The Commerce Department is investigating whether Chinese solar panel companies are avoiding U.S. tariffs by sending products through four Asian countries. Importers are freaking out — but what do they have to fear?
Back in March, the Commerce Department announced that it would investigate whether Chinese manufacturers were re-routing solar panels through four Asian countries in an attempt to avoid U.S. tariffs.
The decision came after California solar panel maker Auxin Solar filed a petition with the Commerce Department asking for the investigation, arguing imports from Malaysia, Vietnam, Cambodia, and Thailand were actually made in China.
Auxin also had support from Members of Congress on both sides of the aisle and in the Senate and House, with Ohio Sens. Rob Portman (R) and Sherrod Brown (D) writing to Commerce Secretary Gina Raimondo:
“As we understand it, these operations use raw materials, labor, capital investment, and research and development from China. Moving to a third country to assemble a product with inputs from the country subject to the original AD/CVD order is textbook circumvention. As you know, if legitimate circumvention allegations go unaddressed, entire domestic industries and thousands of American manufacturing jobs are at risk.”
It all seemed pretty straightforward; Commerce would investigate the claims and issue a decision. If you follow this blog, you know that these sorts of trade cases happen all the time.
But ever since Commerce moved forward with the probe, solar importers have done a full court press to convince everyone that the investigation would spell doom for the industry. There have been many, many many stories in recent weeks arguing that the solar industry is now “frozen” because of the investigation and that it will hinder the Biden administration’s climate goals. They’ve also argued that shipments already have slowed because of the investigation.
It all strikes us as somewhat odd, given that no decision has been made (and thus no new tariffs have been issued). What do these folks have to fear?
That’s the argument that Auxin CEO Mamun Rashid made in a recent interview with E&E News.
“If there’s been no cheating going on, there’s absolutely nothing to worry about,” he said. “If I’m a manufacturer overseas, or I’m an importer, and I know I wasn’t participating in any kind of circumvention, I wasn’t cheating, I don’t have anything to worry about. I don’t understand why the concern is there.”
Rashid also rejected the argument that tariffs, if they are eventually placed on these products, will harm the industry and limit progress on reducing climate emissions. He said:
“I can only speak to my experience. In the last 14 years, we have seen tariffs being instituted and we’ve seen the predictions that were made on what would happen if the tariffs were put in place. And it has never materialized. Deployments have continued to grow double digits and outperform predictions, even prior to tariffs being imposed, and pricing has continued to fall. I have no reason to believe it’ll be any different this time.”
What is getting lost in this whole back-and-forth is a bit of history about U.S. industry — and some much needed perspective on how becoming entirely reliant on imports would likely be worse for the planet.
Solar panel technology was invented in the United States, and there once was a robust solar panel manufacturing industry here, with American firms making around 22% of the world’s panels. Today, that number is less than 1%, with small companies like Auxin doing the work.
The reason for the sharp decline is China’s government, which set out to dominate the global industry and succeeded. Now much of the world is dependent on Chinese-made solar products, and there’s growing evidence those products are made with forced labor. Solar panel production in China is also powered by coal, which… isn’t great for carbon emissions!
The United States has responded to China’s bad behavior; there’s a ban on all products from China’s Xinjiang region, and tariffs on Chinese-made products temporarily helped level the playing field a bit for American makers, with U.S. solar panel production tripling in the United States since 2018.
But if China is circumventing U.S. trade enforcement by sending its panels through other nations, all of these efforts are for nothing. Commerce has the responsibility to investigate these circumvention claims, if only because if true it undermines U.S trade enforcement overall. And U.S. officials have a responsibility to stand up for American manufacturers and workers who are making these products locally.
Rather than join in on a needless panic about the results of an investigation that isn’t complete yet, American policymakers would be wise to do everything in their power to strengthen U.S. solar panel production. Recent events like the COVID-19 pandemic and Russia’s unprovoked invasion of Ukraine have driven home the dangers of becoming overly reliant on imports, after all.
Solar panels will play an important role in reducing carbon emissions and addressing climate change. But that doesn’t mean the United States should abandon the last remaining American companies and workers who are making these products here.
And if China is indeed circumventing U.S. solar panel tariffs, Commerce should take action to remedy the situation. And in the meantime, the United States should make the investments needed to strengthen our domestic capacity to make solar products.
Auxin, for its part, is ready.
“Our production capacity is 150 megawatts right in this moment. It’s going to be 400 megawatts by the end of this year,” Rashid told E&E News. “The facility is designed for more than a gigawatt. All of that will happen if the demand is there. We can very quickly scale up to meet that demand.”