On Saturday morning, in a preliminary review of Chinesesolarpanel imports from May 2012 to November 2013, the Department of Commerce found that China was dumping product -- but just a little bit.

Commerce's findings slow some of the momentum in this polarizing trade case; the current 31 percent tariff on most Chinese PV panel manufacturers will potentially be cut in half to about 15 percent. The new margins for most manufacturers are 1.82 percent (antidumping) and 15.68 percent (countervailing duties).

In June, German-owned, Oregon-based SolarWorld Americas won its trade case when the Department of Commerce found in favor of the company's claim against Chinese solar module makers. The decision imposed significant tariffs on Chinese solar modules. The decision also closed what SolarWorld called a "loophole" that allowed Chinese module manufacturers to use Taiwanese cells in their modules, thereby circumventing U.S. trade duties.

SolarWorld has won at pretty much every step of this case, despite vocal but ineffective opposition from the Coalition for Affordable Solar Energy starring Jigar Shah, and trade organization SEIA, which has come under fire for the amount of influence Chinese manufacturers wield within the organization. (SolarWorld President Mukesh Dulani suggested that SEIA has a bias toward Chinese manufacturers that is “both inappropriate and wrong.”)

So, this weekend's announcement could look like a setback for SolarWorld. But "this is just the first administrative review, and it covers a period when few suppliers were shipping much subject merchandise," according to Shayle Kann, GTM VP of Research.

SolarWorld's CEO has said in the past, "We were able to prove again and again that China was cheating." Commerce has indeed found that China was cheating, just not as much as originally thought.   

Do tariffs actually work?

In October, SolarWorld announced it would add a new production line to its facility in Hillsboro, Ore. that will grow its factory’s panel-assembly capacity to 530 megawatts. Suniva is opening a 200-megawatt capacity panel factory in Michigan. SolarCity has acquired a 1-gigawatt factory project in New York. It's a stretch to say these capacity expansions are related to tariffs.

SolarWorld's expansion will add a potential 200 jobs in the first half of 2015 and bring its total number of full-time employees to 900. SolarWorld's growth news comes amidst a period of worldwide solar expansion, with capacity announcements trending across a healthy solar market.

Sen. Wyden (D-Ore.), chairman of the U.S. Senate Committee on Finance, asserted last month that China had been taking American manufacturing and jobs, saying, "If you don't have manufacturing, you can be held hostage." But between June 2011 and June 2014, the number of jobs related to the operation of solar generation installations more than tripled, increasing from roughly 500 to 1,500, according to data compiled from the Bureau of Labor Statistics.

Still, Hemlock Semiconductor, a Dow Corning company, recently closed a polysilicon facility in Tennessee, a move partly attributed to "global trade disputes," according to reports.

Despite the talk of end times and job loss on both sides of this dispute, the U.S. solar industry continues to grow; the U.S. residential market just had a record 300-megawatt quarter. You'd be hard-pressed to point to a place on the following chart where trade tariffs impacted demand.

FIGURE:  U.S. Solar Installations by Quarter  (Megawatts)

Source: GTM Research U.S. SMI, Q3 2014

But, as we've reported, there is a consequence to those higher module prices. Nick Blitterswyk, CEO of UGE International, which develops renewable projects in more than 90 countries, said that when his company does a solar project in the U.S., material costs are now 5 percent to 25 percent higher than in other countries. “The U.S. solar market is growing rapidly, and these antidumping policies are actually just slowing the growth of the industry,” he said. “It's making electricity costs comparatively higher in the U.S., making it advantageous for businesses to open facilities in countries that don't have these tariffs in place.”

The point of a trade tariff is to level the playing field and remove unfair advantages in global commerce. That's what nations like China pledge to abide by when they join the World Trade Organization.

Trade and commerce rules are meant to be followed -- and penalties are enforced when they are not. Unfortunately, rules for global trade might have been more effective in 1914 than they are today, when supply chains and corporate networks are intertwined across nations.

Now what?

GTM Research's Shayle Kann notes, "In this case, nothing takes effect until the final review, which will come in either early May or early July." He observes that there is not usually a big difference between the preliminary and final reviews, "so we can assume that the tariffs will revert to ~15 percent sometime mid-year."

Jigar Shah, President of the Coalition for Affordable Solar Energy noted, “The proposed lower tariff rates are a step in the right direction for the U.S. solar industry, and we applaud the Department of Commerce for reviewing competitive information and adjusting the tariffs downward. Lowering the tariff import tax means more American consumers will be able to afford solar power and more American solar companies will be able to expand their hiring."

“While this is positive news, it does not solve the underlying problem. The U.S. solar industry remains penalized by a trade policy that inflates the cost of solar power and has already expanded to include imports from Taiwan. We continue to urge the governments of the United States and China to negotiate an end to the trade war for the benefit of all countries involved.”

SolarWorld America's CEO made this comment on today's decision: "The preliminary findings in this review of the antidumping order on solar cells and modules from China do not reflect the actual amount of dumping by Chinese producers. For example, by taking Suntech out of the calculations, the Commerce Department has allowed other Chinese producers to obtain an artificially lowered antidumping rate. While these are preliminary results only and apply to fewer than twenty manufacturers, we will carefully scrutinize them and, as appropriate, prosecute these results and work to ensure that the final results reflect all of China's unfair trading practices. That said, it is important to note that the current deposit rate of more than 29 percent (or higher) will continue to apply to the vast majority of Chinese producers, including the fewer than twenty Chinese manufacturers covered by today's ruling until the final determination later this year."

In 2013, imports of crystalline silicon photovoltaic products from China and Taiwan were valued at an estimated $1.5 billion and $656.8 million, respectively. Chinese companies supplied 31 percent of the modules installed in the U.S. in 2013, and more than 50 percent in the distributed solar market, according to GTM Research.

GTM Research's Kann adds, "More telling will be the second administrative review (which will come in a year or so), which may cover a period (2014) when suppliers were actually shipping all-China product. In the meantime, this largely undercuts the need for negotiation from the Chinese perspective and deals a big blow to SolarWorld."


The GTM Research solar team is available to provide expert, custom consulting on the market impact of China-U.S solar trade law. Contact Justin Freedman (freedman@gtmresearch.com).