AD/CVD Assessment: The Impact of the Circumvention Trade Case and Gloomy Outlook for the US Solar Market

Three-quarters of solar companies say shipments of solar panels have been canceled or delayed after the Department of Commerce opened Auxin Solar’s anti-dumping circumvention case. This statistic is from the preliminary results of a survey conducted by the Solar Energy Industries Association (SEIA). SEIA hosted a webinar on April 5 to discuss Commerce’s survey results and decision timeline. Here are the biggest takeaways.

What is the timeline for the trade judgment?

AD/CVD timeline

Julia Eppard, Counsel at Akin Gump Strauss Hauer & Feld LLP, noted that Commerce has significant discretion and believes they “will have information to make a decision as soon as possible. We believe that they could make a negative decision beforehand [their deadline].

  • But they could also extend the August 29 deadline.
  • Retailers can also change their decision earlier from provisional to final, but this has only happened by changing a positive decision to a negative one.
  • Also note that separate regulations are made for each country based on information collected from the largest manufacturers from each country.

For more information about the timeline, see this article.

Why are there delays and cancellations when the trade hasn’t made a decision yet?

The opening of proceedings to investigate Auxin’s solar cell production claims in Southeast Asia (Cambodia, Malaysia, Thailand and Vietnam) means an affirmative decision is possible – and any duties imposed in such a decision “will be imposed retrospectively on all shipments made from the published initiation date (April 1).” Because of this, many companies have decided to stop shipping already. (There is also a possibility that the retrospective date may go back to November 4, 2021.)

“These are not definitive duties because the ultimate duty in an anti-dumping case is determined during the administrative review process,” explained Akin Gump’s Matt Nicely. “But given the complexity of this case, we do not know at this time how a regulatory review of a specific company in China with respect to its subsidiaries or customers in Southeast Asia would be handled. The risk here is in those cash deposits retrospectively and later when those obligations become final. Even if they are reduced, they represent a potentially significant burden.”

How much of the US solar industry is affected?

SEIA trade case slide on affected sectors

The SEIA survey is an early snapshot of the damage being done to more than 200 companies as a result of the Commerce Department’s investigation (of the 200 respondents, 50 respondents work in residential solar, 100 in commercial, 100 in utility, and 20 manufacturers with some apparent overlaps .)

More than 90% of companies surveyed said the Commerce Department’s actions were having a “severe” or “devastating” impact on their bottom line. Two-thirds of companies surveyed said half of their workforce was at risk, and a third of companies said their entire workforce was at risk. SEIA estimates that the solar industry will lose 70,000 of its 231,000 jobs as a result of this petition.

The energy storage industry is also financially bound by this decision, as to be eligible for the investment deduction, storage systems must be tied to a solar project.

“On behalf of 231,000 American solar workers and thousands of American solar companies, we are calling on Commerce to immediately issue an adverse tentative decision,” said Abigail Ross Hopper, CEO of SEIA. “There is no basis for this petition.”

What is the main argument against the petition?

To prove circumvention under US law, the effort required to manufacture a product in a given country must be minor and insignificant. This means that the process of converting ingots and wafers into solar cells would have to be considered an insignificant part of the PV module manufacturing supply chain.

SEIA’s position seems difficult to prove given the importance of cell production and the billions of dollars being invested in Southeast Asia’s manufacturing base. This point was also raised by LONGi Solar’s MJ Shaio in a recent interview conducted by Solar Builder. Aside from the China-based companies, Southeast Asia-made cells are also vital for the US-based PV module manufacturers.

This chart also underscores that CSPV cells are not a “small” or “insignificant” piece of the PV puzzle.

Production of solar timeline
Source: Exawatt and SEIA

What about the domestic supply of solar modules?

Citing these entities as a circumvention and levying tariffs on CSPV cells made in Southeast Asia would not stimulate much new domestic solar panel demand in the short or even short term given the chart above and these stats:

  • Last year, less than a quarter of the range of modules was sourced from within Germany.
  • About half of all cells in US module assembly plants come from these four countries.

“Our domestic range of modules is not sufficient for the expected growth in the solar industry. This year, our module supply will be short by at least 8 GW,” said Justin Baca, Vice President of Markets and Research, SEIA, also noting that Wood Mackenzie estimates a supply gap of up to 16 GW over the next few years.

So the United States will need more facilities to make CSPV cells, but that will require a lot of capital and time — or, of course, government incentives that have stalled in Congress. The legislation, under consideration as part of the budget reconciliation, would create a robust solar manufacturing supply chain that would make the United States less dependent on overseas products.

“We have said that tariffs are not the right way to incentivize production and that it takes time and political commitment to shift production to the United States at the scale required,” Hopper said. “The countries named in the petition have been reliable trading partners and we need their products, at least in the short term, while we fight to establish a sustainable and strong manufacturing footprint here in America.”

It is also worth noting that the 20 manufacturers in the SEIA survey all said this trade decision will be devastating or severe for their business, which spans the spectrum from PV module manufacturers to shelving manufacturers.

What other domino effects are there for solar installers?

The vast majority of installers and EPCs are already seeing supply stops and delayed projects and as a result need to find an alternative supply. Residential installers and C&I solar systems who buy through distribution may not feel the direct impact yet as distributors work through inventory, but that is likely to change in the coming months.

Even if there is enough supply, it will result in a chaotic market. And keep in mind that other countries are also using CSPV cells from these Southeast Asian countries, which ties them to this uncertainty until decided otherwise.

“One thing I want to make worse than normal times, when trying to find alternative module supplies, three quarters of the industry have already received notification that there is a problem with their supply. That means everyone will rush to other suppliers who they think may not be affected, but are also imports from other countries – like a module assembly in India or Turkey if they get cells from the four countries mentioned here they also take risk. Some of it just hasn’t really leaked out yet.”

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