • Numerous Southeast Asian producers declined to cooperate with the investigation and therefore the Department will treat them as circumventing entities.
  • Commerce will impose certification requirements on all imports of solar panel products from Cambodia, Malaysia, Thailand, and Vietnam.

Today’s announcement was triggered by the Department’s ongoing investigations in response to Auxin’s petition alleging that solar cells and modules shipped from Cambodia, Malaysia, Thailand, and Vietnam are manufactured in significant part from Chinese components and therefore should be subject to the existing antidumping and countervailing duties imposed on Chinese solar cells and modules.

What is the immediate impact?

The immediate commercial impact of today’s announcement is muted by the previous actions of President Biden to provide the US solar industry with a two-year window of relief from the outcome of the Department’s circumvention investigations. In conjunction with his declaration of a national emergency regarding the reliability of the electric grid, on June 6, 2022, the President invoked his emergency authority under section 318(a) of the Tariff Act of 1930 to authorize the Secretary of Commerce to permit, for the next 24 months, duty free entry of solar cells and modules from Cambodia, Malaysia, Thailand, and Vietnam provided that such solar cells and modules were not already subject to antidumping or countervailing duties. This two-year reprieve means that even the products of companies affirmatively found to be circumventing may be entered free of the additional duties during the two-year safe harbor period.

 

Notwithstanding the efforts of the Biden Administration to create breathing room for US solar developers to be supplied from Southeast Asia, the Commerce finding increases the risk that Auxin or another domestic manufacturer could challenge the validity of the June 2022 Presidential action in court. This is because the domestic solar cell and module manufacturing industry can now point to cognizable damage from the two-year duty reprieve, an unprecedented administrative action that had the effect of nullifying the antidumping and countervailing duty law prohibition against circumvention.

What comes next?

The Department’s preliminary determinations will be published in the Federal Register next week, and interested parties will have an opportunity to comment on them. The next substantive action will be on-site audits that the Department will conduct to verify the information submitted by the Southeast Asian companies under investigation. Traditionally, this type of audit is challenging for respondents, so it is possible that the Department could modify its preliminary determinations based on the outcome of the audits. The Department is currently scheduled to issue its final determinations on May 1, 2023.

Concluding observation

As noted above, the Department’s action will require close study and individual companies will experience different impacts depending on the identity of their Southeast Asian suppliers and also on the outcome of the Department’s on-site audits. Accordingly, today’s announcement, while important, is simply the latest chapter in the decade-long battle between solar project developers and domestic manufacturers of solar equipment. It will continue to be important to monitor the trajectory of the Department’s investigations and responses of different interested parties in the coming months.