By Amara Lopez*
President Trump’s decision on January 22, 2018 to implement tariffs on imported solar cells and modules left the U.S. solar energy industry divided. As always with such decisions, there are winners and there are losers.
The controversy began on April 26, 2017, when solar panel manufacturer, Suniva Inc., filed a petition with the International Trade Commission (ITC). Suniva filed for bankruptcy prior to this petition. Suniva alleged in its case that it suffered serious injury from crystalline silicon solar PV cells and modules imports and sought global safeguard relief from the ITC.[i] Another company, SolarWorld Americas, joined as co-petitioner on May 25.[ii]
The International Trade Commission is a bipartisan organization that researches complaints regarding trade disputes with the U.S. and submits its determinations to the President, who then has the final say. The ITC accepted Suniva’s case on May 17, 2017, after Suniva amended their petition, and “instituted investigation No. TA-201-75 pursuant to section 202 of the Trade Act of 1974 (“the Act”) to determine whether crystalline silicon photovoltaic (“CSPV”) cells … are being imported into the United States in such increased quantities as to be a substantial cause of serious injury… to the domestic industry”[iii].
Noting the “extraordinarily complicated” situation, the ITC took its maximum allotted 180 days to make an injury determination, and on September 22, 2017, they ruled in favor of Suniva[iv]. Concluding unanimously that the U.S. solar panel industry has “suffered harm from the global solar manufacturing industry,” the ITC moved to the remedy phase of the investigation to prepare recommendations for the President[v].
Under the Act, the President is authorized to take action in the form of tariffs based on an “ITC determination that increased imports are a substantial cause of serious injury to domestic producers”[vi]. On January 22, 2018, the Office of the U.S. Trade Representative issued a press release. Ambassador Robert Lighthizer made the following statement with an undeniably protectionist appeal:
Upon receiving these recommendations, my staff and I conducted an exhaustive process which included opportunities to brief in person and through public comments, public hearings, and meetings with senior representatives. Based on this information, the Trade Policy Committee developed recommendations, which the President has accepted. The President’s action makes clear again that the Trump Administration will always defend American workers, farmers, ranchers, and businesses in this regard.
It is worth noting that Suniva is majority-owned by a Chinese company based in Hong Kong, Shunfeng International Clean Energy Ltd. The company owns 64 percent of Suniva[vii]. SolarWorld Americas is a wholly owned subsidiary of SolarWorld, its German parent company, an insolvent.[viii]
In November, the ITC submitted its remedy recommendations. The import tariff suggestions varied from commissioner to commissioner but were, on the whole, larger tariffs than what the President ultimately passed.[ix] The safeguard tariffs on imported solar cells and modules will begin at thirty percent, effective immediately, then decrease by five percent annually until it tapers down to fifteen percent in the fourth year.[x] The first 2.5 gigawatt of imported cells are excluded from the additional tariff.[xi] NAFTA countries Canada and Mexico were not excluded from the tariffs.
“When the Commission makes an affirmative injury determination in a global safeguard investigation, it is required to make certain additional findings under the implementing statutes for the North American Free Trade Agreement (NAFTA)” and other international trade agreements between U.S. and foreign countries. The ITC found that both Canada and Mexico accounted for substantial shares of total imports and both contribute “importantly” to the serious injury caused by imports.[xii] Canada seems to disagree. On Wednesday, February 7, three Canadian companies that manufacture CSPV sued the U.S. through the United States Court of International Trade, a court set up to handle disputes under NAFTA.[xiii] The lawsuit alleges the tariff is “unlawful as applied to plaintiffs, and inflicts grave and irreversible harms on them” and thus the Canadian companies “seek a declaration that the proclamation violates the Trade Act and the NAFTA Implementation Act and an injunction prohibiting its enforcements against plaintiffs.”[xiv]
Additionally, South Korea, Taiwan, and the European Union have filed separate suits with the WTO against the U.S., with many expecting China to do the same.[xv] It seems that Lighthizer prepared for this possibility when he asked the ITC whether trade-related harm to the petitioners was caused by “unforeseen developments.”[xvi] This foreseeability determination is material for a WTO ruling. “If the events that led to a finding of harm were foreseeable, or if the U.S. didn’t make an affirmative determination that they were not foreseeable, precedent says that the WTO would likely rule in favor of the challenger.”[xvii] The ITC replied that “the surge in Chinese solar production that led to the ITC’s finding of harm could not have been predicted.”[xviii]
The last time the Act was invoked was in 2002 under President George W. Bush, in order to protect certain U.S. steel products.[xix] After facing challenges from the WTO and threats of retaliation from the European Union, the U.S. withdrew the tariffs in 2003.[xx] Time will tell if President Trump’s tariff will suffer the same fate.
The Act does require that any action taken by the President “must facilitate a positive adjustment to import competition and provide greater economic and social benefits than costs.”[xxi] This is the heart of the debate. Beyond the negative impact these tariffs will have on foreign manufacturers, many predict this will have a negative impact on domestic jobs.
Pitted against the manufacturers’ interests are those of the installers. “Solar Energy Industries Association predicts 23,000 jobs will be lost due to the tariffs – existing and ones that would have been created.”[xxii] Only six percent of panels in the world were manufactured in North America and only 14 percent of solar jobs in 2016 were manufacturing jobs; American production jobs that this tariff seeks to enforce make up a “tiny slice of America’s booming solar business.”[xxiii] To get more specific on what types of manufacturing jobs are present in the U.S., the Solar Energy Industries Association reports that prior to this decision, there were 38,000 but “only 2,000 of which made cells and panels”[xxiv]. Economy analysts predict that some of the cost of these tariffs will be passed on to the consumer and hurt solar panel sales domestically[xxv].
On the other hand, the impact may not be as dramatic as some fear. MJ Shiao, head of Americas research for market analysis and research firm Greentech Market Research, said, “Essentially, this has a meaningful but not destructive impact on solar installations, and at the same time it’s not exceptionally encouraging for domestic solar cell and module manufacturing.”[xxvi] GTM Research forecasts an eleven percent net reduction in installations as a result of the new tariffs.[xxvii]
Additionally, due to the ITC’s months of investigation, the industry had plenty of time to prepare for the import duties many expected to see, and thus insulated itself from full impact of the tariffs, at least for the first year. “Fourth-quarter deliveries from China were almost 11 times higher than in the first nine months of 2017” and manufacturers “hauled panels and cells across the border from Mexico, Canada and other countries to beat the import duties.”[xxviii]
Finally, the President’s tariff was below the statutory maximum of fifty percent.[xxix] With all of that in mind, it is “unlikely the tariffs are severe enough to reboot the U.S. solar cell and module manufacturing sector to their desired extent.”[xxx] Analysts question whether four years of tariffs are enough to really encourage investments domestically.[xxxi]
In a world where companies and industries are internationally interdependent, an attempt to protect certain domestic jobs will adversely impact others. The application of Section 202 of the Trade Act of 1974 will undeniably be different than it was when it came into being over thirty years ago. The international trade climate has developed since then. Time will tell what impact this tariff will have or whether it will be able to stand up against those who have filed suit since it went into effect.
*Amara Lopez is a Junior Editor on MJEAL. She can be reached at firstname.lastname@example.org.
The views and opinions expressed in this blog are those of the authors only and do not reflect the official policy or position of the Michigan Journal of Environmental and Administrative Law or the University of Michigan.
[i] John Fitzgerald Weaver, International Trade Court Rules Suniva and US Solar Panel Industry Injured, electrek.co (Sept. 22, 2017, 12:36 PM), https://electrek.co/2017/09/22/international-trade-court-itc-suniva-tariff-solar-panels/.
[ii] Solar Energy Indus. Ass’n, Fact Sheet – Suniva Trade Case – the Solar Industry’s View, (June 2017), https://www.seia.org/sites/default/files/Suniva-Trade-Case-Membership-Factsheet_SEIA_6-15-2017-final.pdf.
[iii] U.S. Int’l Trade Comm’n, Investigation No. TA–201–75, Vol. 82 Fed. Reg. 25,331, 25,331-31, (June 1, 2017), https://www.usitc.gov/trade_remedy/731_ad_701_cvd/investigations/2017/Solar%20Panels/Safeguard/cspv_-_institution.pdf.
[iv] Id. at 25331.
[v] U.S. Int’l Trade Comm’n, Crystalline Silicon Photovoltaic Cells (Whether or Not Partially or Fully Assembled into Other Products) News Release, Sep. 22, 2017, https://www.usitc.gov/press_room/news_release/2017/er0922ll832.htm.
[vi] Exec. Office of the President of the U.S., Section 201 Cases: Imported Large Residential Washing Machines and Imported Solar Cells and Modules – Fact Sheet (2018), https://ustr.gov/sites/default/files/files/Press/fs/201%20Cases%20Fact%20Sheet.pdf.
[vii] Joe Ryan, Little-Known Lender’s Stand Threatens a $29 Billion Solar Market, Bloomberg, (Sep. 18, 2017, 7:01 PM), https://www.bloomberg.com/news/articles/2017-09-18/little-known-lender-s-stand-threatens-a-29-billion-solar-market.
[viii] Solar Energy Indus. Ass’n, supra note 2.
[ix] U.S. Int’l Trade Comm’n, Investigation No. TA-201-75 Crystalline Silicon Photovoltaic Cells (Whether or not Partially or Fully Assembled into Other Products) Vol. 1: Determination and Views of Commissioners, Publication 4739 (November 2017), https://www.usitc.gov/publications/safeguards/pub4739-vol_i.pdf.
[x] Exec. Office of the President of the U.S supra note 6.
[xii] U.S. Int’l Trade Comm’n, supra note 5.
[xiii] John Siciliano, Lawsuits Start Tumbling in as Trump’s Solar Tariffs go into Effect, Washington Examiner, (Feb. 8, 2018, 5:17 PM), https://www.washingtonexaminer.com/lawsuits-start-tumbling-in-as-trumps-solar-tariffs-go-into-effect/article/2648562.
[xiv] Silfab Solar, Inc. et al v. United States of America, et al, Case No. 18-00023, Complaint, U.S. Court of Int’l Trade, 4, (Feb. 7, 2018), https://www.courthousenews.com/wp-content/uploads/2018/02/Canadian-Solar-Complaint.pdf.
[xv] Timothy Cama, Canadian Solar Companies Sue Trump Over Tariffs, The Hill, (Feb. 8, 2018, 2:42 PM), http://thehill.com/policy/energy-environment/372980-canadian-solar-companies-sue-trump-over-tariffs.
[xvi] Brigham A. McCown, Trump’s Solar Panel Tariff Decision Leaves Almost Everyone Unhappy, Forbes, (Jan 24, 2018, 2:39 PM), https://www.forbes.com/sites/brighammccown/2018/01/24/trump-solar-decision-leave-almost-everyone-unhappy/#76784ecc160b.
[xix] Jean Heilman Grier, USITC Launches Global Safeguard Investigation, Djaghe Int’l Trade, (May 31, 2017), https://trade.djaghe.com/?p=4060.
[xxi] Exec. Office of the President of the U.S., supra note 6.
[xxii] Nathaniel Meyersohn, How Trump’s Solar Panel Tariffs Could Threaten Thousands of American Jobs, CNN Money, (Jan 23, 2018, 4:57 PM), http://money.cnn.com/2018/01/23/news/economy/solar-energy-jobs-trump/index.html.
[xxiv] McCown, supra note 16.
[xxv] Meyersohn, supra note 20.
[xxvi] Julia Pyper, New Tariffs to Curb US Solar Installations by 11% Through 2022, Green Tech Media, (Jan. 23, 2018), https://www.greentechmedia.com/#gs.=Jq1r1c.
[xxviii] Chris Martin, China Flooded U.S. With Solar Panels Before Trump’s Tariffs, Bloomberg Markets, (Feb. 16, 2018, 2:00 PM), https://www.bloomberg.com/news/articles/2018-02-16/china-flooded-u-s-with-solar-panels-before-trump-s-tariffs.
[xxix] McCown, supra note 16.
[xxx] Pyper supra note 26.
[xxxi] Lynn Doan & Brian Eckhouse, Why Trump Is Taxing Solar Panels Imported by U.S., Bloomberg Politics, (Jan. 23, 2018, 11:09 AM), https://www.bloomberg.com/news/articles/2018-01-23/why-trump-is-taxing-solar-panels-imported-by-u-s-quicktake-q-a.