The article was authored by Jeffrey Juger, Director of Marketing & Strategy, Hanwha Q CELLS
When you have a long-term relationship with someone, you begin to associate things with them—restaurants where you had a particularly romantic date or the site of your first kiss. In some respects, I feel like I have had a long-term relationship with the solar trade case. I distinctly remember where I was when I first heard the words “solar trade case” and the many restless nights as I lay awake pondering just what it would do to the solar industry. The solar trade case has had many twists and turns, and barring a positive outcome in government negotiations, it is here to stay. I hope then that my sleepless nights at least lead to a better understanding of the real reason you, the PV module customer, should care about these tariffs.
Except for a couple law classes I took during my business school studies at Yale, I am no lawyer, but I have spent many hours listening to trade attorneys discuss this case and have spent even more time flipping through reams and reams of legal trade jargon. I will attempt to distill the strange world of tariffs into digestible nuggets and explain what it all means and why customers should care deeply about the way it works beyond just the impact to their quoted price.
The easiest way to start this off is simply to show you a decision tree. What about a module assembled in China using a cell made in South Korea? What about one assembled in South Africa using a cell made in China? This tree should help explain.
As you can see from the graphic, there are essentially three distinct and active cases against crystalline PV modules:
- China cells
- China assembly, no matter the origin of cells
- Taiwan cells
In each of the cases, there was a final decision and a rate given for countervailing duties (CVD), counteracting any negative effects of unfair subsidies; and anti-dumping duties (ADD), counteracting negative effects of below cost predatory pricing. The ADD in particular is collected as a cash deposit.
What you, the customer, should keep an eye on is the administrative reviews that occur each year. Interested parties may request review of the rate each year, and based on quantitative assessment, the rates are kept the same, adjusted down or adjusted up. If the rate goes down, the manufacturer who previously paid a cash deposit gets a refund. If the rate goes up, the manufacturer has to pay even more. That rate also holds for future imports, pending future annual administrative reviews. It is the second example (when rates go up) that should concern customers.
Most customers these days receive quotes delivered duty paid (DDP), meaning you get off scot-free, no matter what happens to the rates. However, you should be concerned about what a higher than expected increase to the rate could do to the module manufacturer’s financial wellbeing. Imagine a scenario where a module manufacturer gets blindsided by an increase in the ADD and is unprepared to pay the additional cash deposit. Your 25-year linear power warranty is your biggest insurance for the performance of your system, and any financial uncertainty from the manufacturer meant to honor that warranty should make you uneasy. Why risk it then, when there are manufacturers out there with quality tariff-exempt products at competitive prices?
Hanwha is one such company. With more than 60 years of experience, Hanwha has seen its fair share of international trade cases, and it was ready for this one. Although a bulk of its manufacturing capacity was in China, it quickly acquired access to module capacity in Canada, Poland, Malaysia and South Korea and built up a large cell capacity in Malaysia. Geographic diversity in the supply chain would have already been a nice thing to have, but the uncertainty generated by the trade case makes this geographic diversity even more of an asset.
The trade case will remain complex, and both you and I will always have questions. But with rates clearly variable and changing each year, it would behoove you to consider sourcing product that is immune to these potentially scary shifts.