Presidential Action Triggered by Crisis in the U.S. Solar Industry

In recent months, the U.S. solar industry has been in the midst of an existential crisis, triggered by the threatened imposition of retroactive and future tariffs on a significant portion of U.S. imports. That crisis began on April 1, 2022, when the Department of Commerce (“Commerce”) initiated an inquiry to determine whether solar cells and modules from Cambodia, Malaysia, Thailand, and Vietnam are circumventing antidumping (“AD”) and countervailing duty (“CVD”) orders on solar cells from China. Solar cells from these countries generally accounted for approximately 80% of U.S. solar module imports in 2020.[1] If Commerce finds circumvention, solar cells and modules from the four target countries could not only be subject to combined AD/CVD tariffs approaching 250%, but Commerce’s regulations also allow for the agency to apply these tariffs retroactively to merchandise entering on or after April 1, 2022 (and potentially as far back as November 4, 2021). This threat of AD/CVD tariffs triggered a steep decrease in imports of solar cells and modules from Southeast Asia, and caused parts of the U.S. solar industry to come to a stand-still, furthering domestic reliance on coal.[2] Given this paralysis in the solar industry, lawmakers and others urged the President to provide relief from potential AD/CVD tariffs.[3]

The President’s Response

On June 6, 2022, President Biden issued a declaration of emergency (the “Declaration”)[4] pursuant to section 318(a) of the Tariff Act of 1930, as amended (19 U.S.C. § 1318), and issued a determination pursuant to section 303 of the Defense Production Act of 1950, as amended (50 U.S.C. § 4533) (“the DPA Determination”)[5]. The Declaration finds that an emergency exists “with respect to the threats to the availability of sufficient electricity generation capacity” and authorizes Commerce to issue a moratorium on tariffs on solar cells and modules from Cambodia, Malaysia, Thailand, and Vietnam for up to a 24-month period, while the DPA Determination aims to “expand the domestic production capability” for solar cells during this 24-month period. The Declaration itself does not prevent the imposition of tariffs on imported solar cells and modules from the Southeast Asian countries, rather it authorizes the Secretary of Commerce to “take appropriate action” to permit the duty-free importation of solar cells and modules for 24 months after the Declaration’s issue date.[6]

The President’s use of section 318(a) to authorize a moratorium on import tariffs due to a national emergency appears consistent with the text of this statutory provision. Section 318(a) states:

Whenever the President shall by proclamation declare an emergency to exist by reason of war of otherwise, he may authorize. . . the Secretary of {Commerce} . . . to permit, under such regulations as the Secretary . . . may prescribe, the importation free of duty of food, clothing, and medical, surgical, and other supplies for use in emergency relief work.[7]

While rarely invoked, section 318(a) was recently used by President Trump to reduce certain burdens on the importation of personal protective equipment during the COVID-19 pandemic.[8] There are other examples of prior Administrations suspending imports tariffs under this provision.[9]

In addition to issuing the Declaration, President Biden invoked the Defense Production Act for solar cells and modules, as well as for: insulation, electric heat pumps, transformers (and electric grid components), electrolyzers, fuel cells, and platinum group metals. The White House indicated that the DPA Determination is intended to: accelerate domestic production of clean energy technologies, including solar panel parts and put the full power of federal procurement to work spurring additional domestic solar manufacturing capacity by directing the development of master supply agreements, including “super preference” status.[10]

The President’s emergency action does not impact existing AD/CVD tariffs on imports of solar cells and modules from mainland China and Taiwan including such modules assembled in jurisdictions other than mainland China or Taiwan using cells from mainland China or Taiwan.

What Can We Expect from Commerce?

On the same day the Declaration was issued, Commerce issued a press release in which Secretary Raimondo indicated that Commerce “will issue regulations to temporarily permit for up to 24 months duty-free access to solar cells and modules from Cambodia, Malaysia, Thailand, and Vietnam.” The Assistant Secretary of Commerce for Enforcement and Compliance, Lisa Wang, who is responsible for AD/CVD determinations, similarly stated: “no solar cells or modules imported from Cambodia, Malaysia, Thailand, and Vietnam will be subject to new antidumping or countervailing duties during the period of the emergency.”[11]

Commerce is expected to formalize the moratorium on these AD/CVD tariffs through a regulation. Given the emergency nature of this action, it is likely that Commerce will promulgate this regulation without notice and comment, in a matter of days or weeks prior to the expected date of the preliminary determination in the circumvention inquiry, August 29, 2022. 

It is worth noting that any moratorium on these AD/CVD tariffs by Commerce is not intended to impact Commerce’s findings in the circumvention inquiry. Commerce may still find that solar cells and modules from Cambodia, Malaysia, Thailand, and Vietnam are circumventing AD and CVD orders, in which case tariffs would presumably start to apply after the expiration of the emergency period.

Do These Actions Solve the Crisis for the U.S. Solar Industry?

Given the President’s Declaration and Commerce’s statements, it appears very likely that no new AD/CVD tariffs on solar cells and modules from Cambodia, Malaysia, Thailand, and Vietnam will be imposed during the next 24 months regardless of the outcome of the circumvention inquiry. The Declaration thus has the potential to create the tariff predictability that the U.S. solar industry needs in order to continue importing solar cells and modules using solar cells made in the four target countries.

However, U.S. solar cell producers have already indicated that they are considering a legal challenge to the moratorium on these tariffs. As noted above, the President’s action appears consistent with the statute, and courts typically defer to the President during times of emergency. Given this deference, such a legal challenge is unlikely to be successful, and because of the time typically needed to bring such a challenge, also unlikely to be resolved prior to Commerce’s August preliminary determination.

Unfortunately, even the mere threat of litigation creates some uncertainty for the U.S. solar industry. In litigation challenging AD/CVD tariffs, courts routinely issue retroactive remedies. Thus, in the unlikely event that a challenge to the Declaration is successful, courts could subject solar cells and modules to AD/CVD tariffs retroactively, particularly if procedural steps are taken to enjoin final assessment of tariffs on solar cells and modules during the pendency of any litigation. 

There is greater uncertainty regarding the level of tariffs on imports after the expiry of the 24 month emergency period (or sooner in the seemingly unlikely event the President ends the state of emergency). If Commerce finds circumvention, tariffs may immediately go into effect on solar cells and modules from Cambodia, Malaysia, Thailand, and Vietnam as soon as the emergency ends, and it is unclear what rates might apply at that point. Normally, foreign exporters and producers are able to participate in administrative reviews of AD/CVD orders to establish their own company-specific rates rather than paying the general, country-wide AD/CVD rates, which under the China order are roughly 250% (combined). However, it is unknown whether Commerce will permit exporters/producers from the Southeast Asian countries to participate in reviews during the emergency, given that their merchandise is not expected to be subject to tariffs at the time it is imported. Thus, in mid-2024, presuming the emergency ends at that point, the U.S. solar industry could find that the threat of very high AD/CVD tariffs once again sharply reduces the supply of solar cells and modules in the U.S. market. 

If understanding the President’s or Commerce’s actions on solar cells or the potential tariff risks for solar cell and module imports is important to your company, Covington is well positioned to assist. We have a group of attorneys who are well versed in these trade laws and have decades of experience helping clients navigate the tariff risks created by AD/CVD orders.

*           *           *

If you have any questions concerning the material discussed, please contact the following members of our International Trade and Energy practices: Shara Aranoff, Alexander Chinoy, William Isasi, Andy Jack, and Jay Smith.

[1] Letter from Sen. Heinrich, Sen. Lujan, Rep. Stansbury, and Rep. Fernández to President Biden (May 9, 2022).

[2] See, e.g., Joe Deaux and Jennifer A. Dlouhy, Tariff Fight Paralyzing US Solar Threatens American Steel (2), Bloomberg (June 6, 2022); Keith Goldberg, Utility Says Solar Tariff Probe Will Delay Coal Closures, Law360 (May 4, 2022); N.M. Congressional Democrats Call On President Biden To Expedite Solar Tariff Investigation Impacting Jobs, Investments In New Mexico, ForeignAffairs.co.nz (May 13, 2022).

[3] Evan Halper, White House Takes Steps to Spur Solar Industry, Wash. Post (June 6, 2022), https://www.washingtonpost.com/business/2022/06/06/solar-panel-white-house-tariffs/ (“Several Democratic senators expressed alarm on a call with top White House officials late last month, during which they pressured the White House to intervene.”).

[4] White House, Declaration of Emergency and Authorization for Temporary Extensions of Time and Duty-Free Importation of Solar Cells and Modules from Southeast Asia (June 6, 2022).

[5] White House, Memorandum on Presidential Determination Pursuant to Section 303 of the Defense Production Act of 1950, as amended, on Solar Photovoltaic Modules and Module Components (June 6, 2022).

[6] White House, Memorandum on Presidential Determination Pursuant to Section 303 of the Defense Production Act of 1950, as amended, on Solar Photovoltaic Modules and Module Components (June 6, 2022) (“the Secretary shall consider taking appropriate action under section 1318(a) of title 19, United States Code . . . .”).

[7] (empahsis added)  While the text of this provision references the “Secretary of the Treasury,” the notes clarify that the provision today applies to the Secretary of Commerce who is the official that administers U.S. AD/CVD law.

[8] White House, Proclamation on Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak (Mar. 13, 2020).

[9] See Proclamation 2545, Free Importation of Jerked Beef By The President Of The United States Of America: A Proclamation, 7 Fed. Reg. 2611 (Apr. 7, 1942) (President Roosevelt issuing Proclamation authorizing duty-free importation of jerked beef into Puerto Rico to avoid famine in Puerto Rico).

[10] White House, FACT SHEET: President Biden Takes Bold Executive Action to Spur Domestic Clean Energy Manufacturing (June 6, 2022).

[11] U.S. Dep’t of Commerce, Department of Commerce Statement on President Biden’s Proclamation on Solar Cells and Modules, (June 6, 2022), https://www.commerce.gov/news/press-releases/2022/06/department-commerce-statement-president-bidens-proclamation-solar-cells.

Tags: AD/CVD, antidumping, Biden Administration, China, circumvention, countervailing duty, declaration of emergency, Defense Production Act, Department of Commerce, import, Solar, Southeast Asia, tariffs
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Photo of Shara Aranoff Shara Aranoff

Shara helps clients navigate trade remedies, tariffs, and customs regulations in support of their U.S. and global market strategies.

Shara is the Chair of Covington’s International Trade Practice Group, and co-leads the Customs practice.

Drawing on her 20 years of service in the…

Shara helps clients navigate trade remedies, tariffs, and customs regulations in support of their U.S. and global market strategies.

Shara is the Chair of Covington’s International Trade Practice Group, and co-leads the Customs practice.

Drawing on her 20 years of service in the U.S. government, she develops legal and public policy strategies to assist clients engaging with the U.S. International Trade Commission (ITC), U.S. Customs and Border Protection (CBP), Congress, and the courts. In high-stakes antidumping and countervailing duty investigations, Shara helps global manufacturers, distributors, and retailers protect their access to the U.S. market. She assists technology, life sciences and manufacturing companies enforce and defend their intellectual property rights in cross-border Section 337 investigations. Chambers praises her for bringing “behind-the-curtain knowledge to the private sector” in proceedings before the ITC by leveraging her experience as a decision maker.

Shara also regularly advises clients in a wide range of industries on Customs compliance and tariff mitigation, including:

  • Providing legal opinions or seeking Customs rulings on classification, valuation, country of origin, and product marking/labelling.
  • Conducting internal compliance reviews, drafting compliance policies, and providing training.
  • Responding to CBP audits and inquiries and filing voluntary disclosures.
  • Developing strategies to reduce tariffs and take advantage of trusted trader programs.

Prior to joining the firm, Shara was a Commissioner and Chairman of the ITC, where she was a decision-maker in hundreds of Section 337, antidumping, countervailing duty, and safeguard investigations.

She previously served as Senior International Trade Counsel for Senator Max Baucus (D-MT) at the U.S. Senate Committee on Finance, where she was responsible for legislative and policy issues including Trade Promotion Authority; negotiations involving the World Trade Organization and free trade agreements; and trade remedy and customs laws. She was also an attorney-advisor in the Office of the General Counsel at the ITC, where she was lead counsel in litigation before the Court of Appeals for the Federal Circuit and the Court of International Trade.

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Photo of Alexander Chinoy Alexander Chinoy

Alexander Chinoy assists clients with the resolution of international intellectual property and trade disputes, appearing before a range of U.S. courts and agencies. He is an accomplished trade litigator who has been involved in more than 30 Section 337 unfair import investigations before…

Alexander Chinoy assists clients with the resolution of international intellectual property and trade disputes, appearing before a range of U.S. courts and agencies. He is an accomplished trade litigator who has been involved in more than 30 Section 337 unfair import investigations before the U.S. International Trade Commission (ITC), as well as a range of enforcement and regulatory matters involving U.S. Customs and Border Protection (CBP) and the U.S. Department of Commerce. Alex has been recognized as a leading Section 337 litigator by Chambers USA, with sources noting he is “impressive beyond his years of practice.”

Alex is a past President of the ITC Trial Lawyers Association, the leading bar association for Section 337 practitioners. He has hands-on experience with every phase of Section 337 investigations. He has participated in a dozen hearings at the ITC ranging from trials on violation to enforcement hearings and temporary relief proceedings. His experience spans every phase of 337 litigation, from pre-complaint counseling through appeal of final ITC determinations to the U.S. Court of Appeals for the Federal Circuit (CAFC), as well as CBP enforcement of ITC exclusion orders.

Alex has additional administrative experience before CBP, including classification and compliance matters, as well as before the U.S. Department of Commerce. His broader litigation experience includes district court intellectual property cases, and a range of trade disputes before the U.S. Court of International Trade. He has successfully argued appeals before the U.S. Court of Appeals for the District of Columbia Circuit and the CAFC. Alex has also counseled foreign governments and multinational companies on the use of trade policy tools to resolve international IPR issues and other business disputes, as well as regarding IPR border measures and enforcement remedies outside the United States.

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Photo of William Isasi William Isasi

Clients turn to William Isasi to advise them in all aspects of antidumping and countervailing duty proceedings and World Trade Organization (WTO) litigation.

With more than 20 years’ experience as an international trade lawyer, William has secured low antidumping and countervailing duty tariffs…

Clients turn to William Isasi to advise them in all aspects of antidumping and countervailing duty proceedings and World Trade Organization (WTO) litigation.

With more than 20 years’ experience as an international trade lawyer, William has secured low antidumping and countervailing duty tariffs for his clients and regularly advises clients in all aspects of these trade remedy proceedings and customs matters including:

  • representing producers and exporters outside the United States and U.S. importers in antidumping and countervailing duty investigations before the U.S. Department of Commerce;
  • litigating antidumping and countervailing duty determinations before the U.S. Court of Appeals for the Federal Circuit, the U.S. Court of International Trade, the WTO Appellate Body and panels, and binational panels under the North American Free Trade Agreement;
  • advising U.S. companies on the viability of petitioning for antidumping or countervailing duty orders;
  • achieving effective customs compliance with antidumping and countervailing duty orders; and
  • developing effective business strategies to adapt to potential tariff risks.

William has represented clients in a wide variety of industries including: aerospace, consumer products, chemical and agrochemical, steel, oil and gas, paper, and ball bearings.

He joined the firm after serving as an Assistant Chief Counsel at the U.S. Department of Commerce, Office of the Chief Counsel for Trade Enforcement & Compliance. In that role, he provided extensive legal advice on trade enforcement to the Assistant Secretary for Enforcement & Compliance, Deputy Assistant Secretaries, and other Department officials.

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Photo of W. Andrew Jack W. Andrew Jack

Andy Jack is a broad gauge corporate and securities lawyer who leads multidisciplinary teams to help clients achieve complex business objectives and solve complex business problems.

Andy often serves in outside general counsel or senior strategist roles working closely on strategic matters with…

Andy Jack is a broad gauge corporate and securities lawyer who leads multidisciplinary teams to help clients achieve complex business objectives and solve complex business problems.

Andy often serves in outside general counsel or senior strategist roles working closely on strategic matters with C-suites and boards. His practice spans mergers and acquisitions, strategic alliances and joint ventures, venture capital, capital markets, securities compliance, corporate governance counseling, crisis management and dispute settlements.

With deep experience in the energy, diversified industrials, transportation, technology, sports and hospitality industries, much of Andy’s recent transactional and advisory work focuses on issues arising from global sustainability trends and ESG considerations, including the energy transition, vehicle electrification and advanced mobility.

Some examples of this trending work include:

  • Energy
    • Structuring and negotiating joint ventures to produce sustainable aviation fuels and to develop and deploy shared resources to respond to offshore well blowouts.
    • Advising on a carbon capture project funded by the U.S. Department of Energy.
    • M&A, finance, capital raising and commercial projects for solar PV panel suppliers.
    • Representing corporate offtakers in virtual power purchase agreements to procure renewable energy in support of wind and solar power projects.
    • Advising on U.S. public policy matters affecting the energy transition.
  • Vehicle Electrification and Advanced Mobility
    • A capital markets transaction for an industry leader in advanced mobility.
    • Multiple venture capital financing rounds for an electric truck manufacturer.
    • Joint venture restructuring and M&A transactions for EV battery manufacturers.
    • Collaboration agreements among vehicle electrification technology providers and OEMs.
    • M&A of advanced vehicle components suppliers and engineering service providers.
  • Other industries
    • Advising on board governance structures to address ESG and Sustainability oversight.
    • Assisting clients in developing voluntary sustainability reports and improving SEC reports and proxy statements to address these topics.
    • Responding to shareholder proposals on various ESG issues.

Andy co-chairs the firm’s multidisciplinary global Energy Industry Group and multidisciplinary Sustainability Solutions Initiative. He also serves as pro bono outside general counsel to the American Council on Renewable Energy and as a member of the World Resources Institute Global Leadership Council. With this background and experience, Andy frequently speaks at industry conferences and publishes on these topics. He also serves as an editor of the firm’s Inside Energy & Environment blog

He is Chambers-ranked in Corporate M&A & Private Equity, where clients report that Andy “gives practical advice with commercially reasonable solutions to problems.” He also has been ranked in Legal 500, both for Energy – Renewable/Alternative and Mergers & Acquisitions.

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Photo of Jay Smith Jay Smith

Jay Smith is a partner in the Washington office. He joined the firm after several years as a professor of political science and international affairs, during which he specialized in international trade policy and international dispute settlement. His practice in the International and…

Jay Smith is a partner in the Washington office. He joined the firm after several years as a professor of political science and international affairs, during which he specialized in international trade policy and international dispute settlement. His practice in the International and Litigation groups draws on this academic and policy experience.

He is currently helping clients develop and implement strategies to mitigate supply chain risks arising from U.S. trade actions, such as product exclusions from the restrictions on imported steel and aluminum imposed under Section 232. In addition, Jay regularly represents respondents in U.S. trade remedy proceedings and related litigation, helping to secure a number of negative injury determinations at the ITC in recent years. Jay also advises clients on the negotiation and enforcement of international treaty commitments under the WTO, bilateral and regional trade agreements such as the USMCA, and other international fora—including the ongoing Indo-Pacific Economic Framework negotiations. Much of his policy work is at the intersection of trade and other areas, such as intellectual property, the environment, or labor rights.

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