24 March 2017
Developments in Trade Defence Measures on Solar Panels
New developments have arisen in the longstanding solar panels case. While SolarWorld, a European solar producer, continues its legal challenge against the anti-dumping and anti-subsidy duties on solar cells and solar panels imported from mainland China, the European Commission initiated a partial interim review on 3 March 2017. The legal uncertainty over the trade defence measures has led to heightened tension between the two trading giants, namely the EU and mainland China.
It will be recalled that, from 6 December 2013 onwards, the European Commission has been imposing definitive anti-dumping and anti-subsidy duties on solar cells and solar panels originating in mainland China. While the anti-dumping duties, initially imposed through Regulation 1238/2013 of 2 December 2013, range from 27.3% to 64.9%, the countervailing duties, initially imposed through Regulation 1239/2013 of 2 December 2013, range from 0% to 11.5%. The measures concern – more precisely – “crystalline silicon photovoltaic modules or panels and cells of the type used in crystalline silicon photovoltaic modules or panels (the cells have a thickness not exceeding 400 micrometres)”.
The trade defence measures were initially imposed for a period of two years, as a combination of tariffs on the one hand, and a so-called minimum import price (MIP) on the other hand. With regard to the latter, the European Commission accepted an undertaking, whereby certain producers from mainland China – listed in the annex to Implementing Decision 2013/707 – agreed to sell their solar cells and solar panels to the EU at a price at or above an MIP. In return for doing so, the anti-dumping and countervailing duties were not levied.
On 28 February 2014, several European solar producers (SolarWorld, Brandoni Solare and Solaria Energia y Medio Ambiente) lodged an application for annulment of the MIP, commencing a legal challenge to overturn the deal between the EU and mainland China on the price of imported solar cells and solar panels.
The General Court of the European Union refuted the attempt of the European solar producers to strike down the MIP on 1 February 2016. The General Court dismissed the action as inadmissible, holding that the MIP is not “severable” from the definitive Regulation imposing the anti-dumping and countervailing duties. The General Court, more precisely, found that the annulment of the MIP would alter the very spirit and substance of the definitive Regulation, since an annulment of the MIP would “remove the exemption of [anti-dumping/countervailing] duties from which the imports of Chinese exporting producers who had consented to the undertaking accepted by the Commission benefited”.
Persevering so as to be proven right, SolarWorld lodged an appeal against the order of the General Court on 11 April 2016. SolarWorld requested the European Court of Justice to set aside the order of the General Court, due to the fact that “the General Court committed an error in law in finding that [the MIP] is not severable from the remainder of that Regulation”.
At the hearing before the European Court of Justice on 9 March 2017, SolarWorld argued that annulling the MIP would not alter the scope, spirit and substance of the imposed anti-dumping and countervailing duties, as “changing the form of measures does not change the scope of the Regulation imposing them”. According to SolarWorld, the objective of all anti-dumping and countervailing duties – irrespective of their form – is to adequately remove the injurious effects of dumping and subsidisation suffered by the EU producers.
The European Commission, in turn, argued that SolarWorld is asking the European Court of Justice to redraft the law and dramatically alter its substance by lifting the quantitative condition on the trade defence measures. According to the European Commission, annulling the MIP would have a major impact on the solar market, as most Chinese solar cells and solar panels entering the EU market are exempted from the anti-dumping and countervailing duties due to the mechanism of the MIP.
While the opinion of the Advocate-General is scheduled for 1 June 2017, the MIP related to solar cells and solar panels imported from mainland China could potentially also be amended by the partial interim review initiated by the European Commission on its own initiative on 3 March 2017.
As previously reported, the initial trade defence measures on solar cells and solar panels originating in mainland China were set to expire on 7 December 2015. Following a request for extension of the duties, the European Commission initially proposed to extend the duties for an additional 2 years. This proposal was, however, rejected by the majority of EU Member States. Due to political pressure from mainland China, European solar panel users and environmental groups, the European Commission decided to extend the anti-dumping and countervailing duties for a more limited period of 18 months. This decision was set down in Regulation 2017/366, which was published on 3 March 2017. The extended trade defence measures are still imposed as a combination of tariffs and an MIP. The latter is currently set at 0.56 EUR per watt.
On 3 March 2017, the European Commission also initiated a partial interim review investigation of the trade defence measures, which is explicitly limited to the form of the measures. According to the Commission, “[t]here is prima facie evidence that the circumstances on the basis of which the existing measures were imposed have changed and that these changes are of a lasting nature”.
The Commission is currently examining whether the existing form of the anti-dumping and countervailing duties (i.e. a price undertaking based on an MIP that is subject to a periodic adaptation mechanism) can still be considered as the most appropriate form of measures. The prima facie evidence suggests that the anti-dumping and countervailing duties may reflect the changed circumstances of the market more appropriately by taking the form of a variable duty, based on an MIP for all imports of the product under review. Such a variable MIP would be regularly adjusted to reflect further technological developments and efficiency gains in the solar sector.