Today, the Biden Administration took two separate, complementary actions in a response to intense political pressure arising from the ongoing dispute between domestic solar project developers and domestic solar module manufacturers. The actions, which are described in more detail below, are vulnerable to legal challenge and thus the ultimate success of the Administration’s strategy will likely depend on the willingness of domestic manufacturers to forego legal action based on potential benefits they could receive under the Administration’s two-track approach.

First, President Biden declared a national emergency with respect to the reliability of the nation’s electric grid. In conjunction with the declaration of emergency, the President invoked his emergency authority under section 318(a) of the Tariff Act of 1930 to authorize the Secretary of Commerce, in consultation with the Secretaries of Treasury and Homeland Security, to permit, for the next 24 months, duty free entry of solar cells and modules from Cambodia, Malaysia, Thailand, and Vietnam so long as such solar cells and modules are not already subject to antidumping or countervailing duties. In a separate, but related action, the President also issued a memorandum under section 303(a)(5) of the Defense Production Act making three findings:

  • solar modules and components are critical technology items essential to the national defense;
  • without federal intervention, private industry will not be able to provide necessary quantities of this technology in a timely manner; and
  • government purchases of the technology are the most cost effective method of meeting the need.

These findings will allow the Biden Administration to use federal funds to move toward its stated goal of tripling domestic solar manufacturing capacity from 7.5 GW per year to 22.5 GW per year by 2024.

Today’s moves were triggered by the Department of Commerce’s (Commerce) ongoing circumvention investigations of solar panels from Southeast Asia. The investigations are a response to a petition submitted by domestic solar panel manufacturer Auxin Solar. In its petition, Auxin alleged that modules and components shipped from Cambodia, Malaysia, Thailand, and Vietnam should be treated as having been sourced from China and therefore be subject to the existing antidumping duties on Chinese solar modules and components. An affirmative finding by Commerce would require the imposition of additional duties on modules and components from those four countries. Domestic solar project developers have asserted that such duties could reduce solar deployment by up to 16 GW per year and result in the loss of 70,000 solar jobs. Today’s Presidential actions do not suspend the ongoing investigations, which legally must continue, but on their face would potentially temporarily nullify the consequences of affirmative determinations.

With these two complementary moves, the Biden Administration appears to be making an effort to thread the needle of promoting renewable energy development while also upholding its commitments to expand domestic manufacturing at the expense of China. Whether the Administration succeeds in this task will, to some extent, depend on whether Auxin and other domestic manufacturers accept today’s actions as offering a reasonable path forward and choose not to pursue a legal challenge to the 24 month suspension of duties. If any domestic manufacturer does bring suit and is able to meet the legal thresholds for interim relief, it is possible that the suspension would be enjoined for the duration of the litigation.

The 24 month tariff suspension relies on section 318(a) of the Tariff Act of 1930, which states that when the President “by proclamation declare[s] an emergency to exist by reason of a state of war, or otherwise” he may authorize the Secretary of the Treasury to permit “the importation free of duty of food, clothing, and medical, surgical, and other supplies for use in emergency relief work.”

There are a number of potential ways the Administration’s action could be challenged in court. First, domestic manufacturers could argue that concerns over the long-term reliability of the electric grid is not the type of national emergency covered by the statute. Though the list of allowable emergencies includes the broad catch-all, “or otherwise,” this phrase is arguably limited by the only example provided, namely “war.” There is accordingly a reasonable argument that Section 318(a) only authorizes Presidential suspension of tariffs in connection with a war emergency. Nevertheless, we note that generally the President is given broad discretion in determining what is and is not a national emergency.

Additionally, there is a precedent for Section 318(a) being invoked in similar, arguably non-emergency, circumstances. In 1946, President Truman relied on Section 318(a) in suspending duties on timber products in response to a shortage of housing supplies for World War II veterans. Though the suspension was applied in two Customs Court cases,[1] the basis for the proclamation was not challenged, nor was it considered by the Court.

Another avenue of attack would be to challenge the finding under the Defense Production Act that solar components are critical to the national defense, particularly given that other technologies could support grid reliability. However, this argument is unlikely to be advanced by solar panel manufacturers, as they should benefit from the use of the Defense Production Act, and would also be subject to a review of the scope of the President’s discretion.

Domestic manufacturers could also argue that solar modules and components are simply not the types of supplies for which duties may be suspended under Section 318(a). The Administration would presumably respond that solar modules and components fall within the catch-all of “other supplies.” However, there are four examples in the list of allowable supplies: food, clothing, medical, and surgical supplies. Under the standard approach to statutory interpretation, this list arguably restricts the broader “other supplies” to supplies of the same general type as those in the list. In this case, that would be supplies for the immediate health and safety of individual members of the public. In addition, the use of the word “and” between “clothing” and “medical” arguably means that “other supplies” only modifies the subset of “medical” and “surgical” supplies, as opposed to having broader scope. This interpretation is logical and would restrict the term “other supplies” to mean supplies of a medical nature. The Administration could again attempt to rely on the precedent of President Truman’s suspension of timber duties, but that action was not challenged directly in court and so there is no binding precedent restricting any current court from ruling that, in this case, the President has exceeded his authority under Section 318(a). The argument that solar modules are not the type of supplies contemplated by the statute is a credible basis on which Auxin or other domestic manufacturers could seek an injunction against the proposed suspension of duties.

It will be important to monitor the reactions of Auxin and other domestic manufacturers to today’s news. If they decide not to challenge the Administration’s action, the Biden Administration may have struck a workable compromise between different interests of the solar industry. If they are not supportive, then today’s action could result in a lengthy battle in the courts and further uncertainty.