American clean energy groups have warned Department of Commerce (DoC) plans to press ahead with stiff tariffs on some of the world's biggest PV module suppliers risks having a “chilling” of development of the nation’s solar resource.

Four Chinese solar manufacturers are circumventing taxes by routing PV cells and modules to assembly plants in Southeast Asia for “minor processing” before delivery to customers in the US , according to preliminary findings by the DoC.

“Such actions amount to an effort to evade the existing anti-dumping and countervailing duty orders,” the agency said in a statement, spotlighting solar OEMs BYD, Canadian Solar, Trina and Vina as using facilities in Cambodia, Thailand, and Vietnam to dodge US tariffs.

“Today’s preliminary determination underscores [DoC’s] commitment to holding the PRC [People’s Republic of China] accountable for its trade distorting actions, which undermine American industries,” the agency said.

Four other Chinese suppliers were identified as not circumventing tariffs: Near East Solar in Cambodia, Hanwha and Jinko Solar in Malaysia, and Boviet Solar Technology in Vietnam. Cambodia, Malaysia, Thailand, and Vietnam supplied 80% of US imported solar panels in 2021.

DoC’s findings drew a mixed reaction. Washington, DC-based clean energy groups expressed disappointment, saying the announcement is counter-productive for US clean energy aspirations.

“The only good news here is that Commerce didn’t target all imports from the subject countries,” said Abigail Ross Hopper, CEO of Solar Energy Industries Association. “Nonetheless, this decision will strand billions of dollars’ worth of American clean energy investments and result in the significant loss of good-paying, American clean energy jobs.”

The American Clean Power Association (ACP) interim CEO JC Sandberg called the decision a “step backward for the US,” arguing it undercuts “any sense of business certainty that American companies rely on to continue investing in America’s clean energy future”.

American Council on Renewable Energy (Acore) CEO Greg Wetstone said the DoC “appears to be doubling down on constricting solar availability and imposing massive new red tape with certification requirements that could further chill the industry and thwart the administration’s clean energy objectives”.

However, the DoC’s decision drew support from Coalition for a Prosperous America, an advocacy group in the nation’s capital for US agricultural and manufacturing interests.

“This is an important win for the rule of law, American manufacturers, and the tens of thousands of workers that they employ,” said CEO Michael Stumo, who called on Biden to rescind his June solar emergency declaration.

At a time when American manufacturers are investing billions of dollars to boost domestic production in response to IRA, “it is unconscionable that the White House wants to continue to give Chinese manufacturers a pass for illegally violating US trade law to the detriment of American companies and American workers.”

Last March, the US agency announced a probe after a complaint from Auxin Solar, a small California PV panel manufacturer.

Present anti-dumping duties for China-origin cells and panels are 238.95% and 15.87% for countervailing, measures imposed in 2012 during former US President Barack Obama’s first term in office.

Many manufacturers are subject to significantly lower anti-dumping duties after demonstrating to DoC that their margins are lower than the China-wide margin, Norton Rose Fulbright law firm said in note to clients. The tariff amounts are reviewed annually.

Those collections will begin on 6 June 2024 unless the ongoing DoC probe that will now include in-person audits at plants in Southeast Asia does not verify the initial findings.

The DoC said 22 other companies in Malaysia, Thailand and Vietnam did not respond to its request for information in this investigation, and “consistent with longstanding practice, will be found to be circumventing”.

The agency will issue a final determination on its findings on 1 May 2023.

In June, President Joe Biden in a controversial move preemptively waived for two years any anti-circumvention duties DoC could decide to impose on solar panels through 5 June 2024.

By invoking emergency authority, Biden sided with US developers and electric utilities who applauded the action as necessary to avoid a prolonged industry slowdown that would undercut administration efforts to address climate change. He also cited disruptions in global energy markets caused by Russia’s invasion of Ukraine to justify his declaration.

US manufacturers who are investing to boost production capacity slammed the action as political interference in DoC’s quasi-judicial process and rewarding Chinese-funded special interests to defeat fair application of US trade law.

US DOC rules on solar dumping

The Department of Commerce considers Chinese-origin panels to be dumped if they are sold in the US for less than in China, but treats panels imported from Southeast Asia as Chinese if they are made from wafers manufactured in China and have more than two other components produced there. These are aluminum frames, backsheet, ethylene vinyl acetate sheets, junction boxes, and silver paste.

The US lacks domestic solar ingot, wafer and cell manufacturing capacity and has modest ability to produce solar modules (about 7GW on a direct-current basis), inverters (about 1GW), and trackers. There are only three producers of solar specialty glass in the US.

The landmark climate law Inflation Reduction Act (IRA) that President Biden signed in August provides federal tax credits for solar manufacturing that administration officials believe will enable the US to significantly lessen dependence on China.