Commerce Elevated Importance of R&D in Circumvention Inquiry, Another Exporter Says

A Cambodian solar cell exporter became the latest (see 2407010059 and 2406140059) to claim in a motion for judgment that Commerce wrongly elevated the importance of an exporter’s regional research and development in a circumvention investigation (BYD (H.K.) Co. v. U.S., CIT # 23-00221).

The agency said “R&D should be afforded ‘preeminent importance,’ and made its determinations across the Final Determinations in a manner so as to effectively afford R&D determinative status,” exporter BYD (H.K.) Co. said. But the statute itself orders Commerce to consider R&D as only one of five factors, none of which should be weighted heavier than the others, it said.

BYD also contested Commerce’s finding that solar panel processing in Cambodia was “insignificant or minor” when it had previously been found to “impart the essential characteristics” of the solar panels.

“Minor and insignificant,” it said, essentially means that “the majority of processing costs and the most significant elements of processing” occur elsewhere. This narrower reading of “minor or insignificant” was “clearly” the one intended by Commerce, it said.

“Viewed in the context of the broader trade remedy statutory schema, this proper, narrower view of the circumvention standard makes perfect sense,” the exporter said. “The circumvention statute is an extraordinary exception to the general statutory scheme for application of trade measures. Where applied, the circumvention authority enables Commerce to expand the scope of existing orders without following the more rigorous and involved procedures associated with new AD/CVD investigations.”

Cambodian facilities create “p/n junctions” on cells to transform polysilicon wafers into solar cells, the exporter said. Commerce, it said, has always determined that solar cells whose p/n junctions were formed in third countries don't fall under the scope of the orders on solar cells from China -- until now.

Those cells are then processed further into completed solar modules in those Cambodian facilities, it noted.

“Multiple companies around the globe made large investments in manufacturing facilities in the targeted countries in direct reliance on the established scope of these orders as previously, and repeatedly, clarified by Commerce,” it said.

BYD, a Hong-Kong-based trading company, said it contracts with unaffiliated Cambodian producers to process the solar panels. These processors “made significant investments and operated substantial facilities and manufacturing lines in Cambodia,” it said.

But Commerce didn’t consider the operations of the Cambodian processors during the circumvention inquiry when analyzing R&D levels, investments and production facilities in that country, it said. In particular, when calculating investment levels, it used the “unreasonable comparison of investment levels in China and Cambodia based on absolute values rather than per-unit values.”

The department also used higher surrogate values for cost data even though Cambodia is a market economy, BYD said.

Even looking solely at the department's own calculations, Commerce also wrongly found that the “relatively large” proportion of value added to the solar panels in Cambodia was “minor and insignificant,” the exporter said.

“Although Commerce does not reveal what level of value added would overcome this threshold, the implication is that it would have to substantially exceed [redacted] percent, possibly suggesting, contrary to the statute, that the value added through processing in the third country must account for a majority of the total cost of the finished product,” it said.