(Bloomberg) — The US is launching an investigation into whether Chinese solar-equipment manufacturers are evading tariffs by sending components to other Asian nations for assembly before shipping finished products to the US
The US Commerce Department said in filings Monday that it would open the probe requested by Auxin Solar Inc., a small California panel maker, marking the first formal step of an investigation that could span a year and culminate in expanded duties on the imports.
The investigation threatens to upend the US solar sector, which depends heavily on Asian panels. Companies that build solar farms warned that simply opening a probe will drive up prices and potentially expose importers to retroactive duties. That could slow the growth of clean power in the US and undermine President Joe Biden’s goal of eliminating carbon dioxide emissions from the electricity sector by 2035.
“The Department of Commerce’s decision today signals that the Biden administration’s talk of supporting solar energy is empty rhetoric,” Heather Zichal, chief executive officer of the American Clean Power Association, said in an emailed statement. “If its commitment to a clean energy future is real, the administration will reverse this decision immediately.”
The move is a potential boon for the handful of companies that make solar equipment in the US, but a setback for American developers that depend on low-cost panels from Asia.
First Solar Inc., the biggest US manufacturer, rose as much as 7.7% in US trading. Meanwhile, manufacturer Canadian Solar Inc. dropped as much as 6.9%.
Auxin Solar filed its request for the investigation in February, alleging that manufacturers in Malaysia, Vietnam, Thailand and Cambodia were using components from China and skirting the duties. Those four countries represent up to 80% of the module supply to the US, according to the American Clean Power Association.
“We are grateful Commerce officials recognized the need to investigate this pervasive backdoor dumping and how it continues to injure American solar producers,” Mamun Rashid, CEO of San Jose, California-based Auxin Solar, said in an email.
The tariffs at issue date back to 2012, when the US imposed duties on solar cells and modules from China under then-President Barack Obama after determining Beijing-backed companies were selling at cut-rate prices. Factories soon popped up elsewhere in Southeast Asia that produced solar cells and panels that weren’t subject to the tariffs.
Chinese firms dominate solar manufacturing, a multistep process that often occurs in separate factories that can be located in different provinces or even countries.
Some solar manufacturing advocates have argued that a combination of tough trade enforcement and tax incentives are needed to help bolster the production of clean-energy equipment inside the US They hailed the Commerce Department decision.
“The Biden administration has chosen to side with American companies and workers,” Zach Mottl, chairman of the Coalition for a Prosperous America, said in an emailed statement.
But renewable power advocates said the probe would drain the industry of much-needed domestic support. Solar Energy Industries Association CEO Abigail Ross Hopper said that the decision will harm an industry critical to the president’s climate goals. The administration is “making it impossible to reach those goals.”
The association will be focusing now on “limiting harm” — to push for an expeditious probe to limit exposure to “radical uncertainty,” she said.
The Commerce Department said its investigation will take the form of countrywide inquiries, with the agency asking companies in the targeted nations for information about their solar cell and module production and shipments to the US
The investigation will move slowly by design, potentially extending uncertainty for the sector. The Commerce Department has 150 days to investigate and issue its preliminary findings. A final determination is due in 300 days, with the potential for one 65-day extension.
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