Key Issues Remain Undecided in SE Asia Solar Circumvention Case, Lawyers Say

Among other things, Commerce needs to eliminate any ambiguity around coverage of AD/CVD for solar cells and modules completed in third countries from cells otherwise subject to the determinations. There are also questions that need to be answered around the “utilization” requirement of the two-year grace period for the duties, as well as how Commerce will treat solar wafers made in China from non-Chinese polysilicon, the lawyers said.

The third-country issue relates to language in Commerce’s final rule implementing the two-year grace period that says the grace period doesn’t apply to modules assembled outside of Cambodia, Malaysia, Thailand and Vietnam – the four countries subject to the anti-circumvention inquiries -- using a cell from one of those four countries, said Akin Gump’s Matt Nicely, who represents the SEIA in the case.

The preliminary determination itself appears to mirror the final rule by saying the inquiries cover cells and modules “completed” in the four countries that use components from China and are exported from the four countries to the United States, Nicely said. By his reading, a solar panel made in India from Vietnamese cells that were in turn made from Chinese wafers would not be covered by the inquiry and wouldn’t be subject to duties. But the certifications in the preliminary determination include language that causes “a little confusion,” Nicely said.

“We are in the process of clarifying this,” Nicely said. He said Commerce will probably issue a clarification prior to its final determination given the issue’s importance to some companies, likely in the form of customs instructions CBP will need before it starts potentially collecting duties on Dec. 23, Nicely said. While Nicely thinks Commerce will find third-country cells aren’t included, “it is pretty critically important that they answer the question one way or the other,” he said.

Another origin-related issue that Commerce will have to resolve is what to do with Chinese wafers made of non-Chinese polysilicon, which is especially important, given the industry's shift away from Chinese polysilicon in response to CBP’s forced labor scrutiny. While some parties to the case raised it prior to the preliminary determination, Commerce “didn’t clarify that point,” Nicely said. “We just simply don't know whether Commerce will ultimately deem the use of non-Chinese poly to alter their circumvention finding” or whether they’d still consider wafers made from non-Chinese silicon a Chinese wafer, he said. Nicely said he expects Commerce to address the issue in its final determination.

There also may be some “ambiguity” about Commerce’s “utilization” requirement for taking advantage of the two-year pause on any duties until June 2024. In its preliminary determination, Commerce said that reselling a solar cell or module does not constitute utilization, so any cells and panels only resold by six months after June 2024 don’t qualify. Commerce did not settle the question of what happens if a solar cell or panel is utilized in some way and then resold. “In our view, you’re safe,” and the provision applies to goods that are only resold, but “some further clarification from Commerce would be useful to make sure that nobody’s interpreting it differently,” Nicely said.

Further down the road, there could be some “litigation risk” around the grace period, as President Joe Biden’s proclamation and Commerce’s regulations setting the grace period could be challenged at the Court of International Trade, Nicely said. Auxin Solar, the requestor of the inquiries, or another company could seek an injunction suspending liquidation on entries during the grace period so Commerce could “claw back these duties that” Auxin “would claim are inappropriately being waived under the proclamation,” he said.

“Frankly, I personally think the chances of success are relatively low for that litigation,” Nicely said. “I think the statutory provision that the White House relied upon in issuing the proclamation provides the president a lot of discretion,” he said. Parties seeking an injunction must jump the hurdle of showing they're likely to succeed in a case. “I think the chances of it perhaps depends upon the judge that you'd be in front of, but I think that the likelihood of any judge of the CIT saying that the White House was not allowed to do what it did” is “very low,” Nicely said.

Finally, the number of companies that qualify for a duty exemption because they were not found to have been circumventing AD/CVD will also become apparent in the coming weeks. While Commerce found four companies exempt -- New East Solar in Cambodia, Hanwha Q Cells and Jinko Solar in Malaysia, and Boviet Solar Technology in Vietnam – only Boviet identified its Chinese wafer supplier, so only Boviet is currently eligible for the certification process. The other three companies have until Dec. 22 to reveal their Chinese wafer suppliers and become eligible, Nicely said.

As far as next steps in the anti-circumvention inquiry, Commerce is now beginning on-site verifications of the eight mandatory respondents to the proceedings. Those verifications could turn up things Commerce hadn’t previously been aware of, and result in changes in Commerce’s eventual final determinations, Nicely said. After the verifications are done and the associated reports issued, parties will be given the chance to file case briefs, followed by possible hearings held by Commerce that may or may not be public, he said.

The final determination is currently scheduled for May 1, but Nicely thinks “it’s going to be difficult for Commerce to meet that date” and “there’s nothing stopping the Commerce Department from extending the final determination just like they extended” the preliminary, he said. Nicely sees “a good possibility that they will extend that final determination.”