Commerce Offers Clarity on Solar Supply Chains in Wake of Anti-Circumvention Inquiry, Analysis Says

Conditions in the solar industry are “increasingly uncertain” as the Commerce Department undertakes an anti-circumvention inquiry on solar cells and panels from Cambodia, Malaysia, Thailand and Vietnam, on top of an existing CBP withhold release order and “module pricing concerns,” FTC Solar said in its first quarter financial results released May 10.

But some of that uncertainty was recently resolved by a Commerce memo that clarified that the anti-circumvention inquiries cover Chinese-origin wafers, but not third-country wafers made from Chinese polysilicon. “Wafers produced outside of China with polysilicon sourced from China are not subject to these circumvention inquiries,” the May 2 memo said.

The memo “clarifies that wafer capacity outside of China is not within the scope of this investigation,” Bank of America Securities said in analysis released the following day. “Further it explicitly notes that this remains the case, even if the aforementioned capacity is sourced with Chinese polysilicon,” the report said.

The scope clarification frees supply chains that rely on third-country wafer production from the risk of a hit from antidumping and countervailing duties if Commerce finds circumvention in the inquiry. But it also may portend that Commerce will focus its investigation at the wafer level, rather than determining country of origin as the assembly point of the solar cells, BofA said.

“We think that this would be a particularly punitive outcome -- but appears to be the more extreme outcome sought by petitioners,” the analysis said. Nonetheless, “while the memo focuses on wafer source -- and hence adds to the speculation of the more punitive approach, we continue to believe that [Commerce] will follow the existing convention from the AD/CVD that the Cell level is the critical point of assembly,” it said.

“Don't expect black and white resolution on this issue,” BofA said. “We expect both growing comfort by developers to take procurement risk on panels as well as an expanding pool of eligible supply as product increasingly becomes formally understood to be compliant. We see the latest as injecting confidence in the market for supply.”