As we approach the critical September 22 vote of the U.S. International Trade Commission (ITC) for the U.S. solar industry, here is a brief review of how we arrived at this point and what to expect. This vote will constitute the injury determination in the ITC global safeguard investigation into the effect of imported crystalline silicon photovoltaic (CSPV) products on the U.S. domestic solar manufacturing industry.
Overview
As reported widely in the solar industry press, on August 15, 2017, the ITC in Washington D.C. conducted a public hearing for the injury phase of the trade investigation (Inv. No. 201-075) into CSPV product imports. The hearing generated more than 400 pages of hearing transcript and thousands of pages of briefing materials and statements submitted both in support and in opposition of the need for trade protection remedies to support the U.S. domestic solar manufacturing industry. A public version of some hearing testimony is available here. The stakes are high. This investigation could lead to increased tariffs, quotas, or both, against all U.S. imports globally of CSPV cells whether or not partially or fully assembled into other products. CSPV cells are the most common form of raw power-generating material used in solar panels. This investigation is being conducted pursuant to U.S. trade statutes and U.S. obligations under the World Trade Organization (WTO) terms of the Agreement on Safeguards.
Initially, two U.S. manufacturers of CSPV cells, Georgia-based Suniva and Oregon-based SolarWorld, petitioned for the tariff protection in May 2017, arguing that they are representative of the U.S. domestic solar manufacturing industry and that the industry’s (and their own) financial losses have been caused by a global glut of inexpensive CSPV cells and derivative products. The stakes in the outcome of this investigation are also high for those opposing the tariff protection, which include U.S. purchasers of CSPV cells for assembly operations and other downstream participants in the U.S. solar industry, such as utilities, developers, rooftop panel installers, and investors, because the requested tariff protection would more than double the present cost of CSPV cells and greatly impact the cost of new solar installations. The ITC public investigation summary is available here.
The August 15, 2017 Hearing Before the International Trade Commission
The August 15 hearing addressed the threshold issue of domestic manufacturing sector injury, namely, whether CSPV cells alone and when partially or fully assembled into other products are being imported into the United States in such increased quantities as to be a substantial cause of serious injury, or the threat thereof, to the domestic industry producing an article like or directly competitive with the imported CSPV cells. 19 U.S.C. § 2252(b)(1)(A). As indicated above, the ITC’s vote on this question (aka the injury determination) is on the agenda for a public hearing, starting at 11 a.m. on September 22. The meeting is open to the public and no prior registration is required. ITC meeting information and guidelines are available here. If two or more of the four ITC commissioners vote affirmatively on the injury determination, the investigation will proceed to the “remedy phase” to explore the appropriate remedial measures to recommend to the President. The remedy-phase hearing scheduled for October 3 will be cancelled if three or more of the ITC Commissioners vote negatively on the injury determination.
At the August 15 hearing, Suniva and SolarWorld testified that a global surplus of CSPV cells and panels has made it impossible for the U.S. manufacturers of CSPV cells (such as themselves) to compete effectively with imported CSPV products. They cited data showing job loss, price depression, and the increasing ratio of imports to domestically manufactured products, painting a picture of a quickly shrinking domestic solar manufacturing industry, allegedly attributed to the downward price effects of inexpensive imports. Opposed to the petition, many downstream participants in the solar industry appeared and argued that the increased imports were not a “substantial cause” of the petitioners’ alleged injury, that increased imports were merely a response to increased demand for CSPV cells, and that petitioners’ alleged injury was caused by other factors. Under U.S. law, a “substantial cause” must be “important” and “not less than any other cause.” 19 U.S.C. § 2252(b)(1)(B).
Opponents to the petition also argued that any remedial efforts to protect the domestic industry producing CSPV cells would cause collateral injury to other parts of the U.S. solar industry, including reductions in investment, growth, and workforce across the solar industry as a whole. Although the question of collateral damage is a significant consideration, it is, however, not directly relevant to the injury determination. The legal question at this stage is whether increased quantities of U.S. imports are a substantial cause of serious injury, or a threat of serious injury, to the domestic industry producing articles like or directly competitive with those imports. Collateral effects of any potential remedies on non-manufacturers in the solar industry are important from a policy perspective but will be considered if the ITC votes affirmatively on the injury determination and proceeds to the remedy phase.
Other Key Issues
One important issue, yet unresolved, is whether the ITC will find that manufacturers of assembled products such as solar panels are, along with Suniva and SolarWorld, part of the relevant “domestic industry producing an article like or directly competitive with the imported article.” Such a finding would greatly expand the domestic manufacturing industry to include CSPV module and panel assembly operations and would tend to negate a finding of injury since these assembly operations almost uniformly argue that they have not been harmed but rather have benefited from inexpensive CSPV cells available through global markets. It remains to be seen how the ITC will define the scope of the domestic producers at issue in the injury phase. Potentially relevant to that question, the scope of imports addressed by the Suniva/SolarWorld petition is broad (CSPV cells whether partially or fully assembled into other products). Prior to the August 15 injury determination hearing, the ITC collected data on dozens of companies producing, importing, and exporting CSPV products. The ITC staff released an extensive pre-hearing report that summarized the collected data and is available here. Certainly, the four ITC Commissioners (note that there are two vacant Commission seats) have a lot of data and hearing testimony to parse before their upcoming vote.
Another range of possible concerns is the effect of bilateral and multilateral treaty obligations on this investigation. For example, Canada and other U.S. free trade agreement (FTA) partners have argued that trade treaties such as NAFTA prevent the United States from changing treaty tariff obligations except through the applicable FTA amendment and dispute resolution processes. Similarly, developing countries point to the WTO Agreement on Safeguards language that directs countries initiating global safeguard investigations to exempt certain developing countries that supply less than 3% of subject product imports from increased tariffs. Will the Commissioners factor in these concerns to the injury determination or address them in the remedy phase, if any?
Further Steps
If the ITC votes to continue the investigation into the remedy phase, the public hearing on remedies is set for October 3 with a tight briefing schedule prior to that date. A remedy recommendation to the President will be due by November 13. The President has a range of options available for implementing any such remedies, and is not required to follow the ITC’s recommendation. Any action by the President would likely occur early in 2018.
For questions about this proceeding: Morten Lund, Elliott Williams.