US tariffs are causing some types of Chinese imports to surge.
At the same time, there is an incentive to delay importing more solar panels until a scheduled reduction in the tariff on panels on February 7, 2019.
Requests by importers for exemptions from the US tariffs meet a very different reception depending on whether they are submitted to the US Department of Commerce or the Office of the US Trade Representative.
The United States is collecting a 25% tariff on a list of Chinese products that accounted last year for $50 billion in imports, and it is collecting a 10% tariff on another $200 billion worth of Chinese products. The 10% rate was scheduled to increase to 25% on January 1, but the increase has been delayed for 90 days to give US and Chinese negotiators more time to diffuse trade tensions. Trump is also threatening tariffs on all remaining Chinese goods. China exported $505 billion in goods last year to the United States.
Chinese exports to the United States have surged as companies rush to make shipments ahead of any further increase in tariff rates. Exports in October rose 15.6% in dollar terms compared to October 2017. Exports grew 13.2% in October compared to September this year and by another 10% in November. The threats to impose more tariffs is leading in the near term to a widening of the US trade deficit with China due to the surge in orders to buy goods before they become more expensive.
Meanwhile, solar developers considering importing solar panels may be wise to lock in prices today but wait until after February 7, 2019 to ship them past US Customs. The US is currently collecting a 30% import duty on all solar panels. The rate is scheduled to drop to 25% on February 7.
Higher Chinese demand for solar panels may put upward pressure on panel prices next year. The CEOs of a Chinese solar panel manufacturer and of a Chinese polysilicon producer said on earnings calls in November that they understand from government sources that the government pullback last June on subsidies to install more solar capacity in China is temporary and there could be a large increase in the solar target when the next five-year economic plan is announced. Other analysts are more cautious. Any new solar policies could be announced before the Chinese New Year on February 5.
The Chinese government scaled back central government support on June 1 for new utility-scale solar projects and placed a low cap on distributed solar deployments. The government had already stopped issuing permits for new solar facilities in parts of the country where existing plants are sitting idle due to grid congestion.
Chinese demand was expected to fall to 30,000 to 35,000 megawatts in 2018 compared to 53,000 megawatts in 2017.
IHS Markit is now projecting 40,000 megawatts of Chinese solar installations this year. Bloomberg New Energy Finance expects China to account for 39% of global demand for panels this year. The Chinese market share was 54% in 2017 before the pullback.
US importers are much more likely to be granted waivers from US tariffs on steel and aluminum than on Chinese products.
The US Department of Commerce had processed 17,051 of the 38,000 requests filed for exemptions from steel tariffs through November 15 this year. It granted 12,616 and rejected 4,435 for a 74% success rate, according to Congressional Research Service figures. It had processed 972 of the 6,504 requests for exemptions from aluminum tariffs, granting 830 and denying 142 for an 85% success rate.
Commerce has only 100 employees and outside contractors sifting through the applications, which accounts for the slow processing time.
It tends to grant requests to which no domestic manufacturer objects.
The New York Times reported in late November that two companies accounted for a disproportionate share of the waivers. Greenfield Industries in South Carolina, which is owned by Top-Eastern Group in China, was granted 1,000 steel waivers. The company makes saw blades and other cutting tools. Mandel Metals, an aluminum distributor outside Chicago, was granted 443 waivers from the aluminum tariffs. Mandel Metals imports low-grade aluminum and cuts it to size for customers.
Requests for exemptions from the special tariffs imposed on Chinese products go to the Office of the US Trade Representative rather than the Commerce Department. That office has denied 1,300 requests and approved none, according to the Times. Bloomberg reports that the US Trade Representative has received 11,565 requests and denied almost 1,500 of them.
All of the requests were for waivers from US tariffs on the first $50 billion of Chinese products on which the Trump administration imposed tariffs in July and August. The deadline to apply for waivers from tariffs on the first $34 billion in Chinese products that have been subject to tariffs since July 6 expired on October 9. The deadline for the next $16 billion in Chinese products on which tariffs were imposed on August 24 expired on December 18.
It is not clear what an importer would have to prove to be granted a waiver.
The stinginess in granting waivers may reflect the US government desire to keep maximum pressure on China.
No process is in place yet to request exemptions for the additional $200 billion in products on which tariffs were imposed in September.
The process differs at the two agencies.
Commerce requires a separate request for each product and each importer. For example, a tariff waiver granted to company X to import steel type Y from Canada would not apply to other importers of the same product. The US Trade Representative considers requests by product, so that if a waiver were granted, it would apply to anyone importing the product.