SAN JOSE, Calif. – In what’s seen as a slap on the wrist, the U.S. Department of Commerce proposed duties of 2.9 to 4.73 percent on crystalline photovoltaic panels coming from China. The preliminary ruling is expected to have little direct impact, but eases fears of a solar trade war.
The case is one of at least seven investigations around the world for a growing but nascent solar industry that still thrives on government support. Before the decision, industry observers had expected tariffs of about 20 percent.
“I don’t anticipate these [tariffs] if they stand will have a significant impact on the U.S. solar market,” said John Smirnow, vice president for trade and competitiveness at the Solar Energy Industries Association (SEIA), a U.S. trade group.
The proposed tariffs come in response to a complaint filed by a group of seven photovoltaic panel makers led by Solarworld AG (Bonn, Germany) which has manufacturing operations in California and Oregon. They charged China’s panel makers were selling below cost and the China government subsidies violated rules of the World Trade Organization.
Solar panel prices plunged as much as 40 percent in the past year, fueled by China government investments and loan guarantee offers of up to $40 billion, the U.S. solar panel makers charged in their petition. At the same time, government subsidies for buying solar panels in Europe and elsewhere have declined, creating an oversupply.
High-profile U.S. panel startup Solyndra got caught in the dynamics, folding and laying off 1,100 people last August. Solyndra's failure combined with other bankruptcy's sent shivers of doubt through the clean tech sector last year.
In its ruling, the U.S. Department of Commerce levied its highest tariffs at 4.73 percent on Trina Solar, seen as a rising star among China solar panel makers. SunTech, one of China’s largest panel makers, got the lowest tariffs at 2.9 percent. All other China panel makers face a tariff of 3.59 percent.
Trina and SunTech were among China companies who volunteered for closer scrutiny from Commerce. U.S. investigators determined they could only do such focused investigations of two companies. The higher rates on Trina reflect the U.S. determination the company received more China government subsidies.
Commerce also said its ruling covers panels assembled anywhere in the world using China-made cells. However it said it does not cover panels made in China using cells made in the U.S. or other countries. Petitioners had asked for the investigation to cover both areas.
The tariffs are a first part of the Commerce investigation, focused on China government subsidies. A second part of the investigation will rule on whether China panel makers unfairly priced products below their costs.
Commerce is expected to rule on May 16 on the second part of the case that could add more and higher tariffs. The U.S. International Trade Commission is working on a separate investigation to determine whether China’s panel makers have hurt the U.S. industry with unfair prices.
The decision disappointed U.S. panel makers, but others including U.S. installers expressed some relief.
“The proposed tariffs were moderate but we are not out of the woods yet, and the trade situation is not limited to this case,” said Tony Clifford, chief executive of Standard Solar, a U.S. installer.
China is conducting its own investigation of whether U.S. subsidies violate WTO rules. The U.S. offers a 30 percent tax credit on solar installations and other incentives seen as a key to the solar market here.
At least four other solar trade investigations are going on in China, Europe, Japan and India.
“Everyone is in a very reactive mode,” said the SEIA’s Smirnow, a former trade lawyer. “We are in an environment of growing trade conflict which we don’t think is good for anyone,” he said.
In an effort to turn down the heat, SEIA has launched two initiatives to spawn greater collaboration around global best trade practices. They include a plan to work with the Chinese Renewable Energy Industry Association to launch a solar dialog on best practices at the Asia-Pacific Economic Cooperation (APEC), a voluntary association of 21 countries.
SEIA and others hope the talks could begin at the next APEC meeting in Russia in June. Ultimately they hope the talks could lead to a government/industry group that reduces trade frictions as the World Semiconductor Council did for the chip industry.
“We want to find a win-win; these narrow trade cases trend to produce a lose-lose,” said William Morin, senior director for government affairs Applied Materials which sold more than $1.8 billion in panel-making equipment to China last year. “We really want to get the trade lawyers out of this and get on with the business,” he said, supporting the APEC initiative.
Smirnow of SEIA noted that panels represent just one slice of the overall solar manufacturing pie. The U.S. is a major supplier of raw silicon and capital equipment to the solar industry. Most of the industry’s jobs are in installation and other roles including finance.