By: Stacy J. Ettinger, Elias B. Hinckley, and James R. Wrathall
As we previously reported, on September 22, 2017, the U.S. International Trade Commission (“ITC”) found that increased imports of crystalline silicon photovoltaic (“CSPV”) cells and modules have seriously injured (economically harmed) U.S. solar manufacturers. The four ITC Commissioners have now announced their separate recommendations for how to alleviate or “remedy” that economic injury. Remedies, such as tariffs or quotas, normally can be imposed for a maximum of four years.
The President will have the final say on whether to impose a remedy, and if so, the form, amount, and duration of the remedy. There is speculation in Washington that the President’s remedy decision could be announced in December.
The stakes are high. Industry experts believe that tariffs at the levels originally requested by Suniva could massively impede the economic health and growth of U.S. downstream users and consuming industries, more than doubling the costs of some solar projects and putting tens of thousands of jobs at risk. Industry experts believe that imposition of tariffs at the levels recommended by the Commissioners could potentially have less of a draconian impact. Public comments on remedy issues for the President’s consideration may be submitted before November 20, 2017.
As described below, the Commissioners’ recommendations range from 10-35 percent tariffs on cell and module imports to defined quotas on imports of CSPV products. As a result of the ITC’s earlier injury findings, imports from free trade agreement (“FTA”) countries Mexico and Korea would be subject to imposition of remedies while imports from other FTA countries, including Canada, would not.
Chair Rhonda Schmidtlein recommends an in-quota tariff rate of 10 percent and an in-quota volume level of 0.5 gigawatts for imports of cells. Imports of cells that that exceed the in-quota 0.5 gigawatt volume level would be subject to a 30 percent tariff. Commissioner Schmidtlein also recommends a 35 percent tariffs on CSPV modules, to be reduced in each subsequent year.
Vice Chair David Johanson and Commissioner Irving Williamson recommend a 30 percent tariff on CSPV cell imports in excess of 1 gigawatt. In each subsequent year, the tariff rate would decrease and the in-quota amount would increase. For imports of CSPV modules, Commissioners Johanson and Williamson recommend a 30 percent tariff, to be reduced in each subsequent year.
Commissioner Meredith Broadbent recommends a quantitative restriction (quota) on imports of CSPV products into the United States, including cells and modules. The first year import quota would be set at 8.9 gigawatts, to be increased by 1.4 gigawatts in each subsequent year.
Commissioner Broadbent also recommends the President administer these quantitative restrictions through the sale of import licenses at public auction at a minimum price of one cent per watt. The revenue generated by the sale of import licenses would be used to assist domestic CSPV product manufacturers, including for purchase of production equipment, hiring of production workers, and R&D.
The ITC will send its final report to the President, including the Commissioners’ remedy recommendations, by November 13, 2017. The President has up to 60 days – and complete discretion – to determine the form, amount, and duration of the remedy.
The Commissioners’ remedy recommendations, if adopted by the President, would likely result in less impact on final module pricing than Suniva had originally requested. For example, the initial pricing impact of a 30 percent tariff would likely be in the range of 10 to 15 cents per watt on CSPV modules. This amount would likely decline as the price of modules drops and the tariff rate is reduced over time. Additionally, some CSPV manufacturing might shift to free trade agreement countries not included in the injury finding, which could further pull prices lower over time.
Public comments on remedy issues for the President’s consideration are due to the Office of the United States Trade Representative (“USTR”) on November 20, 2017. Rebuttal comments are due November 29, 2017. USTR will hold a public hearing on December 6, 2017.
For more information on the solar proceeding, including information on filing comments on remedy issues, contact Stacy Ettinger, Elias Hinckley, or Jim Wrathall of K&L Gates.