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Chinese Solar Manufacturers Dodged U.S. Tariffs, Probe Finds – WSJ

Commerce Department findings are likely to accelerate importers’ race to find alternative sources

A Commerce Department investigation this year led to uncertainty over solar-parts imports and the cancellation of solar projects across the U.S. (Jordan Vonderhaar/WSJ)

Yuka Hayashi, WSJ

EnergiesNet.com 12 02 2022

Four leading Chinese solar-cell manufacturers circumvented U.S. tariffs by routing some of their operations through Southeast Asia, a Commerce Department investigation found.

The preliminary findings from the closely watched probe—disclosed Friday—are likely to accelerate importers’ race to find alternative sources either domestically or from other places abroad to meet soaring demand for solar panels.

The investigation began in March and prompted uncertainty over solar-parts imports, leading to the cancellation of solar projects across the U.S. and intervention by President Biden to ease pressure on the industry.

When the investigation began, Chinese Foreign Ministry spokesman Wang Wenbin said Beijing would take “all necessary measures to uphold the rights and interests” of Chinese companies. He noted that the U.S.’s “protectionism” would “disrupt and undermine” the stability of global supply chains and cooperation on climate change.

Trina Solar Science & Technology is among the Chinese companies that were found to have circumvented the tariffs. (Xinxhua)

The outcome of the probe won’t lead to immediate increases in solar tariffs because in June the president implemented a two-year suspension of duties to give importers time to make adjustments. The suspension applies to solar imports from the four countries covered by the investigation: Cambodia, Thailand, Vietnam and Malaysia.

But the Solar Energy Industries Association, a trade group for the U.S. solar industry, said the Commerce Department has touched off supply-chain disruption that won’t be resolved by the time the tariff suspension ends.

The probe and its findings “will strand billions of dollars’ worth of American clean-energy investments and result in the significant loss of good-paying, American, clean-energy jobs,” said Abigail Ross Hopper, the trade group’s president and chief executive.

With the four Southeast Asian countries accounting for roughly 80% of U.S. solar-panel imports, the department’s probe initially caused a significant slowdown in their shipments, leading to delays in solar-farm projects and triggering complaints from federal and state lawmakers and officials.

In addition to the pause of the import duties, Mr. Biden invoked the Defense Production Act to help U.S. suppliers compete with Asian rivals and spur more domestic manufacturing of solar panels.

The Chinese companies that were found to have circumvented the tariffs are BYD (H.K.) Co., Canadian Solar International Ltd., Trina Solar Science & Technology (Thailand) Ltd. and Vina Solar Technology Co., according to a senior Commerce official. Together, they account for more than half of all solar-cell imports into the U.S.

The companies didn’t respond to a request for comment.

The Commerce Department began its investigation at the request of solar-module manufacturer Auxin Solar. (Ian Bates / for WSJ)

The department’s decision highlights the challenge the U.S. faces in reducing its reliance on Chinese suppliers as it accelerates its shift to clean energy. U.S. solar installers and developers are facing an acute shortage of solar panels, now caused by new legislation giving U.S. authorities increased power to block imports of goods linked to forced labor practices in China. The shipment disruption has caused delays in solar deployment, threatening to derail the administration’s climate goals.

The Commerce Department began its investigation at the request of San Jose, Calif.-based solar-module manufacturer Auxin Solar Inc. The company said Chinese solar manufacturers were circumventing the import duties on solar products—introduced in 2012 to protect American companies from subsidized Chinese products—by shipping products through Southeast Asia where final assembly takes place.

Commerce’s probe appears to “have largely validated and confirmed Auxin’s allegations of Chinese cheating,” Auxin CEO Mamun Rashid said. He said his company is grateful to the department for “fairly enforcing the U.S. trade laws for the benefit of U.S. solar manufacturers, their workers, and their communities.”

The probe continued even after the White House introduced the steps to ease its impact.

The department’s decision highlights the challenge the U.S. faces in reducing its reliance on Chinese suppliers. (Shao Rui/Xinxua

Based on information submitted by the companies upon Commerce’s request, the department’s investigators weighed several factors, including whether a majority of investments, manufacturing, and research and developments were conducted in China, before final assembly in Southeast Asia.

The investigators determined the products shipped by the four companies were Chinese-made in totality and thus subject to the tariff rates on Chinese projects.

This would subject BYD, which ships products through Cambodia, to a tariff rate of 27% and Canadian Solar, with a facility in Thailand, to 16%. Trina and Vina will face 254% tariffs as the department determined the companies failed to demonstrate their independence from the Chinese Communist Party. Trina’s products are shipped from Thailand, and Vina, a unit of LONGi Solar, uses Vietnam as its shipment base.

Of the eight companies the Commerce investigators examined, four were found compliant with the tariff rules: Hanwha Q Cells and JinkoSolar with bases in Malaysia, New East Solar in Cambodia and Boviet Solar Technology in Vietnam.

The Commerce Department will release the final result of the investigation in May after conducting on-site audits of the companies and gathering public comments, the senior Commerce official said, adding that the final outcomes may change from those in the preliminary findings.

Write to Yuka Hayashi at Yuka.Hayashi@wsj.com

wasj.com 12 02 2022

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