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Deciphering the solar dumping conundrum

By Bridget McCrea

The duck in the AFLAC commercials knows firsthand how a single leak can turn into a much bigger problem. Standing in a rowboat in a recent commercial for the insurance firm that he represents, the duck frantically moved around trying to prevent new holes (and the subsequent waterspouts that they generated) from sinking the vessel.

The U.S. solar industry and the government entities that support it are feeling a lot like the AFLAC duck right now, thanks to a rash of product dumping. Starting in late-2011, Chinese solar panel makers began unceremoniously dumping (or selling their products for lower than fair market value) their products into the U.S. market.

In May, the Obama administration ordered tariffs of 31% and higher on those solar panels imported from China. More than 60 Chinese firms, including the world’s largest solar panel maker, Suntech Power Holdings Co., face the 31% duty on their exports to the U.S., retroactive to shipments made in February. According to the U.S. Department of Commerce (DOC), all other Chinese exporters of solar cells will pay a tariff of 250%.

The steep penalties pushed Chinese solar manufacturers to get creative when making and exporting their products, according to Dan Bedell, executive vice president of marketing and corporate development for Dallas-based Principal Solar, Inc. Currently in the process of building a solar utility distribution plant, the company also runs The Principal Solar Institute, an educational platform dedicated to spreading knowledge about solar energy.

“Chinese manufacturers aren’t just going to fold their arms and admit defeat because of a tariff,” Bedell points out. “It’s a lot more complicated than that.” What the manufacturers are doing is circumventing the fines by doing final panel assembly in countries like Taiwan, which aren’t subject to the tariffs. Then they are shipping the goods directly from Taiwan to the U.S. That circuitous route adds “some cost to the process, but not much,” according to Bedell.

“The fact that Chinese manufacturers are assembling elsewhere and shipping here didn’t really surprise anyone,” he continues. “Everyone pretty well knew it was going to happen.”

The Saga Continues…

The solar dumping debacle is far from over. In October, the DOC announced its final decision on tariffs to be imposed on solar products imported from China.

It set anti-dumping duties of 31.73% on imports of solar photovoltaic cells and panels from Suntech, 18.32% from Trina Solar, 25.96% from other companies that had requested but not received individual duty determinations, and 249.96% from all other Chinese producers, including those controlled by the Chinese government.

In addition, the DOC imposed anti-subsidy duty percentages of 14.78% for imports from Suntech, 15.97% from Trina Solar and 15.24% for all other Chinese manufacturers. Those increased significantly from preliminary anti-subsidy duties announced in March of 2.9% for Suntech, 4.73% for Trina Solar and 3.59% for all other Chinese producers.

According to the Coalition for American Solar Manufacturing (CASM), which represents 226 solar manufacturers in the United States, China’s predatory trade practices and huge overcapacity have pushed at least 14 crystalline silicon solar producers to close plants or lay off significant numbers of workers over the last two years. CASM says the two most recent announcements were the closing of a Schott Solar facility in New Mexico and a Sharp Solar facility in Tennessee.

Bedell says that thus far U.S. manufacturers have not demonstrated an ability to produce solar panels at the same low price that Chinese manufacturers can churn the products out. Even with the imposed duties, for example, he says products from U.S. solar panel maker Solar World are “quite a bit more” expensive than those coming in from China.  

“Lucrative government subsidies in China are certainly part of the issue,” Bedell says. “Also, we simply don’t manufacturer at the same, massive scales that the Chinese do. When you start putting these things together, it doesn’t look like U.S. manufacturing is in terribly good shape right now.”

Growing in Leaps and Bounds

Challenges aside, Bedell says the current trade case isn’t likely to hurt or help the solar landscape in the United States, nor will it negatively impact international producers. Imports will likely rise in cost by about 5 to 10 percent and the industry will continue to experience price erosion. That could spell opportunity for distributors, who will likely see higher demand for such products as the prices become more affordable.

“Everyone outside of manufacturing benefits from cheaper solar modules,” states Bedell, who expects the solar installations and the industry as a whole to continue to grow in spite of the looming trade war. “The total industry has seen massive growth in the U.S. The actual way that the manufacturing takes place, or where it takes place, doesn’t really have much of an impact on that.”  

The final step in the solar case will be the International Trade Commission’s final decision on November 7, where the ITC will determine whether the trade practices of the Chinese manufacturers and government is harming the U.S. industry. Last December, the commission voted affirmatively, 6-0, in a preliminary determination.

McCrea is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at bridgetmc@earthlink.net or visit her website at www.expertghostwriter.net.

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