US Finds Chinese Companies Dodging Circumvention Tariffs

• US DOC's preliminary findings into Auxin Solar petition finds some Chinese companies guilty of evading AD/CVD tariffs
• BYD Hong Kong, Canadian Solar, Trina Solar and LONGi's Vina Solar have been named as companies that send their China made cells and modules to Southeast Asian nations before shipping these to the US
• New East Solar, Hanwha, JinkoSolar and Boviet Solar have been found not guilty of circumventing tariffs
• Tariffs will not be imposed till June 2024 to comply with US President Joe Biden's use of executive powers to not impose tariffs for 2 years, but Roth says it could be challenged soon
• Industry associations are not happy with the decision as these point at the lack of enough domestic manufacturing capability to be able to afford this lack of module supply

The US Department of Commerce (DOC) has found 4 Chinese companies evading antidumpting duty (ADC) and countervailing duty (CVD) on solar cells and modules originating from China by shipping these to the US from Southeast Asian nations, but says duties will not be imposed till June 2024, however Roth Capital Partners warns of an upcoming challenge to President Biden's 2-year tariff waiver.

Of the 8 companies included in the purview of the investigation launched in response to Auxin Solar petition, 4 were found circumventing the tariffs by sending its Chinese made cells and modules to Cambodia, Malaysia, Thailand and/or Vietnam for 'minor processing' before exporting these to the US. These are BYD Hong Kong, Canadian Solar, Trina Solar and LONGi owned Vina Solar, according to DOC,

The ones let off the hook are New East Solar, Hanwha, JinkoSolar and Boviet Solar.   

Despite the preliminary findings, the department will not collect any duties until June 2024 'unless parties cannot certify that the imports will not be consumed in the US market within 6 months of the entry date'. This is thanks to US President Joe Biden using his executive powers to provide a 24-month reprieve for imported solar components to enter the US without tariffs, to enable module supply to the country (see Biden Saves The Day For US Solar Industry).

"This provides US solar importers with sufficient time to adjust supply chains and ensure that sourcing isn't occurring from companies found to be violating US law," added the DOC.

Further on, the department said it is making a country-specific circumvention finding that designates the country as one through which solar cells and modules are being circumvented from China, but it does not constitute a ban on imports from these countries.

Companies operating in the above mentioned Southeast Asian nations will be 'permitted to certify that they are not circumventing the AD/CVD orders, in which case the circumvention findings will not apply'.

Roth Capital expects this will impact module pricing that can go slightly higher for H2/2024 and beyond since the DOC has said that if the company already doesn't have a tariff rate, it will have 238.95% as the China-wide AD rate, and a CVD 'all-others' rate of 15.24%.

Meanwhile, LONGi reportedly told Reuters that it will actively provide evidence to show it is compliant with the US trade law and not circumventing. It added that irrespective of the final result, it will not affect the company's medium- and long-term planning in the US market.

Industry not happy

President and CEO of the US Solar Energy Industries Association (SEIA) Abigail Ross Hopper, while pointing at the department not targeting all imports from the subject countries as the only saving grace from this determination, called it a 'mistake we will have to deal with for the next several years'.

"As a basic fact, solar cell and module manufacturing greatly exceed the anticircumvention statute's 'minor or insignificant processing' limitation," added Hopper. "While President Biden was wise to provide a 2-year window before the tariff implementation, that window is quickly closing, and 2 years is simply not enough time to establish manufacturing supply chains that will meet U.S. solar demand."

The American Council on Renewable Energy (ACORE) believes this preliminary decision creates 'new challenges' for the country's clean energy transition efforts. "With today's decision, the Commerce Department appears to be doubling down on constricting solar availability, and imposing massive new red tape with certification requirements that could further chill the industry and thwart the administration's clean energy objectives. This is a major step backward at a time when there is finally hope the U.S. can get on the path toward a climate solution," opined ACORE's President and CEO Gregory Wetstone.

Nonetheless, expect more disruption in the market as Roth's Philip Shen expects a 'challenge' to Biden's anti-circumvention tariff waiver of 2 years to come 'as soon as next week or in the subsequent weeks' and added that its source believes the 'probability of success to remove the waiver is non-trivial'.