Understanding the NEW SOLAR TARIFFS, Section 201, and How We Got hERE

 

By now you have probably seen that President Trump has imposed a 30% tariff on solar imports to the U.S. Naturally you might be thinking: WHAT!? How is this possible? Well, if you find yourself in that boat, read on to learn everything you need to know about the section 201 solar trade case and how we got here.

Solar Trade Case (Section 201): Timeline of Events

Section 201 Solar Tradecase Timeline of Events.png

5/17/2017 - Suniva Files Section 201 Petition:

The attack on the U.S. solar industry all started when Suniva, a U.S. manufacturer of solar modules and cells, went bankrupt. The company filed section 11 bankruptcy this April after laying off 131 employees without notice. Suniva, quick to place blame on anyone other than their own management, turned to the low costs of imported solar cells as a scapegoat, claiming that U.S. manufacturers are unable to compete with manufacturers overseas.

A “global safeguard” law was established in the 1974 Trade Act under Section 201 allowing temporary relief to industries where surging imports are proven to cause “serious injury”. On May 17th, 2017 Suniva filed a petition to the U.S. International Trade Commission (ITC) to conduct an investigation into whether imports of solar cells are causing serious injury to the United States solar manufacturing industry.

5/25/2017 - SolarWorld Americas Co-Signs Petition:

Suniva's Section 201 Petition gained momentum when SolarWorld, another bankrupt U.S. solar manufacturer, co-signed the petition on May 25th. Here are a few things to note about petitioners Suniva and SolarWorld:

  • Both are owned by larger companies overseas
    • Suniva is owned by Shunfeng Int'l, a China based enterprise.
    • SolarWorld Americas was a subsidiary of SolarWorld AG, a German company who filed for insolvency this May and proceeded to lay off 360 employees in Hillsboro, Oregon. SolarWorld Americas is now up for sale and under the jurisdiction of the insolvency administrator.
  • Both brought collapse of business on themselves
    • They were unable to produce solar modules at the necessary rate for utility projects.
      • Utility-scale projects use 72-cell modules, which both businesses were unable to manufacture and supply at the necessary demand.
    • They left customers dissatisfied.
      • Both businesses developed high customer dissatisfaction with frequent complaints over late shipments, damaged products, and general product unreliability including subpar panel efficiency.
    • The businesses may have been stagnant in terms of technological advancements which are continually needed to compete with other sources of energy such as wind, natural gas, and thin-film solar.
    • SQN Capital Management is the investment firm funding Suniva's Section 201 petition. Considering all of Suniva's losses, SQN is trying to sell off Suniva’s manufacturing equipment, equivalent to $55 million. In a letter to the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, SQN said that if the assets are purchased- they will drop the solar trade case. PV Magazine described this letter as “an extortion letter”.
      • Sounds like Suniva's interest may not lie in the well being of U.S. solar cell manufacturers after all.

8/15/2017 - ITC Hearing on Injury:

After the Section 201 Petition was filed, the ITC began their investigation to determine whether or not foreign imports have caused injury to the U.S. domestic solar industry. If the ITC found no injury, the case would be thrown out. On August 15th, the ITC held its first, and only, public hearing on the trade case. The hearing basically had two sides: 1) Suniva + SolarWorld Americas (the petitioners), 2) The rest of the U.S. solar industry. Here's a summary of what each side had to say:

The Petitioners:

  • A flood of imports has caused injury to the domestic PV cell industry
    • U.S. manufacturers cannot profitably compete with the low cost of imports from Asia
  • Placing tariffs on international cells and modules made with foreign cells will provide relief to domestic manufacturers
    • The proposed remedy includes an evolving tariff and minimum import price for four years
Proposed Remedy.png

The Rest of the U.S. Solar Industry:

  • The tariffs requested would more than double the price of solar panels in the U.S. making solar energy unable to compete with the costs of other forms of energy
  • Raising trade barriers will have no effect on U.S. cell and module manufacturer's ability to make more profitable panels
  • Higher prices for solar products will cause a drastic drop in demand
  • The threat to the U.S. solar industry at large greatly exceeds the fraction of business represented by the cell manufacturing sector
    • The U.S. employs 260,000 people in the solar industry with services ranging from engineering to installation, financing, legal, consulting and beyond.
    • The U.S. employs 38,121 people in solar manufacturing.
      • This number includes manufacturers of components extending beyond solar cells and modules to include other industry components like racking systems and inverters.
    • The cell manufacturing sector covered by the petition employs less than 1,000 people.
  • The Solar Energy Industries Association (SEIA) has determined that if the remedies sought by the petitioners are put into effect, the U.S. solar industry would lose 88,000 jobs next year alone.
 
 

9/22/2017 - ITC Votes 4-0 Injury is Found:

On September 22nd, the U.S. solar industry faced a devastating blow when the ITC voted in favor of petitioners Suniva and SolarWorld Americas. With four commissioners casting a vote, the final verdict came in 4-0 that "serious injury" was found. This means that after the investigation the ITC determined injury was caused to Suniva and SolarWorld from overseas solar module imports and the case will continue.

10/03/2017 - ITC Hearing on Remedies:

With the injury finding confirmed, the U.S. International Trade Commission entered the second phase, determination of a remedy. The first, and only, hearing to discuss possible trade remedies was on October 3rd in Washington, D.C.

Suniva and SolarWorld Americas issued public briefs in advance of the ITC hearing in which they offered only two options. 1) A tariff plus a price floor for solar cells, 2) A tariff plus a quota

Read SolarWorld America's full pre-hearing brief here

Read Suniva's full pre-hearing brief here

SEIA, along with solar manufacturer SunPower, also prepared a public pre-hearing brief to oppose the tariffs proposed. In it they pointed to tariffs increasing the price of solar panels and killing solar projects both in the works and in the future. The decrease in demand for solar projects is said to result in the loss of 62,800 jobs in 2018 and 80,000 jobs in later years.

Read SEIA's full pre-hearing brief here

10/31/2017 - ITC Votes on Remedies

The ITC proposed remedies which were both less severe than those requested by the petitioners, but still stand to damage the U.S. solar industry at large.

Remedies follow a "tariff-rate quota". The most agreed upon remedy places a 30% tariff on any imports beyond 1 gigawatt of tariff-free solar cells. Tarriffs would be in affect for four years, decreasing the percent tariff by 5% every year.

Each of the four commissioners suggested remedies can be found below. 

Commissioners Irving Williamson and David Johanson

 
Commissioners Irving Williamson and David Johanson.png
 

Chairman Rhonda Schmidtlein

 
Chairman Rhonda Schmidtlein.png
 

Commissioner Meredith Broadbent

 
Commissioner Meredith Broadbent.png
 

11/13/2017 - ITC Reports Remedy to POTUS:

The ITC delivered their recommendation, as detailed above, to President Trump on November 13th.

The commission’s inability to put forth a unified recommendation on almost every aspect of the proposed remedy, left the President with a splintered decision and the need for more clarity in the next phase of the process.

Ultimately the decision lay with the President to either accept the proposed remedy, adopt an alternative remedy, or impose no remedy at all.

1/22/2018 - Actionable Decision by POTUS:

After months of uncertainty and suspense, the fate of the U.S. solar industry lay in the hands of President Trump, a wild card. Just days before the final decision was announced, President Trump discussed the case saying, "You know, they dump ‘em - government-subsidized, lots of things happening - they dump the panels, then everybody goes out of business.”

The solar industry was expecting to hear a decision on January 19th, but then with no decision announced that day and the government shutdown over the weekend, things were starting to get very dramatic. The U.S. government re-opened on Monday afternoon, January 22nd, and a final ruling on the Section 201 Solar Trade Case was announced just hours later.

In the end, President Trump approved placing safeguard tariffs on imported solar cells and modules. His decision places a 30% tariff on imports for the first year and decreases 5% each year for the duration of the four-year relief. The first 2.5 GW Gigawatts of cell imports are exempt for the full duration.

  • According to GTM research, the new tariffs will curb U.S. solar installations by 11% through 2022
  • According to SEIA, the new tariffs will cause 23,000 job losses this year, and tens of thousands more job-cuts will follow throughout the four-year tariff period

It is also expected that the imposed tariffs will hurt, not help, the U.S. solar manufacturing industry. As demand drops for solar installations due to the inflated prices, it is only logical that demand for solar cells and modules will also drop.

To end on the bright side, at least the tariffs imposed are less than the 100% increase first proposed by Suniva and SolarWorld. To discuss this case further and how the new tarriffs will effect the solar industry both in the U.S. and internationally, do not hesitate to contact us.

 

1/24/2018

Written by: Brooke Ruggiero