The DOC’s Anti-Chinese Duties Are Upheld
Originally Published in the ECOreport
The Department of Commerce’s anti-Chinese duties are upheld. The US International Trade Commission upheld the US DOC’s (DOC) decision, from December 16, by 5-0 vote for China, and 4-1 with regard to Taiwan. Anti-dumping duty rates of 52.13%, and anti-subsidy rates of 38.72% will be imposed on most solar panels imported from China. Anti-dumping rates of 19.50% will be imposed on most solar cells from Taiwan, regardless of where the panels are assembled into panels.
Setback for the US Solar Industry
“Today’s decision represents a clear setback for the US solar industry. Yet despite punishing tariffs, and the market uncertainty they have created, our industry has been able to persevere so far in the face of needless and counter-productive litigation. U.S. solar manufacturing and services jobs continue to grow, while solar prices continue to fall,” said Rhone Resch, president and CEO of the Solar Energy Industries Association (SEIA).
He added,
Consider how much better, and stronger, the U.S. solar industry would be doing without hundreds of millions of dollars in added tariff costs. In all likelihood, the industry would be well ahead of its goal of installing 10 gigawatts (GW) of new solar annually. We’d also see a robust and growing U.S. polysilicon industry, shipping billions of dollars in exports and benefitting our economy. Instead, we’re now faced with U.S. polysilicon plant closures and layoffs. And through it all, SolarWorld has gained little to nothing from its short-sighted litigation.
“It’s particularly troubling that U.S. trade policy is working to increase the cost of solar products through tariffs when we know that more affordable solar energy creates more American solar jobs,” said Jigar Shah, President of the Coalition for Affordable Solar Energy (CASE). “As shown in the data from the recent National Solar Jobs Census, falling module prices contributed to a 21.8% growth of solar employment in 2014, including a doubling of the installation sector since 2010, which is the largest source of domestic employment growth.”
Heard This Chicken Little Rhetoric Before
“We’ve heard this Chicken Little rhetoric before during the previous trade case when the Jigar Shah and others claimed tariffs would ruin the domestic industry. It wasn’t true then and I don’t believe it will be true for the entire industry now. A few companies that made bad bets might get hurt, but I am confident the industry will remain strong,” said Tim Brightbill, chief legal counsel to SolarWorld.
Some suggest these duties will only hurt US manufacturers, Chinese manufacturers will simply ship to less restrictive markets.
To which Brightbill responded, “In regard to the Chinese moving production overseas, we welcome the opportunity to compete against what can produce when playing under the rules of international trade, as opposed to trying to tip the scales as they have over the past several years.”
Mukesh Dulani, U.S. president of SolarWorld, issued a press release in which he said:
Today’s decision confirms the facts set out in our initial filing, the commission staff report and our testimony at the agency’s November hearing in the case. Manufacturers in China and Taiwan used illegal trade practices that harm the U.S. industry.U.S companies, including SolarWorld, Suniva, and Silicon Energy, thank the commission and its staff for its thorough investigation and fourth vote to uphold American trade laws.
SEIA’s Proposed Settlement
The origins of this conflict go back to 2011, when massive numbers of inexpensive Chinese modules were dumped into the US market. The US division of SolarWorld and six other manufacturers filed a complaint about unfair business practices. Today’s decision is SolarWorld’s tenth consecutive victory in this case. According to Minnesota Senator Rick Nolan, in the meantime twenty American firms have also gone out of business or been forced to make significant cutbacks.
The Solar Energy Industries Association brought forward a proposal, which they hoped would lead to a negotiated settlement, in September 2013. Some of the highlights, taken from their website, include:
- Chinese companies would agree to create a fund that would benefit U.S. solar manufacturers directly and help to grow the U.S. market. Money for the fund would come from a percentage of the price premium Chinese companies are currently paying to third-country cell producers to get around U.S. trade sanctions, reducing costs and supply chain distortion for Chinese companies.
- The Chinese government would also agree to end its anti-dumping and countervailing duty investigations on U.S. polysilicon exports to China, and remove the threat of artificial cost increases in a key raw material in the solar value chain, benefiting not just Chinese solar companies but all users of solar energy.
- In return, the U.S. anti-dumping and countervailing duties orders would be phased out.
- The proposal also calls for a safeguard mechanism designed to offset any surge of Chinese solar modules into the U.S. market.
Three Conditions Must Be Met
Brightbill said “SolarWorld is open to constructive negotiations,” but three conditions must be met:
- Any proposed agreement must be verifiable and enforceable.
- The proposed agreement must eliminate China’s unfair trade practices.
- The proposed agreement cannot be based on SEIA’s September 2013 proposal.
That third condition sounds “personal,” as do a number of undercurrents in this struggle. SEIA claims there is really one company behind this trade case. One of SolarWorld’s allies recently accused SEIA of looking after Chinese, rather than American, interests.
There are definite international influences in this debate. Some of SEIA’s board members come from US companies with Chinese affiliations. SolarWorld USA is the American division of a German company.
To what extent has solar manufacturing become an international rather than national industry?
“There are elements of both. In some ways, the market is global. But in many other ways, it is still a regional or local market and will remain that way for many years. Also, even in an international industry, all companies must follow the global rules of trade,” said Brightbill.
SolarWorld Is Proclaiming Victory
SolarWorld is proclaiming victory: “Last night, in his State of the Union address, President Obama spoke about the need to promote the middle class, job creation and economic growth,” Dulani continued.
American solar manufacturers have been doing their part by building or expanding facilities and hiring workers in states such as Oregon, Michigan, Ohio and New York. This additional capacity will help us meet the need in the market for American made solar. Today’s votes will allow us to move forward with additional certainty and will likely mean additional investment and hiring in the future.
“Although these second cases have come to an end, there is still much work to do,” Dulani added.
We will continue to work with U.S. Customs and Border Patrol to ensure that U.S. trade laws are thoroughly and effectively enforced to prevent circumvention. We also want to take this opportunity to thank those who stood with us throughout the cases. They include Sen. Ron Wyden, members of the Coalition for American Solar Manufacturing and their more than 25,000 employees and, most importantly, the exceptional employees at SolarWorld, who have supported the company throughout both trade cases.
The duties go into effect on February 1, 2014
Images, descending from the top:
- Photo Credit: Wafering process at SolarWorld Hillsboro Tuesday 3/15/11. © 2011 SolarWorld
- Photo Credit: ESA Renewables project
- Photo Credit: Tim Brightbill, chief legal counsel to SolarWorld
- Photo Credit: Aztec solar
- Photo Credit: Phipps Photovoltaics by Paul g Wiegman (SolarWorld)
- Photo Credit: Yingli Solar
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China must double or triple or even quadriple the price for export Solar to the USA.
and subsidise with this extra revenue export to import duty free countries in Africa Latin America and Asia.
USA want to pay let them pay.
What is the unfair practice, specifically? Doesnt both China and the US subsidize their domestic manufacturers with R and D?
Meanwhile, US instituted trade action against India,
“over the domestic content requirements in India’s massive solar program,”
Meanwhile, US has a few domestic content requirements of its own,
“Domestic content requirements have long applied to federal government procurement, with the Buy American Act of 1933 as the centerpiece. In 1978, the U.S. Congress began to extend domestic content requirements to state and local projects undertaken with federal funds. Those requirements, which are often referred to as “Buy America” requirements, have applied specifically to iron and steel, as well as to manufactured products, used in non-federal infrastructure projects. – See more at: http://trade.djaghe.com/?tag=domestic-content-requirements#sthash.eeuWi0Io.dpuf”
http://www.reuters.com/article/2014/02/10/us-usa-trade-india-idUSBREA161W220140210
OK. I give up. Is this real, or do we have real hypocrisy here?
http://en.wikipedia.org/wiki/Made_in_USA
http://www.international.gc.ca/media/comm/news-communiques/2014/06/27b.aspx?lang=eng
http://www.ehow.com/facts_5854927_u_s_-requirements-nafta-certificate-origin.html
The general presumption is that anti-dumping cases are in bad faith. It’s a normal business practice to sell at a loss; and a normal policy measure to give tax breaks and other advantages to domestic producers, Dressing up the resulting trade spats as falsely objective legal cases does not help their resolution.
Selling at a loss is not normal practice. On the contrary, it is illegal in many countries.
If that below-cost selling is encouraged through government incentives, as the investigation by the European Commision showed it is in China, it is in clear breach of the WTO trade standards.
New car models always sell at a loss. It takes a few years to recover R&D costs.
Stores commonly sell “loss leaders”, items on a deep discount, in order to get customers in the door in hopes that they will buy adequate amounts of full priced product.
There’s no law against “going out of business” sales. Which is what happened in the Chinese solar industry during the Great Compression.
There are some laws against selling at a loss in order to force competition to go out of business. I’ve yet to read how it has been shown that China was doing this.
Your first example is absurd; under no accepted accounting standard is that considered ‘selling at a loss’.
A loss leader is generally not sold below cost, but below its market value – a big difference. Which isn’t relevant here anyway, as PV panel manufacturer cannot do loss leading. Loss leading is selling an item below value in the hope that customers will buy other goods in the process.
Since PV manufacturers only sell one type of product (PV panels) and generally only sell B2B rather than directly to customers, loss leading is impossible (or at least pointless).
There’s no law against selling stocks after going out of business, but that is not what the EU investigation complained about. After all, it suggest the dumping started before the ‘Great Compression’ and thus cannot be (fully) explained by it.
None of the alternative explanations you offered make sense. As such, a (probably unsuccesful) attempt at crushing competition seems to be the only possibility.
“Your first example is absurd; under no accepted accounting standard is that considered ‘selling at a loss’.”
Ford spent $2 billion (today’s dollars) developing the Edsel. They never sold enough units to recover their investment.
“A loss leader is generally not sold below cost”
Many loss leaders are sold at product cost. That price does not recover the overhead thus the sale is happening at a loss to the company.
Now where do you find the information that China was illegally supporting lower than market prices? I have yet to see it.
If I sell every product I have in my shop at 1 cent over its purchase price and make a huge loss, I still cannot say I am selling below cost.
Losing money as a business is legal (duh). What you’re often not allowed to is to sell below marginal cost (production cost of the widget in question).
You keep pretending that making a loss is the same as selling below cost when the two are different concept from a legal/accounting point of view.
So you are claiming that the findings of the EU’s report presented to the Commission are baseless? What basis do you have for that?
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:325:0001:0065:EN:PDF
http://trade.ec.europa.eu/tdi/case_details.cfm?ref=ong&id=1895&sta=21&en=31&page=2&c_order=date&c_order_dir=Down
Feel free to read the entire methodology and findings and comment. If you can’t be bothered, here’s a quick summary: exports to the EU were undervalued by 88% thanks to government subsidies.
Ok. Lets suppose by some standard, Chinese companies sold at a loss. Now you have corrected one infraction by one player.
Explain how US domestic content laws are OK, but Indian ones are not and the US has a real (not hypocritical) case against India.
I am all for fairness. Real fairness, not legalese. But I don’t see it happening anywhere. Yes. I really do think China has been unfair. But I would point to theft of intellectual property, lax enforcement of those rules, and alleged state sponsored tech spying as more clear examples of that.
Even there, when you look at the gross abuse of labor by electronics companies in third world sweat shops….
The whole thing looks to me like the inept and ineffectual professional wrestling referee. I see all sides cheating, but in different ways. It won’t do any good to enforce the rules unequally.
I repeat. Who wins? Whats the end effect?
China is the biggest market. I think it would be a lot more important if the ruling had to do with US manufacturers selling in the Chinese market.
In practical and real terms, what do you think this ruling has done to that?
I see US manufacturers losing any hope of the Chinese market. If they ever had a bargaining chip, they lost it now.
And yes, they probably were unfairly excluded. That is far more important.
And what happens to US consumers? They lose.
So you have a Pyrrhic victory. A moral one, but a practical zero.
From a gobal carbon viewpoint, it might work out. China just spurs its own PV consumption, which it needs to cut coal and pollution. But China has problems with distributed PV adoption that we don’t because they don’t have much private residential. It will take time, but they will probably get up to speed.
I don’t see the SolarWorld moves increasing PV adoption rates globally. I see it leading to a hidden trade war.
“Explain how US domestic content laws are OK and Indian ones are not”.
Well, both the Indian and US ones are fine as per WTO rules (no idea why some Americans complain about the Indian ones).
To simplify, domestic content rules are okay for government procurement and for government procurement only. Saying that an army base must use Indian/American solar panels is fine. Saying that a private solar farm has to use domestically sourced panels is in breach. Both India and America by and large follow this principle.
What China does goes beyond domestic procurement laws (it has those too, but they’re not a point of debate). The wrong done by China is that they subsidise the export of private manufacturers, which distorts markets (probably with the aim of buying market share and driving all but the strongest competitors out of business).
Who wins? In a world where China’s subsidy regime is left unchallenged, consumers win short term and suppliers long-term (the risk of forming an oligopoly of state backed champions is real, with all the harm to innovation and competition that ensues).
In the current world of tit-for-tat sanctions, nobody wins. However, the EU managed to reach a compromise with China after a year of sanctions, proving that China is not immune to this kind of measures.
If a year (or two) of slower than expected PV growth is the price to pay for a fairer market, which will benefit PV forever, I’m all for it.
There is enough short termism in the world, let’s not add further to it.
Larmion – Did you miss it? US is filing suit with WTO against India for domestic content. That is clear hypocrisy on US part.
Maybe you missed the other part. I think China has been lax, allowing rampant piracy and intellectual theft. So sure, I think it needs to be remedies. I just want an even remedy that helps, not hurts, and is fair to all parties. That is clearly not happening.
What I see is US protecting its interest in a developing market. In the US. It thinks.
But the biggest solar market is in China. How dumb is that. So will US manufacturers participate in that? No. They will be shut out.
Worldwide PV growth won’t change. The ITC has more effect in US.
I can see it now. Solarworld has a little less than two years before its market slags.
There was a golden opportunity to bargain with China and fix these issues properly by compromise.
This legal ruse is not going to do it. It needs to be fixed properly. This fix is only hurting solar in the US. China will feed its PV into the fastest growing solar market in the world, its own. And it will ship to other countries world wide. US PV will not compete anywhere but US where it is protected.
I fear we have the makings of the beginning of a full scale trade war. The US has become emboldened by its ability to flaunt its economic muscle. Oddly, India wants protection from China. Thats why it has domestic content laws, not to protect itself from the US. The US should have bargained to open up the Chinese market.
Yes. And who cares if they file a suit? It looks as if India is in the process of implementing most WTO rules. They’ll probably need to make a few minor adjustments and that’ll be it.
For all I care the US complains about unfair competition from Martians. There’s nothing to fear from a WTO investigation if no wrong is being done.
That China is the biggest solar market is irrelevant. Energy is on its ‘negative list’ of sectors with importance to ‘national security’ and thus essentially closed off to foreigners. They just reiterated that this year. Not going to change I’m afraid. You can’t lose out on a market you’re not allowed to enter in the first place.
As for there being a ‘golden opportunity’: the EU reached a more-or-less fair settlement only after imposing tariffs. China behaves like a bully in global trade, but it seems remarkably sensitive to counter-bullying. The US might achieve the same. After all, Chinese companies don’t want to lose access to a high-growth market.
US PV is doing reasonably well outside of the US. SunPower is one of the largest players in my native Benelux market for example and First Solar is a leading player in the (rapidly shrinking) European utility scale market. And it’s not because we all love America so much, but simply because American panels are excellent.
Dont kid yourself. Every country is doing the same. Can you imagine any countries leader proclaiming that they sacrificed national interests for world benefit? Only in a dream.
I said China is rife with piracy. We seem to agree about Chinas overall behavior.
Perhaps you are right that China is a rogue and can’t be brought to the table. But that is contradicted by the recent US/China agreement to reduce carbon. I suspect its a little bit of both.
So what has happened recently? Obama packed off to India, patched things up, and agreed to support Modis plans for billions in solar.
Thats a complete about face from suing India in the WTO for domestic content.
Meanwhile, India made it clear they still intended to mine coal and nobody outside India could tell them what to do.
Lately, it looks like the posturing is done, and the bargaining chips are lined up. Then the leaders visit. Then the real party starts.
Lets see how it goes. Its a strange circus. First nations trade insults, then compliments.
Like the words “military” and “intelligence”, “international” and “cooperation” often don’t go together. Lets hope there is some change regarding that.
http://www.latimes.com/world/asia/la-fg-obama-says-it-is-a-great-honor-to-be-back-in-india-20150124-story.html#page=1
“What is the unfair practice, specifically?”
That’s a question I’ve yet to hear answered.
How much of the “dumping” was simply excess product being sold for any available price when the big industry shakeout happened? About 25% (IIRC) of all solar manufacturers in China failed and were selling their left over stock at below cost. Other producers had to sell at a loss for a while in order to keep their factories in operation.
This is hardly an act of the Chinese government aimed at destroying the US solar industry.
Even if it was, the US is hypocritical for arguing domestic content against other countries when it has its own.
Really. I just don’t get it. Does the US gov want to play by fair rules, or are they just trying to game the system for national interests, to heck with fairness and balance?
Seems like US wants to use domestic content laws to carve out the solar market of national interests and ignore US domestic content laws in NAFTA created to protect its auto industry.
If you wanted to restrict global gov support for industries, how would you do it? Don’t we want global support for new tech? How can we criticize it for China and laud it when we do it? There are massive US subsidies for oil, coal, gas, nuclear,.. many other techs.
Its an old fashioned trade war. WTO is not working. Its large against small.
So whats the result? IMO..
US manufacturers produces more expensive products because of a sheltered market.
US consumers pay higher prices for panels than they might otherwise.
Foreign consumers pay less for panels.
The biggest solar market in the world is China. Guess how many US solar panels will be bought there now? Not many.
And what has been the first impact of this move? A large US producer of silicon was shut down.
I don’t see any upside here. Ok. Lawyers win. Everyone else loses.
It would be worthwhile for other SEIA members to buy up SolarWorld, fire the CEO and legal department, and sell off the assets.
You either have a level playing field or a race to the bottom. If China gives land, buildings, equipment and other assistance to industries and other countries don’t, they win. If the world goes for low cost labor, developed countries will erode and developing countries rich will benefit, not labor.
First, do we know that happened in China?
Second, if so, was the assistance significantly greater than what is often done here in the US when we frequently “pay” manufacturers to locate in a specific state? We give companies tax breaks, low cost loans. We build highways and other infrastructure for their benefit. We create “right to work” laws to keep employees from organizing and demanding better pay. We set up programs in our schools to train the workers they need.
Manufacturing is going to chase cheap labor and other market advantages. That’s why textiles moved from England to New England to Appalachia and on to less developed countries where labor was cheaper.
“..Commerce issued a preliminary determination that 10 categories of Chinese subsidy programs were illegal under U.S. and world trade law and imposed anti-subsidy duties..”
http://www.solarworld-usa.com/newsroom/news-releases/news/2012/anti-dumping-duties
Small edit near the top “regardless of where the panels are assembled into panels.” should be …where the cells are assembled. Please delete this after reading 😀
And of course to twist this a little bit more. Most of the money for these “China” factories was raised on the NY stock exchange. So funded a good part but US people. Of course there is a easy way around this, do what Honda did with cars. Open a factory in the US and then you can sell at the artificial higher price the Germans are now getting.
First work out what dumping is. Here is a definition: “the export by a country or company of a product at a price that is lower
in the foreign market than the price charged in the domestic market.”
Second, after accounting for transportation costs and small amount to allow for transation costs and currency risk, and of course import tariffs, find out if a product is being sold domestically at lower price than in foreign markets.
So, if Chinese solar panels weren’t being sold in China at a lower price than in the US then dumping was not occurring. If they were being sold in China at a lower cost then in the United States then yes dumping was occurring and I’d like to see the evidence.
Shocking that SolarWorld still doesn’t have a proposed settlement. They will go out of business have thrown the last stone. Disgusting.