China: Solar Firms Face More Penalties

China

It has been a tough spring for China’s solar power industry and the summer is not looking any better. In May, Chinese solar companies were implicated in a hacking scheme allegedly run by the People’s Army. Tuesday, the Commerce Department levied steep tariffs against them for taking government subsidies to undercut U.S. competitors. Come July 25, Chinese solar firms could face more trade penalties for dumping below-cost goods on the American market.

The roots of the solar trade war go back to at least 2011 when the American subsidiary of German-owned SolarWorld first complained to the Commerce Department that Chinese competitors were not playing fair. Commerce investigated the complaint and agreed, ruling that the Chinese companies were using subsidies from their government to cut prices and take away business from SolarWorld and other U.S. companies. To level the playing field, the U.S. slapped tariffs of 24 to 36 percent on solar cells imported from China.

Rather than pay the tariffs, Chinese manufacturers seized the advantage of a loophole in the Commerce Department order. It only covered individual solar cells, not the panels that the cells go in to. By outsourcing solar cell fabrication to foreign suppliers, Chinese panel builders could still accept government subsidies and export finished panels to the U.S. without paying the tariff.

Subsidies may have been just part of the assistance Chinese panel makers were getting from their government. A hacking ring operated by the People’s Army broke into SolarWorld’s computers in 2012 and stole company secrets, according to a federal indictment announced May 13. Along with technical data, they allegedly accessed SolarWorld’s marketing, financial and legal strategies.

In December (before it was aware of the alleged spying), SolarWorld filed another complaint with Commerce claiming that the Chinese tactic of outsourcing cell fabrication violated the spirit of the 2012 tariff order. Commerce investigated and on Tuesday issued a new tariff order on Chinese companies.

The tariffs vary from company to company. Suntech Power got hit the hardest with a 35 percent surcharge on its panels. Most other panel makers in China will pay nearly 27 percent. Trina Solar will pay an 18.5 percent tariff.

China said the Commerce Department’s decision ignored facts and violated world trade regulations. It also called the decision an attempt to protect U.S. companies that were unable to compete because of their own problems.

Chinese solar firms may face more bad news July 25 when Commerce will announce whether to impose penalties for dumping. Unlike tariffs for accepting subsidies, dumping tariffs penalize companies for selling their goods at less than the cost it takes to make them. The distinction is subtle, but it could double the tariffs on Chinese panels.

Not everyone in the U.S. is pleased by the tariffs. On one side is the Coalition for American Solar Manufacturing, an industry group of 250 companies that employ 21,000 Americans. They favor the tariffs because they protect well-paying U.S. jobs.

The other side is led by the Coalition for Affordable Energy. It represents solar energy advocates and companies that install solar panels on homes and businesses. They say Chinese competition keeps solar energy affordable and will grow the market. In the face of more tariffs against Chinese solar firms, they worry that consumers are the ones who will pay the penalty.

By J.W. Huttig

Sources:
New York Times
Forbes
Reuters
Oregonlive.com

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