Suniva tariffs

Author: Keith Martin Publication | December 2017

Solar companies are bracing for a decision by President Trump on whether to impose tariffs on imported solar cells and modules.

The President has until January 26 to “take action” after the US International Trade Commission found in November that growing imports of solar cells and panels have injured US panel manufacturers and Trump’s trade representative, Robert Lighthizer, asked the commission in December for a supplemental report.

Lighthizer wants it to “identify any unforeseen developments that led to the articles at issue being imported into the United States in such increased quantities as to be a substantial cause of serious injury.”

The move may be an effort to ensure that any tariffs Trump imposes can survive if challenged before the World Trade Organization. The WTO appellate body has held that a country must explicitly find that escalating imports are a result of “unforeseen developments” before it may impose restrictions.

The last time the US imposed safeguard tariffs like Trump is considering was in 2002 when then-President George W. Bush slapped a 30% tariff on imported steel. The tariff  had to be withdrawn two years later.

Meanwhile, an internal White House four-page paper that is circulating within the Trump administration for comment suggests that Trump may be planning to impose stiffer tariffs on Chinese-made solar equipment. Chinese cells and panels are already subject to countervailing and anti-dumping duties.

The paper criticizes the use of renewable portfolio standards and federal and state tax incentives to promote renewable energy, calling them “overseas job creation programs” that boost demand for renewable energy that is met by overseas equipment suppliers at a cost to US taxpayers.

Suniva, the bankrupt solar panel manufacturer that petitioned the US International Trade Commission in April for import tariffs, told the bankruptcy court in October that it was seeking another $2.3 million loan from SQN Capital, an institutional asset manager that advanced Suniva $5.3 million earlier in the year to let the company continue operating. SQN made it a condition to the earlier loan that Suniva had to ask the US International Trade Commission for tariffs.

Documents filed in the case in late November suggest the company may be considering a sale. However, a Suniva creditor characterized the offers the company has received to date as from vulture purchasers and scrap dealers.

More than 60 witnesses testified at a public hearing in early December in the offices of the US Trade Representative about what action Trump should take.

Meanwhile, Fox News host Sean Hannity and the conservative Heritage Foundation urged Trump not to impose tariffs. Hannity posted an on-line ad attacking Suniva and SolarWorld as “foreign-owned companies” who are “attempting to use our trade laws” to give themselves an advantage.

Trump is not bound by the recommendations of the US International Trade Commission. The four trade commissioners made three separate recommendations for what he should do.

Two of the four recommended that up to 1.2 gigawatts of solar cells in year 1, 1.2 GW in year 2, 1.4 GW in year 3 and 1.6 GW in year 4 should be allowed to enter the US tariff free. Solar cell imports above these levels and all module imports would be subject to a tariff of 30% in year 1. The tariff would drop 5% a year in each of the next three years.

One commissioner recommended a similar approach, but with a lower volume of solar cells that could enter at a reduced tariff. The cell quota would be .5 GW in year 1, increasing by .1 GW a year in each of the next three years. The tariff for cells up to the amount of the quota would be 10% in year 1, dropping by .5% in each of the next three years. Cells above the quota would be subject to a tariff of 30% in year 1, dropping by .1% in each of the next three years. All modules would be subject to a tariff of 35% the first year, dropping by 1% in each subsequent year.

Any import relief is supposed to be temporary and not remain in place for more than four years. However, the period can be extended for up to eight years. Any tariffs that remain in place for more than a year must phase down at regular intervals.

Finally, one commissioner recommended something along the lines that the Solar Energy Industries Association proposed. She would set a combined import quota for both cells and modules of 8.9 GW in year 1, increasing to 10.3 GW in year 2, 11.7 GW in year 3 and 13.1 GW in year 4. These figures are in line with expected imports. Importers would have to compete in a public auction for import licenses. The licenses would sell for a minimum of 1¢ per watt.

She suggested that .72 GW of the quota in year 1 should be set aside for imports from Mexico. The set aside for Mexico would increase at the rate of .115 GW a year for the next three years.     

One of issues facing Trump is whether to exempt imports from countries with which the United States has free trade agreements.

All four commissioners suggested no exemption for Mexico and South Korea. One commissioner would also put Canada in this category.

All the commissioners recommended that imports from the following free-trade countries be exempted from tariffs: Australia, Colombia, Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, Nicaragua, Panama, Peru and Singapore.


Keith  Martin

Keith Martin

Washington, DC