Triple whammy for U.S.-listed Chinese firms

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With Far Eastern module makers learning yesterday the U.S. Securities and Exchange Commission (SEC) will make an initial decision on whether to apply duties to their products by February 14, U.S.-listed Chinese solar stocks took another buffeting with the imposition of a ban on the big four accounting firms auditing their books.

SEC administrative judge Cameron Elliot issued a six-month ban on KPMG, Deloitte, PwC and Ernst & Young to prevent them auditing Chinese firms listed on U.S. exchanges, a move which saw tech firms, including the many U.S.-listed solar companies, suffer a dip in share prices.

Solar companies were already digesting the less-than-surprising news that the SEC had heeded a call by the American division of German solar manufacturer SolarWorld to close a duty loophole on Chinese modules made with Taiwanese cells.

When the SEC imposed steepling anti dumping (AD) and countervailing duties (CVD) on Chinese-made solar cells in October 2012, manufacturers shifted their cell manufacturing to Taiwan to avoid the duties.

Now the SEC has acceded to SolarWorld America’s lobbying to launch AD and CVD investigations into ‘certain crystalline silicon photovoltaic products’ – excluding the Chinese-made cells already covered by duties but including cells made in Taiwan and modules made in both countries.

Preliminary decision by February 14

The SEC announced yesterday it will reach a preliminary decision by February 14 on whether injury is being caused, or likely to be caused, by such products.

If that is found to be the case – and the smart money would be on that outcome – a preliminary decision will be reached on CVD in March and on AD in June.

With the potential for any duties to be backdated three months, the parallel investigations by the SEC and the U.S. International Trade Commission (ITC) will cast doubt on the ability of Taiwanese cell makers to raise prices as they reportedly want to do, according to a report on yesterday’s DigiTimes website.

The DigiTimes report claims solar manufacturers across the Taiwan Strait want to raise the price of high efficiency cells – those with a conversion rate of 17.4% or above – to US$0.41-0.45/W next month.

Against that backdrop, the ban on the big four accountants would register as a triple whammy for U.S.-listed Chinese firms, which would have to either find an alternative accountant or risk being unable to provide audited accounts and see their shares de-listed.

The dispute has arisen because of an unwillingness by accountants from the big four to hand over documents requested by the SEC and relating to companies being investigated for accounting fraud.

With the accountants citing an unwillingness to breach Chinese privacy laws and suggesting the dispute needs to be solved at a diplomatic level, Elliot secured the six-month ban, according to a Reuters report yesterday.