Yesterday, the US Trade Representative announced that President Trump approved recommendations to impose a safeguard tariff on imported solar cells and modules under Section 201 of the Trade Act of 1974. The tariff will be in effect for the next four years at the following rates:

This tariff is the result of petitions filed in May 2017 by two US solar cell manufacturers at the (ITC under Section 201 of the Trade Act of 1974. The petitions alleged that a global imbalance in supply and demand in solar cells and modules and a surge of cheap imports caused serious injury to the domestic solar manufacturing industry. In September, the ITC found injury to the US solar equipment manufacturing industry and, in October, released its recommendations to the White House to impose tariffs. The President’s final decision was in line with the ITC’s recommendations.The first 2.5 gigawatts (GW) of imported solar cells will be exempt from the safeguard tariff in each of those four years. According to the International Trade Commission (ITC), the United States imported approximately 12.8 GW of solar cells in 2016, which was expected to grow in 2017.

Supporters hope the tariff will encourage increased domestic solar manufacturing. Reports are circulating that a solar manufacturer is considering opening a new module factory in Florida. However, critics of the tariff like the Solar Energy Industries Association (SEIA) say that the tariff will result in a loss of 23,000 domestic jobs this year, including many in manufacturing, and will result in the delay or cancellation of billions of dollars in solar investments. The U.S. solar energy industry currently employs 260,000 Americans in jobs ranging from installation to manufacturing racking systems and inverters. The industry created 1 out of every 50 new US jobs in 2016. According to SEIA, only 2,000 people in the United States are employed manufacturing solar cells and panels.

The tariff is also expected to increase solar module costs, with early estimates predicting an increase of 10 to 12 cents per watt based on current US import prices of 35 to 40 cents per watt.

The US Trade Representative’s press release and fact sheet took clear aim at China, singling it out as a major cause of injury to the domestic solar manufacturing industry: “Today, China dominates the global supply chain and, by its own admission, is looking to increase its capacity to account for 70 percent of total planned global capacity expansions announced in the first half of 2017.” The US Trade Representative also stated that it will “engage in discussions among interested parties that could lead to positive resolution of the separate antidumping and countervailing duty measures currently imposed on Chinese solar products and U.S. polysilicon.” Despite the aggressive rhetoric, the tariff will not be limited to Chinese imports.

Additional details on whether any countries will be exempted from the tariff and how the 2.5 GW exemption is determined should be available upon publication of a Presidential Proclamation finalizing the tariff.

Alongside the tariff on solar cells, the Trump Administration also announced a tariff on imported residential washing machines.

On December 2, 2017, the Senate approved its version of the Tax Cuts and Jobs Act. The Senate Bill includes the base erosion and anti-abuse tax, a new tax intended to apply to companies that significantly reduce their US tax liability by making cross-border payments to affiliates. Given its potential to disrupt the financing of renewable energy projects, taxpayers in the renewable energy sector have been paying close attention to its developments.

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Changes to the energy credits proposed in the Tax Cuts and Jobs Act could impact the eligibility of renewable energy projects that had been relying on the guidance previously issued by the Internal Revenue Service.

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President Trump released his budget proposal for the 2018 FY on May 23, 2017, expanding on the budget blueprint he released in March. The budget proposal and blueprint reiterate the President’s tax reform proposals to lower the business tax rate and to eliminate special interest tax breaks. They also provide for significant changes in energy policy including: restarting the Yucca Mountain nuclear waste repository, reinstating collection of the Nuclear Waste Fund fee and eliminating DOE research and development programs.

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On December 18, 2015, President Barack Obama signed into law the Consolidated Appropriations Act, 2016 (H.R. 2029) (the Act), which included welcomed extensions to a number of energy tax incentives. The legislation includes multi-year extensions of the Section 45 Production Tax Credit (the PTC) and the Section 48 Investment Tax Credit (the ITC) for wind and solar projects tempered by a gradual phase out of the total credit available.

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by David J. Levine and Pamela D. Walther

The flurry of international trade disputes in the renewable energy field, particularly the solar sector, is complicating the business landscape for the renewable energy industry.  In their BloombergBNA analysis piece, McDermott international trade lawyers David Levine and Pamela Walther provide a detailed account of renewable energy trade actions in the domestic and international arenas.  As the long-term implications of these disputes raise serious strategic issues for providers, consumers and governments, those involved are well-advised to monitor developments and take an active role in proceedings to protect their interests.

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by Raymond Paretzky and William Friedman

The U.S. Department of Commerce (Commerce) published its final affirmative antidumping (AD) and countervailing duty (CVD) determinations on October 17, 2012, imposing new duties on Chinese solar panel producers and exporters.  Commerce determined that Chinese producers/exporters sold solar photovoltaic cells in the United States at dumping margins ranging from 18.32 to 249.96 percent, and that Chinese producers/exporters have received countervailable subsidies of 14.78 to 15.97 percent. 

Dumping occurs when a foreign company sells a product into the United States at less than fair value prices.  Countervailable subsidization occurs when a governmental authority directly or indirectly conveys benefits that support production by specific companies or sectors, or are contingent upon export performance or the use of domestic goods over imported goods.

As a result of its determinations, Commerce will instruct U.S. Customs and Border Protection to collect cash deposits or bonds equal to these margins on imports.  The cash deposit rates, however, will be reduced by 10.54 percent, the export subsidy rate.  Additionally, Commerce found that “critical circumstances” exist in the CVD investigation for all companies and in the AD investigation for all companies except one, Wuxi Suntech.  As a result, provisional duty deposits, which are normally collected as of the date of publication of Commerce’s preliminary determinations, will be collected 90 days prior to that date (except in the case of AD duty deposits for Wuxi Suntech).

For the early duty deposit collection to be maintained and the AD/CVD duties to stand, the International Trade Commission (ITC) must make an affirmative final determination that dumped and subsidized imports of solar cells from China “materially injure, or threaten material injury to,” the domestic solar panel industry.  If the ITC makes a negative final injury determination, the investigations will be terminated and the duties will not be imposed.  The ITC has tentatively scheduled its final determination vote for November 7, 2012.

by Raymond Paretzky and David J. Levine

The U.S. International Trade Commission (ITC) is now beginning its final phase “injury investigation,” which will result in a determination in November as to whether U.S. producers are harmed by imports of allegedly dumped and/or subsidized imports of Crystalline Silicon Photovoltaic Cells and Modules from China.

The parallel dumping and subsidy actions began with the filing of a petition by Solar World Industries America Inc., the U.S. subsidiary of a German parent company, in October 2011. In December, the ITC issued a unanimous affirmative preliminary injury determination, rejecting arguments by companies opposed to the action that price declines in the industry resulted not from Chinese imports but rather from plummeting silicon prices, reduced U.S. government incentives for the housing industry to use solar cells/panels, and limited U.S. demand. The ITC will revisit these arguments in its more expansive final phase investigation, in which importers, U.S. producers, purchasers and Chinese producers will be required to answer ITC questionnaires. All parties with interests at stake are well advised to make their positions and relevant facts known to the ITC.

If the ITC finds that the U.S. industry making these products is in fact injured (or threatened with injury) by the imports, the United States will impose tariffs on imports of these products. The amount of the tariffs will be determined by the U.S. Department of Commerce (DOC) in separate proceedings. DOC preliminarily found that subsidization was occurring in the range of 2.90 to 4.73 percent and dumping in the range of 31.14 to 249.96 percent, but DOC could change these rates in its final investigations, which are currently ongoing.

Key dates in the ITC investigation’s final phase are:

 Questionnaire Responses Due  Aug. 13
 Confidential Staff Report Released  Sept. 13
 Requests to Appear at Hearing Due  Sept. 19
 Prehearing Briefs Due  Sept. 20
 Hearing  Oct. 3
 Posthearing Briefs Due  Oct. 11
 Final Comments on New Info. Due  Nov. 1
 ITC Vote (Proposed)  Nov. 7