U.S. Countervailing Duties by Jin Zhao

As a student researcher at the Reshoring Institute, I am researching Chinese solar companies and their potential for manufacturing in the U.S. Through my research, I found that U.S. import tariffs target Asian manufacturers for unfair competition and impose extra import charges, known as countervailing duties. Under regulations of the World Trade Organization (WTO), countervailing duty is assessed to offset unfair competition due to foreign government subsidies. These regulations are administered through the U.S. International Trade Administration and the U.S. Department of Commerce. To determine the amount of the countervailing duties, the DOC analyzed 30 Chinese solar manufacturers’ cost structures.

Solar panel manufacturing started in China in 1997. During the last 20 years, the Chinese government has supported the development of solar manufacturing. There are many global solar manufacturers such as Trina Solar Limited and Yingli Solar, based in China. Most of these Chinese solar manufacturers’ profitable markets are located in the U.S. and Europe. With fierce business competition, the U.S. solar manufacturers find it difficult to compete against Chinese manufacturers with their lower raw material costs, labor costs, and government subsidies.

In 2012, SolarWorld Industries Americas Inc. – the U.S. subsidiary of German solar company SolarWorld – triggered a lawsuit to propose U.S. DOC to investigate billions of U.S. dollars in international trading in the solar industry. They requested DOC to charge Anti-dumping (AD) and countervailing duties (CVD) on Chinese solar c-Si photovoltaic modules and Anti-dumping duties on Taiwanese solar c-Si photovoltaic modules.

Because of the heavy CVD and AD tariff, I think Chinese and Taiwanese solar manufacturers face a very serious situation. These additional costs have forced Chinese manufacturers to reduce their imports into the U.S. which has resulted in a tremendous sales revenue loss.

Chinese and Taiwanese companies should seek alternative strategies for the U.S. market to protect their future businesses. Some of the Chinese and Taiwanese companies are considering setting up manufacturing sites in Southeast Asia countries to avoid the countervailing duty rates applied to Chinese imports. In my opinion, it would be a good opportunity for the U.S. solar manufacturers to promote their R&D ability, expand production capacity and trim their U.S. production costs to gain more market share in the global markets. Through these potential moves, we may see a different worldwide solar industry market structure in the future.

Jin Zhao is a graduate student researcher at the Reshoring Institute.  She comes from a solid technical background with a strong interest in business operations. Her areas of focus and interest vary from quantitative analysis to project management. She has a Bachelor’s degree in Electrical Engineering from North China University of Technology. Before starting the MBA Program at University of San Diego, she had more than ten years of work experience in manufacturing operations including Project Operations, Engineering, Customer Service on Site, International Trading, Sourcing, Planning, Order Management and Logistics. Currently, she is pursuing her MBA at University of San Diego and expects to graduate in 2017.