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The US Department of Commerce (DOC) issued its Final Determination on August 18, 2023 related to circumvention of antidumping and countervailing duty (AD/CVD) orders A-570-979 and C-570-980 (the Orders) on certain crystalline silicon photovoltaic (CSPV) cells and modules. DOC found countrywide circumvention of the Orders in all four of the inquiry countries, Cambodia, Malaysia, Thailand, and Vietnam.
The Final Determination extends the suspension of liquidation and collection of cash deposits for certain imports, despite the temporary moratorium on the imposition of AD/CVD on such products.
DOC found that imports from certain producers and exporters are not circumventing the orders, including Hanwha Q CELLS Malaysia Sdn. Bhd., Jinko Solar Technology Sdn. Bhd., and Jinko Solar (Malaysia) Sdn. Bhd. in Malaysia and Boviet Solar Technology Co., Ltd. in Vietnam. Solar cells and modules from these entities will not be subject to suspension of liquidation or the collection of cash deposits, provided that the appropriate certifications are made at the time of entry.
DOC confirmed its affirmative Final Determination based on a totality of the circumstances, including (1) patterns of trade shifting from China to the inquiry countries, (2) an increase in imports of Chinese inputs into the inquiry countries, and (3) a finding that the process of assembly in the inquiry countries is minor or insignificant for all mandatory respondents.
This final factor was a source of considerable debate in the briefing and at a hearing held in advance of the Final Determination. Respondents consistently asserted that DOC’s analysis of processing in the inquiry countries ignored the complexity of solar cell production.
The Final Determination further confirms that solar cells produced in one of the inquiry countries—even from a Chinese-origin wafer—that are subsequently exported to a non-inquiry country and further processed into modules or other products before being imported into the United States are not subject to a finding of circumvention.
DOC also designated certain companies as being noncooperative, and applied an “adverse facts available” (AFA) designation to those companies. Those companies include the following:
The AFA designation will impact the ability of these companies to take advantage of the certification processes, discussed in greater detail below.
DOC will continue its certification process, meaning that to avoid suspension of liquidation and cash deposits, importers and exporters will need to submit the required certifications at the time of importation. The three types of available certifications are as described in the Preliminary Determination that have been underway since December 2022.
The broadest of these certifications is the “Applicable Entry” certification, which effectively provides for AD/CVD-free entry through June 6, 2024 in light of the moratorium established under Presidential Proclamation 10414. All producers and exporters—even those against whom DOC found AFA—may take advantage of the Applicable Entry certification.
US President Joseph Biden issued Proclamation 10414 on June 6, 2022, declaring an emergency with respect to US electricity generation capacity and stating that immediate action was needed to ensure access to a sufficient supply of solar cells and modules to assist in meeting the United States’ electricity generation needs. DOC implemented the Proclamation in a final rule, which includes a waiver for CSPV cells and modules completed in the inquiry countries that are entered or withdrawn from warehouses for consumption in the United States prior to June 6, 2024.
DOC also included a requirement that the cells and modules that benefit from the waiver of AD/CVD must be utilized (defined to mean “used” or “installed”) in the United States within 180 days following the date of termination, which would require that the items be utilized in the United States on or before December 3, 2024. DOC stated the following about utilization in the issues and decision memos issued in the inquiries:
“Used” means the solar cells or solar modules are in operation or functioning in the United States by the Utilization Expiration Date. “Installed” means the solar cells or solar modules have been affixed to the structure or in the system in the United States on which, or in which, they will operate by the Utilization Expiration Date, but they are not in operation by that date. The mere sale of solar modules to a party for a specific project, incorporating solar cells into a solar module into the United States, dedicating solar cells or solar modules to a particular project, or delivering solar cells or solar modules to a project site do not constitute being “used” or “installed.”
While the Applicable Entry certification is wide-reaching, taking advantage of the benefit will require certain efforts from importers, exporters, and other parties in the US downstream transaction chain. The importer must attest that it has personal knowledge of the facts regarding the production, import, and export of solar cells or modules, including the utilization requirements in the United States. For purposes of the certification, “personal knowledge” includes facts obtained from another party.
If Applicable Entry merchandise is sold subsequent to importation, such sale does not mean that the utilization requirements cannot be met. However, for the importer to make the relevant certifications as to use, it must have knowledge of, and documentation supporting, satisfaction of the utilization requirement.
DOC advised that “the documentation that must be maintained is documentation that supports the actual use or installation of the solar cells or solar module by the Date of Termination and that will allow the party completing the certification to certify to the use or installation by that date.” Given the range of companies involved in any transaction chain from the importer to end user, DOC declined to list specific types of supporting documentation that would be acceptable.
It will be up to the parties to determine what documentation they deem sufficient to support the certification submitted, likely through ongoing negotiations. The importer and exporter will have the most leverage in such negotiations as they would be the parties making a certification to the government, and an inability to support that certification may have broader impacts for that importer or exporter following the moratorium (e.g., if DOC determines that AFA should be applied against a party, that party would not be able to participate in the certification process following the moratorium).
Still, the Final Determination is expected to significantly impact the solar industry supply chain after the moratorium ends in June 2024 as it excluded only a select few suppliers. Congress passed a resolution seeking to nullify the moratorium, which President Biden vetoed, and the current politics of the issue are not likely to support an extension in an election year.
Strategies for companies found to be circumventing and/or subject to countrywide circumvention include (1) determining if a lower separate rate might be available under the Orders or (2) modifying supply chains for specific inputs or further manufacturing of a solar cell in a non-inquiry country.
Separate Rates Based on China Orders
The cash deposit requirements are based on rates as determined in the underlying China case, as DOC does not conduct separate rate analyses as part of its circumvention inquiry. For exporters that have a company-specific rate under the Orders, that exporter-specific rate in the most recently completed segment of the proceeding will be used.
If the exporter does not have a company-specific rate, but the producer of the wafer that is incorporated into the solar cell or module has a separate rate, that producer-specific rate will be used. If no specific rate has been assigned, the countrywide AD rate of 238.95% or the CVD rate of 15.24% apply.
Rates may be revised during an administrative review or a changed-circumstances review. Following the imposition of the Orders in China, many suppliers stopped exporting to the United States, and DOC has issued determinations of no shipments in recent years. However, such a determination does not eliminate any previous determination of a separate rate or finding that the exporter was subject to the countrywide or “all others” rate. In other words, a finding of no shipments does not mean the separate rate is 0%.
Supply Chain Modifications
While domestic solar production has increased in recent years, the United States remains heavily reliant on foreign solar modules. More than 90% of the world’s ingots and wafers (made from polysilicon) are produced in China, and 80% of solar panels going into both residential and commercial projects in the United States come from abroad. Of those imports, more than 80% in 2023 so far have come from the inquiry countries, and a third of those come from Vietnam alone.
Non-US producers and exporters have been and will continue evaluating options for adjusting supply chains to avoid the tariffs either through the sourcing of critical components or the further processing of merchandise that is ultimately imported into the United States.
DOC affirmed its preliminary determination that wafers produced outside of China using polysilicon sourced from China are not Chinese wafers for purposes of the circumvention inquiries. DOC continued to find that a wafer is produced in China if the ingot was sliced to form the wafer in China. While wafer production relocation is a consideration particularly for major producers, many will need to continue to incorporate Chinese-origin wafers in the near term and though the moratorium period.
Two additional certifications are available, which will continue following the end of the moratorium. The narrower is available only to those entities that DOC has found to be noncircumventing. As of the Final Determination, this certification is available only to Hanwha Q CELLs and Jinko Solar in Malaysia and Boviet Solar in Vietnam.
The other is an input-based certification highlighting six components and creating a “wafer + 2” test. Importers and exporters may use this certification if the imported products either (1) do not contain a Chinese-origin wafer or (2) despite containing a Chinese-origin wafer contain no more than two of the listed components that are also of Chinese origin. The relevant inputs include silver paste, aluminum frames, glass, backsheets, ethylene-vinyl acetate, and junction boxes.
Each certification will be subject to verification by DOC, which will require the importers and exporters to support through personal knowledge and documentation that the information submitted is accurate.
Failure to participate in verification or adequately support the certified claims may result in the certifying company being added to the list of AFA entities. For example, New East Solar Energy (Cambodia) Co., Ltd. is now on the list of AFA companies despite having been found not to be circumventing the Orders in DOC’s Preliminary Determination because it subsequently canceled DOC’s verification of its information.
DOC affirmed that, for those named entities against whom AFA have been applied, only the Applicable Entry Certification is available. This means that even if an entity adjusts its production process or supply chain such that it can meet the requirements of the component-based certification, it will be unable to complete that certification unless and until the AFA designation is removed. The Final Determination provides that this removal may be challenged only as part of an administrative review, not as part of a changed-circumstances review.
It is possible that certain exporters or producers found to be circumventing or subject to countrywide circumvention will challenge the Final Determination in the Court of International Trade, but it is unclear if any favorable results will be obtained before the June 2024 expiration of the presidential moratorium.
Solar cell and module purchasers and project developers can further manage risks presented by the Final Determination by conducting diligence on prospective producers and exporters by determining their involvement in the circumvention inquiries and whether any specific producer or exporter has been found to be circumventing. If the company is circumventing, either because it is named or is subject to general countrywide circumvention, parties can request information on plans for claiming an applicable certification or the appropriate rate application.
Purchasers can further mitigate import-related risks by procuring merchandise on a Delivered Duty Paid (DDP) basis, whereby the seller would be responsible for declaring and entering the imported merchandise. Negotiation of appropriate representations, warranties, and covenants in procurement agreements also allocate risks among the parties and can shift responsibility for the merchandise to those who are producing or exporting.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following:
 S&P Global, US solar panel imports jumped 87% in Q1 2023, hit new high after Biden’s relief (May 18, 2023).
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