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Solar Panels from China: EU to Lower Minimum Import Price in September 2017

In yet another development in the EU’s longstanding trade defence proceedings against solar panels and solar cells from mainland China, it appears that the European Commission intends to reduce its so-called minimum import price (MIP) as of September 2017. This was reported on 20 July 2017. Pursuant to the European Commission’s draft plans, the MIP for solar panels will drop over 20% within a year, while the MIP for solar cells will drop over 10%.

The EU has been imposing definitive trade defence measures on solar cells and solar panels originating in mainland China from 6 December 2013 onwards. The trade defence measures were imposed as a combination of tariffs on the one hand (anti-dumping duties ranging from 27.3% to 64.9% and countervailing duties ranging from 0% to 11.5%) and an MIP on the other hand.

With regard to the MIP, the European Commission accepted a price undertaking, whereby certain exporting producers from mainland China agreed to sell their solar cells and solar panels to EU customers at a price at or above an MIP. In return for doing so, the anti-dumping and countervailing duties would not be levied.

The trade defence measures on solar cells and solar panels were initially imposed for a period of two years, and were set to expire on 7 December 2015. Following a request for an extension of the duties and political pressure, the EU extended the anti-dumping and countervailing duties for a period of 18 months in March 2017.

As a result, the trade defence measures are now set to expire only in September 2018.

Simultaneous to the extension of the trade defence measures on solar cells and solar panels, the European Commission launched – on its own initiative – a partial interim review investigation in March 2017, which is explicitly limited to the form of the measures. The European Commission is currently examining whether the existing form of the trade defence measures, 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 measures 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 which were previously subject to the price undertaking. Such variable MIP would be regularly adjusted to reflect further technological developments and efficiency gains in the solar sector.

As reported on 20 July 2017, in order to determine its new MIP, the European Commission plans to use a price index linked to PVInsights, instead of the Bloomberg index which is currently used. According to the Commission, this would be the most reliable and most widely used index by the solar industry. Moreover, it appears that the Commission will opt for a new split in prices of solar panels and cells, distinguishing between polycrystalline and monocrystalline cells and modules.

The European Commission’s plans show that, by September 2017, polycrystalline modules will be priced at 41 euro cents per watt, while monocrystalline modules will be priced at 46 euro cents per watt. The prices would then drop evenly each quarter, ending up at 33 euro cents per watt for polycrystalline modules and 38 euro cents per watt for monocrystalline modules. This would mean a decrease of, respectively, 20.48 and 17.93%. In addition, the MIP would drop from almost 21 euro cents per watt for polycrystalline cells and 24 euro cents per watt for monocrystalline cells to 19 euro cents and almost 22 euro cents per watt. This would represent a decrease of, respectively, 5.8 and 10.66%.

While EU solar panel producers argue that the reduced MIP is too low and is set at a level below the cost of production of the solar equipment, the solar association Solar Power Europe claims that the MIP remains too high and threatens to slow down investment in the European sector. Other parts of the Commission’s plans, such as publishing the MIP, are welcomed by industry groups, as they are likely to provide transparency and enable a better enforcement of the measures.

It is important to note that the new MIP will most likely only be available for exporting companies that are part of the EU’s current price undertaking. Over the years, the European Commission has withdrawn the acceptance of the price undertaking for more than 20 producers, due to the fact that they were said to be breaking the terms of the undertaking. Other exporting producers have voluntarily stepped out of the price deal. It is the Commission’s intention to exclude both categories of companies from the new MIP. The imports of all other exporting companies will remain subject to the current ad valorem anti-dumping and countervailing duties.

After September 2017, importers from mainland China that do not adhere to the new and reduced MIP will be subject to anti-dumping and countervailing duties at the EU’s borders.

The European Commission’s plans were sent to interested parties in the trade defence investigations who were given until 4 August 2017 to comment on the proposal. The Commission hopes to have approval on the new MIP from EU governments before the end of September 2017.

Besides the ongoing partial interim review investigation of the anti-dumping and anti-subsidy duties on solar equipment from mainland China, Hong Kong traders should be aware of other challenges currently pending.

First, the legal action for annulment of the MIP, which was filed on 28 February 2014, is still ongoing. The General Court dismissed this action as inadmissible on 1 February 2016 and SolarWorld lodged an appeal against this dismissal on 11 April 2016.

Second, Jiangsu Seraphim Solar System has challenged the European Commission’s decision to withdraw the acceptance of a price undertaking on 18 February 2017. This case is currently pending before the EU General Court.

Third, Canadian Solar lodged an action for annulment before the EU Court of Justice on 8 May 2017. Canadian Solar appealed the decision of the EU General Court of 28 February 2017, in which the General Court confirmed the legality of the EU’s anti-dumping and anti-subsidy duties on solar cells and solar panels from mainland China.

Content provided by Picture: HKTDC Research
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