US Safeguard Duty on Solar: Situation analysis

Access_solar-power-soroti

The move by United States of America to protect its domestic solar industry from imported modules has created unrest in the global solar market. Similar exercise to protect domestic solar producers is underway in India against dumped imports from China, Malaysia and Taiwan. The proposed US Safeguard measures are not likely to affect exports from India to the US, as US must exempt imports from India under the WTO Safeguard Agreement given that the share of India is nominal when compared to other countries

Excluding India from the safeguard investigation and duties that are initiated by the US can be validated as a fair appeal. A closer inspection is needed to highlight the facts and realize the background of such an appeal.

Exclusion from US Solar Safeguard Duty and Investigation: A Fair Appeal by India

Like the US, Indian domestic solar manufacturers are in favour of imposing protective measures against foreign solar modules. And in many occasion have initiated discussions with the Government and the Directorate General of Anti-Dumping and Allied Duties (DGAD) to seek a favourable solution.

So, it is fair to say that India and US domestic solar manufacturers are basically in the same boat regarding this scenario. However, the domestic solar industry in India is still standing by its appeal to maintain export access to the US because, the country’s share in export of solar modules into imports in the US has been meagre for 5 sequential years (check Data comparison).

 

Data Comparison

Country Name 2016 2015 2014 2013 2012
Malaysia 25.40% 18.50% 18.33% 26.33% 24.62%
China 20.96% 28.25% 35.48% 30.31% 31.83%
India 0.08% 0.18% 0.56% 0.06% 0.19%

 

Therefore, it is easy and fair to state that India is not a threat to US domestic solar industry (which China and Malaysia can be considered to be).

Further research into the subject will reveal that India is one of multiple countries that have less than 3% of total import share of US. And it is important to note that article XIX of GATT agreement 1994 highlights and protects countries from safeguard duty investigation and imposition that have less than 3% of total import share within another country. Therefore, under WTO trade regulations, in which India and USA trade ties are defined India should be exempted from safeguard duties.

Therefore, the US should consider the nascent stage of Indian solar industry to ascertain the importance of maintaining export industry.

In FY 16-17, India’s global solar export portfolio generated 69.10 $ mn income from exports. And within April to July of FY17-18, the country generated only 13.49 $ mn income through global solar exports. So, it is obvious that, India needs its export margin to initiate innovation, technological growth, quality improvement, and industrial growth.

The US must understand importance of Indian solar sector for global solar growth. And allow Indian solar module export margins within the US as they are not threatening to US solar industry.

Understanding the Status of Legal Proceedings

Suniva and SolarWorld solar panel manufacturers based out of US, first initiated the appeal to implement duties on imported solar panels to International Trading Commission (ITC) in 15 August 2017. The two solar panel manufacturers cited protection under Section 201 of the 1974 Trade Act. The ‘ACT’ focuses on implementing safety measures followed by an investigation, in case of ‘serious injury’ to a US industry is revealed. And taking into consideration that about 30 US solar makers have announced bankruptcy since 2012 including Suniva and SolarWorld, domestic industry of US had significant reasons to call for safeguard duties on foreign solar imports.

  • The proceedings revealed Vice Chairman David Johanson and Irving Williamson recommending additional tariff of 30% on solar cell if imports exceed 1 GW and additional tariff of 30% on solar modules which should be reduced in subsequent years.
  • Chairman Rhonda Schmidtlein sent a recommendation of 35% tariff on solar modules, reducing it by 1% every year for the next four years and 10% tariff for 0.5 GW of solar cells import and 30% if import exceeds the quota.
  • A four-year quota system was also recommended by Commissioner Meredith Broadbent, allowing import of up to 8.9 GW of solar cells and modules in the first year, with an increase by 1.4 GW each subsequent year.

Although, India is likely to get exclusion from the safeguard duties due to its meagre share of exports within US, as regulation underlines. However, since we now have until January 12, 2018, to get the decision, (as the recommendation committee has already filed the findings to the Hon’ble President Mr. Donald Trump) India needs to utilize this time frame by carrying their appeal to the global platforms where the request for exclusion will resonate worldwide.

Research clearly shows that Indian solar exports are not claiming the demand of the US domestic solar industry but only supplementing the market and keeping things competitive. Therefore, the appeal to be exempted from safeguard duties can be seen as a fair appeal and should be considered seriously.

 

Bibliography:

https://www.wto.org/english/tratop_e/safeg_e/safeg_info_e.htm

https://www.forbes.com/sites/kensilverstein/2017/10/03/will-the-u-s-solar-industry-survive-import-tariffs-trump-holds-the-cards/#2b26800b4a15

http://www.internationaltradecomplianceupdate.com/2017/08/17/us-solar-panel-safeguard-investigation-heats-up/

http://www.livemint.com/Politics/VhHHMl6H7cJFRUiHmA4TAK/US-solar-makers-win-ruling-on-imports-case-goes-to-Donald-T.html

https://www.ft.com/content/514b09d2-829e-11e7-a4ce-15b2513cb3ff

https://timesofindia.indiatimes.com/business/international-business/u-s-trade-panel-recommends-varying-solar-panel-import-restrictions/articleshow/61374334.cms

 

Share your thoughts with me on this at @gyaneshc.

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