The Solar Energy Industries Association (SEIA) has announced a proposal to address the trade dispute between the United States and China regarding solar generating equipment.  Both China and the U.S. have imposed duties on imports of solar equipment: (i) the U.S. Commerce Department found that certain Chinese solar companies had benefited from government subsidies and “dumped” their products into the U.S. market at prices below fair value, and (ii) in July, China began imposing duties as high as 57 percent on imports of polysilicon, a main ingredient in solar cells, from the U.S.  SEIA’s proposal would result in the termination of current disputes, a prohibition on new trade actions, and the establishment of funds to support the U.S. solar industry.

The U.S. trade remedy orders on Chinese solar cells and modules have resulted in Chinese manufacturers attempting to circumvent the antidumping and countervailing duty (AD/CVD) orders by assembling third-country cells into modules in China and then legally importing those modules into the U.S. free of AD/CVD duties.  (See McDermott’s Energy Business Law blog post on the AD/CVD orders.)  SEIA contends that the U.S. and Chinese trade remedy orders currently in place are causing adverse effects in the global solar industry without ultimately addressing the causes of unfair trade competition.

SEIA has been actively involved in the trade proceedings both in the U.S. and in China, and through its proposal hopes to provide a solution that is a “win-win” for both countries, the industry and consumers.  The SEIA proposal would:

• Establish a U.S. Solar Manufacturing Settlement Fund (Fund) and a U.S. Solar Development Institute (Institute), both funded by Chinese solar manufacturers.  The Fund would help finance the production of solar equipment in the U.S. through investments in capital equipment, facilities, research and development, worker training and other areas.  The Institute would work to expand the U.S. solar market and grow the U.S. solar manufacturing base. Money for the Fund and the Institute would come from Chinese companies contributing a percentage of the price premium they currently pay to third-country cell producers to avoid the U.S. AD/CVD orders.  The U.S. entered into a similar settlement arrangement regarding the Brazilian cotton industry.

• Require both the U.S. and China to revoke all AD/CVD orders and terminate all regulatory and judicial proceedings related to U.S. imports of solar cells and modules from China and Chinese imports of polysilicon from the U.S.

• Prohibit the initiation of any new trade remedy investigations or other actions between the U.S. and China regarding imports of polysilicon, solar cells, or modules for the five-year term of the proposed agreement plus 12 additional months thereafter.

While the proposal has not met with an entirely positive response from the U.S. solar manufacturing industry, certain U.S. Senators, including Senators Patty Murray and Maria Cantwell, have expressed support for the proposal.   In the meantime, China recently announced additional tax breaks, in the form of refunds of 50 percent of applicable value added taxes, that will be provided to Chinese manufacturers of solar power products.