The White House has announced that President Trump has issued a tariff on imported solar cells and modules. This will include 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. Additionally, the first 2.5 GW of imported solar cells will be exempt from the safeguard tariff in each of those four years.
U.S. Trade Representative, Robert Lighthizer, made the recommendations to the President based on consultations with the interagency Trade Policy Committee (TPC) in response to findings by the independent, bipartisan U.S. International Trade Commission (ITC) that increased foreign imports of solar cells and modules are a substantial cause of serious injury to domestic manufacturers.
The administration’s fact sheet is centered on China, although it is not the only country affected as Section 201 trade cases are intended to apply globally.
According to the fact sheet, from 2012 to 2016, the volume of solar generation capacity installed annually in the US more than tripled, spurred on by artificially low-priced solar cells and modules from China.
China’s industrial planning has included a focus on increasing Chinese capacity and production of solar cells and modules, using state incentives, subsidies, and tariffs to dominate the global supply chain:
- China issued the Renewable Energy Law in 2005 to promote renewable energy including solar, followed by capacity targets in 2007. The State Council listed renewable energy as one of seven strategic emerging industries eligible for special incentives and loans in 2010.
- China has provided subsidies and financing to its solar companies; has encouraged the development of geographic industrial clusters and components of the supply chain; and has conditioned support on increasing efficiency, R&D expenditures, and manufacturing scale.
- Following these state-directed initiatives, China’s share of global solar cell production skyrocketed from 7 percent in 2005 to 61 percent in 2012. China now dominates global supply chain capacity, accounting for nearly 70 percent of total planned global capacity expansions announced in the first half of 2017. China produces 60 percent of the world’s solar cells and 71 percent of solar modules.
During this time, U.S. manufacturers have sought relief against unfair trade practices:
- In 2011, Commerce found that China had subsidized its producers, and that those producers were selling their goods in the United States for less than their fair market value, all to the detriment of U.S. manufacturers. The United States imposed antidumping and countervailing duties in 2012, but Chinese producers evaded the duties through loopholes and relocating production to Taiwan.
- In 2013, domestic producers filed new petitions to address these loopholes and the shift in sourcing. Chinese producers responded by moving production abroad, primarily to Malaysia, as well as Singapore, Germany, and Korea.
From 2012 to 2016, imports grew by approximately 500 percent, and prices dropped precipitously. Prices for solar cells and modules fell by 60 percent, to a point where most U.S. producers ceased domestic production, moved their facilities to other countries, or declared bankruptcy.
By 2017, the U.S. solar industry had almost disappeared, with 25 companies closing since 2012. Only two producers of both solar cells and modules, and eight firms that produced modules using imported cells, remained viable. In 2017, one of the two remaining U.S. producers of solar cells and modules declared bankruptcy and ceased production.
On May 17, 2017, based on a petition from Suniva and later joined by SolarWorld, the ITC instituted an investigation under Section 201 of the Trade Act of 1974 to determine whether increased imports were a substantial cause of serious injury to the domestic industry.
With all this considerations in mind, the ITC determined that increased solar cell and module imports are a substantial cause of serious injury to the US domestic industry. Although the Commissioners could not agree on a single remedy to recommend, most of them favored an increase in duties with a carve-out for a specified quantity of imported cells.
Following the investigation and recommendations of the ITC, an interagency team led by USTR sought via Federal Register Notices on October 25, 2017 and November 14, 2017 the views of all participants in the solar industry and conducted a public hearing on December 6, 2017.
After consultation with the interagency Trade Policy Staff Committee (TPSC), USTR recommended and the President chose to take action by applying the additional duties mentioned previuosly