RELATED UPDATE: Commerce Department Releases Preliminary Findings on Chinese Solar Manufacturers’ Alleged Circumvention (December 5, 2022)
On March 28, 2022, the U.S. Department of Commerce (DOC) announced it is investigating whether imports of solar panels assembled in Cambodia, Malaysia, Thailand and Vietnam are circumventing duties intended to limit imports of solar cells and panels from China, in violation of anti-dumping rules. The announcement of an investigation is already impacting current and future solar developments using crystalline silicon photovoltaic cells (CSPV).
Although it initially stated that no additional duties will be imposed at this time, the DOC will consider supplementary tariffs on the solar industry based on the results of its investigation. Additional tariffs (which could apply retroactively, to as early as Nov. 4, 2021) could significantly disrupt the supply and manufacture of solar modules, as roughly 80% of U.S. CSPV modules are imported from Vietnam, Malaysia and Thailand.
Proponents of the DOC investigation argue that the alleged circumvention makes it impossible for U.S.-based manufacturers to compete against solar panels made in Asia, and that increased tariffs would support domestic solar panel production. However, opponents of the DOC inquiry fear that the investigation will cause significant harm to U.S. crystalline silicon module producers, as these companies depend on imports of solar cells due to a lack of production capacity within the United States.
Purchasers of cells and components from companies in the affected countries can expect delayed shipments, with some suppliers even deciding to halt shipments altogether until the DOC issues a final ruling. These actions are likely to lead to higher module and cell prices, which will be particularly harmful to utility-scale solar projects where module prices can account for up to 50% of total project costs.
The DOC is expected to deliver the preliminary results of its investigation (including a preliminary duty rate) in August 2022, and it plans to reach a final decision by Jan. 26, 2023, with a possible extension to April 1, 2023.
The McGuireWoods team has seen the uncertainty surrounding this investigation have novel impacts on supply, acquisition, offtake and other contracts. If you have any questions regarding the DOC investigation or its potential impact on your business, please contact the authors noted below.