Chinese solar manufacturers are circumventing decade-old tariffs by assembling equipment in Southeast Asia before shipping it to the US, according to initial findings by the US Commerce Department.
The probe found that some solar cells and modules exported from Cambodia, Thailand, Malaysia and Vietnam used wafers produced in China in violation of US tariffs, the US agency said Friday in a filing.
The finding threatens to worsen trade tensions between the US and China -- the world’s two biggest economies -- as Democrats and Republicans both work to boost domestic manufacturing of solar equipment to reduce reliance on imports from Southeast Asia. Other industries including steel are closely watching the case because it could set a precedent for future investigations, essentially making it easier for tariff proponents to seek their expansion.
A final determination is likely months away, and penalties are unlikely to immediately sting the US industry given President Joe Biden’s decision to freeze new tariffs for solar imports from the four countries under investigation through June 2024. However, the preliminary findings are likely to stoke calls in Congress to do away with that tariff moratorium.
Shares of solar-panel manufactures with operations in Southeast Asia fell. Canadian Solar Inc. declined 2.7% before the start of regular trading in New York.
The Coalition for a Prosperous America, an advocacy group that backed the investigation, called on Biden to withdraw the tariff moratorium in light of the findings, saying it “gives Chinese manufacturers a free pass to illegally circumvent” the duties for 24 months.
The Commerce Department probe was announced in March, after small California manufacturer Auxin Solar Inc. alleged that some panel makers were circumventing duties on China by completing manufacturing in Cambodia, Malaysia, Thailand and Vietnam. Those countries now constitute about 80% of annual US panel imports. The mere existence of the investigation initially spurred some manufacturers to slow or stop shipments to the US.
“The only good news here is that Commerce didn’t target all imports from the subject countries,” Abigail Ross Hopper, chief executive officer of the Solar Energy Industries Association, said in a statement. “Nonetheless, this decision will strand billions of dollars’ worth of American clean energy investments and result in the significant loss of good-paying, American, clean energy jobs.”
The Commerce Department found several companies operating in Cambodia, Thailand, Malaysia and Vietnam were not circumventing tariffs. They include New East Solar (Cambodia) Co. Ltd., Hanwha Q Cells Malaysia Sdn. Bhd., Jinko Solar Technology Sdn. Bhd., Jinko Solar (Malaysia) Sdn. Bhd. and Boviet Solar Technology Co. Ltd.