China Contests Local Value Add Requirements in Indian Solar Module Subsidy at WTO
China filed a request for consultations at the World Trade Organization about Indian tariffs on information and communication technology products and subsidy measures for high efficiency solar photovoltaic modules, the WTO said Dec. 23.
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China's Ministry of Commerce announced its request last week, alleging the measures "give India's domestic industries an unfair competitive advantage and harm China's interests" (see 2512190013).
The specific tariff measures at issue include customs duties imposed by India through the Indian Customs Tariff Act and the Agriculture Infrastructure and Development Cess, covering 11 different tariff lines. The tariffs range from 7.5% to 20% and cover goods including photosensitive semiconductor devices, telephones for cellular networks, machines for making boules or wafers, machines for making semiconductors and machines for making flat panel displays, among others.
Also at issue are conditions set by the Indian government that "govern the eligibility for, and disbursement of incentives under, the Production Linked Incentive Scheme: National Programme on High Efficiency Solar PV Modules."
Under this program, established in 2022, the Indian government incentivizes the production of gigawatt scale manufacturing facilities for solar modules via cash grants. The incentives are conditioned on "several criteria, including a prescribed minimum local value addition" requirement, China said.
The program lays out "three levels of vertical integration of manufacturing for a solar PV module manufacturing facility," and each level comes with different minimum local value addition requirements. The first level covers firms that market the "widest range of solar module inputs (e.g., polysilicon, ingots-wafers and solar cells), along with solar modules themselves." The second level covers companies that make a "narrower range of solar module inputs (e.g., ingots-wafers and solar cells, excluding polysilicon), along with solar modules themselves." And the last level covers firms that only make solar cells and modules.
Firms that receive the subsidy are picked through a bidding process in which companies declare the level of integration they will achieve in their Indian facilities, the percentage of local value added they plan to achieve and the "performance parameters of the manufactured" solar modules. If selected, firms are given a grant for up to five years from when the manufacturing facility is commissioned, and the grant amount "declines year-on-year over this five-year period."
The minimum local value added requirement is calculated as a percentage in which the numerator is the "sale value of the module" minus the value of imported materials and services used to manufacture the module, and the denominator is the "sale value of the module." The minimum local value added requirement "ranges from 50% to 90%, depending on the beneficiary's level of integration," and it increases each year during the five-year granting period, China said.
China alleged that the tariff measures appear to violate Article II of the General Agreement on Tariffs and Trade 1994, since India treats Chinese-origin products less favorably than "that provided for in its Schedule" and doesn't exempt those goods from duties set forth in its schedule of WTO concessions.
The request for dispute consultations then alleged that the solar module subsidy appears to violate Article III of the GATT 1994, since it "accords less favorable treatment to imported goods than to like domestic goods" through the local value added requirements.
China added that the subsidy also likely violate Article 2.1 of the Trade-Related Investment Measures Agreement and Article 3 of the Subsidies and Countervailing Measures Agreement, since the measure is a subsidy that "is contingent on the use of domestic over imported goods."