US Commerce decision welcomed in China, American downstream market to benefit

This article has been corrected and updated with additional information from GTM Research.

The Commerce Department’s recently released preliminary results of reviews examining antidumping (AD) and countervailing duties (CVD) on Chinese solar cells covering 2013-2013 will result in a combined import tariff of around 15% for many leading Chinese PV manufacturers, according to GTM Research — a much better prospect than much higher levels set by Commerce on December 16.

The U.S. Commerce Department’s recent proposals to significantly lower antidumping and countervailing duties on Chinese solar cells is "a big win" for Chinese manufacturers, said GTM Research Senior Vice President Shayle Kann, who predicts cash deposit rates (the tariffs paid upon shipment) will drop from around 31% to about 15% in May or July for most major Chinese manufacturers shipping all-China product into the U.S.

"In short, this is a setback for SolarWorld, and a big win for the Chinese manufacturers," he added.

Germany’s SolarWorld, which has extensive operations in the United States, has led the crusade against the dumping practices of Chinese rivals.

Unlike the December 16 decision, which focused on Chinese modules with Taiwanese or other foreign non-Chinese cells, the January 2 Commerce review centered on Chinese cells in Chinese-built modules.

In its findings, Commerce calls for cuts in AD rates to 1.82% for more than 20 Chinese manufacturers, including Yingli, Canadian Solar, Trina Solar, Jinko Solar, Renesola and BYD. With regards to CVD levels, Commerce preliminarily set rates of 15.68 for most companies (with the exception of Lightway, which will have a 22.73% rate, and BYD, which got a much lower 8.63% tariff).

Such reviews are carried out by the Commerce Department when companies apply for them, according to Jessica Jin, IHS PV analyst in Shanghai.

"This time they have updated the rate and it will be applied if confirmed. Now we have two rates, this updated one and the new 2014 rate, which is only for Chinese modules with Taiwanese cells [or other foreign-made cells]. This updated one is for Chinese cells with Chinese modules, so of course all of the Chinese companies will likely have this rate rather than the higher one."

The new rate is acceptable for Chinese manufacturers, especially for the tier 1 companies, said Jin. "They will still get a very high margin as the U.S. market is still very profitable for them."

The U.S. International Trade Commission (ITC) is expected to decide on Commerce’s findings in April or June (depending on whether Commerce takes an extension) and if confirmed, China’s tier 1 companies stand to benefit as they will no longer have as large a barrier as before.

In addition, Jin said lower rates would result in greater advantages for the downstream market, adding that “low-priced modules help the market to boom. Most of the industry should be happy about the lower prices."

According to Kann, there normally is not a big difference between preliminary and final reviews, so it’s likely that tariffs will revert to approximately 15% sometime in mid-year.

"At that point, two things happen. First, there would be a retroactive reduction in tariffs for the period of investigation (May 25, 2012 to November 30, 2013). This doesn’t have a big impact since most suppliers were using the Taiwanese cell strategy at the time. But second, the cash deposit rate for new imports will immediately drop to approximately 15%, which has a much bigger impact. Though those rates could also be changed later upon review, so nothing is final until well after the fact."

Kann stressed that this was just the first administrative review, and it covers a period when few suppliers were shipping much subject merchandise into the U.S. Possibly more telling will be the second administrative review, expected in a year or so, which may cover a period, such as 2014, when suppliers were actually shipping all-China product.

"My guess is that this is where SolarWorld will focus — they’ll make the point that these new 15% margins could be temporary, and they expect them to go way up in the second review."