By Nithya Nagarajan and Isaac Idicula, Husch Blackwell LLP
Due to various trade remedy actions taken over the course of the past few years, solar panels are 45% more expensive in the United States than in Europe and Australia, and panels are 50% more expensive in the United States than the global average. SEIA believes tariffs are largely responsible for the high price of solar panels in the United States. The Congressional Research Service (CRS) estimates that 98% of solar panels and their components are manufactured outside the United States, as a result solar panels have been the subject of several ongoing trade disputes.
Current status of tariffs on imported solar panels
In 2018, the previous administration instituted tariffs via presidential proclamation 9693 (January 25, 2018) under Section 201 of the Trade Act of 1974 on imports of certain crystalline silicon photovoltaic cells. These safeguard measures were to be in place for a four-year period beginning in February 2018 starting at a rate of 30%, then declining by 5% each year until reaching a rate of 15% for the last year. The Section 201 tariffs on solar panels are currently set to expire on Feb. 6, 2022.
In addition to safeguard tariffs, there are also additional import tariffs and duties which affect solar panels including: (1) duties of 25% and 10% on steel and aluminum authorized by the previous administration under Section 232 of the Trade Expansion Act of 1962, (2) certain duties on semiconductors manufactured in China authorized by the previous administration under Section 301 of the Trade Act of 1974; and (3) antidumping and countervailing duties on crystalline silicon photovoltaic products from China and Taiwan, covering both cells themselves and also cells assembled into modules.
In October 2020, the previous administration issued presidential proclamation 10101 whereby it modified proclamation 9693 and imposed solar safeguard duties on bifacial panels which were previously excluded. In addition, the modification suddenly and without warning increased the safeguard tariffs on all imported solar cells from 15% to 18% on the grounds that the previous exclusion of bifacial modules had impaired the remedial effect of the original safeguard measures.
Current legal claims against the tariffs
SEIA challenged the October 2020 modification in the Court of International Trade and were joined in the appeal by Invenergy Renewables, NextEra Energy and EDF Renewables, arguing that President Trump failed to follow the requirements of the safeguard laws when he issued the modification proclamation. According to the complaint, SEIA argued that Trump failed to meet several procedural requirements when he issued the proclamation. SEIA further argued that while the president can implement a “mid-term ‘reduction, modification, or termination’ of an existing safeguard measure,” he can only do so if that modification is “trade liberalizing.”
The Department of Justice (DOJ) on March 1, 2021, filed a motion to dismiss SEIA’s complaint stating that the statute allows the president to make a “modification” of safeguard measures, and that the statute indicates that these changes or modifications do not need to just a reduction or termination of the tariffs.
The DOJ’s motion is an indication that while there may be changes coming with respect to trade and energy policy, the Biden administration will, for the time being, not take any immediate action to rescind the previous administrations’ actions, but are instead declaring that the president’s actions were a lawful use of presidential power. The DOJ motion comes at the same time the Biden administration plans to expand funding for clean energy and other low-carbon energy technologies as it stated in its Feb. 11, 2021, announcement that it will make available $100 million for alternative energy sources.
This confluence of events will be of significant importance to solar developers and investors given that growth in the solar energy industry is directly correlated with declining costs. It is expected that the expiration of the safeguard measures against solar panels will result in increased growth and investment in the solar energy industry. But for the time being, there seems to be no eagerness to remove these and other tariffs.
Nithya Nagarajan is a Washington-based partner with the law firm Husch Blackwell LLP. She practices in the International Trade & Supply Chain group of the firm’s Technology, Manufacturing & Transportation industry team. Isaac Idicula is an attorney in Husch Blackwell LLP’s Kansas City office.