Solar, Electrical Manufacturers Say Tariffs, TRQs Hurt Them, Talk UFLPA Compliance

Canadian Solar, which is ramping up a 5-gigawatt solar panel manufacturing factory in Texas, told the Office of the U.S. Trade Representative that tariff rate quotas on solar cells under the current safeguard action and Section 301 tariffs on machinery that helps make solar panels and cells are harming solar manufacturers. Canadian Solar also is working on opening a solar cell plant in Indiana, but it won't open until late 2025. It imports cells made in Thailand. The TRQ only allows five gigawatts' worth of tariff-free cells in annually.

Andrew Williams, who testified at a panel hosted by USTR on Promoting Supply Chain Resiliency through trade policy May 3, said, "We have paid millions and millions of dollars in Section 301 tariffs."

John Smirnow, from the Polysilicon Coalition, told the panel that the U.S. has 30 gigawatts of solar panel production now, but needs to grow rapidly to reach 100 gigawatts by 2030, an administration goal. Smirnow complained that IRA manufacturing tax credits cover cells and modules, but not polysilicon, the building block material of ingots and wafers.

"Having a healthy domestic polysilicon industry is essential to national security, supply chain resilience," he said, but it's hard to maintain production when China's production is twice the global demand for solar grade polysilicon.

Vanessa Sciarra, vice president for trade at the American Clean Power Association, which covers utility scale solar, wind, battery storage and transmission, said the administration needs to be realistic about what components for large-scale batteries can be sourced domestically, and how long it will take to develop manufacturing for components that aren't available.

She said since most constituent materials and components are not from countries that the U.S. has comprehensive free trade agreements with, sector-specific negotiations are needed -- but USTR must get Congressional buy-in, as there has been bipartisan anger over the Japan critical minerals deal.

Sciarra acknowledged that both solar power and large scale batteries are heavily import dependent. She told a Commerce Department official asking questions of the renewable energy witnesses that the "million-dollar question" is: "What is the right balance between defending American manufacturing interests ... while also making sure you have adequate supply for deployment needs?"

Fred Fischer, managing director of global policy for the National Electrical Manufacturers Association, told USTR that since Section 301 tariffs were imposed, his industry has paid about $28.9 billion in those duties, and received exclusions that saved importers from paying another $20.9 billion.

"The Section 301 duties were largely assessed on intermediate goods used to manufacture downstream or finished goods, and negatively impacted the overall competitiveness of the U.S. electroindustry," he wrote.

NEMA is calling for a permanent exclusion for those in effect, a new comprehensive exclusion process to open, and an independent study of the effects of the Section 301 tariffs, as was done with Section 232 tariffs. It also wants USTR to return to negotiating new comprehensive free trade agreements.

He said that the industry exported $113 billion in 2023 and imported $245 billion worth of products. He said imports are about 60% of U.S. consumption.

"NEMA member companies rely on secure, fairly priced supplies of raw materials and inputs, including intermediate goods, for the manufacture of building, industrial, lighting, medical imaging, transportation, utility systems, and other electrical goods and services used throughout the nation’s public and private infrastructure," he wrote.

Imports from China are down almost 7% since 2018, but China still accounts for 18% of imports, second only to Mexico.

Cora Dickson, a solar industry analyst at the Commerce Department, asked Fischer if the increase in imports from Mexico is mostly a result of Chinese companies shifting their production there. He said that could be part of the trend, but that U.S., European and Mexican companies also are expanding production in Mexico. He said some of that is a result of Section 301 tariffs, but the speed to market and lower likelihood of intellectual property theft were also reasons to move.

Fischer said NEMA has 37 members that manufacture in Mexico, including a spinoff from GE, now Mexican-owned, that has U.S. production as well.

He said in his industry, Mexican manufacturing has a 15% to 20% chance of incorporating U.S. inputs.

Leo Baunach, from the ILAB office in the Department of Labor, asked if voluntary tracing would help increase labor standards for imported goods.

Smirnow said that when he was with the Solar Industry Association, he oversaw the traceability protocol. He said, "in some ways, solar is creating the standard for traceability," because the industry has been subject to the most scrutiny under the Uyghur Forced Labor Prevention Act. He said that most of the detentions have been of firms mentioned in reports on Xinjiang links in the solar panel supply chain, but those firms now are buying Malaysian, German or U.S. polysilicon.

He said tracing in solar panel manufacturing is easier than in many products, because there are a limited number of polysilicon producers.

Williams said Canadian Solar buys polysilicon from both China and other countries, but still has been able to trace all the way back to the mines and show there is no Xinjiang connection. He told Baunach that making sure there is no forced labor content in your goods isn't only about traceability -- he said his company controls the process back to the ingot, and interviews suppliers regularly.

Fischer said traceability is very challenging for mid-size and small companies that import, and that he hopes the Commerce Department will assist companies to get deeper visibility into their supply chains.