Georgia-based solar manufacturer Suniva filed for Chapter 11 bankruptcy protection yesterday, after a multi-year struggle to keep pace with steep price declines in the global solar industry.

The bankruptcy could mark the beginning of another trade dispute between America and Asia -- and quite possibly the rest of the world. It could also be the first real test for the Trump administration on trade. 

Suniva, which produces high-efficiency solar cells and modules in Georgia and Michigan, blamed China for "flooding the U.S. market" with solar equipment below cost, according to documents submitted to a Delaware bankruptcy court.

Suniva lost more than $50 million since 2015. At its peak, the manufacturer employed 265 people. It now has 35 employees who are helping wind down operations.

"For many years, Chinese manufacturers of solar cells have benefited from favorable, state-sponsored financing and lower labor costs, allowing them to flood the United States market for solar cells and modules with cheap imports. This has negatively impacted manufacturers based in the United States, such as Suniva," wrote David Baker, the company's restructuring officer, in a declaration.

The U.S. Commerce Department issued tariffs on Chinese solar cells and modules in 2012. However, manufacturers with operations in the U.S. complained about a "loophole" that allowed Chinese companies to assemble solar modules in other Asian countries and continue dumping products below cost. The government finalized tariffs in 2014 that included products from Taiwan. But Suniva argued that the problem persists.

"Notwithstanding these protections, solar cell manufacturers in the United States continue to face steep price competition from China, as well as non-China-based overseas manufacturers not subject to United States tariffs, particularly from countries in southeast Asia, including from Chinese manufacturers that have moved production from mainland China to southeast Asia and elsewhere to avoid the United States tariffs. As a result, these tariffs have not been effective in preventing dumping of Chinese solar products into the United States," wrote Baker.

Module oversupply is hurting manufacturers around the world. Module prices fell nearly 40 percent in 2016, according to GTM Research. The world's leading solar companies -- Chinese and American alike -- are under intense pressure to cut costs and restructure their operations. 

Now, Suniva's financial collapse could spark another major dispute over solar trade practices.

Buried in the company's Chapter 11 declaration is a reference to Section 201 of the 1974 Trade Act. Suniva plans to argue to the U.S. International Trade Commission that it has been "seriously injured or threatened with serious injury" by solar imports. It will ask the government for further protections.

The entire description is worth reading:

One of the conditions to SQN’s post-petition financing is that Suniva prosecute a petition under section 201 of the Trade Act of 1974, 19 U.S.C. § 2251 (“Section 201”). Whereas Chinese and Taiwanese manufactured solar cells are subject to U.S. tariffs, solar cells manufactured elsewhere are not. It is solar cells manufactured in southeast Asia and included in solar modules or panels that are flooding the United States market, driving down prices. Domestic industries seriously injured or threatened with serious injury by increased imports may petition the USITC under Section 201 for import relief. After being petitioned, the USITC determines whether an article is being imported in such increased quantities that it is a substantial cause of serious injury, or threat thereof, to the U.S. industry producing an article like or directly competitive with the imported article.

If the Commission makes an affirmative determination, it recommends to the President of the United States relief that would prevent or remedy injury and facilitate industry adjustment to import competition. The President makes the final decision whether to provide relief and the amount of relief. The USITC must generally make its finding within 120 days of receipt of a Section 201 petition and must transmit its report to the President, together with any relief recommendations, within 180 days after receipt of the petition. If the USITC finding is affirmative, it must recommend a remedy to the President, who determines what relief, if any, will be imposed. Such relief may be in the form of a tariff increase, quantitative restrictions, or orderly marketing agreements. Importantly, such relief, if found applicable to U.S. solar cell manufacturers, could protect U.S. based manufacturers against imports of solar cells manufactured in southeast Asia as well as Japan, Germany, South Korea, and Canada. Therefore, if a Section 201 petition is successful, it could resuscitate Suniva’s business, allow Suniva to compete with the lower cost imports currently flooding the U.S. market, and dramatically increase the value of Suniva’s substantial equipment and enterprise.

If Suniva files a petition under Section 201, it could have consequences for America's trade relationships with virtually every country. But the company would have to prove "serious" injury. 

Here's how the International Trade Commission describes the bar: "Section 201 requires that the injury or threatened injury be 'serious' and that the increased imports must be a 'substantial cause' (important and not less than any other cause) of the serious injury or threat of serious injury." 

Shayle Kann, GTM's senior vice president, has been following America's solar trade wars closely over the years. He said Suniva's petition (if filed) would broaden solar trade disputes: "The range of potential remedies is wide."

"First, if the ITC does find 'significant injury' to the domestic industry, it could recommend a wide range of remedies, including import tariffs, import volume limits, and other means. Second, these remedies could be aimed at all countries, unlike the previous solar trade case, which impacted only China and Taiwan. Third, the timeline on Section 201 investigations is relatively short (once filed, a recommendation could reach the president in six months)," said Kann.

"Finally, given that this would be the first major trade action of the Trump administration and that the final decision in Section 201 proceedings lies directly with the president, this could have wider political ramifications," he said.

It may also align the Trump administration with the solar industry for the first time.

The White House has specifically called out Section 201 as a “vital tool for industries needing temporary relief from imports to become more competitive.” Suniva's petition would put the Trump administration's trade policies to the test.

Suniva has not yet filed the petition. But "this is a highly important development to monitor," said Kann.

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