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Trade Defence Measures on Solar Panels: Canadian Solar Leads New Chinese Appeal While EU Producer Solarworld Forced to File for Bankruptcy

It was reported on 15 May 2017 that Canadian Solar is leading a new Chinese appeal against EU duties on solar cells and solar panels from mainland China, giving rise to yet another development in the EU’s longstanding solar panels trade defence proceedings.

The legal action launched by Canadian Solar, a producer from mainland China, started in 2014, when the company – together with Yingli Solar and JingAo Solar – challenged the imposition of the anti-dumping and anti-subsidy duties on solar cells and solar panels from mainland China by the European Commission before the EU General Court.

In its decision of 28 February 2017, the EU General Court rejected all arguments put forth by Canadian Solar, Yingli Solar and JingAo Solar, confirming the legality of the EU’s anti-dumping and anti-subsidy duties. The General Court, in particular, made two interesting findings.

First, the General Court noted that the EU institutions were right to consider that, in determining the normal value of the products concerned in the exporting country, the term “exporting country” did not necessarily have to be defined in the same way for the entirety of the product, irrespective of its origin. As a result, the General Court held that the EU institutions were entitled to consider that, for solar cells and solar panels originating in and consigned from mainland China and for modules originating in mainland China but consigned from third countries, the exporting country corresponded to the country of origin (mainland China), whereas, for modules consigned from mainland China but originating in a third country, the exporting country corresponded not to the country of origin but to the intermediate country (also mainland China).

Second, the General Court considered that the EU institutions were entitled to view photovoltaic cells and modules as a single product. According to the General Court, the common specific feature of both cells and modules is their capacity to convert solar energy to electricity, with the intended use of being installed in photovoltaic systems. As a result, the General Court held that the European Commission was not required to conduct separate investigations for the different products.

Canadian Solar appealed the decision of the EU General Court on 8 May 2017, by lodging an action for annulment before the EU Court of Justice. Despite this, it appears that Yingli Solar and JingAo Solar have not challenged the General Court’s decision. In its appeal, Canadian Solar is expected to focus on the argument that the General Court erred by finding that the European Commission was not under the obligation to investigate the products (i.e. solar cells and modules) separately when deciding whether to apply the duties.

In addition to Canadian Solar’s appeal, it came to light on 12 May 2017 that SolarWorld – a German solar equipment producer – was forced to file for bankruptcy on 11 May. For years, SolarWorld has been the most vocal company in the EU, battling against imports of solar cells and solar panels from mainland China and fighting for higher EU anti-dumping and anti-subsidy measures.

SolarWorld was, for example, part of the original complaint filed by the trade association EU ProSun which led to the imposition of definitive EU anti-dumping and anti-subsidy duties on solar cells and solar panels originating in mainland China from 6 December 2013 onwards. Traders will recall that these measures were imposed as a combination of tariffs on the one hand (anti-dumping duties ranging from 27.3% to 64.9% and anti-subsidy duties ranging from 0% to 11.5%) and a so-called minimum import price (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.

SolarWorld’s was one of the loudest voices against the price undertaking; it also led the legal challenge for the annulment of the MIP which was filed on 28 February 2014. The General Court dismissed the latter action as inadmissible on 1 February 2016, and SolarWorld lodged an appeal against the decision of the General Court on 1 April 2016. This case is still ongoing, and the opinion of the Advocate-General is scheduled for early June 2017.

Hong Kong traders should note that SolarWorld’s bankruptcy does not mean that the fight for stronger EU measures is over. On the one hand, SolarWorld’s ongoing lawsuits could continue, despite the company’s collapse. A judicial administrator who is involved in SolarWorld’s bankruptcy has to determine what will happen with the pending court cases. In doing so, the administrator is likely to weigh the financial costs and potential benefits of the cases. On the other hand, other EU solar equipment producers and lobby groups have signalled that they intend to continue the legal battle against the EU.

For a comprehensive overview of the trade defence proceedings on solar cells and solar panels from mainland China, it should be recalled that other legal actions are still pending. Jiangsu Seraphim Solar System – an exporting solar producer from mainland China – challenged the European Commission’s decision to withdraw the acceptance of its price undertaking on 18 February 2017. This case is currently pending before the EU General Court. Moreover, the European Commission initiated on 3 March 2017 – on its own initiative – a partial interim review investigation of the anti-dumping and anti-subsidy duties, which is explicitly limited to the form of the measures.

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