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US follows up on illegal solar panel imports allegation, launches new one on rare earth magnet imports

01 October 2021 Amena Saiyid

The Biden administration is serious about investigating any claims that imports of critically needed materials, especially from China, are short-changing domestic manufacturers of clean energy technologies, as two recent actions show.

The Department of Commerce asked the American Solar Manufacturers Against Chinese Circumvention (A-SMACC) on 29 September to back up allegations of unfair import practices in a 16 August petition with more information. The group, which comprises anonymous US solar developers, alleged imports of solar cells and modules from Malaysia, Thailand, and Vietnam were "unlawfully circumventing antidumping and countervailing duties on China."

And earlier this week, Commerce published a Federal Register notice announcing the start of an investigation into imports of rare earth permanent magnets used in wind turbines, electric vehicles (EVs), as well as fighter jet and missile guidance systems.

Wind turbines and solar panels are seen as essential to President Joe Biden's goal to decarbonize the US power sector, as are the rare earth minerals that go into some turbine motors and EVs.

Ever since he took office in January, Biden has made no secret of his ambition to compete with China in the clean energy technology race, while expressing concern about sourcing materials from China and countries with suspect labor practices.

"As I've said before, we're in competition with China and many other nations for the 21st century. To win, we're going to have to make sure the future will be made in America," Biden said 5 August, announcing a national 50% EV goal for new car sales for 2030.

According to IHS Markit analysts, the investigation won't affect the wind turbine markets in the next 12 months, and it is too early to speculate about its impact on the EV market.

As far as the US solar market is concerned, another IHS Markit analyst said the impact, if there was any at all, would be felt in 2022, but that too would depend on a variety of policy developments, not just on the outcome of the A-SMACC petition.

Commerce seeks more information

The US currently has 108.7 GW of installed solar capacity, according to the Solar Energy Industries Association (SEIA), a US trade association, which had its members exhort Commerce to reject the 16 August petition.

In its petition, A-SMACC alleged that more than a dozen companies based in Malaysia, Thailand, and Vietnam are illegally and unfairly importing Chinese solar products, and thereby circumventing 2012 antidumping duty (AD) and countervailing duty (CVD) orders on solar cells and modules from China.

Commerce had until 29 September to decide whether to accept the A-SMACC petition and investigate its claims, or to delay its investigation pending more information about the US companies that are allegedly being harmed by the solar cell and module imports.

The agency chose the latter.

"We have examined your submissions and have determined that we require additional information to address certain threshold issues before we can consider the merits of your requests for anti-circumvention rulings," Abdelali Elouaradia, director of Commerce's Office IV AD/CVD Operations, wrote to Wiley Rein attorney Timothy Brightbill, who is representing A-SMACC.

"Meritless" petition

Elouaradia gave the group until 6 October to respond, adding it would take the agency another 45 days to determine whether to initiate an investigation, during which it may seek further information.

For now, Commerce has asked for the names of the companies, which the petition said would be harmed by the imports, and concealed their identities due to fear of retaliation from China. To investigate claims of "substantial harm," the government agency also asked Brightbill to reveal whether A-SMACC companies have any foreign ownership as well as any sales or production offices in the three Southeast Asian countries in question.

SEIA CEO Abigail Ross as well as American Clean Power Association CEO Heather Zichal have deemed the A-SMACC petition to be meritless.

"Moving ahead with this matter would cause grave damage to the solar sector in the United States and put the Biden administration's economic and climate goals at risk," Zichal warned in a 29 September statement.

Ross, in her own 29 September statement, noted that "the detail and nature of the questions Commerce asked the anonymous petitioners clearly indicates that the petitioners have produced a filing largely devoid of the information the department needs to assess whether to initiate this case."

On 22 September, more than 200 solar companies wrote to Secretary of Commerce Gina Raimondo urging her to drop the petition, saying it "would harm the US solar industry and the nation's climate goals."

Brightbill did not respond to a Net-Zero Business Daily request for comment on the Commerce letter. In a 28 September press release though, Brightbill, who is a partner with Wiley's international trade practice, said nearly all the raw materials, R&D, and capital investment at the dozen or so companies his clients seek action against is still coming from China. "These factories exist only to serve the US market and to avoid AD/CVD duties. This is the very definition of circumvention," he added.

The circumvention ruling that Brightbill's clients have requested covers only "certain Chinese-owned companies" in Malaysia, Thailand, and Vietnam, he pointed out. "There is plenty of fairly traded, non-Chinese available capacity to meet US solar demand from non-subject companies in those countries and in the rest of the world, in addition to new and increasing capacity from US producers," he said.

Minimal disruption to construction timelines

US solar capacity installations between 2021 and 2025 are set to total 149 GW, according to IHS Markit data.

Despite challenges in the global supply chain, many US developers have experienced minimal disruption to construction timelines in 2021, an analysis of IHS Markit data from the end of August shows. Developers have already installed about 12 GWdc of utility-scale solar PV and procured the equipment they need for more than 8.9 GWdc of projects under construction, with 5.3 GWdc already approved, IHS Markit Executive Director Clean Tech and Renewables Edurne Zoco told Net-Zero Business Daily 1 October.

"We do not forecast any of the current policy developments to have impact on 2021 installations, but they could impact 2022 [solar module availability and prices] depending on the final outcome of all these actions," Zoco said.

In addition to the A-SMACC petition, she pointed to the US Customs and Border Protection's Withhold Release Order that requires companies to furnish a certificate of origin for their products and the four-year tariff program President Donald Trump imposed via a proclamation in January 2018 on imported solar modules and cells that phases down from 30% to 15% in its final year. The tariff came on the heels of a case brought before the US International Trade Commission by two US solar manufacturers, Suniva and SolarWorld.

Rare earth magnet imports under scrutiny

While Commerce waits for Brightbill to furnish additional information, it has launched an investigation on its own into imports of rare earth permanent magnets used for defense purposes, wind turbines, and EVs.

Biden has been clear about shoring up domestic production of critical minerals and identifying gaps in supply chains that would hinder the US from achieving its clean energy goals, notably a net-zero carbon power generation sector by 2035.

The rare earth element used in these neodymium-iron-boron (NdFeB) magnets is neodymium.

According to a White House report, China has all the essential rare earth supply chain tiers from mining and crushing to processing and manufacturing.

An International Energy Agency May report on critical minerals reveals that China was responsible for more than 60% of global production of rare earth elements and for nearly 90% of refining capacity in 2019.

US wind industry largely unaffected by investigation

IHS Markit Senior Analyst Indrayuth Mukherjee told Net-Zero Business Daily that the onshore wind sector remains less susceptible to swings in rare earth magnet prices, with the four dominant vendors in the US—GE, Vestas, Siemens Gamesa, and Nordex—predominantly supplying geared turbines that have a limited use of these magnets.

"However," Mukherjee added, "the offshore sector remains more vulnerable to any potential swings in prices due to this new development."

For instance, IHS Markit data tracking global wind turbine orders as of 25 August found that both GE and Siemens Gamesa—who have secured nearly all the offshore orders in the US market in the last 12 months—offer direct drive turbines that do use rare earth-based permanent magnets.

The American Clean Power Association told Net-Business Zero Daily 30 September that it was still evaluating the investigation notice and would most certainly be commenting by the 12 November deadline.

Meanwhile, Raimondo, announcing the investigation on 24 September, said the agency remains committed to securing supply chains to protect national security, economic security, and technological leadership. If Raimondo finds, on the basis of the investigation, that imports of rare earth magnets are in quantities that affect or impair national security, she will recommend action to the president accordingly. The report is due by 27 June 2022, after which Biden has 90 days to decide on a course of action that include tariffs.

Posted 01 October 2021 by Amena Saiyid, Senior Climate & Energy Research Analyst, IHS Markit

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