Duties on China Solar Products May Violate AD/CVD Scope Rules, CIT Says
Antidumping and countervailing duties recently imposed on solar products from China may violate important limits on how widely AD/CV duties can be applied to third-country products, the Court of International Trade said in a decision issued June 8 (here). In its 2015 AD/CVD orders, Commerce applied rules of origin that appear to contradict previously imposed duties on Chinese solar cells, and may have unreasonably applied duties to solar products “from China” that in reality derive most of their value from other countries, the court said.
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Commerce issued AD/CVD orders on solar products from China and Taiwan at the request of domestic manufacturers that alleged Chinese companies were circumventing earlier orders on solar cells from China, imposed in 2012, by moving production offshore to Taiwan. While the solar cells order covered all solar cells produced in China and assembled into panels anywhere in the world, including China, the scope of the solar products orders covered all solar panels from China, regardless of cell origin, except those covered by the solar cells orders. In effect, the solar products orders covered “all panels assembled in China from cells produced anywhere in the world, other than China,” CIT said.
According to CIT, the solar products orders, by contradicting the rule of origin for a similar type of product, violated long-held principles governing the scope of AD/CV duties. “Commerce established two different rules of origin for solar panels, depending on where they were assembled,” CIT said. “For solar panels assembled anywhere other than China, origin is the country of cell-production. For solar panels assembled in China, origin is instead determined by the country of assembly, even though most of the production (the making of the constituent cells) takes place in another country.” Historically, it is “unprecedented” for Commerce to apply more than one country-of-origin determinative rule to products “within the same class or kind of merchandise,” CIT said.
Such contradictory rules of origin leads to strange effects, CIT said. For example, panels assembled abroad using cells produced in the U.S. are considered of U.S. origin, and not subject to AD/CVD liability, when assembled in any country except China. However, when those same solar cells are assembled into panels in China, they are treated differently from those assembled in any other customs territory. “Unlike the latter, which retain their U.S. origin regardless of where they are ultimately assembled, the U.S. cells that are assembled into panels in China are subject to AD/CVD liability as merchandise of China,” CIT said.
Commerce also failed to explain how it's reasonable to apply AD/CVD liability to the full value of solar panels assembled in China from third-country cells, even though Commerce itself has acknowledged the majority of the cost of manufacture in production is incurred during the cell production process, and thus takes place in a third country. “Commerce essentially reversed course and, without acknowledging any deviation from its established prior policy, not only applied two different rules of origin to solar panels, depending on where they were assembled, but also applied AD/CVD liability to the entire value of merchandise mostly produced outside of the subject country’s comparison market, including merchandise that was mostly produced in the United States,” CIT said.
The court had similar concerns related to the fairness of calculating duties based on possible dumping and subsidization in China, even though the majority of the production of China panels made from third-country cells occurred in a third country. Sending the orders back to Commerce for reconsideration or further explanation, the court ordered that Commerce file its remand redetermination by Aug. 8.
(SunPower Corp. v. U.S., Slip Op. 16-56, CIT # 15-00067, dated 06/08/16, Judge Pogue)