Chinese Solar Panel Producers 'Spinning Off' Production to China to Circumvent Orders, US Says
Responding to exporters and importers of Thai solar panels, the U.S. argued Sept. 25 that it hadn’t unlawfully elevated one relevant factor, research and development, in a circumvention inquiry over the other four. It agreed the Commerce Department had prioritized R&D -- but that was reasonable in context and allowable by statute, it said (Canadian Solar International Limited v. U.S., CIT # 23-00222).
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Particularly, regarding the relationship between the two Thai exporters and what the department described as their Chinese parent companies, “Commerce found that this scenario involved vertically integrated Chinese producers spinning off the final stage of production into Thailand,” the government said.
Solar panel exporters Trina Solar Science & Technology and Canadian Solar sought relief from an affirmative circumvention finding from the Court of International Trade in June (see 2406140059). Both parties agreed the manufacturing steps that imparted their solar panels’ essential character occurred in Thailand, so Commerce was expanding the scope of an antidumping duty order on Chinese solar panels by still finding circumvention, they argued.
Specifically, they pointed out that the statute governing circumvention inquiries lists five factors Commerce must take into account when making a circumvention finding: level of investment in the country, value added "as a proportion of the total value of the respondents' U.S. exports," R&D level, the nature of the production process, and the extent of the production process. The statute specifically says “and,” they argued; not “or.”
But this is a mischaracterization of the purpose of circumvention proceedings, the U.S. said. The overall purpose of an investigation is to prevent evasion, it said, and Commerce did so here. The department is given five factors to “take into account,” but “the legislative history provides that Commerce will evaluate the factors ‘depending on the particular circumvention scenario,’” it said.
It said the department is allowed “tremendous” discretion in making such circumvention findings. In particular, it pointed to other elements that the statute recommended, but didn’t require, Commerce to consider, such as trade patterns of the individual respondents, levels of affiliation between “respondents and their Chinese suppliers,” and the amount, if any, that solar panel imports to Thailand from China had risen during the investigation.
The government also said that Commerce elevated the importance of the R&D factor as part of an industry-specific determination. Research and development “is a particularly important factor in the solar industry” because, “once carried out, it is easily transmissible across borders,” it said. This makes it easy for larger corporations “to ‘spin off’ production of solar cells into third countries … in which third country producers are left with little choice but to source solar wafers from China,” it said.
The government alleged that this is what happened here. All of the investment and machinery, plus “all or nearly all of the most valuable, high-tech inputs” the Thai exporters needed came from Chines parent companies, it said.