Preliminary Solar Anti-Circumvention Decision Published

By Christian Roselund

On 2 December 2022, the U.S. Department of Commerce issued its long-awaited Preliminary Determination in the anti-circumvention case covering crystalline silicon PV imports from Cambodia, Malaysia, Thailand, and Vietnam. While Commerce found circumvention of existing import duties on Chinese solar cells and modules made from them in all four nations, it also provided multiple pathways to export cells & modules to the United States without additional duties.

This decision indicates that Commerce will not significantly restrict module availability from these countries to developers in the United States. We do expect it to boost production of solar bill of materials components in Southeast Asia and other low-cost, non-China locations.

Background

In 2012, Commerce found that crystalline silicon PV manufacturers in China were both selling solar PV cells and modules into the United States at below market value and benefitting from subsidies deemed illegal under U.S. trade law. The resulting anti-dumping (AD) and countervailing duty (CVD) orders led to Chinese module makers importing large volumes of cells from Taiwan to assemble into modules to ship to the United State. A second set of duties on both cells from Taiwan and modules from China in 2014 curtailed that activity.

During the next few years, several leading Chinese solar PV manufacturers including JA Solar, Jinko, and Trina built factories in Southeast Asia to serve the U.S. market. And they were not alone; Southeast Asia was already a destination for module makers including Sunpower (now Maxeon), Panasonic, and First Solar. Over time, more manufacturers including LONGi and others moved to the region, and Southeast Asia became the largest source of modules for the U.S. market. In 2020, more than 75% of U.S. solar imports – both crystalline silicon and thin film – originated in three of the four “named countries” under investigation.

In February 2022, Auxin Solar, a small solar manufacturer in California, filed a petition alleging that manufacturers in the named countries were circumventing the 2012 duties on Chinese solar cells. The basis of the allegation is that the use of Chinese wafers, intellectual property, and bill of materials components made the process in Southeast Asia “minor or insignificant.”

Auxin’s claim has been widely disputed by U.S. clean energy trade associations including the Solar Energy Industries Association and the American Clean Power Association, which have come out against the petition. However, the company has had support from American unions and domestic manufacturer First Solar. Commerce agreed that Auxin’s claim met the minimum requirements for an investigation and launched one on April 1, 2022.

The investigation has seen several twists and turns. As has happened in other AD/CVD cases, the danger of retroactive duties from this investigation froze imports. This led to action by the Biden Administration, which in June 2022 issued an emergency proclamation that voids the application of duties under this investigation through June 2024. Additionally, Commerce has pushed back deadlines twice such that the Preliminary Determination due on 30 August 2022 was not issued until 2 December 2022.

Legal Issues and Market Impacts

The Preliminary Determination reflects many of the complexities and contradictions of this case. While there was a finding of circumvention applied by default to manufacturers in all four nations, four of the mandatory respondents were found to not be circumventing duties.

Some of these companies were found to simply not have much of a connection to Chinese solar manufacturing. Commerce looked at five different factors to determine this, including affiliations with Chinese solar companies, location of R&D spending, and whether material was imported from Chinese affiliates. For other companies, despite strong connections to China, the use of non-China materials was deemed sufficient for a finding of no circumvention. One of the significant points of argument in this case is a legal precedent that the cell is the point of substantial transformation. Clean energy trade groups have alleged that by focusing on the source

of the wafer and other materials, Auxin is attempting to shift “substantial transformation” to the
wafer level.

The Preliminary Determination limits the scope of the investigation to cells made with Chinese wafers and modules comprising three or more of six specified components (silver paste, glass, aluminum frames, EVA, backsheets, junction boxes) from China in the bill of materials. This is a favorable detail for exporters and while SEIA and ACP remain concerned about the precedent set by the “wafer-forward” implications of the ruling, the market impacts are another matter.

CEA has identified 30 gigawatts of ingot and wafer capacity that is either online or will be online in 2025 in the four named countries. Additionally, more than 20 gigawatts of three of the items in the bill of materials list (glass, encapsulants, and junction boxes) are made in Southeast Asia today. For silver paste, this widely available from South Korea and Japan. Currently, aluminum frames are the only item on the list that is solely available from China.

More centrally, for those components that are not made in SE Asia today, factories can be designed, built, and brought online before the end of President Biden’s emergency period. The result is that it should be relatively easy for solar PV manufacturers in the named countries to shift their wafer source and/or bill of materials components to continue to ship to the United States without being subject to additional duties.

The Preliminary Determination in the Big Picture of Solar Supply

The December 2 decision is preliminary, and findings could change in the Final Determination due on May 1, 2023. CEA expects some clarification around the requirements for the bill of materials, but no major changes to the scope.

We expect an increased localization of supply chains, mostly in terms of the named bill of materials components, in Southeast Asia and other low-cost nations to serve factories in the named countries. Along with this, we expect Southeast Asian factories to continue to supply most PV modules used in the U.S. solar market, at least through 2025.

Other significant trade barriers do remain that pose a more significant challenge for solar supply than the anti-circumvention investigation. Notably, there are still more than 1,000 shipments of PV cells and modules detained under UFLPA.

Source: CEA Research