US Department of Commerce Preliminarily Determines that Imports from Southeast Asia are Circumventing ADD/CVD Orders on Solar Cells and Modules from China

On December 8, 2022, the US Department of Commerce ("Commerce") published its preliminary determinations that solar cells and modules completed in Cambodia, Malaysia, Thailand, or Vietnam (collectively, "Southeast Asia") using components from China, and exported from Southeast Asia, are circumventing the antidumping duty ("ADD") and countervailing duty ("CVD") orders on solar cells, whether or not assembled into modules, from China ("Orders")¹. This alert discusses the preliminary determinations and the potential impacts on producers and importers of solar cells and modules from Southeast Asia.

Preliminary determinations

Commerce preliminarily determined that circumvention was occurring through each of the four Southeast Asian countries, making "country-wide" circumvention findings designating Cambodia, Malaysia, Thailand, and Vietnam as countries where solar cells and modules are being circumvented from China.

Commerce also conducted company-specific inquiries, selecting two respondents from each of the four countries (mandatory respondents); half were preliminarily found to have circumvented US duties on solar cells and modules from China by completing only "minor processing" prior to shipment to the United States.²

On the basis of its affirmative findings with respect to certain of the mandatory respondents, Commerce concluded that other producers in each country are circumventing the duties, despite the fact that Commerce did not gather or consider information regarding their specific operations in the Southeast Asian countries.

Scope

Products subject to these circumvention inquiries are solar cells and modules that have been completed in Southeast Asia using parts and components from China, that are then subsequently exported from Southeast Asia. The preliminary determinations further specify that these inquiries cover: (A) solar cells that were produced in Southeast Asia from wafers produced in China; and (B) modules, laminates, and panels that were produced in Southeast Asia from wafers produced in China, and where more than two of the following components in the modules were produced in China: (1) silver paste; (2) aluminum frames; (3) glass; (4) backsheets; (5) ethylene vinyl acetate sheets; and (6) junction boxes. If modules do not meet both of the conditions in (B), they are not covered, even if the cells within the modules were produced in Southeast Asia from wafers produced in China. Finally, wafers produced outside of China with polysilicon sourced from China are not considered to be wafers produced in China for purposes of these circumvention inquiries.

Therefore, the following products produced in Southeast Asia are not within the scope of the inquiries and preliminarily not subject to duties and suspension of liquidation:

(A) Solar cells produced in Southeast Asia from non-Chinese wafers;

(B) Modules produced in Southeast Asia using non-Chinese wafers; and

(C) Modules produced in Southeast Asia using Chinese wafers, but for which four or more of the aforementioned module components were not produced in China.

Suspension of Liquidation and Cash Deposit Requirements

Even if Commerce makes a final affirmative determination, certain duties owed under the inquiries will not be collected until June 2024.

As an initial matter, products not within the scope – either due to product characteristics, or because they are produced/exported from non-Southeast Asia countries – are not subject to the inquiries. With respect to in-scope imports, on June 6, 2022, President Biden issued Proclamation 10414 ("Declaration of Emergency and Authorization for Temporary Extensions of Time and Duty-Free Importation of Solar Cells and Modules From Southeast Asia") authorizing the Secretary of Commerce to suspend collection of ADD/CVD duties and cash deposits on subject solar cells and modules from Southeast Asia. This exemption will remain in place until June 6, 2024 (or until the emergency is declared terminated, whichever occurs first – the "Date of Termination"). On September 12, 2022, Commerce issued a final regulation implementing the proclamation. Per the final regulation, Commerce will direct the US Customs and Border Protection ("CBP") to discontinue the suspension of liquidation and cash deposit requirements that were ordered based on Commerce's initiation of these circumvention inquiries. Commerce will not direct CBP to suspend liquidation or require cash deposits based on affirmative preliminary determination of circumvention on any "Applicable Entries." However, Commerce will direct CBP to suspend liquidation or require cash deposits based on the affirmative preliminary determination of circumvention on any entries that are not considered "Applicable Entries."

Entries made on or after April 1, 2022, but before the Date of Termination

With the exception of Certified Entries described below, Commerce will instruct CBP to suspend liquidation and require cash deposit for entries of subject solar cells and modules made on or after April 1, 2022, but before the Date of Termination (June 6, 2024, when Presidential Proclamation 10414 expires). As for the cash deposit rate:

1. If the exporter has a company-specific cash deposit rate under the Orders, the cash deposit rate will be the company-specific rate established for that company in the most recently-completed segment of the solar cells proceedings;
2. If the exporter does not have a company-specific cash deposit rate under the Orders, the cash deposit rate will be the company-specific rate established under the Orders for the company that exported the wafers to the producer/exporter in the relevant Southeast Asian countries that were incorporated in the imported solar cells or modules.
3. If neither the exporter or the wafer supplier has a company-specific rate, the cash deposit rate will be the China-wide rate (AD: 238.95%; CVD: 15.24%).

Entries made on or after the Date of Termination

With the exception of entries that are accompanied by a "Non-Circumventing Entries" certification or a "Chinese-Components" certification – discussed below – Commerce will instruct CBP to suspend liquidation and require cash deposit for entries of subject solar cells and modules made on or after the Date of Termination (June 6, 2024).  As such, there will be no exception for the "Applicable Entries" starting from the Date of Termination.  As for the cash deposit rate:

1. If the exporter has a company-specific cash deposit rate under the Orders, the cash deposit rate will be the company-specific rate established for that company in the most recently-completed segment of the solar cells proceedings;
2. If the exporter does not have a company-specific cash deposit rate under the Orders, the cash deposit rate will be the company-specific rate established under the Orders for the company that exported the wafers to the producer/exporter in the relevant Southeast Asian countries that were incorporated in the imported solar cells or modules.
3. If neither the exporter or the wafer supplier has a company-specific rate, the cash deposit rate will be the China-wide rate (AD: 238.95% + CVD: 15.24%).

Certification

Imports of solar cells and modules from Cambodia, Malaysia, Thailand, and Vietnam will not be subject to suspension of liquidation or cash deposit requirements if accompanied by a certification attesting that they are not circumventing the AD/CVD orders. There are three types of certifications:

1. "Applicable Entries" Certification (Appendix IV of the Preliminary Determination): Available to all companies producing and exporting in-scope solar cells and modules from Southeast Asia. Companies need to certify that the solar cells and modules they export and import are "Applicable Entries" (i.e., entries of subject cells and modules that are entered into the United States, or withdrawn from warehouse, for consumption before the Date of Termination and, for entries that enter after November 15, 2022, are used in the United States by the Utilization Expiration Date). "Utilization Expiration Date" is the date 180 days after the Date of Termination. "Utilization" and "utilized" means the cells and modules will be used or installed in the United States.
2. "Non-Circumventing Entries" Certification (Appendix V of the Preliminary Determination): Only companies that were preliminarily found to be not circumventing the Orders and their importers are eligible to use this certification (e.g., New East Solar, Hanwha, Jinko, and Boviet).
3. "Chinese-Components" Certification (Appendix VI of the Preliminary Determination): All companies that export solar cells and modules from Southeast Asian countries (except for the non-cooperative companies in Appendix II) and their importers are eligible to use this certification. Companies need to certify that the solar cells and modules they export and import are not subject to these circumvention inquiries. In particular, they need to certify that (1) the Southeast Asia-made solar cells covered by the certification were not manufactured using wafers produced in China; or (2) the Southeast Asia -made modules covered by the certification were not manufactured using wafers produced in China; or (3) the Southeast Asia-made modules covered by the certification were manufactured using wafers produced in China but no more than two of the aforementioned module components that were used to manufacture the modules were produced in China.

Industry response and next steps

As noted above, in response to US industry concerns that the inquiries would exacerbate supply constraints, in June 2022 President Biden stated that Cambodia, Malaysia, Thailand, and Vietnam would be exempted from solar tariffs for two years, "in order to ensure the U.S. has access to a sufficient supply of solar modules to meet electricity generation needs while domestic manufacturing scales up."

Following the issuance of the preliminary determination, the Solar Energy Industries Association stated on December 2 that, even with the two-year exemption, "two years is simply not enough time to establish manufacturing supply chains that will meet U.S. solar demand." The Association also stated that: "[t]he only good news here is that Commerce didn't target all imports from the subject countries. Nonetheless, this decision will strand billions of dollars' worth of American clean energy investments and result in the significant loss of good-paying, American, clean energy jobs."

In the coming months, Commerce will conduct in-person verifications, and parties will have the opportunity to submit case and rebuttal briefs. It is likely that the Petitioner will argue that Commerce should decrease the Chinese components requirements for non-subject merchandise, thus making more modules subject to the circumvention inquiries; that Commerce should reconsider its findings that certain companies are not circumventing the Orders; and that Commerce should put stricter language in the certifications. Final determinations are currently scheduled for May 1, 2023.

Commerce's preliminary determination is available here.

_{1. Antidumping and Countervailing Duty Orders on Crystalline Silicon Photovoltaic Cells, Whether or Not Assembled Into Modules, From the People's Republic of China: Preliminary Affirmative Determinations of Circumvention With Respect to Cambodia, Malaysia, Thailand, and Vietnam, 87 Fed. Reg. 75,221 (Dep't Commerce Dec. 8, 2022).
2. See id.}

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