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US Department of Commerce Issues Final Trade Ruling…Does it Change Anything?

On 10 October 2012, the US Department of Commerce (DoC) issued its final ruling on the countervailing duty (CVD) and anti-dumping (AD) complaints. The process to determine final rates has taken almost exactly one year and the entire complaint will be either confirmed or denied by mid-November 2012. The complaints, brought by the Coalition for American Solar Manufacturing (CASM) and spearheaded by SolarWorld, were a response to rapidly falling PV module ASPs which has been pressuring solar manufacturer margins for over two years. A timeline of the trade dispute can be seen below:

Complaint Timeline

Action

Date

Notes

Petition Filed

19 October 2011

 
DoC Initiation Date

8 November 2011

 
ITC Preliminary Determination

5 December 2011

Ruling in the affirmative.
CVD Deposit/Bond Payment

21 December 2011

Earliest date at which shipments of Chinese solar cells to US market can be required to post a deposit/bond relating to CVD preliminary ruling.
AD Deposit/Bond Payment

17 February 2012

Earliest date at which shipments of Chinese solar cells to US market can be required to post a deposit/bond relating to AD preliminary ruling.
DoC CVD Preliminary Determination

19 March 2012

Ruling in the affirmative.
DoC AD Preliminary Determination

17 May 2012

Ruling in the affirmative.
DOC AD/CVD Final Determination

10 October 2012

Final determination on both AD and CVD rulings was made 10 October 2012.
ITC Final Determination

pre-20 November 2012

This will take place given the final affirmative ruling from Commerce and will be the final determination in the complaint.

 
The tables below show both the DoC preliminary and final rates for both the AD and CVD complaints. As can be seen, CVD rates increased significantly from the preliminary ruling, meaning that provisions set aside by most companies may prove insufficient if the rulings are upheld. AD rates for Trina Solar and 59 other name manufacturers decreased from their preliminary levels but the rates for Suntech increased while penalties against all other unnamed producers stayed steady.

Countervailing Duty Rates

Company March 2012 Preliminary Ruling October 2012 Final Ruling
Suntech Power 2.90% 14.78%
Trina Solar 4.73% 15.97%
All other Chinese producers 3.61% 15.24%

 Anti-dumping Rates

Company March 2012 Preliminary Ruling October 2012 Final Ruling
Suntech Power 31.22% 31.73%
Trina Solar 31.14% 18.32%
59 named producers 31.18% 25.96%
All other Chinese producers 249.96% 249.96%

 
Now that the DoC has issued its final ruling in the affirmative and released final penalty rates, the US International Trade Commission (ITC) will consider the case one last time to make a final decision on whether AD/CVD penalties will be enacted. Such a ruling is expected before the end of November 2012.

As reported in the Q2’12 edition of Solarbuzz Quarterly, most major manufacturers had made provisions to deal with the preliminary duties. The data below shows the Q1’12 set-aside provision amounts, as well as the effect on each firm’s gross margin. Since the imposition of preliminary duties, all of these manufacturers have modified supply-chain relationships to avoid AD/CVD duties by using non-Chinese manufactured cells. While this has been cited as a means of ‘bypassing’ AD/CVD charges, outsourcing cells to Taiwan has been an integral part of most Chinese-based module manufacturers for many years.

Impact of Selected Chinese Firms

Sample Group of Selected Chinese Producers Q1’12 Provisions from Preliminary Anti-dumping and Countervailing Duties (AD/CVD) Rulings
Suntech Power AD/CVD: $19.2 million (4.76%)
Trina Solar AD: $19.3 million (5.52%)CVD: $6.9 million (1.97%)
Yingli Solar AD/CVD: $13.7 million (2.74%)
JA Solar AD/CVD: $2.9 million (1.14%)

 
The increase in CVD rates may mean that the provisions listed above will be insufficient to compensate for the retroactive bond payments. As such, this could mean many of these companies will have to set aside additional funds to make up any difference. Alternatively, the reduction in AD rates for Trina Solar and the other named manufacturers may suggest that the current provisions are adequate – even if the funds do change from an AD provision to a CVD provision.

Beyond the simple details of the case, it remains uncertain what the overall impact on the U.S. PV market will be. As the table above shows, most major manufacturers have already accepted the fact that they would need to provide funds to address the trade complaint and have already done so. And with the vast majority of firms having already changed supply-chain operations to avoid future charges, this means that only minimal additional charges are expected as a result of the final ruling.

In fact, the DoC ruling does not address this second issue, a fact which CASM has already noted. Indeed, CASM has indicated that once the ITC rules in the affirmative, it will seek another investigation against solar PV modules assembled in China regardless of their cell origin. If initiated, this would bring the U.S. investigations more in line with those being conducted in the European Union and – compared to the current ruling – would have a much greater effect on Chinese imports into the U.S. market. Ultimately however, this ruling is yet another part of an escalating global trade war that could engulf the solar industry and cause more pain by preventing supply/demand rationalization from taking place.