US imposes tariff on Chinese solar panels, a victory for US manufacturers

US manufacturers had sought the ruling by the Commerce Department that Chinese firms were dumping solar panels, but the dispute is likely to aggravate US-China relations.

A man walks through solar panels at a solar power plant under construction in China's Xinjiang's Aksu region, in this April 5 file photo.

The United States Commerce Department ruled Thursday that Chinese manufacturers are guilty of dumping solar panels in the US market for less than it cost to make them, a violation of World Trade Organization rules that had harmed American manufacturers.

As a result, the Chinese manufacturers – including Wuxi Suntech Power Co., Ltd. and Changzhou Trina Solar Energy Col, Ltd., among others – will have to start paying a tariff of more than 31 percent when their products enter the US market.

The ruling adds a major point of friction to already troubled US-China relations, which have been soured recently by a dispute over human rights.

The ruling was a major victory for a coalition led by seven companies with US facilities that brought the trade complaint last fall. That group, the Coalition for American Solar Manufacturing (CASM), led by German-based Solar World, which has US manufacturing plants, called the Commerce finding a positive first step.

“Commerce’s ruling in the SolarWorld case is a bellwether decision,” said Steve Ostrenga, chief executive officer of Helios Solar Works, a CASM member company. “It underscores the importance of domestic manufacturing to the US economy and will help determine whether the country will be a global competitor in clean technologies or outsource them China. It is also critically important for thousands of US workers.”

But the ruling was criticized by the Coalition for Affordable Solar Energy (CASE), a group of domestic solar installers and Chinese manufacturers.

"It will ultimately come right out of the paychecks of American solar workers," Jigar Shah, president of CASE said in a statement. The decision, he predicted, would boost solar electricity prices in the US "precisely at the moment solar power is becoming competitive with fossil fuel generated electricity.”

In a preliminary ruling in March, Commerce determined that Chinese producers and exporters had also received subsidies ranging from 2.90 percent to 4.73 percent, a smaller advantage over US manufacturers than many analysts had expected.

The dumping decision, like the subsidy decision, is also preliminary. A final decision will be delivered later this year on both. The preliminary tariffs could be increased, or slashed if importers are able to argue their case persuasively enough.

The ruling wasn't entirely a surprise. It follows a January finding by the Commerce Department's International Trade Administration that Chinese manufacturers had received heavy subsidies via dozens of low-cost Chinese government loan programs.

Amid that competition, now seen as unfair, solar photovoltaic module production in the US dropped from 1,273 megawatts in 2010 to 1,219 megawatts in 2011. The cause was due to "global oversupply and the shuttering of a number of production facilities," according to a 2011 year-in-review study conducted for the Solar Energy Industries Association by GTM Research.

At the same time, however, imports of Chinese solar cells and modules into the US more than doubled from 2010 to 2011, with their value soaring from $1.5 billion to $3.1 billion, the Commerce Department found.

Amid that flood, US-based SpectraWatt, founded in 2008, closed last year. Evergreen Solar Inc. and Solyndra, the California company that received a $535 million federal loan guarantee, shut last year, too. Sanyo last month said it plans to close its solar ingot and wafer factory in Carson, Calif., laying off about 140 workers.

"Everybody knows that what the Chinese charge for modules is very close to their production costs," Fatima Toor, a solar industry analyst with Lux Research, a Boston-based renewable energy market research firm, told the Monitor in a March interview. "They have government backing and government support to help them survive. They can get away selling near cost, while it's hard if you are a US manufacturer to do that."

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