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Trade Barrier on Solar Cells and Modules to Significantly Impact US Solar Industry

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Trade Barrier on Solar Cells and Modules to Significantly Impact US Solar Industry On January 22, 2018, U.S. Trade Representative (USTR) Robert Trade Barrier E. Lighthizer announced that President Donald Trump had on Solar Cells decided to impose safeguard remedies, or temporary trade barriers, with respect to imports of crystalline silicon photovoltaic and Modules cells and modules — key components for solar panels. The to Significantly president’s decision follows a petition for remedies brought by the U.S. manufacturers Suniva, Inc. and SolarWorld Americas, Impact US Solar Inc. in April 2017 and subsequent recommendations by the Industry International Trade Commission and the Office of the USTR. Given the significant impact that these The Solar Safeguards Case Contributing Partner safeguard remedies will have on the According to data gathered by the market conditions for solar cells and Lance T. Brasher / Washington, D.C. commission, annual U.S. consumption of modules in the U.S., stakeholders in the solar cells and modules in new solar power solar industry should be prepared to installations increased from 2.7 GW in analyze and adjust to the remedies that Associate 2012 to 13.5 GW in 2016 — a nearly 400 will be imposed. percent increase. Over the same period, the Luke A. Meisner / Washington, D.C. average price of solar cells and modules Background in the United States fell by roughly a third Section 201 of the Trade Act of 1974 due to both declining costs and competi- authorizes the imposition of temporary tion from imports. In 2012, solar power trade barriers to protect U.S. industries represented 9 percent of all newly installed that are injured — or threatened with electricity-generating capacity in the serious injury — by increased imports. United States. By 2016, that figure had These safeguards are intended to protect grown to almost 40 percent, with more the domestic industry by reducing the solar power capacity installed in 2016 than flow of global imports, thereby relieving any other electricity generator, including pressure on U.S. producers and giving natural gas, wind and coal. Significantly, them time to “make a positive adjustment however, the vast majority of the increase to import competition.” Unlike other in U.S. consumption of solar cells and trade remedies, safeguards do not require modules has been supplied by lower-priced a finding that foreign producers and imports. In 2016, imports comprised over exporters have engaged in unfair trade 95 percent of all solar cells and modules practices. However, the level of injury consumed in the United States. experienced by the U.S. industry must be more significant. Potential safeguard In April 2017, based on these trends, remedies that could be imposed include, Suniva and SolarWorld filed a petition with This article is from Skadden’s 2018 Insights. but are not limited to, increased tariffs, the International Trade Commission for This memorandum is provided by Skadden, quotas, tariff-rate quotas (TRQs), import safeguards regarding imports of solar cells Arps, Slate, Meagher & Flom LLP and its licenses and international negotia- and modules. The commission later deter- affiliates for educational and informational tions. While the president is required to mined that U.S. producers of solar cells purposes only and is not intended and consider recommendations for safeguards and modules had been injured as a result should not be construed as legal advice. from the commission and USTR, he is not of increased imports of such products into This memorandum is considered advertising under applicable state laws. held to them and can choose other forms the United States. Three commissioners of remedies or decide not to impose any recommended in a report to President Four Times Square relief. Remedies are put in place for four Trump on November 13, 2017, that a TRQ New York, NY 10036 212.735.3000 years, with the possibility of an extension. with tariffs of up to 30 percent be applied Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates skadden.com Trade Barrier on Solar Cells and Modules to Significantly Impact US Solar Industry to imports of solar cells and that a flat- On January 22, 2018, President Trump may want to consider acting quickly to rate tariff of up to 35 percent be applied approved applying safeguard tariffs for obtain products before the tariffs begin to imports of solar modules. A fourth the next four years with the following to apply. commissioner recommended that imports terms: The remedies will include a tariff be subject to a maximum quota of 8.9 GW of 30 percent in the first year, 25 percent – Consumers are expected to face higher and to a licensing system whereby each in the second year, 20 percent in the third prices and potential supply shortages for import license is auctioned at a minimum year and 15 percent in the fourth year. solar cells and modules. This may lead of $0.01/W. Additionally, the first 2.5 GW of imported them to re-evaluate the viability of their solar cells will be exempt from the safe- planned solar installation projects and The USTR then solicited comments guard tariff in each of those four years. perhaps cancel or delay projects. The from interested parties and held a public Solar Energy Industries Association hearing on the appropriate remedy that Implications recommends that consumers estab- should be imposed in order to make its lish relationships with a diverse set of President Trump’s decision to impose own recommendation to the president. In suppliers to ensure an adequate supply safeguard tariffs will have a significant addition, the USTR asked the commission of panels, including manufacturers in impact on the solar industry over the next for additional information regarding “any the U.S. and in any countries that are several years. Some industry analysts unforeseen developments that led to the excluded from the safeguards. have predicted that safeguard tariffs will articles at issue being imported into the result in a decrease in the consumption of United States in such increased quanti- – Investors and other sector participants solar cells and modules and the cancel- ties as to be a substantial cause of serious may be presented with new opportuni- lation or delay of planned solar projects injury,” which has resulted in success- ties following increased prices and during this time period. As a result, ful challenges of prior U.S. safeguards tightening supply conditions that will companies and investors should begin at the World Trade Organization. The likely be created in the U.S. market. taking steps to reduce the impact on their commission issued a supplemental report The imposition of safeguard remedies businesses and potentially even take on December 27, 2017, in which it stated may cause a spike in demand for advantage of the changed market condi- that the “unforeseen developments” U.S.-manufactured solar products and tions. Key players in the solar industry included the fact that “the government of imports from excluded countries or should consider the following as a result China implemented a series of indus- for substitute products not subject to of the remedies: trial policies, five-year plans, and other the safeguards, such as thin-film solar panels that do not use solar cells and government support programs favoring – Because the first 2.5 GW of imported modules and are thus outside the scope renewable energy product manufacturing, solar cells will be exempt from the safe- of the Section 201 investigation. including [solar cells and modules].” guard tariffs, importers of solar cells Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates 2 .
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