US suspends tariffs on some solar panel imports for two years, but leaves China out

The White House said on Monday that the US would suspend tariffs for two years on solar panel imports from four Southeast Asian countries as part of efforts to address "the urgent crisis of a changing climate" - but left China out of the reprieve.

US President Joe Biden is waiving tariffs on panel imports from Cambodia, Malaysia, Thailand and Vietnam "to ensure the US has access to a sufficient supply of solar modules to meet electricity generation needs while domestic manufacturing scales up", the White House said.

Concerns, though, that China - the world's largest producer of the panels - is using forced labour as part of its hard-line policies against Uygurs and other ethnic religious minorities in the country's Xinjiang region led to the Uygur Forced Labour Prevention Act, which Biden signed into law in December.

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At an event hosted by the Washington International Trade Association and the Asia Society Policy Institute on Monday, US Trade Representative Katherine Tai elaborated on the Biden administration's policy with respect to panel imports from China.

Solar energy will "allow the world to be more effective in reaching our climate and our carbon goals, but we are 85 per cent reliant on China as a producer of solar panels", she said.

"And the real challenge we have there is that supply chain runs right through the region of China where we know there's a significant forced labour problem."

The administration invoked the Defence Production Act to accelerate domestic production of the panels, and will use federal government procurements to increase demand. Domestic products targeted by the DPA order also include building insulation, heat pumps, fuel cells and platinum group metals.

"These actions will spur domestic manufacturing, construction projects, and good-paying jobs - all while cutting energy costs for families, strengthening our grid, and tackling climate change and environmental injustice," the White House said.

Biden's predecessor Donald Trump imposed tariffs on all solar panel imports in 2017. That move mostly affected imports from China and was a precursor to the broader trade war with Beijing that Trump initiated in July 2018.

When it announced those tariffs in September 2017, the US International Trade Commission said it determined that solar panels, also known as photovoltaic cells, "are being imported into the United States in such increased quantities as to be a substantial cause of serious injury to the domestic industry".

The import tariffs have hampered Biden's pledge to support expansion of American solar power projects, and a Commerce Department investigation into whether Chinese solar-equipment manufacturers are evading tariffs, launched in March, has threatened his climate agenda further.

Abigail Ross Hopper, president and chief executive of the Solar Energy Industries Association trade group, praised the announcement while chiding the administration for the investigation, which was initiated by a request from Auxin Solar, a California panel producer.

Auxin Solar claimed in its request that manufacturers in Malaysia, Vietnam, Thailand and Cambodia were using components from China, effectively allowing Chinese companies to avoid the duties.

"We remain confident that a review of the facts will result in a negative determination," Hopper said, adding that "the president's action is a much-needed reprieve from this industry-crushing probe".

"The work our members did to articulate the urgency created by the initiation of this case and to provide data on negative impacts was critical to the effort to raise awareness about the damage being done," she said.

In April, a survey by the association of solar industry players indicated that 83 per cent of the respondents had experienced delays or cancellations on their panel orders as a result of the investigation.

These reported supply disruptions jeopardise Biden's efforts to meet a goal stated in Monday's announcement to boost US solar generation capacity to 22.5 gigawatts by 2024 from 7.5 gigawatts when he took office last year.

A separate but related White House notice on Monday said that Southeast Asian suppliers accounted for about three-quarters of US solar panel imports.

"Utilities and grid operators are increasingly relying on new solar installations to ensure that there are sufficient resources on the grid to maintain reliable service," the notice said.

"The unavailability of solar cells and modules jeopardises those planned additions, which in turn threatens the availability of sufficient electricity generation capacity to serve expected customer demand," the White House added.

Additional reporting by Owen Churchill

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.

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