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President Biden Extends Safeguard Measure on Solar Products for Four Years, Doubles Tariff-Rate Quota for Solar Cells

On February 4, 2022, President Biden issued a Proclamation extending the United States' safeguard measure on imports of certain crystalline silicon photovoltaic (CSPV) cells (whether or not partially or fully assembled into other products).  The Proclamation extends the safeguard measure for four years (the maximum period allowed by law), but reduces its restrictiveness by doubling the volume of the tariff-rate quota (TRQ) on imported CSPV cells to five gigawatts (GW).  The Proclamation also preserves the exemption of bifacial solar panels from the safeguard measure, and authorizes the US Trade Representative (USTR) to negotiate agreements with Canada and Mexico that could lead to the exclusion of those countries from the safeguard remedy. This alert provides an overview of the Proclamation.  

 

Extension of CSPV safeguard measure

President Donald Trump imposed the safeguard measure on CSPV products beginning on February 7, 2018.[1]  The measure was scheduled to remain in place for four years, and consisted of (1) an annual TRQ of 2.5 GW for imports of CSPV cells; and (2) a tariff on imports of CSPV modules and above-quota cells, beginning at a rate of 30 percent ad valorem and declining gradually to 15 percent in the fourth year of the measure.[2]  In August of 2021, two separate groups of domestic CSPV producers filed petitions with the US International Trade Commission (ITC) seeking the extension of the safeguard remedy for an additional four years beyond its scheduled expiration date of February 6, 2022.[3]  On November 24, 2021, the Commission recommended that the President extend the safeguard measure for four years.[4]  

President Biden's Proclamation concurs with the ITC's findings that "the safeguard action. . .continues to be necessary to prevent or remedy the serious injury to the domestic industry," and that "there is evidence that the domestic industry is making a positive adjustment to import competition."  The Proclamation extends the safeguard measure for four years and doubles the TRQ volume for CSPV cells, so that up to 5 GW of CSPV cells can be imported each year free of safeguard tariffs. Imports of covered CSPV cells in excess of the 5 GW TRQ, and all imports of covered CSPV modules, will be subject to additional tariffs at the rates shown below.

Safeguard Measure on CSPV Cells and Modules, as Modified and Extended by Proclamation 10339
Period Year 5
2/7/2022 – 2/6/2023
Year 6
2/7/2023 – 2/6/2024
Year 7
2/7/2024 – 2/6/2025
Year 8
2/7/2025 – 2/6/2026
Tariff on modules and out-of-quota cells  14.75% 14.5% 14.25% 14%
In-quota quantity (cells only) 5 GW 5 GW 5 GW 5 GW

The Proclamation also maintains the exclusion of bifacial CSPV panels from the safeguard measure.  The Trump Administration first granted the exclusion in June of 2019, but subsequently attempted to withdraw the exclusion after finding that it had undermined the effectiveness of the safeguard measure.  The US Court of International Trade ordered the reinstatement of the exclusion in November 2021, following a legal challenge initiated by the Solar Energy Industries Association (SEIA).[5]  

The safeguard measure as modified by President Biden's Proclamation is less restrictive than the remedy recommended by the ITC in its December 2021 report.  The Commission recommended that the President maintain the original TRQ level of 2.5 GW for the final four years of the safeguard action, rather than increasing the level of the TRQ.[6]  In the Commission's view, domestic producers of CSPV modules had derived benefits from the safeguard tariff on imported modules, but "CSPV cell producers have received less benefit to date from the safeguard measure on imports of CSPV cells, as the 2.5 GW TRQ quota level on cell imports has not yet been reached in any year and hence no duties on imports of cells have been applied under the safeguard measure."  In the Commission's view, "[a]n increase in the TRQ quota from the current level of 2.5 GW would allow additional volume of CSPV cells to enter under the zero duty in-quota rate and extend the period for which CSPV cell producers have not benefitted from tariff relief under the safeguard." 

The Commission did not make a formal recommendation with regard to the bifacial panels exclusion. However, the Commission concluded in its report that "the bifacial exclusion was an impediment to the domestic industry's positive adjustment to import competition during the remedy period," given "the substitutability between monofacial and bifacial modules, the small but increasing domestic production of bifacial modules at the time the bifacial exclusion went into effect, and the huge volume of imports of bifacial modules that entered free of tariffs between June 2019 and October 2020[.]"[7]   

President Biden's Proclamation has drawn mixed reactions from stakeholders in the US solar industry. The Solar Energy Industries Association, which represents companies "throughout the solar value chain, including importers, manufacturers, distributors, installers, and project developers," opposed the extension of the safeguard measure but praised the Biden Administration for arriving at a "balanced solution in upholding the exclusion for bifacial panels and increasing the tariff rate quota for cells."[8] SEIA stated that the expanded TRQ "will benefit both domestic module manufacturers and their customers in the residential, and commercial and industrial segments," and that the bifacial panels exclusion will "improve power output and lower costs in the utility-scale segment," as such panels are "not available in the United States at scale."  By contrast, several US producers of CSPV products have criticized the decision, arguing that the expanded TRQ and exclusion of bifacial panels will render the safeguard measure ineffective and significantly undermine the development of a domestic solar supply chain.[9] 

 

Negotiations with Canada and Mexico

President Biden's Proclamation instructs USTR to enter into negotiations with Canada and Mexico concerning their CSPV exports to the United States, pursuant to Section 203(f) of the Trade Act.[10]  Section 203(f) authorizes the President to negotiate agreements with foreign countries "limiting the export from foreign countries and the import into the United States" of the articles subject to an existing safeguard measure.  If the President negotiates such an agreement, he may "suspend or terminate" the safeguard action, "in whole or in part[.]" 

The Proclamation authorizes USTR to suspend the application of the safeguard measure "in whole or in part" with respect to imports of Canada or Mexico, if USTR concludes agreements with those countries that USTR determines "will ensure that imports of Canada or Mexico do not undermine the effectiveness of the action[.]" Canada and Mexico are relatively small exporters of CSPV products to the United States, accounting for approximately 0.4 percent and 1 percent of total US imports, by value.[11]  On June 18, 2021, Canada filed a dispute against the United States under the US-Mexico-Canada Agreement (USMCA), arguing that the United States violated Articles 10.2.1 and 10.2.2 of the USMCA (among other provisions) because it "failed to exclude imports from Canada" from the CSPV safeguard "despite the fact that imports from Canada did not account for a substantial share of imports and did not contribute importantly to the serious injury caused by imports."[12]  The Panel completed its report in this dispute on January 3, but the report has not yet been made public. 

 

President Biden's Proclamation can be viewed here

 

[1] Proclamation 9693 of January 23, 2018, To Facilitate Positive Adjustment to Competition From Imports of Certain Crystalline Silicon Photovoltaic Cells (Whether or Not Partially or Fully Assembled Into Other Products) and for Other Purposes. 
[2] On October 10, 2020, President Trump issued Proclamation 10101, which increased the fourth year tariff rate to 18 percent and made other changes to the safeguard measure.  However, on November 16, 2021, the US Court of International Trade enjoined the enforcement of this Proclamation, which had the effect of restoring the fourth year tariff rate to 15 percent. Solar Energy Industries Assoc. et al. v. United States, Court No. 20-03491, Slip Op. 21-154 (CIT Nov. 16, 2021).  For more information, please refer to the W&C US Trade Alert dated November 30, 2021.
[3] For an overview of these petitions, please refer to the W&C US Trade Alert dated August 13, 2021.  
[4] Crystalline Silicon Photovoltaic Cells, Whether or Not Partially or Fully Assembled Into Other Products, Investigation No. TA-201-075 (Extension), Publication 5266, December 2021 ("Commission Report").   
[5] For an overview of the CIT’s ruling and the history of the bifacial panels exemption, please refer to the W&C US Trade Alert dated November 30, 2021.  
[6] Commission Report at pp.50-53.  
[7] Commission Report at p.29.  
[8] "SEIA Supports Biden Administration’s Effort to Find Balanced Solution on Section 201 Tariffs," Solar Energy Industries Association, February 4, 2022.
[9] "Biden extends Trump’s solar tariffs with key exemptions," E&E News, February 4, 2022
[10] 19 U.S.C. 2253(f).  
[11] Commission Report at Table H-1.    
[12] Request for the establishment of a panel by Canada, June 18, 2021

 

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