US dumping allegations threaten solar exporters

Vietnam currently maintains an open import policy for solar panels and does not require special licences. Photo: Le Toan

A coalition of US energy producers, called the American Solar Manufacturers Against Chinese Circumvention (A-SMACC), has requested an investigation of several Malaysian, Thai, and Vietnamese companies allegedly involved in the unlawful avoidance of antidumping and countervailing duties on China.

Wiley, a preeminent Washington DC law firm, is advising A-SMACC and filed a petition on August 16, requesting the US Department of Commerce (DOC) to investigate the possible tariff evasion.

A-SMACC members believed that photovoltaic panels produced in the three Southeast Asian countries mainly use input materials and technology from China, with the latter thus “bypassing trade remedies and entering the United States while enjoying lower tariffs”, said Chu Thang Trung, deputy director of the Trade Remedies Authority under the Ministry of Industry and Trade.

According to Wiley, for too long the circumvention of anti-dumping and antisubsidy laws on Chinese solar products have caused difficulties for the industry, even rendering it likely that the US industry “will succumb to monopoly control”, with its energy security at risk while “clean energy manufacturing [will be] gravely imperilled”.

Thus, the law firm recommended that existing trade remedies on Chinese solar products should be extended to circumventing entities such as the suspected companies in Southeast Asia.

Long-lasting tensions

As Wiley stated, Chinese solar companies are almost exclusively exporting from Southeast Asia to the US. However, most of the production, research, and development facilities remain in China. The filing, according to Wiley, is intended to ensure a level playing field for the US solar industry, as well as investments needed to tackle climate change in the long run.

Trung from the Trade Remedies Authority confirmed to VIR that US manufacturers have filed a request to investigate photovoltaic panel producers from Thailand, Malaysia, and Vietnam.

“However, the DOC’s public system has no information available yet that are related to this investigation request,” Trung said. “Domestic manufacturers do not produce and export many photovoltaic panels.”

Up to now, IREX Energy JSC under Solar BK Group is the only domestic producer of solar cells, but has a very low market share. The rest of the market is covered by foreign-invested enterprises, most of which are Chinese, American, and Canadian.

Data from the General Department of Vietnam Customs showed that in 2019 Vietnam imported 36.2 million solar panels with a value of nearly $850 million, an increase of more than 224 per cent compared to 2018. Last year, the import volume tripled to 114.6 million panels with a value of up to $2.4 billion, an increase of more than 185 per cent compared to 2019.

Trung pointed out that Chinese solar panel exports to the US fell sharply after a wave of tariffs that began in 2012, when the US government imposed rates of up to 250 per cent based on an investigation that showed that Beijing subsidised Chinese solar panels, enabling them to compete in the US market at a cheaper price.

At the time, the escalating US-China trade tensions aggravated China’s output of modules and photovoltaic panels. In February 2018, the US government imposed a global safeguard tariff of 30 per cent on all imported solar panels, excluding Canadian products. Moreover, Chinese panels were at risk of being entirely excluded from the US market when former President Trump decided to impose 25-per-cent tariffs on Chinese tech goods in August that year.

After the Uruguay Round, the US revised some of its criteria for antidumping avoidance in its 1988 Trade Act through the Uruguay Round Agreements Act. These changes mainly correct legal loopholes related to upstream and third-country evasion.

Meanwhile, looking back at cases related to basa fish and plywood that the US has been investigating in Vietnam, most of these were also linked to accusations of tariff evasion with China. In the case of plywood products, the investigations also focused on goods assembled in a third country and thus changing the origin before being exported to the US.

Vietnam is currently maintaining an open import policy for solar panels and does not ban any goods from being imported nor does it require special licences. The import tariff on many of these panels coming into Vietnam is set to zero, thus not excluding the possibility that foreign manufacturers import components to Vietnam just for processing, assembling, and exporting.

Intertwined networks

The direction of Wiley closely mirrors the investment landscape, as many of the eight exporters to the US are required to be investigated in more than one market. Trina Solar is required to be investigated in both Thailand and Vietnam, and Vina Cell Technology is also active in both Malaysia and Vietnam.

In Vietnam, China’s Trinor Energy Group has been implementing large-scale projects. This August, Trina Solar Science and Technology Co., Ltd. – which is fully invested by Trinor Energy – is urgently recruiting personnel for many positions for the new factory in the northern province of Thai Nguyen. At the same time, Trina is trying to supplement its existing workforce at its Bac Giang factory in the north.

Trina Solar started operating in Bac Giang in 2017 and benefited from a sharp increase in orders during the trade tensions between the US and China, while avoiding the US trade remedies imposed on photovoltaic panels imported from China. With a designed output of up to 1GW per year, Trina Solar became the largest solar panel factory in the country at this time, after being founded in 1997 by Gao Jifan in China.

Trina Solar chose Thai Nguyen for its first factory outside China producing 210mm photovoltaic cells and 550W Vertex modules to better meet the growing demand of the North American market. The factory in Thai Nguyen was established last December and has capacities for 3GW of photovoltaic cells and 4.5GW of Vertex modules.

A-SMACC requested the DOC to investigate trade remedy evasion with the expectation that the process and procedures are completely different from previous antidumping measures, using this as the basis for applying higher tariffs to items like Trina Solar’s products when imported into the US market.

Le Sy Giang, director of GH Consults, realised that many Vietnamese businesses face difficulties in appealing to trade remedy investigations due to the level of understanding on trade remedies and the lack of a clear strategy, experience, and determination. In addition, the financial capacity of domestic enterprises is still weak, with the costs of an appeal being high and, in order to succeed, it is necessary to hire a consultant from the country that initiated the investigation.

If Vietnamese enterprises are investigated and have to pay higher tariffs, “this fact could lead to a different calculation of the dumping margin, which could cause great damages to domestic manufacturers,” Giang warned.