United States: International Trade Actions Complicate Global Market For Renewable Energy Businesses, Particularly Solar Sector

A number of recent trade actions involving renewable energy, particularly in the solar sector, are complicating the business landscape domestically and globally for a wide range of entities operating in these industries. In light of finite demand and increasing global production capacity of renewable energy resources, governments have brought trade actions on behalf of their domestic industries in the World Trade Organization (WTO) in Geneva. Domestic industries in the United States, China, the European Union, and India have brought trade remedy actions under their respective country's trade remedy laws seeking to curtail import competition. Decreased prices for various alternative sources of energy, such as natural gas and coal, pose additional challenges for the renewable energy sector that further complicate strategic decision making by renewable energy industry members, their existing and prospective customers, their investors, and even the governments that are administering the trade actions. All parties involved, from developers and producers of solar or wind projects to distributors and installers of energy systems, are well advised to monitor and consider carefully the impact of these trade actions on their businesses.

World Trade Organization Dispute Settlement. Three of the four renewable energy-related trade actions now pending before the WTO involve challenges to solarsector domestic content requirements, including domestic content requirements of solar sector feed-intariff (FIT) programs. FIT programs provide domestic solar energy producers with long-term guaranteed revenue contracts at favorable prices. The FIT programs being challenged in the WTO allegedly favor domestic producers in violation of international rules because they make the guaranteed purchase contracts contingent on the use of domestically-produced equipment. The WTO actions could result in the elimination of the domestic content requirements that favor domestic producers, or possibly a dismantling of the FIT programs themselves.

The first of the WTO actions, brought by the European Union and Japan, challenges the domestic content requirements of an Ontario, Canada, FIT program (WT/ DS412 and WT/DS426). That program requires wind and solar energy producers to use a certain percentage of equipment sourced from Ontario to qualify for the high fixed-rate prices for electricity guaranteed under the FIT program. A WTO panel ruling issued on Dec. 19, 2012, condemned the domestic content requirement of Ontario's FIT program on the basis that it creates incentives to use domestic equipment and components over equipment produced by third-country suppliers (244 International Trade Daily, 12/20/12). The panel found the domestic content requirements violate both the General Agreement on Tariffs and Trade (GATT) and the WTO Agreement on Trade-Related Investment Measures (TRIMs). The panel rejected claims brought under the WTO Agreement on Subsidies and Countervailing Measures (SCM) essentially because the complainants failed to prove that the energy production facilities in Ontario received a subsidy benefit through the guaranteed prices for their electricity. One of the panel members wrote a dissenting opinion, rare in WTO dispute settlement proceedings, arguing that the challenged measures did in fact confer a 'benefit' because the generous pricing offered to the high-cost energy producers allowed them to enter the wholesale electricity market when that would not have been possible in the absence of the FIT program.

On Feb. 5, 2013, Canada appealed the panel's findings to the WTO Appellate Body, reportedly arguing that the panel failed to recognize that a government procurement exception to GATT Article III's domestic content limitation applied to the FIT program (25 International Trade Daily, 2/6/13). The EU and Japan may file counter-appeals with the Appellate Body, which must decide appeals within 90 days of requests.

The second FIT case, initiated by China in November 2012, challenges the domestic content requirements of EU and EU Member State FIT programs (WT/DS452) (214 International Trade Daily, 11/6/12). China specifically named Greece and Italy as two European countries with offending FIT programs. Although this dispute has only reached the consultation stage, China raised GATT and TRIMS claims similar to those upheld by the WTO panel in the Ontario FIT case discussed above. If the Ontario panel's findings are upheld on appeal, the EU may find it difficult to defend its own Member State FIT programs since they appear to contain domestic content requirements similar to those the EU itself challenged in the Canadian case. China has also raised a claim under the WTO SCM agreement and may seek to overcome the evidentiary problem in the Ontario case by showing how the guaranteed prices of the FIT programs do confer a benefit to the participating electricity producers in the EU Member States.

A third WTO solar-related domestic content case was initiated on Feb. 6, 2013, by the United States against India's national solar program (26 International Trade Daily, 2/7/13). In its formal consultation request, the United States challenges so-called 'forced localization requirements' under which India requires its solar energy producers to use Indian-manufactured solar cells and modules to participate in its national solar program, and subsidies offered to those developers that use domestic equipment instead of imports. Similar to the cases brought against Canada and the EU, the United States claims India's domestic content requirements and related subsidies violate the nondiscrimination provisions of GATT Article III, the TRIMS agreement, and the WTO SCM agreement. A fourth WTO case could affect the administration by the United States of its countervailing duty (antisubsidy) law in all cases involving non-market economy countries, including those targeting the renewable energy sector. In this action, China has challenged a 2012 U.S. law that allows countervailing duty cases against non-market economies. This WTO action by China follows a number of legal challenges to the application beginning in 2007 of the U.S. countervailing duty to China and Vietnam, countries deemed by the U.S. Commerce Department to be non-market economy countries for which special treatment under the antidumping law is required. The WTO agreed to establish a dispute settlement panel in mid-December 2012 and a panel ruling could come sometime in late 2013 (242 International Trade Daily, 12/18/12).

Domestic Trade Remedy Actions Under domestic trade remedy laws, China, the European Union, the United States, and India have actions pending that could result in additional duties at the border on imports of solar cells and modules alleged or (in the U.S. cases) already found to be subsidized and/or unfairly priced in countervailing duty (CVD) and antidumping (AD) investigations, respectively. The United States also has just concluded AD/CVD investigations on wind towers from China and Vietnam and, like the solar cells/modules cases, these investigations concluded with affirmative findings of dumping, subsidization, and resulting injury to the U.S. domestic industry.

The United States recently concluded AD/CVD investigations on imports of Chinese solar cells and modules.

The findings mean that importers into the United States of these products must now deposit AD/CVD duties ranging from 24 percent to more than 250 percent, depending on the Chinese producers/exporters. The CVD and AD duty orders imposing the additional duties on solar cells and modules will remain in place for a minimum of five years (216 International Trade Daily, 11/8/12). The Chinese and U.S. participants in the case are separately challenging different parts of the Commerce Department's determination through the U.S. court system (26 International Trade Daily, 2/7/13).

In January 2013, the United States concluded its AD/ CVD investigations on wind towers (the large steel bases for wind turbines) imported from China and Vietnam with findings of dumping, subsidization, and resulting injury to U.S. producers of wind towers. As with the U.S. cases on solar cells/modules, imports into the United States of wind towers from China and Vietnam will now be subject to AD/CVD duties. On Dec. 18, 2012, the Commerce Department released its final determinations finding that Chinese exporters sold wind towers in the United States at below fair value and received countervailable subsidies (243 International Trade Daily, 12/19/12). The dumping margins range from 44.99 percent to 70.63 percent. The subsidy rates range from 21.86 percent to 34.81 percent. The Commerce Department also found that Vietnamese exporters sold wind towers in the U.S. market at below fair value prices at margins between 51.50 percent and 58.49 percent. On Jan. 18, 2013, the International Trade Commission made a positive injury determination finding that the U.S. industry is threatened with material injury by reason of subsidized and less than fair value imports from China and imports of less than fair value from Vietnam. As a result, the Commerce Department has issued AD/CVD orders in this case (14 International Trade Daily, 1/22/13).

Chinese solar cells and modules are also the subject of European Union antidumping and countervailing subsidy investigations (173 International Trade Daily, 9/7/12); (217 International Trade Daily, 11/9/12). Members of the European Parliament have urged the European Commission to conclude the preliminary stage of both its antidumping and countervailing duty investigations against Chinese solar cells and modules earlier than the legal deadlines of June 2013 and August 2013, respectively. Members of the European Parliament have argued that the survival of the EU solar industry could be threatened by waiting until June and August.

Widely reported as retaliatory in response to the U.S. and EU actions, on Nov. 26, 2012, China announced it was initiating AD and CVD investigations on polysilicon, a key element in the production of solar cells, from the United States and from the European Union, as well as from South Korea (213 International Trade Daily, 11/5/12). The Chinese industry is seeking retroactive application of the duties in both cases.

In November 2012, India joined the solar sector trade wars by announcing the initiation of antidumping investigations against solar cells produced in or exported from China, Taiwan, Malaysia, and the United States (230 International Trade Daily, 11/30/12). The targeted third-country industries had until early January 2013 to respond with information and data showing they are not dumping low-priced solar cells into the Indian market and are not a reason for the Indian solar cell manufacturers' failure to capture a reasonable share of the domestic market. The cases could have investment implications for U.S. solar cell manufacturers that supply or have signed contracts to supply solar cells to Indian companies.

Implications for Renewable Energy Sector The series of legal actions discussed here reflect the broader competing interests of the industries involved as well as the interests of their governments in promoting and protecting their domestic businesses. The actions themselves pose immediate costs and burdens for those parties directly involved. The longer term implications raise more serious strategic considerations for the industries at issue. For the solar sector, particularly, these actions will likely prompt or at least contribute to 'winners' and 'losers' among the current array of companies involved globally. AD/CVD duties will increase the costs to importers and, ultimately, consumers in any country that imposes such import relief. With global economic pressures persisting, domestic employment concerns ever-present, and national resources at issue, governments certainly will continue to seek, directly and indirectly, to affect the markets for these industries. Accordingly, producers as well as investors, suppliers, and consumers are all well advised to monitor and, where appropriate, take an active role in these legal proceedings to protect their interests going forward.

Previously published by Bloomberg BNA

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions