On September 16, 2022, the Biden Administration announced the final rule regarding a two-year pause on the imposition of new anticircumvention duties on imports of solar cells and modules from Cambodia, Malaysia, Thailand and Vietnam. This decision was in response to significant opposition from importers of solar panels who have been expressing concerns about the levy of antidumping and countervailing duties on solar cells and panels from these South East Asian countries effectively halt numerous solar projects in the United States and thus prevent the adoption of solar energy in the United States.
The announcement of the two-year moratorium comes in response to a circumvention inquiry filed by Auxin Solar and initiated by the Department of Commerce on April 1, 2022. Those cases alleged that the amount of processing done in these Southeast Asian countries was insufficient to allow these Southeast Asian products to not be subject to the antidumping and countervailing duties orders on solar cells and modules from China.
Because the circumvention cases, and the potential high duties that could be imposed on the Southeast Asian countries effectively brought many solar projects to a halt in the United States, President Biden took the unprecedented step of invoking the Defense Production Act to halt the anticircumvention cases. The two-year pause under the Defense Production Act also gives the President expanded powers to authorize the U.S. industry to increase the ability to domestically manufacture solar components.
The provision of law used allows the President to suspend certain import duties to address an emergency “by reason of a state of war, or otherwise.” During the state of emergency the President can authorize the import of “food, clothing, and medical, surgical, and other supplies for use in emergency relief work” on a duty-free basis. While there is a two-year pause on the imposition of any duties, the Commerce Department has stated that its investigation will continue in the interim but that if an affirmative finding of circumvention results from that investigation, any additional duties or cash deposits would only be imposed after the 24 month pause expired. It is very likely that the use of the Defense Production Act by the administration to halt Commerce’s ability to impose additional duties will be challenged by multiple parties, but it is too early to tell whether an appeal will be filed. The current deadline for the preliminary determination of the circumvention investigation is November, 28, 2022.
The final rule makes certain changes from the originally proposed rule, most importantly outlining the two-year pause should not be used as a mechanism for stockpiling of solar cells and modules to escape any findings of circumvention for the future. The June 6, 2022, proclamation by President Biden declaring an emergency and invoking the provisions of the Tariff Act of 1930 and the Defense Production Act, did not originally address the concerns related to stockpiling, but after reviewing comments by several industry groups representing domestic manufacturers as well as members of the Senate Finance Committee, the final rule published on September 16, 2022, addressed these concerns. Commerce in its final rule stated that “[i]t is not Commerce’s goal to have merchandise that enters before the Date of Termination be used in projects long into the future, as the emergency declared by the President exists at this very moment.” Taking into consideration all the comments, Commerce made several revisions to the rule including a provision that limits the tariff exemption to panels and cells that are “used or installed” in the U.S. within 180 days of the rule’s date of termination. That termination date is, at the latest, June 6, 2024.
Husch Blackwell will continue to monitor developments with respect to this issue and provide further updates.