The fate of the U.S. solar industry is now (at least somewhat) in the hands of President Donald Trump. By Jan. 12, 2018, he must decide what action, if any, to take against overseas solar panel manufacturers whose imports are damaging their domestic competitors.
After finding that foreign-made panels are injurious to U.S. manufacturers, the U.S. International Trade Commission (ITC) recently announced the remedies its commissioners are proposing to the president. However, President Trump has full discretion to accept, reject or modify those recommendations.
As discussed in detail in a July 20 alert, “Suniva’s Solar Panel Trade Action and Its Impact on the Industry,” in April, 2017, Georgia-based solar panel manufacturer Suniva Inc. filed a petition with the ITC pursuant to Section 201 of the Trade Act of 1974. SolarWorld Americas Inc. later joined the case. Both companies allege they have faced financial hardship as a result of foreign competitors inundating the market with less-expensive panels. The ITC agreed — finding unanimously on Sept. 22, 2017, that the increased quantities of foreign solar panel imports are a substantial cause of serious injury to domestic solar panel manufacturing. Now the commissioners have announced their remedy recommendations, which are more moderate than those sought by the petitioners.
Suniva and SolarWord had asked the ITC to recommend that the president establish tariffs of 32 cents per watt on foreign-made solar panels — essentially doubling their current average price. While such tariffs may aid U.S. solar panel manufacturing, opponents argue that they would stifle the solar industry as a whole. The unavailability of inexpensive solar panels could derail potential future solar projects, disrupting the $29 billion industry.
While the ITC commissioners were divided on the precise remedy to apply, all of their recommendations were significantly milder than the petitioners’ requested relief.
Commission Chairman Rhonda K. Schmidtlein recommended a 10 percent tariff on the first 0.5 gigawatts of solar cells imported, with a 30 percent tariff on any additional solar cells over the 0.5 gigawatt threshold. For all solar module imports, she recommended a 35 percent tariff. The tariffs for both the cells and modules would be incrementally reduced over a four-year period.
Commission Vice Chairman David S. Johanson was joined by Commissioner Irving A. Williamson in recommending that the president impose an initial 30 percent tariff on imported solar cells beyond the first gigawatt of imports, with the tariff amount incrementally decreasing and the quota threshold incrementally increasing over four years. As for solar modules, Johanson and Irving recommended an initial 30 percent tariff, which would incrementally decrease over four years.
Commissioner Meredith M. Broadbent proposed only quantitative restrictions, recommending limiting the aggregate imports of solar cells and modules to 8.9 gigawatts the first year, to be increased by 1.4 gigawatts each year over a four-year period.
In their proposals, the commissioners appear to try to balance the need to provide relief to U.S. solar panel manufactures with the needs of the rest of the solar industry, which relies on access to solar panels to continue solar energy development. As Commissioner Broadbent stated, a significant limit in global imports “would adversely affect the hundreds of thousands of U.S. workers employed in installing solar projects, manufacturing other equipment used in [solar] installations, and providing a range of services, including cutting-edge research and development, in support of this market.”
The ITC will present its full report to the president by Nov. 13, 2017. Ultimately, it will be up to him to decide what specific actions to take, if any. However, if the president agrees with the ITC’s recommendations, it will be relatively good news for the U.S. solar industry. Even the highest tariff recommended by ITC is only about a third of that sought by Suniva and would be much less of an impediment to solar project development. Still, any tariff imposed on solar panel imports likely will cause some disruption to the U.S. solar industry.
Please contact any of the authors to learn more about this trade action and its potential impact on the industry as a whole. McGuireWoods will continue tracking this issue.