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Section 201 Solar Trade Case Questions Answered

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Matthew Nicely (left) is a lawyer with Hughes Hubbard and Reed representing the U.S. Solar Energy Industries Association (SEIA) against petitioners, Suniva and Solar World, who seek damages from the International Trade Commission for injuries caused by low-cost imported solar cells and modules. Last week, he and colleagues Abby Hopper from SEIA and Dan Shugar from NEXTracker participated in an exclusive Renewable Energy World webcast to explain what happens next with the Section 201 Trade Case.

Below please find Nicely’s answers to the questions that were asked during the webcast but were not answered during the presentation. Perhaps one of these is your question, too.

Q: Excluding US and Canadian module supply, are any panels, poly, mono, etc, exempt from ITC ruling?

Nicely: No.

Q: Does this 78-cent price floor include the 40-cent tariff, making the min price 78 cents or $1.18 (tariff + floor price)?

Nicely: According to Suniva, the minimum price includes the cost of the tariff.  They now propose a 32-cent tariff and a 74-cent minimum price, and clarify that this means the minimum import value would be 42 cents, because once the tariff is applied, the price would be 74 cents.  (In our view, this is not only illegal, but unworkable.)

Q: Also, are these prices retail MSRP or wholesale?

Nicely: Not clear, actually; as mentioned above, they say that the minimum price includes the tariff, but they don't indicate how they would enforce the minimum price in the market, or to whom it would apply.  But, because it is a price from an importer, the likelihood is that it's wholesale, not retail. 

Q: Mathew, can any other U.S. company fight or file against this potential ruling?

Nicely: Yes, please file any comments by the deadline for post hearing remedy briefs, which is October 10. 

Q: Several related questions:  Does the remedy have to include a time or measure by which the remedy would be removed?  Does the cost-benefit have to include the additional cost to customers that a tariff would impose?

Nicely: Petitioners are proposing 4 years, after which it could be renewed under U.S. law (though this presents complicated issues under WTO law).  Yes, the cost benefit analysis should include the cost to the customer.  

Q: Does recommendation have to unanimous to go to president? What happens if there's a remedy vote that's tied or that is 3 against to 1 or etc. Does the recommendation go forward, stall, back to the drawing board?

Nicely: Each of the commissioners could have a different remedy recommendation.  This has happened in the past (several of the products in Steel 201 had multiple remedy recommendations because the commissioners could not agree). 

Q: Are imports from all countries affected?  It was alluded that maybe some countries are excluded.

Nicely: Safeguard measures are supposed to be global, but we agreed with our FTA partners (all except Korea and Mexico) to possibly allow them an exclusion.  This is the Commission voted Canada, Singapore, and several other FTA partners do not injure the domestic industry and are therefore likely to be exempt from the Commission's remedy recommendation.  But, the President can decide to ignore this recommendation and make the relief truly global. 

Q: Do you have a chart showing how many jobs each sector will lose?

Nicely: This was in the presentation. [Editor’s note, access the archive here.]

Q: Would ITC recommend tariff and quota at the same time?  Or one or the other?

Nicely: They can do both.

Q: Would ITC consider different pricing per solar sub-sector (residential, DG and utility scale)?

Nicely: Maybe.

Q: Does anyone on the commission have past dealings with the coal industry and could argue by increasing solar tariffs it would increase jobs in the coal industry?

Nicely: Unclear.

Q: Why was thin film carved out?

Nicely: Presumably because it would have damaged their injury case.  First Solar is very successful, and would have undermined their ability to prove serious injury.

Q: Can the ITC remedy recommendation and White House ruling be retroactive? Or will it only apply to cells/modules imported into the US after the President's ruling?

Nicely: It should only apply to those that come in after the President announces the relief, but there have been cases in which the Commission has proposed to apply to unliquidated entries.

Q: Is there a chance for high efficiency cells (mono-PERC or HIT) to receive a lower import duty or will it be flat for any crystalline cell type/bin?

Nicely: If applied, it will likely be flat, but we don't know yet for sure.

Q: How you do feel the current trade case with Boeing could impact this case? Boeing requested a tariff of 79 percent, but the ITC has recommended a 219 percent tariff imposed. Do you fear that something similar will happen?

Nicely: Not relevant at all. That's a countervailing duty case, addressing subsidization by one foreign government.  Very different law from Section 201 safeguard.

Q: Who gets the tariff money?

Nicely: Customs and Border Protection collects and it goes to the US Treasury.

Q: Does executive branch have to follow the 50 percent maximum tariff?

Nicely: Yes.

Q: How is the 50 percent ad valorem rate calculated? Is it done on a per shipment basis? Does this mean that the 78-cent limit is not a possible legal outcome?

Nicely: Ad valorem duties are applied to the customs value of the product upon entry through Customs at the border.  Yes, if per watt rate or a minimum price is imposed that exceeds 50 percent ad valorem, it would not be permitted under the statute.

Q: What's the difference between an import licensing fee and a tariff?

Nicely: The fee we have proposed could go into a separate account that is dedicated for disbursal to the cell and module industry. A tariff is collected by the Customs Service, and would go into the US Treasury and be more difficult to disburse under current law.  

Q: Where would monetary relief come from for the domestic industry? Would a small tax on imports with carryover funds to Domestics be the easiest mechanism for both sides to agree upon and for the president to approve?

Nicely: The President has many statutes on which he can rely to find authority to do this.  However, if there is question about his authority under one or more of the laws we have identified, he can ask Congress for the funding.  One alternative SEIA has proposed is Section 1102 of the 1979 Trade Act, which contemplates a license fee that could be collected on imports and distributed to the industry.  SEIA thinks this should be considered, because what the industry needs is capital, not trade relief.

Q: How does Section 201 impact small (resi), medium, and large scale developers, respectively?

Nicely: This was in the presentation. [Editor’s note, access the archive here.]

Q: Is it not self-evident the trade restrictions benefit those companies that manage to sell product here from the foreign market with higher prices overall. Not the domestic industry?

Nicely: If there is a market to sell at those higher prices (i.e., if the increase in price does not eliminate demand), then yes, it would benefit the exporters.  It could also mean that domestic prices could increase, but not if the industry does not address its quality and service failures.

Q: Regarding SEIA's proposed remedies (i.e., assistance programs), how will these programs funded (in other words, where is money from)?

Nicely: The President has many statutes on which he can rely to find authority to do this.  However, if there is question about his authority under one or more of the laws we have identified, he can ask Congress for the funding.  One alternative SEIA has proposed is Section 1102 of the 1979 Trade Act, which contemplates a license fee that could be collected on imports and distributed to the industry.  SEIA thinks this should be considered, because what the industry needs is capital, not trade relief.

Q: So, with statue restricting ad valorem to 50 percent is $0.40 cell tariff legally impossible?  Could it still happen regardless?

Nicely: In our view the 40 cent/watt tariff is illegal.  It should not happen, and if it does SEIA, exporters, and importers will fight it. 

Q: If the Tariff is approved how much of a price increase is expected on residential installations?

Nicely: Unclear.  This is likely to depend on each company's willingness to reduce profits and their ability to pass on the costs. 

Q: What is the likelihood that SEIA's proposed remedy will be approved/accepted and make it into the president's recommendation?

Nicely: No way to tell.

Q: Will RPS standards in the different states, especially California, require solar installation notwithstanding the higher cost and how much higher will the installed cost be?

Nicely: If they still exist yes, but many of these mandates have already been met.

Q: What impacts are foreseen on the value for distributed renewables, specifically distributed hydro, will an approved Sec 201 have?

Nicely: Too hard to predict

Q: Does the panel expect financing products for residential to be adversely impacted by tariffs.

Nicely: I don’t know.

Q: What percentage of the pre-section 201 7.5GW ground mount market utilizes thin film modules?

Nicely: 25-30 percent.

Q: Is there past cases that parallel this situation where we can predict the outcome? 

Nicely: First, Trump has never been president before, so we can't really predict what he will do.  Second, there has never been a case quite like this where substitutable products (i.e., natural gas, wind, thin film) are such a significant factor, so that the demand effect, and corresponding job losses, are huge. 

Q: Do you have any ideas how this may affect insurance (beyond increased cost of materials)?

Nicely: No idea.

Q: Given that US is the second largest market in the world, what do you see as an impact of a safeguard duty in the US on global market?

Nicely: It will likely increase supply globally, which could drive prices down around the rest of the world.  That being said, demand is growing around the rest of the world, so the impact might not be as great as feared.

Q: If this trade case goes in the favor of Solarworld. will it open the door for other failed US ventures in the solar market to approach the ITC?

Nicely: Perhaps, but it would have to be a different product.  These cases are not specific to a company; they are about imports of specific products. 

Q: Can congress overturn any ruling from the president?

Nicely: If his remedy is different from what the Commission proposes, yes. 

Q: How could existing trade agreements (such as NAFTA) impact the case outcome?

Nicely: Our FTA partners are able to argue for exclusion from the relief based on language in each of the FTAs allowing for such exclusion under certain circumstances. All FTA partners other than Korea and Mexico were found not to contribute sufficiently to the industry's serious injury, so they are all excluded from the Commission's injury finding and likely their remedy recommendations. 

Q: Does that mean that Suniva's tariff request was illegal?

Nicely: Yes, Suniva' proposal exceeds the 50 percent ad valorem maximum set forth in the statute.  So does the new proposal in their prehearing remedy briefs filed this last week.

Q: Is the Georgetown study referenced in SEIA's brief?

Nicely: No. [Editor’s note, during the webcast Dan Shugar referenced a study conducted by Georgetown University in 2013 that showed the effects of section 201 safeguards placed on three other industries. The finding was that none of the industries were restored to competitiveness and in fact domestic production declined to below pre-safeguard levels. Access the archive here.]

Q: What is the potential for the WTO to challenge the outcome from ITC or from the president?

Nicely: Very likely to be challenged if restrictive trade relief is imposed.

Q: USITC News Release didn't mention China.  What does that mean?

Nicely: Nothing - China is subject to the decision.  Again, this is a global mechanism.  We don't have an FTA with China, so China is treated no differently from the rest of the world.

Q: All the arguments put forth seem to be around the job loses that the tariffs will cause. Is there any analysis on the consumer impact in terms of taking away customer choice and depriving energy users of future lower prices driven by solar?

Nicely: This is not a consumer-friendly law; it protects manufacturers, and almost always results in an increase in price to the consumer.  However, under Section 201, the Commission is supposed to consider the effects on the broader economy, which includes consumers.

Q: What counties does the tariff target as written now, will they include more countries in the future?

Nicely: All imports so all countries.

Q: Matthew can you please confirm that Canadian modules with Asian cells under NAFTA would not be subject to tariffs? Is it possible that the president changes this or is it unlikely?

Nicely: This is a controversial point in the litigation.  NAFTA rules indicate that NAFTA rules of origin. 

Q: We all agree that the ITC ruling may not be the best news for the solar industry this year; but i would like to know in your opinion what positive may we take from this decision - like, what good do you see in this decision.

Nicely: None.  

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Editor's Note: If you missed the webcast and would like to listen to it now, you can access the on-demand version at this link

Solar modules credit DepositPhotos

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