The dynamic environment affecting solar cell and module manufacturers, exporters, and importers remains in flux as US and non-US manufacturers take their challenges to the courts.
In late 2023, Auxin Solar, a US solar producer, and Concept Clean Energy (CCE), a US designer of solar structures, filed a complaint with the US Court of International Trade (CIT), appealing the Final Determinations published by the US Department of Commerce (DOC) in its inquiries into circumvention of antidumping and countervailing duty (AD/CVD) orders on certain crystalline silicon photovoltaic (CSPV) cells and modules.
At the same time, Trina Solar (Vietnam) Science & Technology Co. Ltd. (Trina) contested DOC’s underlying determination in the AD/CVD circumvention proceeding. Trina argued that DOC improperly failed to consider formation of the positive/negative (p/n) junction in its determination that assembly and completion of CSPV cells and modules in Vietnam was minor or insignificant. It further asserted in a motion for judgment at the CIT that DOC cannot extend its finding based on adverse facts available for one mandatory respondent on a countrywide basis, affecting cooperative companies like Trina against which DOC made no company-specific findings.
BACKGROUND: CIRCUMVENTION INQUIRIES AND EXECUTIVE ACTION
AD/CVD orders have been in place against Chinese-origin CSPV cells and modules since 2012. In the decade following the initial imposition of those duties, companies adjusted their manufacturing operations, relocating significant operations to Southeast Asia. In February 2022, California-based Auxin Solar filed a petition alleging that Chinese solar manufacturers were circumventing AD/CVD orders on certain CSPV cells and modules by producing portions of solar panels in facilities in Cambodia, Malaysia, Thailand, and Vietnam. Upon initiation of the circumvention inquiry, these countries accounted for approximately 80% of supply in the United States, and the market ground to a halt with uncertainty.
US President Joseph Biden issued Proclamation 10414 on June 6, 2022, declaring an emergency under 19 USC 1318(a) with respect to US electricity generation capacity and stating that immediate action was needed to ensure access to a sufficient supply of solar cells and modules to assist in meeting the United States’ electricity generation needs. DOC implemented the Proclamation in a final rule, which included a waiver for CSPV cells and modules completed in the inquiry countries that are entered or withdrawn from warehouses for consumption in the United States prior to June 6, 2024.
The DOC issued its Final Determination in the circumvention inquiry on August 18, 2023. DOC found countrywide circumvention of the orders in all four of the inquiry countries (Cambodia, Malaysia, Thailand, and Vietnam). This final rule continued DOC’s certification process, the broadest of which is the “Applicable Entry” certification, which effectively provides for AD/CVD-free entry through June 6, 2024 in light of the moratorium established under Presidential Proclamation 10414. All producers and exporters—even those against whom DOC found Adverse Facts Available—may take advantage of the Applicable Entry certification.
DOC also included a requirement that the cells and modules that benefit from the waiver of AD/CVD must be utilized (defined to mean “used” or “installed”) in the United States within 180 days following the date of termination, which would require that the items be utilized in the United States on or before December 3, 2024. CBP is currently undertaking to determine compliance with Applicable Entry certifications by issuing questionnaires with targeted requests for information and documentation supporting utilization by the mandated date. Additional maneuvers affecting domestic production and imported merchandise, including the initiation of direct AD/CVD investigations into CSPV cells and modules from the Southeast Asian countries, are discussed in our June 20, 2024 newsletter.
AUXIN SOLAR CIT PROCEEDING
In late 2023, Auxin Solar and CCE filed a lawsuit in the CIT against the DOC and CBP asserting that the government did not collect all fees and credits due in light of affirmative AD/CVD findings on imported solar cells and modules from Southeast Asia. The companies say they have standing because each is adversely affected by agency action—Auxin Solar because it cannot make cells and panels that compete with imported merchandise and CEE because it cannot make solar structures that satisfy domestic content requirements if domestic importers are stymied. A number of non-US CSPV cell and module importers joined the litigation as defendant-intervenors, arguing that they would be liable for the duties that were suspended under the moratorium.
Auxin Solar’s Complaint
The complaint focuses not on the imposition of AD/CVD against Southeast Asian imports, but rather on the fact that DOC did not direct CBP to suspend the liquidation of and require cash deposits on imported merchandise within the moratorium period under Presidential Proclamation 10414. The parties assert that this period—which Auxin Solar and CCE term DOC’s Final Solar Duty Holiday Rule—“has precipitated a lawless CSPV cell and module marketplace characterized by a massive and sustained wave of cheap CSPV cells and modules from Malaysia, Thailand, Vietnam, and Cambodia that are made from components originating in the People’s Republic of China.”
The complaint argues that DOC is legally bound to direct CBP to suspend the liquidation and require cash deposits of estimated duties for each import upon an affirmative determination of AD/CVD application. Instead, DOC promulgated new regulations to comply with Presidential Proclamation 10414’s moratorium period when it was neither “practically nor legally required” to do so. Auxin Solar and CCE allege that by taking such action, DOC and CBP have deprived them of their right to relief from subsidized and dumped imports.
Auxin Solar challenges three aspects of DOC’s Final Determinations in the circumvention inquiries that, if successful, could significantly expand affected merchandise. First, Auxin Solar challenges DOC’s definition of “inquiry merchandise” as unreasonable, unsupported, and unlawful. The concern stems from DOC’s “wafer-plus-three” requirement in defining which modules are considered “inquiry merchandise.”
Second, Auxin Solar challenges DOC’s certification scheme to exclude certain merchandise due to production using “non-circumventing material.” These certifications cover merchandise under the “wafer-plus-three” requirement as well as cells and modules produced from non-Chinese origin wafers.
Third, Auxin Solar argues that DOC’s analysis of the statutory factors of minor or insignificant production were unsupported and in conflict with DOC’s prior practice. If successful on its arguments, Auxin Solar could challenge the definition of inquiry merchandise, undermine the certification regime, and challenge application as to certain individual respondents.
Defendants’ Motion to Dismiss
In January 2024, the United States filed a motion to dismiss the proceeding for lack of subject matter jurisdiction, arguing that Auxin Solar and CCE’s reliance on the CIT’s residual jurisdiction statute (28 USC § 1581(i)) was improper and instead should have been asserted under Section 1581(c), which allows for challenges to DOC’s final determinations in AD/CVD circumvention inquiries.
The CIT denied the government’s motion to dismiss on the grounds that Auxin Solar’s appeal fell “squarely within” the court’s residual jurisdiction because Auxin Solar was not challenging DOC’s final determination in the circumvention inquiry, but instead was challenging DOC’s Duty Suspension Rule implementing the presidential moratorium and more broadly relating to the “administration and enforcement” of DOC’s circumvention determinations, rather than the determinations themselves.
The court analogized Auxin Solar’s complaint to other cases in which DOC’s instructions did not align with the final determination in a proceeding. In those cases, CIT ordered reliquidation of entries when DOC’s instructions to CBP were determined unlawful. If the same were to happen in this case, reliquidation could result in AD/CVD being applied to all applicable entries entered during the moratorium, regardless of the submission of Applicable Entries Certifications and utilization by the relevant date.
Joint Stipulation
This availability of reliquidation as a remedial power is further emphasized in the parties’ joint stipulation that CIT has the authority to “direct the United States to reliquidate entries ‘for which liquidation was not suspended and cash deposits were not collected’” pursuant to the moratorium. While there is no immediate effect, it signals the understanding that AD/CVD may be owed on moratorium entries should Auxin Solar prevail.
Motion for Judgment on Agency Record
Most recently, on July 22, Auxin Solar and CCE filed a motion for judgment on the agency record, arguing broadly that implementation of the moratorium violated 19 USC § 1318(a) (“Section 318(a)”), which does not authorize duty-free importation of CSPV cells and modules because such products are not imported for use in emergency relief work. The motion cites the Supreme Court’s recent landmark decision in Loper Bright v. Raimondo overturning the longstanding Chevron doctrine for the proposition that DOC’s interpretation of the statute be given no deference.
Plaintiffs assert that Section 318(a) authorizes duty-free treatment of five types of goods: food, clothing, and medical, surgical, and other supplies for use in emergency relief work—none of which would be “commonly understood as extending to imported merchandise intended to be used to produce electricity from the sun.”
Even if the CSPV products could be considered these types of supplies, plaintiffs argue, DOC unlawfully afforded them duty-free treatment either because they were imported before an emergency was declared or because the importer’s use would not relieve the emergency. Plaintiffs request that the court vacate the moratorium in in its entirety and order reliquidation of any entries that entered duty-free pursuant to the moratorium.
TRINA SOLAR CIT PROCEEDING
From an alternative perspective, non-US manufacturers are also challenging DOC’s determinations. Trina filed its brief dated June 25 contesting DOC’s scope ruling determination that expanded the Orders to include Vietnamese products made with Chinese-origin silicon wafers. Trina claims that the determination ignores a critical step in the solar cell production process—the formation of the p/n junction—that occurs in Vietnam.
Trina asserts that “the formation of the p/n junction has long been considered the transformative step in the production process of a solar cell,” which the solar industry has relied on for over a decade in “guiding significant investment and development decisions.” The brief provides that DOC’s ignorance of the formation of the p/n junction resulted in the improper determination that the process of assembly or completion of the CSPV cells and modules in Vietnam was minor or insignificant. Taking into consideration formation of the p/n junction in DOC’s broader evaluation of the production process “compels a negative finding of circumvention.”
Trina also contested DOC’s countrywide circumvention determination in Vietnam based on one noncooperative respondent, despite the cooperation of other respondents, including the other mandatory respondent. The consequence of this determination is that non-examined, cooperative respondents like Trina are adversely affected by DOC’s affirmative finding of circumvention.
The government’s responsive briefing is currently scheduled to be filed by October 21, 2024.
LOOKING FORWARD
While US producers are continuing to increase domestic production and capacity, the industry is very much dependent on imported modules to meet demand for US installation. If the Auxin Solar court rules in the plaintiffs’ favor, significant additional duties may be owed on entries for which importers expected duty-free treatment. Notably, this would apply only to entries for which only the “Applicable Entries” certification was claimed. In its Final Determination, DOC allowed for other potential certifications that would allow for entry free of AD/CVD, including the component content certification. Importers should ensure that all relevant certifications were prepared and submitted with their entries to avoid owing duties in the event duty-free entry pursuant to the moratorium is ruled to be unlawful.
The landscape for imported solar cells and modules and costs that may be imposed on importers remains in flux. Between the ongoing litigation related to the anticircumvention proceeding, the additional direct AD/CVD case against imported CSPV cells and modules from Southeast Asia, USTR’s proposed increase in Section 301 tariffs on Chinese-origin products in strategic sectors including solar cells and modules to 50% over the next three years, and the removal of the bifacial module exclusion under the Section 201 tariff program, solar importers are faced with a number of existing and potential restrictions that affect sourcing and valuation propositions for ongoing projects as well as near-term and future planning.
It has become increasingly more important for parties to understand the allocation of risk and responsibility when it comes to importation of merchandise and the accompanying obligations to complete and submit relevant certifications and pay duties on imported goods. Parties are also engaging in more detailed discussions regarding downstream supply chains for solar cells and modules to ensure that component certifications can be claimed and to better understand the potential outcomes of the AD/CVD proceedings and ongoing litigation.
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