Anti-circumvention duty moratorium

Anti-circumvention duty moratorium

June 23, 2022 | By Keith Martin in Washington, DC

Tariff moratorium regulations are expected soon.

The US Department of Commerce must issue regulations to implement a 24-month moratorium on any anti-circumvention duties that Commerce decides later this summer to impose on solar cells and panels imported from Vietnam, Malaysia, Thailand and Cambodia.

Financiers reacted positively to news of a moratorium, but with some caution about whether they would be able to proceed with financing of stalled solar projects.

Auxin, a US solar panel manufacturer, could still file suit to block implementation. The Biden administration is using authority under section 318 of the Tariff Act of 1930 to waive tariffs on “food, clothing, and medical, surgical and other supplies for use in emergency relief work.”

Projects that would be uneconomic if they had to bear the tariffs may still be delayed until after regulations are issued and the market has a chance to assess the merits of any lawsuit. (See “Tariffs, Inflation and Other Challenges” starting on page 1 in the June 2022 NewsWire)

President Biden issued a proclamation on June 6 authorizing the US Secretary of Commerce to “consider” taking action to waive duties on solar cells and panels imported from the four Southeast Asian countries, “under such conditions as the Secretary may prescribe,” until 24 months after June 6 or, if earlier, until US solar panel manufacturing can increase significantly enough to declare an end to the “emergency” requiring the tariff waver.

The Commerce Department issued two statements the same day indicating that it will implement the moratorium.

The implementing regulations will have to be vetted by the US Treasury and Department of Homeland Security before they are issued.

Commerce is investigating whether solar panels entering the United States from Vietnam, Malaysia, Thailand and Cambodia are essentially Chinese panels that would be subject to anti-dumping and countervailing duties if imported from China directly. If so, then they will be subject to the same such duties as Chinese panels.

Approximately 80% of solar panels imported during 2021 came from the four countries and fewer than 1% came from China directly. The US has been collecting anti-dumping and countervailing duties on Chinese panels since 2012.

The current China-wide rate for anti-dumping duties is 238.95% and for countervailing duties is 17.1%. Many manufacturers are subject to significantly lower anti-dumping duties after demonstrating to Commerce that their dumping margins are lower than the China-wide margin. Chinese-made panels are considered “dumped” if they are sold in the US for less than they are sold in China.

The countervailing duties on some Chinese manufacturers range a little above or below the China-wide rate. (For more detail, see “Solar Panel Import Duties” in the March 2022 NewsWire.)

Commerce has until August 29, 2022 to make a preliminary determination in the investigation and until April 3, 2023 to make a final decision.

The moratorium regulations will have to address whether any duties will apply retroactively to panels imported before June 6. Commerce has authority to impose them on solar panels imported as far back as November 4, 2021.

Most current solar panel supply contracts put the tariff risk on the US customer. However, presumably panel suppliers will have to take the risk that their panels will make it past US Customs within the 24-month period. (For other market reaction, see “Project Sales Closing Despite Circumvention Risk” starting on page 11 in the June 2022 NewsWire.)