Preliminary Anti-Dumping Duties For Chinese Solar Modules: Its Connection From The Past To The Future
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This past week, U.S. imposed tariffs at a range of 31 to 250 percent on Chinese-made solar products to aid domestic (U.S.) manufacturers beset by foreign competition, but many critics believe that this decision may end up raising prices and hurting the U.S. renewable energy industry. I personally have several issues or question with regard to this range of tariffs, to be addressed in this post.
FACTS
The purpose of imposing this range of tariffs, otherwise known as the preliminary anti-dumping duties, is because the U.S. Department of Commerce ruled that Chinese manufacturers sold solar panels in the U.S. at prices below the cost of production. This decision is meant to provide a boost to the U.S. solar manufacturing industry. In the preliminary determination, the U.S. Department of Commerce (DOC) set duties at 31.14 % for Trina, 31.18 % for 59 Chinese solar manufacturers (including Yingli Green Energy, LDK Solar, Canadian Solar, Hanwha Solar One, JA Solar Holding, and Jinko Solar) that chose to participate in the investigation, 31.22 % for Suntech, and 250 % for those Chinese solar manufacturers that chose not to participate at this investigation. The tariffs will be retroactive and be applied to panels that were shipped from as far back as about the middle of February, 2012. A final determination may still be made, so the tariff rates may be adjusted in the future. But the tariff rates resulting from this ruling were much higher than many had anticipated. This was the second of two duties/tariffs set by the DOC that stemmed from a trade complaint filed by SolarWorld’s American subsidiary. DOC’s final determinations are expected to be made for both tariffs in late July of 2012 and its announcement may reach the public as late as September of 2012.
Previously, in March, the DOC announced a preliminary determination that set relatively modest countervailing duties that essentially measure the level of subsidies and benefits coming from the Chinese government to Chinese crystalline silicon panel manufacturers: 2.9% for Suntech, 4.73% for Trina, 3.59% to all others. But now, added by the second duty/tariff mentioned in the paragraph above, Chinese solar panels will be much more expensive. The ruling could add about $0.30 per watt to the price of a panel. So, Chinese companies are expected to set up workarounds like tolling (tolling is expected to add only about $0.06 to $0.08 per watt) in which they send panels through another country, or even set up remote manufacturing facilities outside their country.
Below, I have a video clip from Suntech Power, to help better understand how Suntech PV cells and modules are made, below:
UNDERSTANDING
If you are as ignorant as I was about the international trade policy, this will help to clarify the situation: To search for better understanding of the DNA of history of U.S. Tariffs, I obtained help from Wikipedia, and found that tariffs were the largest source of U.S. federal revenue until the Federal income tax began after 1913. The history of U.S. tariffs went as far back as Tariff of 1790, established under the guidance of Alexander Hamilton;he calculated that the U.S. required sufficient revenue in order to maintain $3 million per year in operating cost and repayment for the $75 million foreign and domestic debt. Therefore, Hamilton proposed an increase in the average tariff rate of 5% to between 7 and 10%, with addition of numerous items, and the passage of an excise tax. Congress refused to pass the excise tax, but James Madison successfully steered the tariff increases through the legislature. In light of our current national debt rate and the relationship between President and Congress, one is amazed at how often history repeats itself. I am no longer surprised at the dramatic increase of tariffs (be it solar or otherwise) if I simply remember how much our current national debt rate is. But one does need to ask if similar rate of increase in tariff is also occurring in other industries.
Secondly, with the help from Encyclopedia Britannica and Wikipedia, essentially, in international trade ( if company a comes from country A and company b comes from country B), it is all right for company a to sell at below the cost of production in country A (which often happens when there is an over supply of certain products, as what would happen during sales and clearances) , but it is not all right for company a to sell at below the cost of production in country B (henceforth the existence of tariffs) in order to protect merchants/manufacturers of similar products from country B. So, the existence of tariffs would benefit the local manufacturers but not necessarily local consumers.
CONCERNS/QUESTIONS/SUGEESTIONS
I have several concerns/issues/questions regarding this decision/tariff range:
- The range from about 31% to 250% seems rather wide. The high end (250%) reserved for Chinese solar manufacturers that did not participate in this investigation: will this unusually high tariff rate result in preventing other Chinese manufacturers from ever considering any future sells to U.S. while providing special protection for Chinese manufacturers that have already participated in the current investigation with U.S. ?
- The fact that this tariff will be retroactive as far back as February of 2012: will this decrease the desirability/amount of future international trades with U.S. from other nations ?
- How are these rates determined ? I had a tough time obtaining the information regarding how these rates were set due to its proprietary information status. Is it possible for the decision for these rates to be more transparent and be available to public?
- Assuming we are all cooperative human beings trying to optimize our earthly resources, will it be possible for the Chinese manufacturers to work out deals with the US manufacturers by transporting the solar cells (which takes up most of the manufacturing cost of any solar module) to U.S. to be assembled into its modular forms in U.S. plants so to help reduce the tariffs. In so doing, this will also help to reduce the transporting cost of the frames and various other components of the solar modules. U.S., in this scenario, will benefit from increased local jobs for assembling solar panels in U.S.
- In light of our globalized economy and existence of tolling (mentioned above under FACTS), it is questionable how much revenue will truly be generated from this tariff.
- Will this tariff increase the cost for American consumers and reduce the competitiveness of U.S. solar industry rather than simply boosting U.S. solar manufacturing industry in the future ?
I hope U.S. Department of Commerce will carefully weigh all of these issues before final determination later this year. Much remains to be seen. I welcome any of your questions/discussions/comments/concerns/suggestions here at Sun Is The Future (of http://sunisthefuture.net) via sunisthefuture@gmail.com
~have a bright and sunny day~
Gathered, written, and posted by sunisthefuture-Susan Sun Nunamaker
Any comments and suggestions are welcomed at sunisthefuture@gmail.com
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