Biden Pauses Possibility of AD/CVD Circumvention Deposits for Solar Panels

Simon Lester, a former legal affairs officer in the dispute settlement secretariat at the World Trade Organization, said in a phone interview: "This really seems like a stretch." He called the action wacky, and said that he had thought that the quasi-judicial nature of AD investigations did, as Commerce Secretary Gina Raimondo said repeatedly, preclude political intervention.

"I totally bought what she was saying and that’s what I’ve been saying to people, too," Lester said. But, he said, it seems like the executive branch can declare an emergency to make all sorts of interventions.

"They were just getting pressure from all sides," he said, from the domestic solar industry and labor unions to pursue the anti-circumvention case, but from environmentalists to override the process, because it was slowing the installation of utility-scale solar arrays.

The announcement said explicitly that the investigation was making solar panels unavailable and jeopardizing utility-scale installations, which are needed "to ensure that there are sufficient resources on the grid to maintain reliable service." It also said: "Electricity produced through solar energy is also critical to reducing our dependence on electricity produced by the burning of fossil fuels, which drives climate change. The Department of Defense has recognized climate change as a threat to our national security."

At the same time that the administration said it was going to pause any cash deposits if the Commerce Department finds there was circumvention, it also said it will be using the Defense Production Act to favor domestic panels in procurement, as well as to favor a number of climate-change-fighting products, such as building insulation, electric heat pumps, fuel cells, electrolyzers and platinum group metals, and electric transformers and electric grid components. That last industry had been the subject of a Section 232 investigation, after 25% tariffs on grain-oriented electrical steel led to more companies making transformers in Mexico and Canada so as to avoid the tariff. The Commerce Department had found that a 25% tariff on transformers was warranted, but the Trump administration never imposed the tariffs.

Lester said that by linking the DPA actions and the pause on duties, the administration was trying to find a way to make all the players happy.

"The Federal Government is working with the private sector to promote the expansion of domestic solar manufacturing capacity, including our capacity to manufacture modules and other inputs in the solar supply chain, but building that capacity will take time. Immediate action is needed to ensure in the interim that the United States has access to a sufficient supply of solar modules to assist in meeting our electricity generation needs," the administration said.

What exactly the DPA can do for these industries is not clear; the Department of Energy said, "Following this announcement, DOE and the White House will continue to convene relevant industry, labor, and community stakeholders as we maximize the impact of the DPA tools made available by President Biden’s actions and strengthen domestic clean energy manufacturing."

Solar panels from Cambodia, Malaysia, Thailand and Vietnam are 75% of imports, and they are the ones targeted by the circumvention case; they also are the ones protected by the action. The action does not affect current AD/CVD orders on Chinese and Taiwanese panels, and it does not change the solar safeguard, which imposes a tariff rate quota for imports to protect domestic industry.

Sen. Jacky Rosen, D-Nev., took credit for the action. "I’ve been leading the fight in the Senate against the threat of additional job-killing solar tariffs, and I’m glad the Biden Administration is now taking concrete action in response to my efforts with a bipartisan group of colleagues sounding the alarm about this issue. The risk of additional tariffs on imported solar panels would have been devastating for American solar projects, the hundreds of thousands of jobs they support, and our nation’s clean energy and climate goals."

The American Clean Power Association, which represents utilities that buy panels, said the "action is necessary due to the inconsistent and archaic regulatory process at the Department of Commerce that has frozen the U.S. solar industry."

Auxin argues solar cells and modules from Cambodia, Malaysia, Thailand and Vietnam should still be subject to AD/CVD on China if they’re made from Chinese wafers (see 2202090060). The domestic producer says the conversion of solar wafers to solar cells is a “minor or insignificant” process that circumvents the duties and should not change origin. But solar importers and exporters say that standard is much broader than Commerce’s longstanding policy that country of origin is determined by where the P/N junction is added via a subsequent doping process, allowing the polysilicon to generate electricity (see 2104070025).

Auxin said in a statement the pause was unprecedented and possibly illegal.

First Solar, which is not a party to the circumvention complaint, said the decision "directly undermines American solar manufacturing by giving unfettered access to China’s state-subsidized solar companies for the next two years. This sends the message that companies can circumvent American laws and that the US government will let them get away with it as long as they’re backed by deep-pocketed political pressure campaigns."

Nathan Rickard, a trade lawyer at Picard, Kentz who has represented parties in circumvention cases, said in a telephone interview that there's no precedent for this kind of pause for deposits. He said he doesn't think the administration has a strong legal basis for the authority they're claiming.

Lester doubted Auxin would sue, since the administration is saying it will do procurement deals for domestic producers, and said he doesn't think anyone else would have standing. When he learned Auxin had issued an angry statement, he said maybe they were just doing that to try to get a sweeter deal. "They might even file a lawsuit to express their anger -- get as much leverage as they can," he said.

Rickard said it's very expensive to bring AD/CVD cases, and small businesses already have a harder time accessing trade remedies as a result. He asked: Why would any company spend the time and money to do it if they know it can be short-circuited for political reasons?

The action was dangerous, from his perspective, as "it injects a political element to all of this stuff, to where you’re just encouraging people who have strong importing interests" to try a political campaign against an AD/CVD case so they can continue importing unfairly cheap goods.