UPDATE: On June 6, 2022, President Biden announced a two-year tariff exemption on solar cells and modules from Southeast Asia, in response to an inquiry by the Commerce Department into possible trade violations involving Chinese products that has slowed down the solar supply chain and made module availability scarce.
President Biden also authorized the use of the Defense Production Act to accelerate domestic production of clean energy technologies, including solar panel components. The goal of this announcement was to “spur domestic manufacturing, construction projects, and good-paying jobs—all while cutting energy costs for families, strengthening our grid, and tackling climate change and environmental injustice.” In addition, President Biden urged Congress to quickly pass tax cuts and additional investments in clean energy manufacturing and deployment.
Palmetto believes these announcements are great for the industry and provide needed relief to an already strained and complex solar supply chain. We will continue to take actions that further mitigate potential supply chain risks, including the use of multiple panel models, new procurement options, and additional warehouses. We’re confident that this puts us in a strong position to continue supporting our partners through this time.
Tariffs have always been a topic of debate in the U.S. solar industry, with advocates claiming they protect domestic industry and opponents arguing they do more harm than good. Whatever your stance, there’s no denying that the most recent investigation by the U.S. Department of Commerce into the alleged circumvention of tariffs by Chinese solar panel manufacturers could have lasting effects on the future of the solar industry in America.
As your dedicated business partner, Palmetto wants to make sure you are informed of the situation affecting our industry. We also want to make you aware of measures we are taking to maintain our strong supply chain position and mitigate any potential risks to sales and fulfillment.
What is a Solar Tariff?
A solar tariff (also called a duty) is a tax imposed on the import of solar equipment. A country may choose to employ a tariff for a variety of reasons, the three most common of which are:
- To protect domestic industry (protective)
- To discourage a behavior (punitive)
- To generate revenue
There are several different types of solar tariffs, but in the U.S., we currently have what are called antidumping tariffs, allowed under Section 201 of the Trade Act of 1974. The government imposes this type of protective tariff on foreign imports to prevent dumping—when companies price products below fair market value.
Antidumping tariffs are fairly common. Many governments utilize duties like this to protect domestic industries from foreign producers. However, some companies find ways around this duty—it’s called circumvention, and this is what the Department of Commerce is investigating in its latest probe into Chinese solar panel manufacturers.
What is the US DOC Solar Tariff Investigation?
In March 2022, the U.S. Department of Commerce (DOC) announced a year-long antidumping investigation of solar cells imported from Southeast Asia. The investigation was prompted by a petition filed in February of 2022 by California-based solar panel manufacturer Auxin Solar, which you may have heard about in the news.
The petitioner alleges that Chinese crystalline silicon photovoltaic (CSPV) producers have circumvented current antidumping and countervailing duties for solar parts produced in China by completing production in Malaysia, Vietnam, Thailand, and Cambodia.
According to Auxin, this allows Chinese manufacturers to continue “their assault on domestic producers” by circumventing established tariffs. Auxin also states that China’s “predatory pricing” is in part fueled by additional allegations, including:
- Intellectual property theft
- Inhumane forced labor practices
- Non-market subsidization of the upstream solar supply chain
Ultimately, Auxin wants China to play fair by “fairly pricing their CSPV cells and modules for export to the United States.” However, industry organizations like the Solar Energy Industries Association (SEIA) strongly oppose this petition, calling Auxin’s claim “meritless” and alleging it could undermine America’s progress toward clean energy.
What is the Current Impact of this Investigation?
When the investigation was first announced, many solar panel manufacturers increased their wholesale prices in anticipation of the potential impacts of new tariffs. Some manufacturers even paused shipments to the United States while they awaited more clarity about the situation. This resulted in increased panel pricing, and increased risks to the supply chain.
Following President Biden’s announcement of the two-year tariff exemption and the use of the Defense Production Act, we’re starting to see some improvements in the supply chain, although the industry is still digesting the expected short-term and long-term implications of these announcements.
What are the Expected Long-Term Impacts?
Long-term impacts will be determined by the outcome of the investigation, but the 24-month suspension of duties and safe harbor conditions for importers will provide needed relief to solar companies going into 2023. We’re confident that the industry can adapt and overcome, like we have in the past when facing other large-scale challenges.
What is Palmetto Doing to Mitigate Potential Risks?
Throughout this debate, one thing has been made clear: Palmetto is already well-prepared to mitigate any potential risks to sales and fulfillment that might come from this situation. In addition to the flexibility provided by our current platform, updates are already underway to further adapt and respond to these changes.
Our unique market position enables us to make nimble yet significant changes that help maintain our strong supply chain position and competitive pricing, allowing our Sales and Installation Partners to continue operations as smoothly as possible.
1. Supply Risk Assessment
Actively assessing supply risk with our suppliers, to better determine where we may need to supplement existing suppliers with new panel sources and new warehouses.
2. Equipment Diversification
We are rapidly building a module diversification strategy, using criteria based on a set of product performance, warranty, underwriting, and supply availability.
3. Tech Enablement
We plan to enhance our sales platform to support locally targeted panel and module bundling, based on availability and fulfillment optimization.
What Can Partners Expect from These Updates?
We’ll be providing additional tools and training for sales and installation partners to learn how to best use these new features.
1. New Sales Positioning
Any information about new modules in the equipment bundles will be provided to sales partners, with differences clearly outlined to aid in the sales process.
2. Automatic Module Selection
Palmetto’s sales platform will automatically add the best module option for fulfillment, based on local market requirements and conditions.
3. Updated Site Design & Engineering
Site designs and engineering plans will automatically be updated to reflect the auto-bundled equipment in any new sales proposals.
4. Stronger Supply Chain
Equipment routing from new warehouse options will be configured into our fulfillment platform, ensuring we minimize any disruptions to the supply chain.
Palmetto is Ready to Support Our Partners
In the solar industry, the only constant is change, so Palmetto takes proactive measures to address those changes and support our sales and installation partners. We will continue to monitor this situation closely, strategically intervening and engaging in measured advocacy efforts and we will update you with any important developments along the way.
The U.S. must continue to support the adoption of clean energy during this pivotal moment in human history. The world depends on it.
