He went through the schedule of the ongoing U.S. Department of Commerce (DOC) and International Trade Commission (ITC) investigations and the next big date is in mid-February, when DOC will render a preliminary decision regarding possible unfair subsidies by the Chinese government to its PV manufacturers.
In mid-April, Commerce will decide the anti-dumping part of the case brought by SolarWorlds U.S. subsidiary and six other American manufacturers on October 19 last year. Since there is the possibility that anti-dumping duties can be applied retroactively for a period of 90 days prior to the preliminary ruling (if so-called "extraordinary circumstances" are alleged and established by DOC), importers of record could face punitive tariffs on goods imported as early as mid-January.
What makes the American system of investigating and penalizing unfair trade practices particularly harsh is the uncertainty of what punitive tariffs will ultimately apply. In the words of Lebow, this creates a "chilling effect" where companies are unwilling to take the risk of importing Chinese solar panels, since for up to two years they are not sure what duties will ultimately be imposed. This differs from the approach taken in Europe, where tariffs are fixed and industry participants are not left guessing what their ultimate exposure will be.
In the U.S., the case is reviewed by DOC one year after its final ruling (scheduled for this October) and this subsequent investigation can yield new findings and revised tariffs. What makes the investigation (and review process) almost arbitrary is the fact that China is still classified as a "non-market economy". If China were a market economy, DOC would look only at its home market and inputs and prices in this market. But as a "non-market economy" DOC needs to look at inputs and prices in market economies with a similar level of development (mainly on a GDP per capita basis) to Chinas.
For a long time India was taken as this reference country, but given the fact that Chinas per capita GDP has risen beyond Indias, Commerce is now looking at the following six countries to determine input values and so arrive at a "fair price" for PV cells and modules: Ukraine, Colombia, South Africa, Philippines, Thailand and Indonesia. To arrive at so-called "surrogate values" for various input costs (material costs, electricity, labor, etc.), DOC looks at imports into these six countries, which, according to Lebow, can be quite different from the actual inputs Chinese manufacturers procure to produce their product.
So the whole process, from the choice of reference countries to the choice of particular "surrogate values", makes it extremely difficult, if not impossible, for Chinese manufacturers to determine whether they are in fact "dumping".
Yingli steps in
As the case stands now, only Suntech and Trina have been asked by DOC to respond to the petition and investigation. Yingli is trying to enter the investigation as a "voluntary respondent", but at this point it is not clear whether Yingli will prevail. If it did prevail and Commerce ruled that Yingli was not dumping and not receiving unfair subsidies from the Chinese government, Yingli could avoid punitive tariffs altogether. So its likely that Yingli feels fairly confident that its pricing is fair and that it is not getting unfair support from its government.
For other Chinese manufacturers the situation is far worse: if DOC and ITC rule in favor of petitioners, then they are slapped with the weighted average of tariffs imposed on the mandatory and/or voluntary respondents. In other words, only the largest Chinese players are heard by the U.S. government; the rest have to accept whatever the government determines vis-à-vis these top suppliers.
What can Chinese manufacturers do about this? Lebow confirmed that one way is to become the U.S. importer of record and so take the risk off purchasing Chinese cells and modules for the U.S. market. Another way is to buy up companies in overseas markets (like LDK Solars recent purchase of the German PV manufacturer Sunways), which produce the goods in question in a country outside China. What matters is the locus of production, not whether the company selling the products is Chinese, American or from some other country.
As Lebow also mentioned in the Jeffries call, most of these investigations against Chinese respondents usually end up in favor of the U.S. petitioners, so chances are not good for Chinese manufacturers. Given the wide discretion in selecting surrogate countries and values in the case of non-market economies, the U.S. trade system is basically stacked against suppliers from such countries.
At the same time, China is stepping up its own trade investigations and there is a glimmer of hope that as these cases increase both countries will realize that it is not in their interest to put up trade barriers, especially in markets critical for making progress on the clean energy front. So a chance remains that government officials from both countries will take the initiative and find a compromise before a trade war really heats up.
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