In August, an anonymous coalition, American Solar Manufacturers Against Chinese Circumvention or A-SMACC, filed a petition asking for an investigation into manufacturers accused of avoiding antidumping and countervailing duties against China via expansions into Southeast Asia. The companies named in the petition are Jinko Solar (Malaysia and Vietnam), LONGi (Malaysia and Vietnam), JA Solar (Malaysia), Canadian Solar (Thailand and Vietnam), Trina Solar (Thailand and Vietnam), Talesun (Thailand), Astroenrgy (Thailand), Sunergy (Vietnam), Boviet Solar (Vietnam), and GCL (Vietnam). Wiley, a DC-based law firm, filed the petition. A-SMACC released the following statement:

“For too long, obvious circumvention of antidumping and countervailing duties on Chinese solar products has hobbled the US industry, eviscerated our supply chains, and put our clean energy future at risk. It is time for America to lead in this critical sector.

While Chinese companies now almost exclusively export to the United States from Southeast Asia, the vast majority of manufacturing, research and development, and capital investment remain in China. In cases like this, the law is clear; the duties on Chinese solar products should be extended to circumventing entities.” 

SEIA, the US solar industry’s lobbying organization, responded by stating that the proposed tariffs and resulting price increases would devastate US solar industry demand causing developers to pause plans and manufacturers in Southeast Asia to cease importing products.

On Thursday, September 30, the US Commerce Department will consider whether to investigate or dismiss the petition. At that point, the members of A-SMACC may be made public.  

Who is behind A-SMACC?

The question solar industry participants should be asking is – who has something to gain from the petition? The US has no crystalline cell manufacturing. First Solar (CdTe) is the country’s only major cell manufacturer. The US has ~6-GWp of module assemble capacity available for crystalline cells and imports cells primarily from Southeast Asia and South Korea.

If First Solar and module assemblers buying from South Korea (primarily Hanwha Q-Cells and LG) are behind the petition, there is no good reason they should keep this a secret – other than avoiding an unflattering spotlight and many questions concerning their agenda.

There is always an agenda behind actions such as the one before Commerce.  When (if) the petitions are made public, their agenda will be clear.

Are China’s manufacturers shipping through Southeast Asia to avoid tariffs?

A-SMACC claims that manufacturers in China are using Southeast Asia as a passthrough to avoid tariffs — meaning that some value is added to the product before shipping it to its destination as a new product. 

Manufacturers in Southeast Asia have 19%, 57.3-GWp, of global capacity to produce cells and 23%, or 82.3-GWp, of global capacity to produce modules. The manufacturers named in the petition have 39.6-GWp of cell capacity in Southeast Asia, leaving other manufacturers with 17.7-GWp of cell capacity in the region.

Manufacturers expand to other countries for a variety of reasons. The most important reason for expansion off-shore is cost – lower manufacturing costs. Typically, a combination of incentives including low tax rates, grants, loans, favorable leases, and low-cost inputs including energy and labor are traditional reasons to locate manufacturing in a country. Other reasons to expand in other countries include favorable labor laws, more benevolent laws in general, nearness to supply lines or markets, and, of course, avoiding tariffs. Decisions about locating manufacturing are always complex.

A-SMACC’s claim that China’s manufacturers are using Southeast Asia as a passthrough to avoid tariffs would likely be challenging to prove. 

Would Additional Tariffs have a Catastrophic Impact on the US Solar Market?  

The US has no crystalline cell manufacturing to protect, one major thin-film manufacturer, and about 6-GWp of module assembly capacity. The module assembly capacity relies on imported cells. Maxeon announced plans for cell manufacturing in the US– but announcements are not actions. It will take several years for the US to establish crystalline cell manufacturing and a combination of manufacturing and buyer incentives. Module assembly can be established faster but relies on imported cells.

The US is an import market. Meeting the country’s solar deployment goals requires imports.

If the Commerce Department investigates and rules in favor of the A-SMACC petition, it would have no choice under the law and would have to impose tariffs

Tariffs act as a tax on buyers. The proposed tariffs would hit US market participants already reeling from higher shipping costs and delays, higher costs for inputs, proposed changes to the ITC that add complexity and cost, and the WRO, which is currently stalling cells and modules at the ports. Additional costs would not shut the market down, but it probably would lead some developers to rethink plans.