U.S. Sets Duties as High as 4.73% on China Solar Equipment

President Barack Obama’s administration imposed preliminary duties of as much as 4.73 percent on solar-energy equipment imported from China, a rate that an analyst said may have little impact on the industry.

Suntech Power Holdings Co. (STP), the world’s largest solar-panel maker, was told to pay a 2.9 percent tariff and Trina Solar Ltd. (TSL) will pay 4.73 percent to make up for subsidies they received from China’s government, the Commerce Department said today in a statement. All other Chinese solar-equipment firms were told to pay 3.61 percent. The duties are retroactive for 90 days before the ruling.

“This could have been a lot worse,” said Aaron Chew, an analyst at Maxim Group LLC, who said some people expected a tariff as high as 10 percent. “The tariffs were totally expected, but this is at levels that are much lower than expected.”

Shares of Chinese solar companies surged in New York, with Suntech Power, Yingli Green Energy Holdings and Trina Solar Ltd. each up more than 12 percent today. The decision may have a bigger impact on trade talks between the world’s two biggest economies than on the renewable energy industry, though it may prod Chinese manufacturers to make more of their solar products abroad, said Anthony Kim, solar analyst with Bloomberg New Energy Finance.

‘Symbolic’ Fight

“The tariff won’t have an effect on Chinese-sourced modules” which are 10 percent cheaper than similar products made elsewhere, said at a New Energy Finance conference in New York. “At this point, that tariff is more symbolic of the fight against Chinese imports.”

Of the major Chinese suppliers, JA Solar Holdings Co. (JASO), which makes solar cells, may be the most affected by tariffs, said Jesse Pichel, an analyst with Jefferies Group Inc.

“We believe JASO is most exposed to the duty, as its cell customers will shift cell purchases to Taiwan for U.S. export,” Pichel said today in a research note. “JASO will need to expand production lines outside China to avoid the duty.”

The size of these tariffs probably won’t affect prices significantly, said Paula Stern, a former commissioner with the International trade commission.

“With so many other moving parts, including distributors in South Korea and Taiwan, I don’t think it will have a very large market impact,” she said in an interview today at the conference in New York. “It could get wiped out in an exchange- rate shift.”

SolarWorld’s Complaint

The case was brought by the U.S. unit of SolarWorld AG (SWV) and six other domestic producers. The U.S. producers said competitors in China benefit from unfair government subsidies.

“This is a clear statement, going forward, there was not free trade happening,” Gordon Brinser, president of SolarWorld’s Hillsboro, Oregon-based U.S. unit, said in an interview. “We support free trade without government intervention, and clearly there have been illegal Chinese government interference.”

Brinser declined to comment on any impact on sales or whether the duties were less than expected.

Trade between China and the U.S. has become an issue in the U.S. presidential campaign. The trade deficit with China widened to $295 billion last year and U.S. leaders have called for a harder line on the Asian nation to drive down the 8.3 percent U.S. unemployment rate.

Suntech rose 44 cents, or 14 percent, to $3.57; Trina increased 61 cents, or 7.9 percent, to $8.38; and Yingli jumped 46 cents, or 12 percent, to $4.27 at 4:15 p.m. in New York Stock Exchange composite trading.

December Decision

The quasi-judicial U.S. International Trade Commission unanimously agreed in December that domestic producers have been hurt by Chinese imports of solar panels that turn sunlight into electricity. The probe was then turned over to the Commerce Department to determine the punishment.

Opponents, such as the Washington-based Coalition for Affordable Solar Energy, say duties would increase prices and cost U.S. jobs.

Obama along with the EU and Japan on March 13 filed a complaint in the World Trade Organization over China’s export limits on rare earth minerals. Earlier this year, he signed an executive order creating a panel to probe unfair trade practices by nations including China, and the U.S. has urged the Asian nation to allow its undervalued currency to appreciate.

Prices Decline

The prices of solar modules, or panels, fell 50 percent last year, largely as a result of the cheap Chinese imports, Timothy Brightbill, an attorney for SolarWorld said before the decision.

The solar companies claim the Chinese companies are selling products at a loss in an effort to drive out U.S. competitors. The Commerce Department has put off a determination on that allegation until May 17.

In its complaint, SolarWorld and the other domestic firms asked for 100 percent tariffs to counter the alleged dumping. They didn’t specify a remedy for the countervailing duties accusation.

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 trade commission and the Commerce Department.

Renewable-Energy Challenge

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.

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

Attorneys for Suntech and Trina, 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.

In a related complaint, the Commerce Department this year may impose penalties after U.S. firms said the Chinese imports are being sold for under market value, or dumped.

To contact the reporters on this story: William McQuillen in Washington at bmcquillen@bloomberg.net; Eric Martin in Washington at emartin21@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net; Will Wade at wwade4@bloomberg.net

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