Over the past few weeks, one trade group in Washington has triggered a media firestorm about a Commerce Department investigation into trade violations on imports of solar panel components. The organization, known as the Solar Energy Industries Association, has warned that the uncertainty surrounding the investigation has stopped imports of most solar components, canceling or delaying hundreds of large-scale solar projects, leading to probable layoffs and an attenuated build-out of renewable energy.
SEIA has been wildly successful in mainlining its views. The New York Times, The Wall Street Journal, and The Washington Post have all done major stories about the controversy, warning of a “frozen” solar industry and a collapse of the green transition, while heaping blame on Auxin Solar, the small manufacturer that initiated the legal process that led to the Commerce investigation. As Bloomberg has reported, 22 senators from both parties have pleaded with President Biden to expedite matters at Commerce; key officials inside the administration like climate envoy John Kerry have lobbied for the same. Energy Secretary Jennifer Granholm expressed her concern publicly in Senate testimony. One progressive group has created an attack website against Auxin, accusing it of “close ties” to Republicans and the Koch brothers.
While all of these media reports, politicians, and assorted groups either quote or borrow heavily from the narrative of the Solar Energy Industries Association, at no time do they disclose that among its leading members are the same Chinese-owned companies that are implicated not only in the investigation of illegal tariff evasion, but in the use of slave labor to produce solar components and coal-fired energy to power the factories.
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Dan Whitten, vice president of public affairs for SEIA, responded to Prospect queries with a series of comments, but regarding its membership would only say that “SEIA represents the American solar and storage industries and American workers, full stop.” This ducks the fact that SEIA’s membership includes U.S. subsidiaries of Chinese producers JinkoSolar, JA Solar, Trina Solar, BYD, and LONGi Solar, which are the dominant solar component manufacturers in the world. In addition, SEIA counts as members Hanwha Q Cells and Canadian Solar, which are headquartered in Korea and Canada, respectively. Canadian Solar has a large manufacturing base in China and its subsidiary CSI Solar was listed on the Shanghai Stock Exchange; Q Cells has manufacturing in China, though it has other factories in the U.S. and recently announced a new one. As recently as 2019, Jinko gained a seat on SEIA’s board of directors, and Hanwha Q Cells still holds one today.
The Commerce Department investigation involves attempts by Chinese-owned companies to evade anti-dumping and countervailing duties (AD/CVD) placed on solar imports from China back in 2012. The main tactic is to route exports through third countries not subject to the duties, and pretend that the products originate there. The companies subject to the duties include JinkoSolar, JA Solar, LONGi Solar, Trina Solar, BYD, Hanwha Q Cells, and Canadian Solar, all of whom are SEIA members.
“If you look at SEIA, if they have to advocate on one side or the other, they always benefit Chinese solar companies,” said Nick Iacovella of the Coalition for a Prosperous America, a bipartisan nonprofit. His colleague Mike Stumo was blunter. “SEIA is an agent of LONGi and Jinko. In other times it would be subject to FARA,” he said, referring to the Foreign Agents Registration Act, a disclosure requirement on lobbyists for foreign governments.
The Commerce Department investigation involves attempts by Chinese-owned companies to evade anti-dumping and countervailing duties placed on solar imports from China.
While the Commerce investigation is about circumvention of anti-dumping laws, it’s impossible to dissociate it from a looming statutory prohibition on imports using forced labor in the solar-producing region of Xinjiang, which comes into force at the end of June. Many see the current fight as a dry run for the attempt to overturn enforcement of a congressional statute. Several Chinese-owned firms in SEIA’s membership have also publicly admitted to using slave labor. Yet SEIA allowed all these companies to sign a pledge it organized committing to ban forced labor from the solar supply chain.
The need to build out the green transition is great, and solar is a key facet of that. But SEIA has overhyped the destruction of solar in the past, and there’s reason to be skeptical of its apocalyptic claims today.
Moreover, the battle of who will control solar production in the future, and whether it will continue to be dominated by China, is critical to the future of clean energy. We are still living through a pandemic that revealed the dangers of centralizing production and breaking supply chain resiliency in the interest of cheap goods. That lesson has implications for solar, even outside of the environmental and human rights concerns of leaving all production to China.
THE DUTIES DATE BACK to Barack Obama’s administration. Since December 2012, the U.S. has collected anti-dumping and countervailing duties on solar imports from China. These were intended to offset the effect of Chinese state-owned companies, which control about 80 percent of the solar supply chain, overproducing and underpricing polysilicon wafers, solar cells, and modules in order to gain market share on production. It’s a rather overt tactic: China’s latest five-year plan only outlines getting 20 percent of its own energy from renewables by 2025, but since 2005, it has made solar production a strategic focus. And this is a common way that Chinese companies have dominated industries.
The response to the countervailing duties was similarly deliberate. Suddenly, solar component imports to the U.S. from four Southeast Asian countries—Cambodia, Malaysia, Thailand, and Vietnam—spiked. Today, they account for “82 percent of the most popular type of solar modules used in the United States,” the Times noted.
Critics argue that the strategy was clear: Chinese companies were transshipping solar components (nearly all polysilicon originates in China) to neighboring nations to circumvent the duties. In the face of that, any U.S. solar manufacturer could file a circumvention claim, which must by law be investigated by the International Trade Administration, the Commerce Department’s trade enforcement arm, in a quasi-judicial process with court review.
The dispute comes down to this question: Are the factories in the four Southeast Asian countries making significant modifications to Chinese solar cells and panels, or are they engaging in “minor processing,” serving mainly as a pass-through for largely intact Chinese imports to avoid duties.
In the investigation, which began April 1 and is scheduled to end August 30, Commerce will send questionnaires to the largest producers in these four countries, asking them to certify the sources of their components and their manufacturing process within 20 days, under a process in place since the duties commenced in 2012. If the companies establish that they source from countries other than China or produce in-house, they pay no duty. If they source from China but make major modifications, they pay no duty. If they source from China and are found to make minor modifications, duties are paid based on an annual rate that is specifically laid out and known to everyone in the industry.
A Commerce spokesperson explained that this process “is transparent, internationally accepted, and has been the law of the land since 1930.” The spokesperson added that “imported solar cells and panels remain important to advancing current efforts, and Commerce is committed to holding foreign producers accountable to playing by the same rules as U.S. producers.”
These duties are applied at the company level. For 90 percent of all imports from China, the rate is, in total, between 12 and 20 percent, and that’s only assessed on the components, not the entire solar panel. Canadian Solar, BYD, and LONGi are at 12 percent, and Jinko is at 20 percent. Hanwha Q Cells is at about 28 percent, and Trina and JA, which have been cited for dumping more severely, are much higher. As Commerce Secretary Gina Raimondo reiterated in Senate hearings yesterday, only if the companies cannot demonstrate any separation from the Chinese government would the duties rise above 250 percent.
But SEIA has gone with the 250 percent number. Whitten also cited to the Prospect “the retroactive nature of the tariffs” (they are not tariffs, but duties that offset Chinese subsidies) as a killer for the industry. It wants Commerce to preempt its own investigation and issue a preliminary ruling showing no harm.
But the key point is that any company that knows its supplier knows exactly what it would have to pay in the worst-case scenario. It’s written down on a sheet of paper. “The investment guys are in a panic because it will limit [profit] margin, but it’s not the end of the business,” said Lori Wallach, who runs Rethink Trade for the American Economic Liberties Project.
The only real existential threat would be for any company that doesn’t know its supply chain, or has been trying to hide what it’s sourcing out of Xinjiang. Which raises this question: If the investigation is truly “meritless,” as SEIA has repeatedly claimed, and solar installers are so confident that nothing they’re doing violates these duties or any other orders, why have the shipments stopped?
SOLAR INSTALLERS AND OTHER MEMBERS OF SEIA lived with this threat for ten years, enough time to diversify their supply chains, to prevent any investigation from having a large impact. SEIA told the Prospect that it “strongly supports domestic manufacturing,” and has endorsed clean-energy tax credits that would help get there. However, its main strategy for the past ten years has been to lament restrictions on Chinese solar production.
For example, in 2018, Donald Trump levied Section 201 tariffs on solar cells and modules emanating from China. SEIA condemned the move, saying that “even the slightest increase in the price of modules can mean that homeowners, utilities and businesses will choose an alternative for their power generation.” Projects would not “pencil out.” Jobs would be lost. And it wouldn’t assist U.S. manufacturing.
The pricing war with Europe and the political machinations to break the back of trade enforcement underscore the broader need for domestic sources of supply.
But in 2019, U.S. solar manufacturers reached a ten-year high in global market share, at 19.8 percent, according to figures from the Energy Information Administration. (Sadly, this is seen as a high number, despite the fact that U.S. researchers invented solar in the 1950s.) And solar installations grew by 43 percent in 2020, after the Section 201 tariffs were imposed. Module prices also continued to fall steadily. SEIA’s pre-tariff report estimated 15 gigawatts (GW) of installations in 2020; actual installations were over 19 GW. In 2021, that rose to 24 GW, despite the tariffs.
SEIA has done very well along with the industry. Its publicly available tax returns show millions of dollars in annual revenue—$16.3 million in 2019, with $1.3 million in expenditures that year to major lobbying groups like Squire Patton Boggs.
Today, there does seem to be an actual problem, as solar shipments dry up and installers are unable to find quick alternatives. One utility company in Indiana, amid delays of a solar build-out, had to keep a coal-fired power plant online.
But there are multiple factors beyond the anti-dumping investigation for the lack of shipments. First of all, U.S. installers are being outbid by the Europeans, who have reached peak levels of urgency to install renewables amid Russia’s invasion of Ukraine and threats to the supply of Russian natural gas. Even before the war, European solar wholesale prices were rising, thanks to tight gas supplies. Now it’s being called an “insane” rush to installation. Forward prices for corporate power purchase agreements are up 103 percent in recent months, according to a Bloomberg New Energy Finance survey. That’s a gold mine for suppliers, who can break their U.S. contracts and supply EU producers.
Others argue that the Asian companies are deliberately stopping component shipments to try to force Commerce to stand down. “The Chinese are smart, they know how the political system works,” said Iacovella. “They know climate is a strong motivator among Democratic politicians and the Biden White House.” The Coalition for a Prosperous America has called this a “game of chicken.”
Solar companies have come close to admitting this. In a letter to the Commerce Department, over 50 smaller solar installers explained that “the manufacturers exporting from the countries named in the petition will not ship us the [solar] modules we’ve ordered.”
SEIA’s Whitten insists that “solar module shipments have stopped because the risk of doing business in the U.S. solar market is untenable.” But again, if there was nothing to worry about from this investigation, there wouldn’t be any need for companies to immediately stop shipping components to the U.S. to avoid the retroactive duties.
The pricing war with Europe and the political machinations to break the back of trade enforcement underscore the broader need for domestic sources of supply, which could have been built out anytime over the past decade, and were built out when tariffs were placed on solar. Biden extended the Trump solar tariffs but exempted bifacial solar modules, the most-imported types of panels, and stateside production fizzled. (In its 2019 tax return, SEIA takes credit for that exemption.)
It is important to note that the preponderance of the delays are from massive commercial solar arrays for governments and utilities, not rooftop solar. “They want the least expensive hardware,” said Wallach. “Yet they have known since the original AD/CVD cases of 2012 that Chinese sourcing was risky.”
And duty circumvention is not the only source of risk.
THE UYGHUR FORCED LABOR PREVENTION ACT is designed to prohibit any imports from the Xinjiang region, where detention camps run rampant. It passed the House 428-1 and the Senate by voice vote, and was signed by the president last December. The bulk of the solar components produced in China, and about half of the world’s polysilicon, comes from this region.
While the Chinese government has called the use of forced labor in Xinjiang “a rumor,” it has been acknowledged by virtually everyone involved in the industry. Polysilicon from China is on an official Department of Labor list of goods produced by forced labor. “It is a problem,” John Kerry conceded in House testimony last year.
In February 2021, SEIA had 175 member companies sign a pledge that opposed forced labor in the solar supply chain. “We hereby commit to helping ensure that the solar supply chain is free of forced labor and raising awareness within the industry on this important issue,” the pledge reads.
But incredibly, among the companies signing that pledge were U.S. subsidiaries of Chinese firms that have been credibly accused of engaging in forced labor. LONGi, one of the signatories, had its shipments seized by Customs and Border Protection (CBP) under a separate anti-slavery statute last November. JinkoSolar, Canadian Solar, and Trina Solar have also had imports blocked. Jinko and Trina are also signatories to the pledge. A U.K. report in April 2021 named those two companies and JA Solar as users of Uyghur forced labor. JA Solar also signed the pledge.
A March 2021 letter from Sens. Jeff Merkley (D-OR) and Marco Rubio (R-FL) notes that Jinko, JA, and LONGi have all “publicly indicated that they source polysilicon” from Xinjiang.
Asked about the signatories to the pledge, SEIA’s Whitten said that the organization created a traceability tool to help companies maintain an ethical supply chain, and “has been calling on all U.S. solar companies to immediately leave the Xinjiang region since October 2020.” But it’s hard to square that with pledge-signers including subsidiaries of Chinese companies still producing in Xinjiang.
For their part, the Chinese companies have implausibly intimated that they have a floor in their factories where non-slaves make components for the U.S. market, according to sources.
The connection between the anti-dumping/countervailing duty investigation and the looming forced labor order is unmistakable.
This will all come to a head June 23, when the Uyghur Forced Labor Prevention Act takes effect. Instead of short-term delays on shipments that can be sourced back to Xinjiang, there will be a full-on prohibition of those goods.
At least, that’s the theory. While CBP has caught some goods with slave labor, they have been criticized for mild disinterest in enforcement. The way it works is that the importer must affirmatively prove its goods are free of forced labor, and CBP must create an entities list that is prohibited, and a standard for how companies can get off the list. None of that has been completed yet, according to sources. “By statute, they should stop everything, but are they really going to do that?” asked Wallach.
The connection between the anti-dumping/countervailing duty investigation and the looming forced labor order is unmistakable. If the solar industry can stop a Commerce Department inquiry, they can set a standard to quietly ignore goods made with slave labor, as long as it’s in the name of hitting climate goals.
Those climate goals are in question, too. Solar component production uses large quantities of energy, and the Xinjiang plants rely on low-cost coal. In 2020, China started more coal plants than the world decommissioned combined, much of it in the solar-producing region. It takes years for a solar plant using coal to return to carbon neutrality. Domestic manufacturing would not have the same kind of problems.
Most important, holding the future of the green transition subservient to one country is folly, as two years of evidence with pandemic-era disruptions of concentrated supply more than proves. Even if you think that China is a rational actor that won’t overprice or hold back solar to get what it wants, any disruption can cause chaos, not just an anti-dumping investigation. Several Chinese cities are currently under lockdown because of the country’s zero-COVID policy. Floods have delayed production significantly. Extreme heat last year shut down factories due to government restrictions on energy. And Europe’s situation with natural gas and Russia should spark caution about how political unrest can upend supposedly stable supply.
Plenty of businesses and public officials are using this moment to consider decoupling from China to increase supply chain resiliency. The solar industry appears to want to do the opposite, looking the other way at slave labor and increased dirty-energy use.
Raimondo, in a speech earlier this year, said that domestic manufacturing was critical. “The more we rely on other countries to make things for us, the more vulnerable we become to supply chain disruptions like we have seen over the past two years,” she said in the March 15 speech.
SEIA has made the climate cost the centerpiece of their campaign. But it’s worth questioning whether climate and trade goals have to necessarily conflict in this case. If Chinese solar panels are dirtier to produce, some of the climate benefit is muted. If they’re made with forced labor, it shocks the conscience. And if they are wantonly violating trade laws, then the share of Chinese dominance will grow, adding a host of problems, not just for the economy, but for the climate as well.