Presidential Action Triggered by Crisis in the US Solar Industry
In recent months, the US 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 US 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 US solar module imports in 2020. 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 US solar industry to come to a stand-still, furthering domestic reliance on coal. Given this paralysis in the solar industry, lawmakers and others urged the President to provide relief from potential AD / CVD tariffs.
The President’s Response
On June 6, 2022, President Biden issued a declaration of emergency (the “Declaration”). pursuant to section 318 (a) of the Tariff Act of 1930, as amended (19 USC § 1318), and issued a determination pursuant to section 303 of the Defense Production Act of 1950, as amended (50 USC § 4533) (“the DPA Determination ”). 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, but rather 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.
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 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.
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. There are other examples of prior Administrations suspending imports tariffs under this provision.
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.
The President’s emergency action does not impact existing AD / CVD tariffs on imports of solar cells and modules from China and Taiwan including such modules assembled in countries other than China or Taiwan using cells from 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. “
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 US 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 US solar industry needs in order to continue importing solar cells and modules using solar cells made in the four target countries.
However, US 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 definition, 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 US 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 enjoy 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 US 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 US 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.
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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.
 Letter from Sen. Heinrich, Sen. Lujan, Rep. Stansbury, and Rep. Fernández to President Biden (May 9, 2022).
 See, eg, 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 ClosuresLaw360 (May 4, 2022); NM Congressional Democrats Call On President Biden To Expedite Solar Tariff Investigation Impacting Jobs, Investments In New MexicoForeignAffairs.co.nz (May 13, 2022).
 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. ”).
 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).
 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).
 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…. ”).
 (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 US AD / CVD law.
 White House, Proclamation on Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak (Mar. 13, 2020).
 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).
 White House, FACT SHEET: President Biden Takes Bold Executive Action to Spur Domestic Clean Energy Manufacturing (June 6, 2022).
 US 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.