Topics in International Trade: Solar Energy
This is the first in a series of articles we intend to publish to inform clients and readers of significant trade related issues. In a world where international trade is becoming increasingly significant, it is more important than ever for companies to be aware of trends and developments that might affect them.
Recently, the highly mediatized financial collapse of solar panel manufacturer Solyndra brought the entire solar industry under public scrutiny. In filing for bankruptcy protection, Solyndra, along with two other American solar energy companies that declared bankruptcy in August, has highlighted the challenges facing the U.S. solar industry, including that posed by competition from China.
In 2010, Chinese solar photovoltaic manufacturers increased their share of the worldwide market to 45%, up from 36% in 2009. This compared to U.S. manufacturers’ drop in worldwide market share from 58% in 2009 to an alarmingly low 17% in 2010. Similarly, over 90% of all worldwide, newly-produced solar photovoltaic product exports currently originate from China, with Chinese producers accounting for approximately 37% of the U.S. market.
A variety of macroeconomic factors have contributed to the current state of affairs, including the global crisis of 2009, the ensuing decline in the price of silicon (which is necessary to develop crystalline silicon cells, which in turn convert sunlight to energy and form the basic elements of solar panels), as well as the subsequent oversupply of silicon in the market. Beyond these general factors, three specific factors have allowed Chinese manufacturers to efficiently marshal solar photovoltaic market share:
1) China has a combination of low production and labor costs.
2) The Chinese government is allegedly providing substantial subsidies to Chinese manufacturers.
3) Chinese solar cell and panel producers are allegedly dumping their products in the U.S. at prices significantly below their actual value.
With regards to these factors, seven American makers of solar panels have recently filed a petition with the U.S. Department of Commerce and the International Trade Commission, asking them to conduct antidumping and countervailing investigations into Chinese imports of crystalline silicon solar cells and panels. The petition requests that the U.S. Department of Commerce impose significant duties on Chinese imports of crystalline silicon solar cells, whether imported individually or partially or fully assembled into panels, in order to offset unfair pricing and subsidies. If the U.S. Department of Commerce determines that the proper circumstances exist, the petition further requests that duties be imposed retroactively on solar cell and panel imports from China for up to a three month period prior to any ruling. The petition alleges that Chinese producers benefit from a wide range of subsidies provided by the Chinese government, including large cash grants; discounted raw materials; discounted or free land, power and water; below market loans and credit; tax exemptions, incentives and rebates; as well as export credit and export insurance at preferential rates. The petition requests that the U.S. Department of Commerce and the International Trade Commission investigate merchandise currently classified under the following HTSUS tariff classifications: 8541.40.60.20; 8451.40.60.30; 8501.61.00.00 and 8507.20.80.
The U.S. Department of Commerce and the International Trade Commission will initiate their investigations within three weeks of the date of filing of the petition (October 19th). Already, Chinese solar companies are disputing these allegations of unfair trade practices and have expressed confidence in their ability to defend themselves in any upcoming investigation. Additionally, the China Commerce Ministry has issued a statement accusing the U.S. of adopting policies to protect its domestic solar industry and has called on the U.S. to reject this recent call for tariffs on Chinese products.
Regardless of the outcome of this dispute, the petition demonstrates not only the impact international competition can have on a company but also the continuing fragility of the trade relationship between the U.S. and China, particularly with regards to “hot-button” industries like clean energy. It also underlines the need for U.S.-based importers and exporters to be cognizant of this heightened scrutiny and to strive to stay in tune with what is occurring internationally in your industry. To that effect, we would like to encourage you to contact one of the attorneys at Middleton & Shrull with any questions or concerns regarding how this or other trade-related issues may influence your respective import and/or export practices.
(Sources include publications by: Wiley Rein, Milbank Tweed, The New York Times, Bloomberg, National Journal, PRI’s The World, The Hill, and OregonLive.com)
Matthew Bock
Associate Attorney
Middleton & Shrull - Customs and International Trade Lawyers