Key Takeaways | How Solar Industry Leaders are Addressing and Overcoming the US–China Trade War | McDermott Will & Emery

The US-China trade war has had a significant impact on the solar industry, and that impact is expected to increase. In this webinar, learn how solar industry leaders are dealing with the effects of the US-China trade war and how they are preparing for the future.

Our first webinar in this series featured McDermott Will & Emery partner Carl Fleming, Pine Gate Renewables Director of Regulatory Affairs Brett White, Vice President of Construction James Froelicher, and Assistant General Counsel Jess Cheney.

Below are the key takeaways from the webinar:

1. Retention of approval orders. The U.S. Customs and Border Protection (CBP) issued a Hold Release Order (WRO) against Hoshine Silicon Industry Co. Ltd., a company based in China’s Xinjiang Uyghur Autonomous Region, which manufactures all silica-based products made by Hoshine and its subsidiaries are to be arrested at all US ports of entry. As a result of this WRO, manufacturers from the Xinjiang Uyghur Autonomous Region have moved to avoid exposure.

There have been numerous arrests of silicate-based products in several ports in the United States and the arrest of materials is expected to continue. To counter this, suppliers and industry leaders are providing evidence that the materials are not made from forced labor or Hoshine and its subsidiaries.

While the WRO was expected to cause significant disruption, it is not having as much of an impact as feared given that many suppliers had already left the Xinjiang Uyghur Autonomous Region.

2. Anti-dumping and compensation petition. Anti-dumping and compensation petitions filed in August 2021 called for the U.S. Department of Commerce (DOC) to impose additional tariffs on solar panel imports from Malaysia, Thailand, and Vietnam. The petitioners asked for additional tariffs between 50% and 250%. The DOC has yet to decide whether to initiate an investigation based on the petition, but the effects of the petition are already being felt with disruptions in the supply chain. If examined by the DOC, the solar industry would likely experience a sharp slowdown in projects in 2022 and 2023, as neither providers nor developers are willing to bear the economic risk of the possible tariffs.

3. The DOC and the Biden administration. The DOC and the Biden government are expected to make decisions on tariffs, as well as anti-dumping and countervailing duties, which will directly affect the solar materials supply chain.

The Biden government hopes to increase domestic supply of solar materials, however domestic manufacturers currently produce only about 25% of total solar material demand. As a result, the solar industry cannot immediately switch to purchasing solar materials from local manufacturers because the supply is simply not available. As an incentive to increase domestic production, the solar industry leaders hope that tax credits can be offered to companies that manufacture solar materials.

The Biden government is expected to decide whether to extend or reduce the current 18% tariff on imported solar panels. Regardless, the decisions of the DOC and the Biden administration will have a direct impact on the supply and cost of solar materials.

4th The solar market in Q4 and 2022. Given the political decisions to be made by the DOC and the Biden administration on tariffs and tariffs on solar materials, project budgets and project deadlines are difficult to predict given the uncertainty surrounding the cost and stability of the supply chain. Those solar developers who were able to resolve these issues by setting up their regulatory, procurement, and legal teams were able to meet project deadlines for the fourth quarter and should be able to do so in 2022, but will face more challenges.

With the current disruption in the supply chain, suppliers are trying to invoke force majeure provisions in their contracts to renegotiate terms that take into account the increase in material costs. In the coming year, tariffs, tariffs and WRO are likely to have a greater impact, as active negotiations have already taken place on purchase agreements that require certain pricing and the assumed pricing no longer reflects the market. Rather, prices are likely to have risen. This will lead companies to find ways to reduce costs in other areas, which will likely include negotiating with suppliers.

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