The U.S. International Trade Commission on Dec. 2 took the first step toward imposing added tariffs on Chinese solar imports, voting unanimously in Washington on a petition by Bonn- based SolarWorld AG (SWV) that called for antidumping and countervailing duties. The commission will now hold a full investigation.

“The ruling was made without sufficient evidence showing U.S. solar panel industry has been harmed,” China’s Ministry of Commerce said in a statement Dec. 3. It was taken “regardless of defense opinions from Chinese firms, as well as opposition from the U.S. domestic industries and other stakeholders, which prominently shows the U.S.’s strong inclination to trade protectionism and for which China is deeply concerned.”

The Chinese government uses cash grants, raw-materials discounts, preferential loans, tax incentives and currency manipulation to boost exports of solar cells, according to SolarWorld’s Oct. 19 complaint to the ITC and the U.S. Commerce Department. SolarWorld, a maker of solar modules, is seeking duties to offset the practices.

Economic Harm

The ITC is examining possible economic harm to SolarWorld from Chinese imports, while the department determines the penalty for Chinese companies that illegally dump products.

The department may decide on preliminary remedies as early as Jan. 12.

Tariffs may raise the cost of modules by 10 percent, Aaron Chew, a senior analyst at New York-based Maxim Group LLC, said in a Dec. 2 research note.

“The United States should avoid abusing trade remedies which will affect bilateral trade and mutually beneficial cooperation between China and U.S. enterprises in the new energy sector,” the Chinese Commerce Ministry said in its statement.

China exported $3.5 billion of solar goods, including solar cells, to North America last year, according to the China Chamber of Commerce for Import & Export of Machinery and Electronic Products. North America is China’s third-biggest solar export market, following Europe and Asia in 2010, accounting for about 11 percent of China’s global solar exports.

Democratic lawmakers wrote a letter on Dec. 2 to President Barack Obama urging an investigation into the Chinese imports, which they say don’t compete fairly with domestic products.

Chinese Imports

Imports of Chinese solar products more than quadrupled from 2008 to 2010, lawmakers said in the letter. Chinese imports control half the market, benefiting from government-provided loans, cheap land, tax breaks and an undervalued currency, said the lawmakers, including Senator Ron Wyden, an Oregon Democrat, and Representative Edward Markey, a Massachusetts Democrat.

SolarWorld and six other companies that haven’t been publicly identified have requested tariffs of 100 percent, saying Chinese solar manufacturers benefit from unfair government support.

The U.S. group asked the federal government to slap duties on more than $1 billion of Chinese imports.

China’s Commerce Ministry said on Nov. 25 that it would begin its own investigation into American state support for renewable energy and would consider the stimulus programs of the states of Washington, Massachusetts, Ohio and California, and two others in New Jersey.

Energy Sources

Representatives of Chinese companies told the commission Nov. 8 that tariffs sought by U.S. competitors would make it more difficult to expand the use of renewable energy. China and the U.S. are among nations encouraging use of alternative energy sources, driving costs down across the board, so it would be unfair to penalize China, they told the panel.

SolarWorld said Sept. 2 that it was cutting almost 200 jobs at its facility in Camarillo, California. Solyndra LLC, a California maker of solar panels that received $535 million in U.S. loan guarantees, blamed cheap Chinese imports for its collapse. Solyndra filed for bankruptcy on Sept. 6.

“There’s a serious concern going forward with the current situation,” Gordon Brinser, the president of SolarWorld’s U.S. unit, said in a Dec. 1 interview before the ruling. “SolarWorld is a strong company, but others in the industry are struggling.”

The Commerce Ministry said yesterday it hopes the “U.S. side will objectively analyze the reason why some of U.S. solar panel firms lack competitiveness.”

Increased Costs

Attorneys for Suntech Power Holdings Co. Ltd. and Trina Solar Ltd. (TSL), two of the biggest China-based makers of crystalline silicon panels, told the trade commission Nov. 8 that added tariffs would increase the cost of solar panels, which would then be passed on to the consumer.

Chinese solar manufacturers have said they may shift manufacturing to other countries to avoid tariffs if they’re imposed.

Executives at four of China’s biggest solar-panel makers have said they don’t receive special treatment from the Chinese government and that they pay higher interest rates for loans than U.S. or European competitors.

SolarWorld has said that China’s rapid growth in solar products is possible only with government support as it seeks to push out U.S. competitors by selling products for less than cost.

“If they continue at the rate they are going, it’s not a sustainable situation,” Brinser said.

Chinese Credit

China provided $30 billion in credit to its biggest solar manufacturers last year, about 20 times the amount provided by the U.S., Jonathan Silver, executive director of the Energy Department’s loan program, told a congressional panel Sept. 14. Silver resigned on Oct. 6.

First Solar Inc. (FSLR), based in Tempe, Arizona, and SunPower Corp., based in San Jose, California, may benefit from higher sales prices stemming from the tariffs, Ahmar Zaman, an analyst at Minneapolis-based Piper Jaffray Companies Inc., wrote in a Dec. 1 research note.

First Solar isn’t involved in the ITC case, spokeswoman Melanie Friedman wrote in an e-mail Dec. 2. SunPower is neutral, Chief Executive Officer Thomas Werner said in a Nov. 30 presentation at the Baird Clean Technology Conference.

To contact Bloomberg News staff for this story: Zheng Lifei in Beijing at lzheng32@bloomberg.net

To contact the editor responsible for this story: Paul Tighe at ptighe@bloomberg.net

http://www.bloomberg.com/news/2011-12-04/china-rejects-u-s-trade-panel-s-ruling-that-solar-imports-harm-industry.html

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