The Commerce Department is Looking into Allegations of Circumvention Against Chinese Solar Manufacturers

By Matthew McMullan
Mar 29 2022 |
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Petition argues imports from third countries have skirted duties for years.

The Commerce Department on Monday announced an investigation into solar panel imports from a number of Asian countries to determine if, in an effort to avoid U.S. tariffs, Chinese solar equipment manufacturers are routing their products through assembly plants there. It’s a way to cheat at trade rules called “circumvention.”

Commerce is acting in response to a petition filed by Auxin Solar, a California manufacturer that last year spoke out in favor of maintaining a separate tranche of Trump-era tariffs raised on solar imports. At the time, Auxin argued the tariffs not only allowed them to stay in business (in a market typically swamped by low-cost import competition) but to expand operations. But the effort was not successful — the Biden administration revised those tariffs last month, weakening them by removing a big category of products from their reach.

Still, Auxin, on behalf of the rest of the domestic solar manufacturers, has pressed ahead with the argument for stronger U.S. trade enforcement. And its February petition – which alleges that final assembly plants in Malaysia, Thailand, Vietnam and Cambodia have been used for years by major Chinese manufacturers to avoid well-earned U.S. solar import tariffs – was buoyed by bipartisan groups in both the House and Senate that urged Commerce to initiate an investigation.

“As we understand it, these operations use raw materials, labor, capital investment, and research and development from China,” wrote Ohio Senators Sherrod Brown (D) and Rob Portman (R) in their letter. “Moving to a third country to assemble a product with inputs from the country subject to the original (anti-dumping/countervailing duty) order is textbook circumvention.”

Today’s announcement from Commerce showed it agrees, at least, that an investigation into the allegations are warranted. This is a welcome development. But it’s predictably sparked outrage from industry associations that lobby on behalf of installers, who have been eager to frame unfairly traded solar panels as an either/or scenario: Either you’re for a shift to clean energy to avoid a looming climate disaster, or you’re for fairly applying trade rules. “If its commitment to a clean energy future is real, (the Biden administration) will reverse this decision immediately,” said the chief executive of one to Bloomberg News.

This, in response not to new tariffs but an investigation. Those associations have little to say about the embodied carbon inherent in the international solar industry and are split on the appropriate response to the Congressional blacklist of Chinese solar companies employing forced labor (The correct answer is: Don’t use it.). But they’re falling apart at the mention of a tariff investigation that will take months to complete.

Because, again, it should be remembered that these tariffs that Auxin claims these companies are evading were earned. From an earlier explainer written on this blog:

China’s government utilized massive government subsidies, lax environmental standards, and forced labor practices to make its solar panels. It built up its domestic supply chain and kept coal power plants open to supply cheap electricity to make the panels. Then, it dumped its artificially cheap solar panels onto the global marketplace, suppressing U.S. solar manufacturers who abide by strict labor and environmental standards and free market rules.

As a result, American solar plants closed. The U.S. is now heavily reliant on China for its solar needs, which creates a real dilemma for Biden’s solar ambitions, given the fact that there’s strong evidence that China utilizes forced labor throughout its solar industry.

Anyway, we look forward to this investigation’s results. And if these imports are in fact circumventing existing U.S. tariffs, the importers should be expected to pay them. Them’s the rules.