Solar Circumvention Proceeding Update

On May 2, the U.S. Department of Commerce issued a memorandum to update litigation parties on developments in the on-going solar cell and panel circumvention proceeding. Key points from the memorandum are described below, and a copy can be found here.

• First, Commerce has now clarified its position that solar cells and modules made from non-Chinese wafers are not covered by the circumvention proceeding and will not be subject to antidumping and countervailing duty (“AD/CVD”) cash deposit requirements moving forward, even if Commerce issues an affirmative circumvention determination.
  • While Commerce is apparently focusing on the origin of silicon wafers, this does not mean that only the value of a wafer will face AD/CVD cash deposits. If Commerce issues an affirmative circumvention determination, then AD/CVD cash deposits for cells and modules will be determined based on the entire market value of the cells and modules incorporating Chinese wafers.
  • In addition, the removal of non-Chinese cells and modules from coverage by the AD/CVD orders likely will be done with specificity, meaning that only particular cells and modules made from non-Chinese wafers will be excluded from AD/CVD requirements.
• Second, Commerce may find that cash deposit rates for imports covered by the circumvention case are to be based on the identity of the supplier of the China-origin wafer, rather than based on the identity of an affiliated exporter/producer in one of the four relevant countries. For example, if Company X in Thailand sources China-origin wafers produced by Chinese Company Y, and uses those wafers to produce cells and modules in Thailand, then, if Commerce issues an affirmative circumvention determination, the cash deposit rate applied to Company X’s cells and modules exported from Thailand to the USA may be based on Company Y’s AD/CVD combined cash deposit rate in the China proceeding, rather than on a Company X affiliate’s combined cash deposit rate in the China proceeding. If implemented, such a system may make predicting cash deposit levels even more challenging and uncertain.
• Third, Commerce is considering a certification process by which importers or exporters will be able to certify to the U.S. government either that their product (1) was made from non-Chinese wafers and so should not face any AD/CVD cash deposit requirement, or (2) was made from Chinese-origin wafers supplied by Company X and therefore should receive the combined cash deposit rate associated with Company X. It is likely that any certification process will be performed at the cell or module level and that all cells and modules sharing the same characteristics may be combined for certification purposes. Commerce has requested comments on the certification process from parties participating in the case by May 9, although that deadline may be extended.

Several parties—including NextEra, Tesla, Boviet, Jinko, JA Solar and Talesun—have submitted extensive comments to the Commerce Department strongly opposing Auxin’s circumvention claims and requesting that Commerce either rescind the circumvention proceeding or issue a negative circumvention determination as soon as possible. While it is unlikely that Commerce will rescind the circumvention proceeding, or issue a preliminary determination before late August, there is a basis to think that the chances of a negative preliminary circumvention determination have increased.

For background information on the Commerce Department’s circumvention proceeding, please see Orrick’s webinar here. For specific additional information or questions, feel free to reach out to your Orrick client manager or any of our team members who participated in the webinar.