On Monday, June 6, President Biden announced a two-year suspension of the imposition of new tariffs on solar industry imports. Although not unprecedented, the move has drawn both praise and criticism from members of the industry; while this action will enable developers, at least for a two-year period, to source solar modules and cells from countries like China and in turn accelerate manufacturing, an ongoing US Department of Commerce investigation into these foreign supply chains may be stifled as a consequence.
The Presidential Determination was issued pursuant to Biden’s authority under Section 303(a)(5) of the Defense Production Act of 1950. While the Defense Production Act was primarily geared towards protecting and facilitating domestic production capability during wartime, the presidential authority has been used outside of these contexts as a matter of national security. In this instance, the Memorandum for the Secretary of Energy (issued concurrently with the Presidential Determination) stated that expansion of “domestic production capability for solar photovoltaic modules and module components is necessary to avert an industrial resource or critical technology item shortfall that would severely impair national defense capability.” The action extends to most solar photovoltaic modules and components, including ingots, wafers, solar glass, and cells. In effect, the two-year suspension of tariffs will assist the solar industry in securing supply, combating inflation, generating manufacturing capacity, and in turn, developing solar generation projects.
While the action supports President Biden’s goal of decarbonizing the power sector by 2035, it also conflicts with the president’s stance on trade relations with China, as he previously decided against rolling back existing Trump-era tariffs. Additionally, it runs counter to an ongoing probe conducted by the US Department of Commerce. Auxin Solar petitioned for the investigation after it alleged Chinese solar manufacturers skirted the existing tariffs by moving operations into Vietnam, Malaysia, Thailand, and Cambodia. Auxin Solar reacted negatively to the tariff suspension, calling it “extremely problematic” and that it has allowed “Chinese-funded special interests to defeat the fair application of US trade law.”
Although dumping and other hostile actions by foreign manufacturers may negatively impact the competiveness of US-based counterparts, major industry actors, such as the Solar Energy Industry Association, have pointed to the investigation as a major obstacle to renewable development.
Barclay Damon’s Regulatory Practice Area and Energy Team attorneys will continue to monitor the ongoing investigation for any updates in connection with solar tariffs and the two-year suspension.
If you have any questions regarding the content of this alert, please contact Brenda Colella, Regulatory Practice Group Leader, at bcolella@barclaydamon.com; or David Solimeno, associate, at dsolimeno@barclaydamon.com; or another member of the firm’s Regulatory Practice Area or Energy Team.