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Trade Defence Measures against Solar Panels

On 18 April 2017, a legal action was published in the EU’s Official Journal, challenging the European Commission’s decision to withdraw the acceptance of a price undertaking, giving rise to yet another development in the longstanding solar panels trade defence proceedings. Jiangsu Seraphim Solar System – an exporting producer of solar panels from mainland China – has brought its case before the EU’s General Court, arguing that the Commission was wrong in removing its name from the list of companies that benefit from the price undertaking in the framework of the solar panels proceedings.

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. The definitive trade defence measures were imposed by means of Regulation 1238/2013 and Regulation 1239/2013 and were, importantly, imposed as a combination of tariffs on the one hand (i.e. anti-dumping duties ranging from 27.3% to 64.9% and countervailing duties ranging from 0% to 11.5%) and a so-called minimum import price (MIP) on the other hand.

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, the European Commission extended the anti-dumping and countervailing duties for a period of 18 months. This decision was set forth in Regulation 2017/366, which was published on 3 March 2017.

With regard to the MIP, the European Commission accepted a price undertaking, whereby certain exporting producers from mainland China – listed in the annex to Implementing Decision 2013/707 – agreed to sell their solar cells and solar panels to EU customers at a price at or above an MIP (which is currently set at 0.56 EUR per watt). The exporting producers also agreed to sell their solar cells and solar panels by means of direct sales only.

For the purpose of the undertaking, a direct sale is defined as a sale either to the first independent customer in the EU, or via a related party in the EU listed in the undertaking. In return for doing so, the anti-dumping and countervailing duties would not be levied. The price undertaking sets out, in a non-exhaustive list, the breaches of the undertaking. This list of breaches includes indirect sales to the EU (i.e. sales to a related party in the EU which is not listed in the undertaking).

As Jiangsu Seraphim Solar System was listed in the annex to Implementing Decision 2013/707, its solar cells and solar panels were originally not subject to the trade defence duties. On 7 December 2016, however, through Regulation 2016/2146, the European Commission decided to withdraw the acceptance of the undertaking under Implementing Decision 2013/707 for two exporting producers from mainland China, namely Jiangsu Seraphim Solar System and Ningbo Huashun Solar Energy Technology. The withdrawal entered into force on 9 December 2016.

The European Commission argued that Jiangsu Seraphim Solar System reported numerous sales transactions of solar cells and solar panels to an allegedly unrelated importer in the EU and had issued undertaking invoices for such sales. Based on the information available to the Commission, the involved importer was related to Jiangsu Seraphim Solar System. As the importer was not listed as a related party in the undertaking, the Commission held that Jiangsu Seraphim Solar System had breached the terms of the undertaking. As a result, in Article 2 of Regulation 2016/2146, the Commission declared the undertaking invoices concerned invalid and stated that the definitive anti-dumping and countervailing duties, which were due at the time of acceptance of the customs declaration for release into free circulation, should be collected by the national customs authorities.

On 18 February 2017, Jiangsu Seraphim Solar System challenged the European Commission’s decision to withdraw the acceptance of the undertaking. In its action, which was published in the Official Journal on 18 April 2017, Jiangsu Seraphim Solar System requests the General Court of the European Union to annul Article 2 of Regulation 2016/2146.

According to Jiangsu Seraphim Solar System, the European Commission breached several of its obligations under the EU’s basic anti-dumping and anti-subsidy Regulation “when it invalidated undertaking invoices and then directed customs to all duties, as if no valid undertaking invoices had been issued and communicated to customs at the time the goods were declared for release in free circulation”. Jiangsu Seraphim Solar System bases its plea on that of illegality in relation to Article 3(2) of Regulations 1238/2013 and 1239/2013, which give the Commission the power to declare undertaking invoices invalid.

In the past, the European Commission has, through 8 different regulations, withdrawn the acceptance of the price undertaking for 21 different exporting producers.

In addition to the legal challenge undertaken by Jiangsu Seraphim Solar System, the MIP related to solar cells and solar panels imported from mainland China could potentially be amended by the ongoing legal action of EU solar producer Solar World on the one hand, and the recently initiated partial interim review on the other hand.

On 28 February 2014, several European solar producers lodged an application for annulment of the MIP, starting 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, on 1 February 2016, dismissed the action as inadmissible, holding that the MIP is not “severable” from the definitive Regulation imposing the anti-dumping and countervailing duties. On 1 April 2016, SolarWorld lodged an appeal against the order of the General Court, requesting the European Court of Justice to hold that “the General Court committed an error in law in finding that [the MIP] is not severable from the remainder of that Regulation”. The opinion of the Advocate-General is scheduled for 1 June 2017.

On 3 March 2017, the European Commission initiated – on its own initiative – a partial interim review investigation of the anti-dumping and countervailing duties, which is explicitly limited to the form of the measures. The 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 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 variable MIP would be regularly adjusted to reflect further technological developments and efficiency gains in the solar sector.

Content provided by Picture: HKTDC Research
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