Circumvention Inquiry into Solar Imports

Circumvention Inquiry into Solar Imports

INSIGHTi

Circumvention Inquiry into Solar Imports
Updated August 24, 2023
On August 18, 2023, the Commerce Department issued a final determination affirming that Chinese-
manufactured crystalline silicon photovoltaic (CSPV) cells and panels are circumventing U.S.
antidumping and countervailing duty orders. Commerce initiated the inquiry in April 2022 in response to
U.S.-based Auxin Solar’s petition alleging that solar cells and panels imported from Cambodia, Malaysia,
Thailand, and Vietnam use Chinese-made parts and components to avoid high U.S. tariffs on solar
equipment imported directly from China. The investigation has been controversial, including among
Members of Congress. Some stakeholders assert that uncertainty about the tariffs could slow deployment
of solar energy in the United States while others insist that action is needed to protect U.S. solar
manufacturing.
Background
In 2012, the Commerce Department and the U.S. International Trade Commission (ITC) determined that
imports of solar cells and panels from China were being sold below cost (“dumped”) or unfairly
subsidized and were injuring or threatened to injure the U.S. solar manufacturing industry. Commerce
imposed two remedial orders. The antidumping (AD) order imposed duties ranging from 18% to 25% on
goods produced by specific Chinese firms and 250% on imports from all other Chinese firms. The
countervailing duty (CVD) order, which counteracts subsidies, imposed duties of 14%-15% on all solar
products from China. In its petition, Auxin contended that certain producers in Southeast Asia have
manufacturing operations that involve minimal capital investments and technical research and rely on
Chinese inputs (e.g., solar glass, aluminum frames, and silver paste) to make CSPV cells and panels that
are then exported to the United States.
How Commerce Conducts Circumvention Inquiries
Circumvention inquiries determine whether a good imported from a country not subject to an AD or CVD
order should be included in the scope of an existing order.
Any interested party (e.g., relevant domestic and foreign manufacturers, importers, unions, and trade
associations) may submit a request for a circumvention inquiry. The Secretary of Commerce may also
self-initiate an inquiry. Once the Secretary receives a request, federal law and regulations establish
deadlines for further action:
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• Within 30 days of receiving a request containing the required information, the Secretary
is to initiate an inquiry, publish a notice in the Federal Register, and instruct Customs to
suspend liquidation (i.e., the final calculation of duties) and require any firm under
investigation to deposit duties.
• Within 150 days of the notice, the Secretary is to issue a preliminary determination.
• Within 300 days of the notice, law and regulations require that the Secretary issue a final
determination.
• If the investigation is “extraordinarily complicated,” the Secretary may extend the final
determination deadline by up to 65 days.
As part of its inquiry, Commerce considers whether “the process of assembly or completion in the foreign
country ... is minor or insignificant.” In making that determination, Commerce takes into account the level
of investment, research, and development undertaken in the foreign country, the nature of the production
process, the extent of the production facilities, and the value added to the final product.
If Commerce determines that the goods in question should be included within the scope of the existing
order(s) (an “affirmative determination”), duties could be applied to goods that entered the United States
after publication of the notice. In certain circumstances, the Secretary may collect duties on goods entered
prior to publication, back to the date of the original order(s). Commerce could apply duties to covered
goods specific to particular producers, exporters, or importers, and on a country-wide basis (i.e., against
solar imports from Cambodia, Malaysia, Thailand, and/or Vietnam).
Domestic Solar Industry
Manufacturing of CSPV panels, the most common source of solar energy in the United States, involves
four primary stages: the refinement of polysilicon, production of thin sheets of silicon (wafers),
fabrication of solar cells, and panel assembly. Completed solar systems also require numerous
components not used to generate electricity, such as inverters that convert direct current into alternating
current and racking systems that position the panels.
No CSPV cells are produced in the United States. As of August 2023, 16 U.S. factories assembled CSPV
panels using imported cells, according to the Department of Energy. Seven CSPV panel plants closed
between 2018 and 2021. In 2020, domestic production accounted for 10% of apparent U.S. consumption
of CSPV panels. Most new solar installations in the United States use panels assembled in Malaysia,
Thailand, or Vietnam. Critics of the circumvention inquiry asserted that higher tariffs on these imports
could raise the cost of solar systems in the United States and reduce installation work, the main source of
solar-related U.S. employment.
Issues for Congress
Critics of the inquiry raised questions about Commerce’s procedures for initiating circumvention
inquiries. In May 2022, some Members of Congress expressed concerns about the relative ease with
which an investigation can be initiated, the absence of a domestic industry support requirement (which
exists for regular AD/CVD investigations), and the absence of a procedure for Commerce to consider
external factors (e.g., public interest). Prior to the ongoing investigation, the House passed H.R. 4521
(117th Congress), which would have codified Commerce’s circumvention regulations, potentially making
it easier for Commerce to initiate such investigations. The provisions were not included in a later version
of the bill that was passed and signed into law (P.L. 117-167). Similar bills to codify Commerce’s
circumvention regulations—H.R. 3882 and S. 1856—have been introduced in the 118th Congress.

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On June 6, 2022, President Biden declared an emergency citing Section 318 of the Tariff Act of 1930 and
authorized the Secretary of Commerce to suspend AD/CV duties on imports of solar cells and modules
from Cambodia, Malaysia, Thailand, and Vietnam for 24 months to support U.S. solar deployment efforts.
In declaring the emergency, President Biden did not cite to the National Emergencies Act (NEA) and at
least some observers argued that Section 318 should fall under the NEA. In responding to the criticism,
the Commerce Department asserted that the President had independent emergency authority under
Section 318 and noted that, in the alternative, Commerce “[did] not agree that Proclamation 10414 fails to
conform with the requirements of the [NEA].” Should Section 318 fall under the NEA, Congress could
terminate the emergency declared by the President.
Following the declaration of emergency, Commerce proceeded with the investigation, and on September
16, 2022, Commerce published a final rule implementing the declaration. On December 2, 2022,
Commerce issued an affirmative preliminary determination. Per Commerce’s instructions, importers must
certify that their solar cells and panels meet the requirements of “applicable entries” covered by the
President’s emergency declaration. Regarding nonapplicable entries, Commerce instructed Customs to
suspend liquidation and collect cash deposits for entries entered on or after April 1, 2022. In an
affirmative final determination issued on August 18, 2023, Commerce determined that five of the eight
companies investigated were circumventing AD/CVD orders.
The investigation raised varying views among Members of Congress. During and after the investigation,
some Members raised concerns over the impact the affirmative determination may have on the U.S. solar
industry and employment and urged the Biden Administration to extend the tariff suspension on solar
products. Some other Members praised Commerce’s enforcement of U.S. trade law and suggested
rescinding the proclamation.
In March 2023, Representative Bill Posey introduced H.J.Res. 39 (118th Congress) disapproving of
Commerce’s September 16 Final Rule under the provisions of the Congressional Review Act. The House
and Senate both passed the resolution, which was subsequently vetoed by President Biden. Congress did
not override the veto.
As an alternative to the Congressional Review Act, Congress could seek to terminate the emergency
under the provisions of the NEA.
Table 1. Timeline of Actions in Circumvention Investigation
Date
Action
February 8, 2022
Auxin filed a circumvention inquiry request with the Department of Commerce pursuant to 19
C.F.R. §351.226(c).
April 1, 2022
Commerce initiates its circumvention inquiry and instructs CBP to col ect cash deposits that
would be applicable if Commerce determines the imported solar cells and modules in question
are subject to the scope of the orders.
June 6, 2022
President Biden declares an emergency under Section 318 of the Tariff Act of 1930 (19 U.S.C.
§1318) and authorizes the Secretary of Commerce to allow the importation, free of AD/CV
duties, of certain solar cells and modules from Cambodia, Malaysia, Thailand, and Vietnam.
August 22, 2022
In response to a request from Auxin, in accordance with 19 C.F.R. §351.302(b) Commerce
extends the deadline for issuing its preliminary determination by 90 days to November 28,
2022.

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September 16, 2022
Commerce publishes its Final Rule creating procedures in accordance with the declaration of
emergency. Commerce directs CBP to liquidate any suspended entries of subject solar cells
and modules and to refund the cash deposits that CBP had been col ecting since April 1.
November 14, 2022
In response to receiving “extensive comments concerning the upcoming preliminary
determinations,” Commerce, in accordance with 19 C.F.R. §351.302(b), extends the deadline
for issuing its preliminary determination by three days, until December 1, 2022.
December 1, 2022
Commerce preliminarily determines that, with some exceptions, solar cells and modules
exported from Cambodia, Malaysia, Thailand, and Vietnam are circumventing the AD/CV
orders on solar cells and modules from China.
December 8, 2022
Commerce publishes its preliminary determination in the Federal Register.
March 7, 2023
Representative Bil Posey introduces H.J.Res. 39 disapproving of Commerce’s September 16
Final Rule.
April 21, 2023
The House Committee on Ways and Means reports out H.J.Res. 39 favorably.
April 27, 2023
It is reported that Commerce, in response to a flurry of filings by interested parties, extended
its deadline for issuing its final determination to August 17.
April 28, 2023
The House of Representatives passes H.J.Res. 39.
May 3, 2023
The Senate passes H.J.Res. 39.
May 16, 2023
President Biden vetoes H.J.Res. 39.
May 24, 2023
A vote in the house to override President Biden’s veto fails.
August 23, 2023
Commerce publishes its final determination in the Federal Register.
Notes: Non-hyperlinked actions are available at access.trade.gov.

Author Information

Liana Wong, Coordinator
Manpreet Singh
Analyst in International Trade and Finance
Analyst in Industrial Organization and Business

Christopher A. Casey

Analyst in International Trade and Finance

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