non-confidential version via electronic … · non-confidential version of solarworld's...

1776 K STREET NW

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Timothy C. Brightbill 202.719.3138 [email protected]

September 28,2017

Inv. No. TA-201-75 NON-CONFIDENTIAL VERSION

VIA ELECTRONIC FILING AND HAND DELIVERY

Lisa R. Barton Secretary to the Commission U.S. International Trade Commission 500 E Street, SW Washington, DC 20436

Re: Crystalline Silicon Photovoltaic Cells (Whether or Not Partially or Fully Assembled Into Other Products): Prehearing Brief on Remedy of SolarWorld Americas, Inc.

Dear Secretary Barton:

On behalf of SolarWorld Americas, Inc. ("SolarWorld"), a petitioner and

domestic interested party in this proceeding, please find enclosed two copies of the

non-confidential version of SolarWorld's Prehearing Brief on Remedy in the above-

referenced proceeding.

The requisite certification is enclosed in accordance with Sections 201.6 and

207.3 of the Commission's rules. In addition, in accordance with Section 201.16 of

the Commission's rules, the enclosed brief has been served, by hand delivery, next-

day delivery, or international express delivery, on all parties entitled to receive it as

indicated on the attached public service list.

14141035.1

Wiley Rem

. LLP

Lisa R. Barton September 28, 2017

NON-CONFIDENTIAL VERSION

If you have any questions regarding this submission, please do not hesitate

to contact the undersigned.

~Ub~m_it_te~d~' ---

Timothy C. Brightbill, Esq. Maureen E. Thorson, Esq. Tessa V. Capeloto, Esq. Usha Neelakantan, Esq.

WILEY REIN LLP 1776 K Street, NW Washington, DC 20006 (202) 719-7000

Counsel to Solar World Americas, Inc.

14141035.1

ATTORNEY CERTIFICATION

Crystalline Silicon Photovoltaic Cells (Whether or Not Partially or Fully Assembled Into Other Products)

Inv. No. TA-201-75

In accordance with section 207.3(a) of the Commission's rules (19 C.F.R. § 207.3(a)), I, Timothy C. Brightbill, of Wiley Rein LLP, counsel to SolarWorld Americas, Inc., certify that under penalty of perjury under the laws of the United States of America and pursuant to the Commission's regulations:

(1) I have read the foregoing submission in the above referenced case;

(2) to the best of my knowledge and belief, the information contained therein is accurate

and complete; and

(3) in accordance with section 201.6(b)(3)(iii) of the Commission's rules (19 C.F.R.

§ 201.6(b)(3)(iii)), information substantially identical to that for which we request

confidential treatment is not available to the general public and the public disclosure

of such information would cause substantial harm to the persons, firms, and other

entities from which the information was obtained.

Timothy C. Brightbill

DISTRICT OF COLUMBIA: SS Sworn and subscribed to before me this September 27, 2017.

Natalia Xanthakos Notary Public, District of Columbia -My Commission Expires 9/30/2019 '

Notary Public

My commission expires: .sasa« ..... t _

CERTIFICATE OF SERVICE

PUBLIC SERVICE

Crystalline Silicon Photovoltaic Cells (Whether or Not Partially or Fully Assembled Other Products)

Inv. No. TA-201-75

I certify that a copy of this document was served on the following parties, via same-day

messenger, UPS next-day delivery (*), or UPS worldwide express delivery (**), on September

28,2017.

On behalf of Changzhou Trina Solar Energy Co., Ltd., Vina Solar Technology Co., Ltd., and Taiwan Photovoltaic Industry Association:

On behalf of Goal Zero, LLC:

Robert G. Gosselink, Esq. Trade Pacific PLLC 660 Pennsylvania Avenue, SW Suite 401 Washington, DC 20003

Diana Dimitriuc-Quaia, Esq. Arent Fox LLP 1717 K Street, NW Washington, DC 20006

On behalf of REC Solar Pte. Ltd. and REC Americas, LLC:

On behalf of Auxin Solar Inc.:

Kelly A. Slater, Esq. Appleton Luff Pte. Ltd. 1025 Connecticut Avenue, NW Suite 1000 Washington, DC 20036

Thomas M. Beline, Esq. Cassidy Levy Kent (USA) LLP 2000 Pennsylvania Avenue, NW Suite 3000 Washington, DC 20006

On behalf of The Solaria Corporation: On behalf of Solatube International, Inc.:

Lindsay B. Meyer, Esq. VenableLLP 600 Massachusetts Avenue, NW Washington, DC 20001

Nancy A. Noonan, Esq. Arent Fox LLP 1717 K Street, NW Washington, DC 20006

On behalf of Korea Photovoltaic Industry Association, Hanwha Q-Cells Korea, LG Electronics, Hyundai Green Energy (KPIA) (KOPIA), and the Government of Canada:

Daniel L. Porter, Esq. Curtis Mallet-Prevost, Colt & MosIe LLP 1717 Pennsylvania Avenue, NW Washington, DC 20006

On behalf of the Solar Energy Industries Association and its member SunPower Corporation:

Matthew R. Nicely, Esq. Hughes Hubbard & Reed, LLP 1775 I Street, NW Washington, DC 20006

On behalf of Tesla and its subsidiary, SolarCity Corporation:

Kenneth G. Weigel, Esq. Alston Bird LLP 950 F Street NW Washington, DC 20004

On behalf of JA Solar International Co., Ltd., JingAo Solar Co., Ltd., JA Solar Technology Co., Ltd., Hefei JA Solar Technology Co., Ltd., and JA Solar Malaysia Sdn. Bhd.:

Kristin H. Mowry, Esq. Mowry & Grimson, PLLC 5335 Wisconsin Avenue, NW Suite 810 Washington, DC 20015

On behalf of Sunrun, Inc.:

Bernd G. Janzen, Esq. Akin Gump Strauss Hauer & Feld LLP 1333 New Hampshire Avenue, NW Washington, DC 20036-1564

On behalf of Suniva, Inc.:

Matthew J. McConkey, Esq. Mayer Brown LLP 1999 K Street, NW Washington, DC 20006-1101

On behalf of Boviet Solar Technology Co., Ltd. and Boviet Solar USA, Ltd:

William J. Clinton, Esq. White & Case LLP 701 Thirteenth Street, NW Washington, DC 20005

On behalf of Sunforce Products, Inc.:

Kristen Smith, Esq. Sandler, Travis & Rosenberg, P.A. 1300 Pennsylvania Avenue, NW Suite 400 Washington, DC 20004

On behalf of Mission Solar Energy LLC, and OCI Solar Power LLC:

Neil Ellis, Esq. Sidley Austin LLP 1501 K Street, NW Washington, DC 20005

On behalf of Jinko Solar Technology SDN. BDN., Jinko Solar Co., Ltd., Zhejiang Jinko Solar Co., Ltd., Jinko Solar Import and Export Co., Ltd., Zhejiang Jinko Trading Co., Ltd., and JinkoSolar Inc.:

Richard L.A. Weiner, Esq. Sidley Austin LLP 1501 K Street, NW Washington, DC 20005

On behalf ofNeo Solar Power Corporation:

Jay C. Campbell, Esq. White & Case LLP 701 Thirteenth Street, NW Washington, DC 20005

On behalf of the Government of Taiwan:

Walter J. Spak, Esq. White & Case LLP 701 Thirteenth Street, NW Washington, DC 20005

On behalf of Red Sun Energy JSC and Renewable Energy Systems America Inc.:

Donald B. Cameron, Esq. Morris, Manning & Martin, LLP 1401 Eye Street, NW Suite 600 Washington DC, 20005

On behalf of AES Distributed Energy, Inc.:

Stephen S. Kho, Esq. Akin Gump Strauss Hauer & Feld LLP 1333 New Hampshire Avenue, NW Washington, DC 20036-1564

On behalf of SunPower Corporation, SunPower Corporation, Systems, SunPower North America, LLC, SunPower Corporation Mexico, S. de R.L. de C.V., SunPower Philippines Manufacturing Ltd., and SunPower Solar Malaysia Sdn. Bhd.:

Daniel J. Gerkin, Esq. Vinson & Elkins LLP 2200 Pennsylvania Avenue, N.W. Suite 500 West Washington, DC 20037

On behalf of NextEra Energy Resources, LLC and Canadian Solar Solutions Inc., Canadian Solar Manufacturing Co., Ltd., Canadian Solar Manufacturing Vietnam Co., Canadian Solar Indonesia, and Canadian Solar Brazil Commerce, Import and Export of Solar Panels Ltd., Heliene Inc., and Silfab Solar Inc.:

H. Deen Kaplan, Esq. Hogan Lovells US LLP Columbia Square 555 Thirteenth Street, NW Washington, DC 20004

On behalf of Hanwha Q Cells America, Inc.:

John Gurley, Esq. Arent Fox LLP 1717 K Street, NW Washington, DC 20006

On behalf of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products and Sunrun:

Spencer S. Griffith, Esq. Akin Gump Strauss Hauer & Feld LLP 1333 New Hampshire Avenue, NW Washington, DC 20036-1564

On behalf of 8minuteenergy Renewables LLC:

John P. Smirnow, Esq. Smirnow Law 1717 K Street, NW Suite 1120 Washington, DC 20006

On behalf of Hemlock Semiconductor Operations LLC:

Stephen J. Orava, Esq. King & Spalding 1700 Pennsylvania Avenue, NW Washington, DC 20006

On behalf of Depcom Power Inc.:

Kevin M. O'Brien, Esq. Baker McKenzie LLP 815 Connecticut Avenue, NW Washington, DC 20006

On behalf of the Government of the People's Republic of China:

Fang Liu, First Secretary Embassy of the People's Republic of China 2133 Wisconsin Avenue, NW Washington, DC 20001

On behalf of Vikram Solar:

(**)Ratheesh Malottu M.S. Pothal & Associates F-12/4, 1st Floor Malviya Nagar New Delhi 110017

On behalf of the Ministry of Economy of Mexico:

Aristeo Lopez, Esq. Embassy of Mexico 1911 Pennsylvania Avenue, NW Washington, DC 20006

On behalf of the Government of Canada:

Colin Bird, Minister Counsellor Embassy of Canada 501 Pennsylvania Avenue, NW Washington, DC 20001

On behalf of Ministry of International Trade and Industry, Malaysia:

(**)Mohd Zahid Bin Abdullah, Director Ministry of International Trade and Industry Menara Perdagangan Antarabangsa dan Industri No.7, Jalan Sultan Haji Ahmad Shah 50480 Kuala Lumpur Malaysia

On behalf of Vietnam Competition Authority:

(**)Nguyen Phuong Nam, Deputy Director General Vietnam Competition Authority No. 25, Ngo Quyen Str. Hoan Kiem Dist. Ha Noi, Vietnam

On behalf of the European Commission:

Dr. Sibylle Zitko, Esq. The European Commission Delegation of the European Union to the United States of America 2175 K Street, NW Washington, DC 20037

On behalf of the Government of the Republic of Korea:

Jim Won Choi, Counsellor Embassy of the Republic of Korea 2450 Massachusetts Avenue, NW Washington, DC 20008

On behalf of GigaWatt, Inc.:

(*)Deep Patel, Founder & CEO GigaWatt, Inc. 310 E Orangethorpe Ave. Suite D Placentia, CA 92870

On behalf of the Government of Taiwan, Taipei Economic and Cultural Representative Office In The United States:

Chien Chi Chao, Economic Officer Taipei Economic and Cultural Representative Office In The United States 4301 Connecticut Avenue, NW Washington, DC 20008

On behalf of Wacker Polysilicon North America LLC and Wacker Chemie AG:

(*)Gregory Brabec, Esq. Wacker Polysilicon North America LLC 553 Wacker Boulevard, NW Charleston, TN 37310

On behalf of the Republic of Indonesia:

Reza Pehlevi Chairul Embassy of Indonesia 2020 Massachusetts Avenue, NW Washington, DC 20036

On behalf of the Royal Thai Government:

Prayoth Benyasut, Minister (Commercial) Office of Commerical Affairs Royal Thai Embassy 1024 Wisconsin Avenue, NW Suite 202 Washington, DC 20007

On behalf of the Government of Indonesia:

(**)Mardjoko, Act. Director of Trade Defense Jalan M.l Ridwan Rais NO.5 Jakarta 10110

On behalf of LOF Solar Corp.:

(* *)Hsiao-Chun, Lu LOF Solar Corp. 2F, No.6, Prosperity Rd. 2 Hsinchu Science Park Hsinchu 30078 Taiwan, RO.C.

On behalf of Indo Solar Ltd.:

(**)H. R Gupta, Managing Director INDOSOLAR Limited Mis M.S. Pothal & Associates, F-12/4, 1st Floor Malviya Nagar, New Delhi 110017

On behalf of the Government of Brazil:

Aluisio Gomien de Lima Campos Embassy of Brazil 3006 Massachusetts Avenue, NW Washington, DC 20008

On behalf of Solartech Energy Corp.:

(**)Jeannie Kao Solartech Energy Corp. 8F., No. 760, Sec. 4, Bade Rd., Songshan Dist., Taipei 105, Taiwan

BEFORE THE UNITED STATES INTERNATIONAL TRADE COMMISSION

CRYSTALLINE SILICON PHOTOVOLTAIC CELLS (WHETHER OR NOT PARTIALLY OR FULLY ASSEMBLED INTO OTHER PRODUCTS)

Inv. No. TA-201-75

Business Proprietary Information has been removed on pages 3, 5-6, 11-13, 15- 18,26,29,32,34-35,37,39-41,48,50, 54-56, the Exhibit List and Exhibits 6-7, 11-12,14,18,26-27, and 31


PREHEARING BRIEF ON REMEDY OF SOLARWORLD AMERICAS, INC.

September 28,2017

14141035.1

Timothy C. Brightbill, Esq. Maureen E. Thorson, Esq. Tessa V. Capeloto, Esq. Usha Neelakantan, Esq.



Table of Contents

I. INTRODUCTION 1

II. THE SERIOUSLY INJURED U.S. SOLAR INDUSTRY REQUIRES A REMEDY THAT WILL DRAMA TICALL Y IMPROVE ITS FINANCIAL PERFORMANCE 5

A. The Commission Vote and the Staff Report Demonstrate the Need for Effective and Comprehensive Relief 5

B. The Goal of a Remedy for the Domestic Industry Must be to Significantly Improve Profitability and the Ability of U.S. Producers to Reinvest and Drive Technological Innovation 5

C. The Commission and the Administration Should Act Rapidly to Prevent Another Import Surge 7

III. THE COMMISSION SHOULD RECOMMEND FOUR-YEAR SPECIFIC TARIFFS AND FOUR-YEAR QUOTAS TO REMEDY THE SERIOUS INJURY SUFFERED BY THE DOMESTIC INDUSTRY 10

A. Description of the Proposed Tariffs and Methodology Used l0

B. Description of the Proposed Quotas and Methodology Used 14

C. The Commission Should Recommend That the Tariffs Be Decreased and the Quotas Increased Gradually Over the Four-Year Period 19

D. Other Remedy Elements 19

1. The Commission Should Recommend the Promotion of Programs for U.S. Solar Innovation and Leadership .20

2. The Commission Should Recommend That the President Issue an Executive Order Mandating All U.S. Government Agencies to Require he Use of U.S.-Origin Solar Cells and Panels For All U.S. Government Projects 21

3. The Commission Should Review Prior Tax Credit Programs and Recommend Amending the Investment Tax Credit Program 23

4. The Commission Should Recommend International Negotiations to Address Global Solar Cell and Module Overcapacity 24

5. The Commission Should Recommend That the President Direct the Department of Homeland Security to Conduct a Study of the Cyber, Electrical Grid, and National Security Risks of Using Foreign Origin Solar Panels in the United States 25

6. The Commission Should Recommend Immediate Certification of all Shuttered Facilities for Trade Adjustment Assistance 26

7. The Commission Should Recommend That the President Begin Settlement Negotiations on the Existing U.S. AD/CVD Orders Against Solar Products from China and Taiwan, and Chinese AD/CVD Orders Against Solar-Grade Polysilicon 27

1


8. The Commission Should Recommend That the President Direct the U.S. Department of Energy to Fully Fund Its SunShot Initiative Research Grants During the Remedy Period 29

IV. JUSTIFICATION FOR THE REMEDY PROPOSAL. 29 A. A Tariff and Quota Combination is the Most Effective Means of Providing

Relief to the Industry 29 B. A Four- Year Period of Relief is Essential to Give the U.S. Industry the

Ability to Implement Measures Intended to Allow the Industry to Adjust to Import Competition 32

C. The Proposed Tariff-Quota Combination Will Not Impede Access to Imports 32

V. THE PROPOSED REMEDY WOULD HAVE POSITIVE EFFECTS ON THE U.S. SOLAR CELL AND MODULE MANUFACTURING INDUSTRY, AND WILL NOT NEGATIVELY IMPACT DEMAND .36 A. The Projected Effect of the Proposed Remedy on the U.S. Industry Would

be Beneficial 36 B. The Proposed Remedy is Intended to Ensure That There Is Sufficient Supply

in the U.S. Market During the Period of Adjustment.. .38 C. The Proposed Remedy is Projected to Create Thousands of Solar Jobs .39 D. The Proposed Remedy Would Have Limited, if Any, Effect on Demand

and Downstream Consumers 40 VI. ANTI-CIRCUMVENTION EFFORTS SHOULD FORM AN INTEGRAL BASIS OF

THE COMMISSION'S RECOMMENDATIONS .44 VII. THE DOMESTIC SOLAR INDUSTRY'S ADJUSTMENT TO IMPORTS .49

A. The Conditions That Will Characterize a Healthy Industry 51 B. U.S. Solar Producers Have Committed to Significant Adjustment Measures

During the ReliefPeriod 54 1. SolarWorld is Committed to Engaging in Significant Measures

During a Period of Temporary Relief to Allow it to Adjust to Imports 54 2. Other Producer Commitments 55

C. The Measures Described Above are Based on Estimated Profitability During a Temporary Relief Period 57

VIII. CONCLUSION 58

11


I. INTRODUCTION

The U.S. International Trade Commission ("the Commission") has unanimously found

that increased imports of crystalline silicon photovoltaic ("CSPV") cells and modules have

seriously injured the domestic industry. The Commission must now recommend to the President

an appropriate remedy that will "address th {is} serious injury" and "be most effective in

facilitating the effort of the domestic industry to make a positive adjustment to import

competition." 1

SolarWorld and Suniva are two of the U.S. solar industry's pioneers, and together have

decades of U.S. manufacturing experience. Today, Suniva is closed, and SolarWorld remains in

grave danger. Behind both is a trail of nearly 30 competitive U.S. companies that have shut

their doors because of imports. To satisfy the statutory objectives of a safeguard proceeding, the

Commission should recommend a remedy that will, at a minimum, address the domestic

industry's large and growing operating losses-losses that have already caused numerous solar

producers to shut down and that threaten many others. Specifically, the Commission should

recommend both a tariff and a quota on CSPV cells and modules. Both remedies are permitted

under the statute, and both remedies are necessary to address the serious injury resulting from

imports, and will allow the domestic industry to positively adjust to import competition.

A temporary tariff will help stabilize u.S. prices while allowing domestic producers to

ramp up production and capacity. A tariff will also drive increased foreign investment to the

United States by incentivizing U.S. solar manufacturing. Foreign solar cell and module

producers have confirmed as much, touting the benefits of a tariff:

19 U.S.C. § 2252(e)(1).

1


According to Gagan Pal, chief marketing officer of Adani Solar, a fast-growing solar PV manufacturing business based in Ahmedabad, India, new tariffs aren't necessarily a bad thing. While trade cases don't align with free market principles, a policy that "puts everyone at par .. .is helpful," he said. For Adani and others, the SunivaiSolarWorld trade case could help justify opening a new U.S. based solar manufacturing facility. "If {new tariffs} come into effect, I think the clear direction that will emerge from this is that manufacturing in the U.S. will be incentivized, or supported by direct or indirect means," Pal said.'

Likewise, Tom Zhao, managing director of global sales for Chinese solar producer BYD,

stated:

"We are also thinking about putting a factory in the U.S. if the 201 case comes into place ... Made in U.S. may be a good solution to try to help our customers here. They have a very long pipeline of solar projects for the next few years, and they cannot really afford to pay the higher cost of modules." 3

In mid-September of this year, at Solar Power International ("SPI"), one of the largest solar trade

shows in North America, a representative from Chinese producer Canadian Solar similarly noted

that, "{w}e're being a prudent business and evaluating all options.?" These producers are not

alone, according to Greentech Media ("GTM"), a market analysis and advisory firm focused on

the global electricity industry. In fact:

GTM spoke with several solar manufacturers and their partners at SPI who gave similar responses: they're waiting on Friday's ITC decision before making any big decisions. One major solar project developer indicated that a supply deal is already the works. Separately, a solar panel manufacturer said plans to open a U.S. factory are already underway."

The message from foreign producers could not be more clear - tariffs will help stimulate

U.S. solar manufacturing and investment, and therefore U.S. solar jobs.

2 Julia Pyper, Foreign Solar Manufacturers Weigh Opening US Facilities as GreentechMedia.com (Sept. 20, 2017) (emphasis added), attached at Exhibit 1.

Id. (emphasis added).

Id.

Tariff Decision Looms,

4

5 Id.

2

BusH 'aess Proprietary Info ...... as Been Deleted NON-CONFIDENTIAL VERSION

In addition, a temporary quota will enable the domestic industry to recover domestic

market share and profitability, while providing consumers with sufficient access to solar cells

and panels. A quota is also necessary to counteract any attempts by foreign producers to evade

and circumvent the tariffs, which is highly likely given the rampant circumvention that occurred

during and after the imposition of antidumping ("AD") and countervailing duty ("CVD") orders

on CSPV products from China and Taiwan in 2012 and 2015. Almost immediately after those

orders were imposed, Chinese producers added significant module capacity in Canada,

Indonesia, Korea, Malaysia, Thailand, and Vietnam to avoid paying duties. According to the

Final Staff Report, "{m}odule capacity in these six countries grew from [ ] kw in 2012 to

] kw in 2016," and "{e}xcept for a [ ], none ofthe

six largest module manufacturers in China had established any module production in any of these

six countries prior to 2015."6 In other words, Chinese and other foreign cell and module

producers will stop at nothing to avoid paying duties. This underscores the need for both a tariff

and a quota if the remedy is to be effective for the U.S. industry.

The remedy must be implemented for four years to allow domestic producers to make

long-term capital improvements. In order to sufficiently address the serious injury that resulted

from the import surge, improve the domestic industry's competitive position, and provide

support to the entire U.S. solar supply chain, the Commission's remedy should also include

additional recommendations, such as the provision of loans and grants to stimulate U.S. solar

manufacturing innovation, R&D and growth; the initiation of international negotiations to

address global solar cell and module overcapacity; and actions to stimulate U.S. government

procurement of domestically- produced solar cells and modules. These, and the other proposed

6 Staff Report, Crystalline Silicon Photovoltaic Cells (Whether or not Partially or Fully Assembled into Other Products), Inv. No. TA-201-75 (Sept. 11,2017) ("Final Staff Report") at IV-4I.

3


remedies discussed below, will help ensure that the Commission's recommended remedy

benefits the entire U.S. solar industry.

Finally, the Commission's proposed remedy should recommend steps to address the

potential circumvention of relief through the Free Trade Agreement ("FT A") partners that were

excluded from the Commission's injury finding, most notably Canada and Singapore. The rules

of origin for solar products under the North American Free Trade Agreement ("NAFTA") and

the Singapore-U.S. Free Trade Agreement ("SUSFTA"), together with the demonstrated

portability of foreign solar production and other market conditions, make the risk of

circumvention via Canada and Singapore particularly acute.

If provided with sufficient relief, U.S. solar cell and module producers will make the

necessary investments to improve their competitive position in the global market. Recent actions

by the domestic industry confirm as much. Indeed, almost immediately following the

Commission's affirmative injury vote on September 22, 2017, SolarWorld Americas announced

plans to ramp up production and hire up to 200 workers. 7 With the appropriate remedy,

SolarWorld will undoubtedly invest, expand, and hire many more hardworking Americans.

The U.S. solar cell and module industry has been driven to the brink of extinction due to

the import surge. The Commission now has the power to help bring the industry back, and along

with it the thousands of U.S. jobs that disappeared during the period of investigation ("POI") by

recommending SolarWorld's proposed remedy.

SolarWorld Americas, Responding to Trade Vote, Moves to Gear up Production, Hiring, BusinessWire.com (Sept. 25, 2017), attached at Exhibit 2.

4

BU8iaess Proprietary Informatio Has Been Deleted NON-CONFIDENTIAL VERSION

II. THE SERIOUSLY INJURED U.S. SOLAR INDUSTRY REQUIRES A REMEDY THAT WILL DRAMATICALLY IMPROVE ITS FINANCIAL PERFORMANCE

The record in this investigation confirms that the domestic solar cell and module industry

has been devastated by the surge of low-priced imports.

A. The Commission Vote and the Staff Report Demonstrate the Need for Effective and Comprehensive Relief

Solar cell and module imports into the United States increased 270 percent by value and

nearly 500 percent by volume between 2012 and 2016, largely due to global overcapacity.! As

imports surged into the U.S. market, spiking in 2016, U.S. prices crashed, falling by roughly 60

percent during the POI. Domestic market share declined by [ ] percentage points," and nearly

30 U.S. solar manufacturing facilities closed. The U.S. solar industry [

].10 Despite a 350 percent increase in demand, production and capacity growth during

the POI was minimal, and countless U.S. jobs were lost. Put simply, the result of this surge was

nothing short of devastating to the domestic industry.

B. The Goal of a Remedy for the Domestic Industry Must be to Significantly Improve Profitability and the Abilitv of U.S. Producers to Reinvest and Drive Technological Innovation

The Commission's remedy should be designed to first save the domestic solar cell and

module industry and then significantly improve its profitability. The U.S. solar industry [

]. While there were periods of moderate

improvement in the U. S. industry's financials because of the 2012 and 2014 trade cases." these

8

10

Final Staff Report at C-3.

Id.

Id. at C-4 (Table C-l).

Id.

9

II

5

Business Procrietary Informal Has Been De eted


improvements were short-lived, as other subject imports quickly rushed into the U.S. market. As

a result, over the course of the entire period, the U.S. solar industry [

As discussed extensively in SolarWorld's prehearing and posthearing injury briefs, the

domestic industry's failure to earn a profit during the POI directly and negatively impacted its

ability to adequately finance its innovation and growth. l3

]:

[

SoIarWorld further explained that:

[

12 Id. The industry's [ ] over the POI. Id. at C-8 (Table C-3). Thus, Table c-i of the

Commission's Prehearing Staff Report appears to understate the injury to the u.s. producers' financial results. See Prehearing Report, Crystalline Silicon Photovoltaic Cells (Whether or not Partially or Fully Assembled into Other Products), Inv. No. TA-201-75 (Aug. 1,2017) ("Prehearing Staff Report") at C-3 (Table C-l). 13 For example, [

]," and ]." In addition to significant negative

effects on its prior investments, [

]. Id. at E-2 (Table E-l); see also Letter from Wiley Rein LLP to Sec'y Int'l Trade Comm'n re: Crystalline Silicon Photovoltaic Cells (Whether or Not Partially or Fully Assembled Into Other Products): Prehearing Brief on Injury of SolarWorld Americas, Inc. (Aug. 8, 2017) ("SoIarWorld's Injury Prehearing Brief') at 30-34. 14

]. 15 Id. at [ ].

6


Thus, the Commission's remedy must allow the domestic industry to return to a level of

profitability to ramp up operations and expand.

Similarly, the remedy should be sufficient to enable domestic producers to achieve long-

term bankability. SolarWorld was a Bloomberg Tier 1 supplier, and therefore bankable, in 2014,

2015, all of 2016, and through February 2017.16 SolarWorld only lost its Tier 1 status after its

profitability collapsed due to the most recent import surge. This loss of Tier 1 status has

narrowed SolarWorld's financing options. As a result, the Commission's remedy should allow

SolarWorld to recapture its status as a Tier 1 supplier and obtain the necessary financing to

innovate and grow.

In sum, the goal of the Commission's remedy must be for the domestic industry to

significantly improve profitability so that it has the capital to engage in cutting-edge research and

development and make the investments necessary to remain a top player in the u.S. solar market.

C. The Commission and the Administration Should Act Rapidly to Prevent Another Import Surge

The Commission has until November 13, 2017 to recommend a remedy to the President,

and the President has until January 12, 2018 to proclaim a remedy for this industry.!? However,

the Commission and President may act sooner. Indeed, the statute encourages the Commission

to provide its report to the President "at the earliest practicable time." Here, there is good reason

to act in advance of these statutory deadlines: rapid action would reduce the possibility of

another surge of solar imports just prior to any remedy taking effect.

The global solar industry is keenly aware of these investigations, which have been well

documented by the solar trade press on a weekly, if not daily, basis. Now that the Commission

16 SolarWorld's Injury Prehearing Brief at 8.

17 19 U.S.C. § 2252(£)(1) (report by Commission); id. at § 2253(a)(4)(A) (action by President). These deadlines assume no Presidential request for additional information from the Commission. See id. at § 2253(a)(5).

7


has made its injury determination, importers will take steps to "beat the remedy" on solar cell

and module imports. Foreign producers and importers have every incentive to send any and all

wattage of solar cell and modules that they have - and even to drain inventories and divert horne

market sales - to increase U.S. shipments prior to the date of any Presidential remedy

proclamation. Indeed, recent reports indicate that developers are "rush {ing} to stockpile every

available panel" in advance of a remedy." "{E}verybody is grabbing what they can."!?

According to the vice president of development and strategy at Southern Current LLC, a South

Carolina-based solar company that builds utility-scale and residential projects, rather than

waiting until a deal is financed before purchasing panels, the company has been warehousing

product because of this trade case. As the company's vice president recently noted, "{ w} e are

putting money at risk to buy panels because we are worried that we won't be able to get them.,,20

A pre-remedy surge of solar cell and module imports will further harm the solar cell and

module industry and would undermine any remedy. Inventory levels in the United States are

already elevated. U.S. importer inventories more than quadrupled between 2012 and 2016,

skyrocketing from 303,409 KW to 1,238,641 KW,2I and will likely only increase. In fact, the

total quantity of arranged imports for 2017 - 10.2 GW - is 20.5 percent higher than the annual

import level reported in 2015.22 The build-up of even more inventories prior to the remedy date

would render the proclaimed remedy ineffectual. This is a serious concern given the precarious

18 Joe Ryan and Chris Martin, Solar Developers Hoard Panels as u.s. Tariff Threat, BloombergNews.com (Sept. 14,2017), attached at Exhibit 3. 19 Id. 20 Nichola Groom, Prospect of Trump tariff casts pall over U.S. solar industry, Reuters (July 25, 2017), attached at Exhibit 4. 21 Final Staff Report at III-37 (Table III-IS).

Id. at II-19 (Table II-6). 22

8


state of the domestic industry, which has already suffered multiple bankruptcies, closures, and

other serious indicia of injury.

If a remedy is not issued quickly, not only will other U.S. solar cell and module

producers be forced to shut down, their many suppliers will suffer as well. In fact, since briefing

in the injury phase concluded, Panasonic Eco Solutions Solar America LLC announced that it

was closing its solar ingots production facility in Oregon because of "business conditions in ...

the solar industry," and eliminating nearly 100 jobs.23 Panasonic's factory produced silicon

ingots, which are processed into wafers for use in the production of solar cells and modules.

This closure falls closely behind the announced closure, in August 2017, of Ulbrich Solar

Technologies Inc., a U.S. producer of copper-based components for photovoltaics, due to the

"tremendous pricing pressure" on the North American solar market.i" These recent closures

underscore the urgent need for relief in this case, and reinforce the widespread negative effects

that will occur absent immediate relief.

The most difficult part of this investigation - the injury phase - has concluded. After the

various remedy issues are argued at the Commission's October 3,2017 hearing, a rapid response

will be necessary to remedy the serious injury and prevent a final surge of imports. SolarWorld

thus respectfully urges the Commission to advance a remedy recommendation to the President as

quickly as practicable, and in advance of its November 13, 2017 deadline, if possible.

SolarWorld further requests that the Commission recommend that the President proclaim a final

remedy as soon as possible.

23 Renewablesnow, Panasonic to shut down Oregon ingots factory (Sept. 8,2017), attached at Exhibit 5.

Id. 24

9


III. THE COMMISSION SHOULD RECOMMEND FOUR-YEAR SPECIFIC TARIFFS AND FOUR-YEAR QUOTAS TO REMEDY THE SERIOUS INJURY SUFFERED BY THE DOMESTIC INDUSTRY

To address the serious injury inflicted on U.S. solar cell and module manufacturers, and

to ensure that the U.S. solar industry as a whole, including downstream consumers, remains

viable and a global leader in solar energy, SolarWorld urges the Commission to recommend a

four-year relief program as followsr"

Cells: $0.25 per watt and a quota of 0.22 GW in 2018.

Modules: $0.32 per watt and a quota of5.7 GW in 2018.

Provided below is a detailed explanation of the methodology chosen to determine these tariff and

quota levels," justification for this proposal, and a description of the effects that this proposed

remedy is estimated to have on the U.S. solar industry. SolarWorld notes that this proposal has

been carefully crafted, taking into account the varied nature of U.S. solar producers (cell

producers, module producers, and integrated manufacturers), as well as its effects on the U.S.

solar industry as a whole, including downstream industries and consumers.

A. Description of the Proposed Tariffs and Methodology Used

To correct the ongoing deterioration in the U.S. industry's financial performance and to

provide it with a reasonable and appropriate remedy to the serious injury inflicted by imports,

SolarWorld urges the Commission to recommend four-year specific tariffs" on CSPV cells and

25 Section 2253(a)(3) authorizes the President to "(A) proclaim an increase in, or the imposition of, any duty on the imported article; . . . (C) proclaim a modification or imposition of any quantitative restriction on the importation of the article into the United States; . . . and . . . (J) take any combination of actions listed in subparagraphs (A) through (I)." 19 U.S.C. §2253(a)(3).

26 While SolarWorld has not proposed the imposition of a minimum import price, it does not oppose Suniva's proposal for such a remedy.

27 Under the statute, the President has the authority to "proclaim an increase in, or the imposition of, any duty on the imported article," but limits the rate of duty increased or imposed to no "more than 50 percent ad valorem above the rate (if any) existing at the time the action is taken." 19 U.S.C. §§ 2253(a)(3)(A), 2253(e)(3). The statute further provides that "the term 'ad valorem' includes ad valorem equivalent. .. The term 'ad valorem' equivalent

10

Buiness Proprietary Informal .. Has Been Deleted NON-CONFIDENTIAL VERSION

espy modules. SolarWorld proposes that the tariff be set at $0.25 per watt on eSpy cells and

$0.32 per watt on espy modules in the first year of the relief period. These tariffs are at or

below the 50 percent threshold permitted under the statute."

To ensure the recovery of the U.S. industry, SolarWorld seeks a remedy geared towards

returning prices to a level at which the domestic industry was profitable, while taking into

account projected U.S. demand in 2018. The first part of such a remedy is a tariff (the second

part, the proposed quota, is described infra). To calculate the tariff, SolarWorld has used 2013 to

2015 as the reference period, as shown in the table below. Because of the conditions of

competition in this industry during the period of investigation, as well as the domestic industry's

substantial losses during the period, SolarWorld requests that the maximum allowable tariff of

$0.32 per watt be applied to eSpy modules imports from the covered countries in 2018.

Calculation of the reference period threshold tariff for CSPV products-?

Quantity (kW) 2013-2015 [ ] [ ]

0.32

Value ($1,000) 50%*AUV ($/watt)

In the fourth quarter of 2015, [ ] of solar modules were installed in the United

States, representing the [ ] for installations in U.S. history. 3D As shown

means the ad valorem equivalent of a specific rate .... " 19 U.S.c. §§ 2481(3), 2481(4). See also Remedy Recommendations in Section 201 Cases, USITC GC-H-190, at 10 (July 3, 1984) (explaining that the tariff in a section 201 case "could be in the form of an ad valorem rate (e.g., 10 percent ad valorem), a specific rate (e.g., 5 cents per pound), or a compound rate (e.g., 5 cents per pound plus 10 percent ad valorem)." While SolarWorld acknowledges that this Commission report predates the Uruguay Round Agreements Act which results in certain changes to the relevant provisions of the Trade Act of 1974, this finding remains applicable and relevant nonetheless.

28 19 U.S.C. § 2253( e )(3). The threshold calculations are based on the weighted average unit value of CSPV products during 2013 to 2015.

29 Final Staff Report at C-3 (Table C-l).

30 Solar Energy Industries Association, Solar Market Insight Report (Q4 2016) at 3, excerpts attached at Exhibit 6; Solar Energy Industries Association, Solar Market Insight Report (Q2 2017), at 78, excerpts attached at

11

nBUSine8s Proprietary Informati .. as Been Deleted NON-CONFIDENTIAL VERSION

below, during this quarter, U.S. solar demand was very strong even as module prices ranged

from [ ]:

u.S. CSPV Module Pricing In 2015:Q431

SEIA Report 2017: Q 1 Product 2 Product 3 Product 4 Product 5

[

].32 While recent CSPV product hoarding as a result of this

proceeding has reportedly driven prices somewhat higher.P once such stockpiling ceases, global

prices are likely to return to the $0.35 - $0.40 per watt range, due largely to flat or weaker

demand in China and other markets - the same scenario that occurred during the second half of

2016.34

Exhibit 7. [ ].

31 Solar Energy Industries Association and GTM Research, U.S. Solar Market Insight Report Q4 2015: Executive Summary ("Q4 2015 U.S. Solar Market Insight Report Executive Summary"), excerpts attached at Exhibit 8; Final Staff Report at V-36 to V-39 (Tables V-13 to V-16). 32 Q2 2017 U.S. Solar Market Insight Full Report at 79, excerpts attached at Exhibit 7.

33 See Joe Ryan and Chris Martin, Solar Developers Hoard Panels as U.S. Tariff Threat Looms, Bloomberg (Sept. 11, 2017), attached at Exhibit 3 (reporting the solar developers are suspending construction as the threat of U.S. import tariffs "has driven up pricing and spurred hoarding"); FBR Capital Markets & Co., Total Eclipse: Previewing Solar 201 Trade-Case Options, at 4 (2017), attached at Exhibit 9 (reporting that inventory hoarding is evident from the spike in U.S. prices from the mid-$0.30 per watt global average to $0.50 per watt); Frank Andorka, On this episode of solar hoarders: Developers gobble panels before possible price hike, pv magazine (Sept. 14, 2017), attached at Exhibit 10; Nichola Groom, Prospect of Trump tariff casts pall over U.S. solar industry, Reuters (July 25,2017), attached at Exhibit 4 (reporting that "U.S. solar companies are snapping up cheap imported solar panels ahead of a trade decision by the Trump administration .... " and that" {p }anic buying has sent spot prices for solar panels up as much as 20 percent in recent weeks as installers rush to lock up supplied ahead of potential tariffs.").

34 Notably, current module prices have reportedly spiked to as high as $0.50 per watt due to hoarding, indicative of the ability of the market to absorb such increases in module prices.

12

Buslaess Proprietary Informal .. Has Been Deleted NON-CONFIDENTIAL VERSION

A tariff of $0.32 per watt on modules would therefore bring prices in line with those that

existed during the fourth quarter of 2015 [

].

Estimated effect of a specific tariff on modules of $0.32 per watt on market price levels'" .

Price Price + 32(:/watt Specific Tariff

[ ] [ ] [ 1 [ ] r ] r 1

As demonstrated above, the proposed $0.32 per watt tariff is equivalent to 50 percent of the

average unit value for the representative period, and is therefore consistent with the statute under

19 U.S.C. § 2253(e)(3). Moreover, as Exhibit 11 demonstrates, the proposed tariff would return

system prices back to the level that prevailed in the first quarter of 2016.

SolarWorld is also proposing a $0.25 per watt tariff on imports of CSPV cells. This tariff

is lower than the 50 percent threshold of AUVs for CSPV products during the reference period of

2013 to 2015. Furthermore, the requested duty is less than the 50 percent of the cell average unit

value of[

SolarWorld would like to highlight several points for the Commission's consideration.

First, SolarWorld is proposing the tariff on a cent per watt basis. The ad valorem equivalent is

equivalent to or less than the 50 percent threshold required under the statute. Imposing such a

specific tariff, rather than on an ad valorem basis, is intended to ensure that foreign producers do

not simply absorb the tariff and continue to ship massive volumes of CSPV products to the

35 Q2 2017 U.S. Solar Market Insight Full Report at 79 {a}, excerpts attached at Exhibit 7; GTM Research, PV Pulse (July 2017), tabs 2A {c} and 2D {b}, excerpts attached at Exhibit 12. 36 See Final Staff Report at Table V-17.

13


United States, as they have done with respect to the antidumping and countervailing duty

orders.'? SolarWorld strongly urges the Commission to adopt such an approach.

Second, and related, SolarWorld urges the Commission to recommend development of a

system to address the addition of components, such as inverters, microinverters, etc., that

increase the value of the CSPV product, but do not increase wattage. This is another means of

absorbing duties, as foreign producers will seek to add such components to the imports, but

because the wattage does not change, the tariff will remain the same. This was an issue in the

European price undertaking, and is an area of significant concern to Petitioners here.

B. Description of the Proposed Quotas and Methodology Used

In addition to the tariffs described above, SolarWorld proposes that the Commission

recommend the imposition of a 220 MW quota on CSPV cells and a 5,700 MW quota on CSPV

modules in 2018. As explained in more detail below, the goal of such quotas, in addition to the

proposed tariffs, is to allow the domestic industry to recover market share and profitability while

ensuring sufficient supply in the U.S. market, and simultaneously addressing concerns that

foreign producers will absorb or seek to circumvent the proposed tariffs. Given the

demonstrated willingness of Chinese producers to inflict injury on the U.S. market through

massive supply at low prices (even with the existing antidumping and countervailing duties in

place), SolarWorld believes that such quotas are imperative to ensuring an effective remedy that

allows U.S. production to recover. In short, tariffs alone will not be successful without ensuring

domestic production and market share through a quota.

The methodology used to calculate the quotas is reasonable and straightforward, and

considers estimated demand for 2018, domestic production capacity, excess inventories, the

37 See infra Section III.

14

Business Proprietary InformatiOil U. Boon Deleted


capacity of excluded countries (primarily Singapore). It also allows for excluded thin film

product. With these quota levels, SolarWorld seeks to ensure that the proposed remedy supports

the continued expansion of U.S. solar installations.

With solar installations in 2018 estimated at [ ] GW,38 the goal of the chosen

methodology is to ensure sufficient supply to meet this demand. Based on information collected

by the Commission, domestic CSPV module capacity in 2016 is [ ] GW.39 In addition,

[

].40 Accordingly, SolarWorld has allocated a

conservative estimate of 0.5 GW for Tesla production in 2018. Assuming the capacity in 2018 is

unchanged from 2017 levels, this brings total domestic production capacity to [ ] in 2018.

The methodology then allows for [ ] of imports from Singapore," which were

excluded from the Commission's injury finding. The quota also provides for a thin film solar

panel allowance of 0.9 GW,42 which is included in the [ ] GW of projected installations for

2018, but outside the scope of this case. Therefore, for purposes of establishing a reasonable

quota for CSPV products, SolarWorld assumes that approximately 0.9 GW of total installations

in 2018 will consist of excluded thin film panels.

In addition, market information and questionnaire data demonstrate that solar inventory

levels are already substantially elevated." Importers reported 2017 arranged U.S. imports

38 ], excerpts attached at Exhibit 12. 39 Final Staff Report at C-I0 (Table C-3a).

Id. at III-16.

Id. at IV-llO.

40

41

42 See Testimony of Colin Meehan, First Director of Regulatory and Public Affairs, regarding Ohio House Bill 114, Ohio House of Public Utilities Committee (Mar. 21, 2017), attached at Exhibit 13.

43 U.S. inventories more than quadrupled between 2012 and 2016, reaching more than 1.2 GW in 2016. Staff Report at III-37 (Table III-15).

15

Business Proprietary Informat Has DeeD Deleted NON-CONFIDENTIAL VERSION

totaling [ ] GW,44 but this does not appear to take into account the more recent hoarding of

imports that is reported to have occurred since the filing of the petition as developers rush to

stockpile CSPV cells and panels before a remedy goes into effect." Indeed, this spike is

consistent with importers' prior behavior - in the seven months after the filing of the first

antidumping and countervailing duty cases against Chinese CSPV cells in 2011, imports surged

by [ ] percent." The [ ] percent import surge from the solar AD/CVD case is thus a

reasonable measure of the surge expected here. Applying that surge to the [

] 201747 brings excess inventory to an estimated 2 GW.

The table below summarizes the calculation of the quota:"

Estimated demand for 2018 Minus thin film allowance Minus U.S. domestic capacity Minus estimated Tesla capacity in 2018 Minus Singapore cell capacity Minus excess inventory due to hoarding Proposed Quota

44 Final Staff Report at II-19 (Table 11-6).

GW [ 1 0.9 [ ] 0.5 [ ] 2.0 5.7

45 See Joe Ryan and Chris Martin, Solar Developers Hoard Panels as U.S. Tariff Threat Looms, Bloomberg (Sept. 11, 2017), attached at Exhibit 3 (reporting the solar developers are suspending construction as the threat of U.S. import tariffs "has driven up pricing and spurred hoarding"); FBR Capital Markets & Co., Total Eclipse: Previewing Solar 20] Trade-Case Options, at 4 (2017), attached at Exhibit 9 (reporting that inventory hoarding is evident from the spike in U.S. prices from the mid-$0.30 per watt global average to $0.50 per watt); Frank Andorka, On this episode of solar hoarders: Developers gobble panels before possible price hike, pv magazine (Sept. 14, 2017), attached at Exhibit 10; Nichola Groom, Prospect of Trump tariff casts pall over U.S. solar industry, Reuters (July 25, 2017), attached at Exhibit 4 (reporting that "U.S. solar companies are snapping up cheap imported solar panels ahead of a trade decision by the Trump administration .... " and that "{p }anic buying has sent spot prices for solar panels up as much as 20 percent in recent weeks as installers rush to lock up supplied ahead of potential tariffs."). 46

47

See Import Surge After Solar I, attached at Exhibit 14.

Final Staff Report at II-19 (Table II-6).

SolarW orld notes that Canada is not included in this calculation because it has no cell production. 48

16

Business Proprietary Iofor ••• Has Been Deleted


A quota of 5.7 GW is fully consistent with the statute, which requires "the importation of

a quantity or value of the article which is not less than the average quantity or value of such

article entered into the United States in the most recent 3 years that are representative of imports

of such article and for which data are available .... ,,49 In this case, the pre-surge period of

2013-2015 is the most representative of imports of CSPV modules.l" as it does not include the

surge levels of 2016. Imports (excluding Singapore) during that three-year period averaged

[ ], which is lower than the proposed quota of 5.7 GWY

The quota for cells is calculated as the difference between the domestic module and cell

capacities in 2016. Module capacity is equal to the volume in the Staff Report plus 500 MW

estimated capacity for Tesla. Cell capacity is also from the Staff Report, but is adjusted to reflect

the 300 MW of cell capacity added by Suniva in late 201652 and an estimated 500 MW of cell

production for TeslaiPanasonic. The calculations to establish the 2018 quota on cells are shown

in the following table:

Module capacity in 2016 Plus estimated module capacity for Tesla in 2018 Equals estimated total module capacity in 2018 Estimated total cell capacity in 2016 Plus estimated cell capacity for Tesla in 2018 [ ] [ ]

[

GW

= 1.25 0.50 1.75

0.50

0.22 ]

Thus, the total quota on CSPV products is 5.92 GW (5.7 GW for CSPV modules and 0.22

GW for CSPV cells). The proposed quota will thus allow for the importation of CSPV cells and

49 19 U.S.C. § 2253(e)(4).

50 Imports of CSPV products surged in 2016, a period not representative of CSPV product import levels. This year has therefore been excluded from the representative period. 51 Final Staff Report at C-3 (Table C-la). (Total imports ofCSPV products excluding Singapore).

Id. at III-14. 52

17

Business Proprietary InfonHtI Has Beelll Deleted NON-CONFIDENTIAL VERSION

modules at a level exceeding that that occurred during the representative period (presented in the

table below) and will allow imports sufficient to maintain anticipated consumption in 2018.

Imports of CSPV Products From 2013-2015

2013

Finally, SolarWorld proposes the following mechanisms to monitor and implement the

proposed quota. First, SolarWorld urges the Commission to recommend that the quota be

reviewed and adjusted (1) on a quarterly basis to account for any differences in the estimated

inventory overhang (i.e., the quota should be reduced (or increased) if the inventory overhang

allowance is too low (or too high); and (2) based on the date of implementation; if the quota is in

effect for less than 12 months in 2018, it should be adjusted accordingly. For example, should

the remedy go into effect on April 1,2018, the quota for the remainder of the year would be 4.3

OW (0.75*5.7 OW) for modules and 0.17 OW (0.75*0.22 OW) for cells.

Second, SolarWorld proposes that the quota be allocated to ensure that no more than 60

percent of the quotas on cells and modules are allowed to enter the United States in any six-

month period. This is to ensure that foreign producers and importers do not rush in product in a

manner that continues to seriously injure the U.S. industry.

Third, as detailed infra." SolarWorld also proposes that the Commission recommend that

the implementation of an effective monitoring system, such as a licensing system, that will allow

the U.S. government to enforce the remedy and to monitor and assess trends in the volume of

imports coming in to the United States during the relief period.

53 Id. at C-3 (Table C-la) (excluding Singapore).

See infra Section VI. 54

18


C. The Commission Should Recommend That the Tariffs Be Decreased and the Quotas Increased Gradually Over the Four-Year Period

The statute requires that the President phase down the imposed remedy at regular

intervals during the relief period. 55 SolarWorld believes that the proposed tariffs and quotas will

be most effective, and will best facilitate relief while ensuring adequate demand and supply in

the market, if modified as follows in the second, third, and fourth years of relief:

Cells Year Tariff Quota Year 2 24.5 cents/watt 0.27GW Year 3 24.0 cents/watt 0.32GW Year 4 23.5 cents/watt 0.37GW

Modules Year Tariff Quota Year 2 31 cents/watt 8.50GW Year 3 30 cents/watt 8.75 GW Year 4 29 cents/watt 9.00GW

This sequence is consistent with the President's discretion to determine the appropriate scope

and phasing of the remedy.l" and is designed to match roughly the anticipated pace at which

demand will increase relative to capacity, thereby relieving the conditions that led to surging

imports and serious injury in the first place. The above-referenced quota recommendation

assumes all inventory overhang is used in Year I, and allows a substantial increase in Years 2-4.

D. Other Remedy Elements

The Commission's recommended remedy to the President should include additional

elements to allow U.S. solar cell and module producers to ramp up capacity and production

quickly as well as engage in R&D; stimulate U.S. solar demand; and provide benefits to the

entire U.S. solar value chain. Each of these elements is discussed below.

55 19 U.S.C. § 2253(e)(5) ("An action ... that has an effective period of more than 1 year shall be phased down at regular intervals during the period in which the action is in effect.").

56 See Statement of Administrative Action accompanying the Uruguay Round Agreements Act, H.R. Doc. No. 103-316, vol. 1 (1994) at 293, reprinted in 1994 U.S.C.C.A.N. 4040, 4266 ("The President will retain the discretion to determine the appropriate 'regular intervals' and the amount by which the relief is phased down at those intervals.").

19


1. The Commission Should Recommend the Promotion of Programs for U.S. Solar Innovation and Leadership

The Commission should recommend that the President direct DOE and/or other U.S.

federal government agencies to promote policies and actions that strengthen innovation, R&D,

and high-tech jobs and engineering for U.S. solar cell and module manufacturers, as well as other

manufacturers in the solar value chain. Specifically, the Commission could recommend that

DOE institute a program modeled after the Section 1705 Loan Guarantee Program. This

program, which expired in 2011, provided loan guarantees for renewable energy projects,

including solar manufacturing and solar power generation projects, that employed "new or

significantly improved" technologies.V Notably, other players in the U.S. solar industry agree

that the provision of loan support or guarantees for U.S. suppliers could be an effective tool "to

support real investment in domestic solar manufacturing. ,,58

In addition, the Commission could recommend the establishment of a new fund, based on

collected tariffs, to support U.S. solar cell and module manufacturing and innovation. The fund

could be used to help finance new or additional manufacturing solar cell and module capacity

and R&D, with priority given to companies that recently shut down or reduced

capacity/production in response to adverse market conditions (and could ramp up quickly), and

to companies conducting R&D related to developing innovative solar technology. Existing

tariffs from Solar 1 and Solar 2, and/or from collected Section 201 tariffs, could provide a

57 Final Staff Report at V-52.

58 MJ Shiao and Shayle Kann, 6 Ways to Encourage American Solar Manufacturing Without Import Duties, GTM (Sept. 25, 2017), attached at Exhibit 16.

20


funding source, as GTM has noted." These duties could then be "equitably redirect {ed} toward

new manufacturing investment. ,,60

Such funding must be implemented and available to eligible manufacturers as quickly as

possible. Because of the serious injury to the domestic industry, many U.S. companies face

extremely limited financing options, which could slow their ramp-up and recovery.

2. The Commission Should Recommend That the President Issue an Executive Order Mandating All U.S. Government Agencies to Require the Use of U.S.-Origin Solar Cells and Panels For All U.S. Government Projects

The statute states that the President may "take any other action which may be taken by

the President under the authority of law and which the President considers appropriate and

feasible for purposes of' facilitating the domestic industry'S positive adjustment to import

competition." Consistent with this Administration's focus on American manufacturing,

SolarWorld urges the Commission to recommend that the President issue an Executive Order

requiring that all U.S. government agencies procure American-made solar cells and panels for all

U.S. government projects, and for all projects involving photovoltaic devices that will be used by

a federal agency. Doing so will not only encourage U.S. production and the hiring of American

workers, it will also address the increasing national security concerns arising from reliance on

foreign origin solar cells and panels in the United States.62

SolarWorld notes that procurements of photovoltaic devices by the Department of

Defense ("DOD") are governed by section 858 of the Carl Levin and Howard P. 'Buck' McKeon

59 Jd.

Id.

19 U.S.C. §§ 2253 (a)(3)(I), (a)(1 )(A).

See infra Section C.D.5.

60

61

62

21


National Defense Authorization Act for Fiscal Year 2015.63 Section 858 requires the Secretary

of Defense to ensure that any "covered contract" include a provision requiring that "any

photovoltaic device installed under the contract be manufactured in the United States

substantially all from articles, materials, or supplies mined, produced, or manufactured in the

United States substantially all from articles, materials, or supplies mined, produced, or

manufactured in the United States," unless a determination is made that such a requirement is

inconsistent with the public interest or involves unreasonable costs." The definition of "covered

contract," however, provides a significant loophole that has allowed significant amounts of

foreign-origin product to be used in such projects:

"Covered contract" means a contract awarded by the Department of Defense that provides for a photovoltaic device to be-(A) installed inside the United States on Department of Defense property or in a facility owned by the Department of Defense; or (B) reserved/or the exclusive use of the Department of Defense in the United States for the full economic life of the device.f

This loophole has allowed developers to easily use non-U.S. origin solar products for projects

from which the generated energy is used by the DOD as well as third parties. This is a

significant known gap that SolarWorld urges the Commission, and the President to address. To

do so, SolarWorld urges the Commission to recommend that the President issue an Executive

Order defining the phrase "exclusive use" to mean "a substantial majority." In other words, the

U.S. origin photovoltaic device requirement will apply to any contract awarded by the DOD that

involves the DOD's use of the largest portion of the power generated by the photoelectric device.

Alternatively, and consistent with the President's authority to "submit to Congress

legislative proposals to facilitate the efforts of the domestic industry to make a positive

63 10 U.S.C. § 2534 note.

P. Law 113-291, Sec. 858 (Dec. 19,2014).

10 U.S.c. § 2534 note (emphasis added).

64

65

22


adjustment to import competition ... ,,,66 SolarWorld urges the Commission to recommend that

the following legislative amendment to section 858 of the NDAA:67

Proposed Amendment: Covered contract means a contract awarded by the Department of Defense that provides for a photovoltaic device to be-(A) installed inside the United States on Department of Defense property or in a facility owned by the Department of Defense; or (B) reserved for the exclusive used by the Department of Defense in the United States for the full economic lire of the device.

Such an amendment would secure U.S.-origin product for contracts involving

photovoltaic devices that will be used by the Department of Defense, whether exclusively or in

conjunction with third-party users. This is consistent with the Administration's focus on

Americanjobs and American manufacturing.

3. The Commission Should Review Prior Tax Credit Programs and Recommend Amending the Investment Tax Credit Program

U.S. solar demand is expected to remain robust next year (although falling over 2016

levels) and grow in 2019.68 Indeed, by 2019, more than half of all states in the U.S. will be at

least 100 MW annual state markets." Notwithstanding this projected growth, the Commission

should consider recommending additional actions to help further stimulate U.S. solar demand.

The lTC, which is currently in effect, provides a 30 percent tax credit on capital

expenditures for new solar PV systems on residential commercial properties, and utility-scale

systems. In order to obtain the 30 percent credit, projects must be commissioned by the end of

2019.10 The ITC subsequently drops to 26 percent in 2020, 22 percent in 2021, and after 2021

66 19 U.S.C. § 2253(a)(3)(H).

67 S. 1519, 115th Congo (2017), the National Defense Authorization Act for Fiscal Year 2018, ("NDAA"), as recently passed by the Senate, contains at section 863 of the bill, a sunset for provisions that support Buy America for solar use by the Department of Defense and should be vigorously opposed when the bill goes to conference. 68 U.S. Solar Market Insight Executive Summary Q3 2017 at 6-7, attached at Exhibit 17.

Id.

Id.

69

70

23


drops to zero for residential projects, while commercial and utility projects drop to a permanent

10 percent. Projects commenced before December 31, 2021 may still qualify for the ITC if

placed in service before December 31, 2023.71 As discussed in the Final Staff Report, there are

several other federal tax credits that have expired or have been scaled back in recent years. 72

Given the current landscape with respect to federal tax incentives, and to stimulate

increased solar demand in the United States, the Commission should review and reassess the

utility of previous federal programs, such as the MTC, PTC, and Treasury 1603 program, and

should recommend amending the ITC program. As previously indicated, the ITC drops from 30

percent to 26 percent in 2020. The Commission should recommend that the ITC credit remain

30 percent from January 1, 2020 and thereafter for projects using domestically produced cells

and panels" - a proposal that GTM notes would help support domestic manufacturing.?' By

contrast, the ITC would progressively decline for projects using foreign produced CSPV cells

and panels in the manner currently prescribed (i.e., 26 percent in 2020,22 percent in 2021, and 0

percent for residential/10 percent for commercial and utility thereafter). This would allow a

transition period for ongoing and planned projects, while using U.S. tax dollars to support

domestic solar manufacturing in 2020 and beyond.

4. The Commission Should Recommend International Negotiations to Address Global Solar Cell and Module Overcapacity

71 Id.

72 See Final Staff Report at V -52. The Manufacturing Tax Credit ("MTC"), which allocated $2.3 billion in investment tax credits up to 30 percent of investment in manufacturing facilities of clean energy products, expired in 2013. The Production Tax Credit ("PTC"), which encouraged solar energy production by providing a 10-year production-based tax credit equal to 2.3 cents/kw, expired at the end of2013. The cash grant program (also referred to as the Treasury 1603 program), which provided a cash grant equal to up to 30 percent of eligible capital expenditures in lieu of the Investment Tax Credit ("ITC") for commercial solar projects, expired at the end of2016. 73 This would not affect other photovoltaic technologies, such as thin film.

74 MJ Shiao and Shayle Kann, 6 Ways to Encourage American Solar Manufacturing Without Import Duties, GTM (Sept. 25, 2017), attached at Exhibit 16.

24

Bus.Bess Proprietary loformatkta Has Been Deleted


Section 2253(a)(3)(G) states that the President may "initiate international negotiations to

address the underlying cause of the increase in imports of the article or otherwise to alleviate the

injury or threat thereof.?" The massive level of global overcapacity in the solar industry is well

documented in the Commission's Staff Report," in SolarWorld's pre- and posthearing injury

briefs,"? and in the numerous articles and reports cited therein. This global overcapacity is a key

cause of the serious injury suffered by the domestic industry, and addressing this overcapacity is

imperative to ensuring a healthy domestic, and global, solar industry. Accordingly, the

Commission should recommend negotiations to address global solar overcapacity in its report to

the President.

5. The Commission Should Recommend That the President Direct the Department of Homeland Security to Conduct a Study of the Cyber, Electrical Grid, and National Security Risks of Using Foreign Origin Solar Panels in the United States

The Commission should recommend that the President direct the Department of

Homeland Security to conduct a study evaluating the cyber, electrical grid, and national security

risks of using foreign origin solar panels in the United States. In its most recent August 2017

issue, Photon International profiled [

].78 The article noted that:

[

75 19 U.S.c. § 2253(a)(3)(O).

76 See Final Staff Report at IV-9, IV-I0, and IV-13 (reporting that estimated global solar cell capacity in 2015 was 63 OW, global solar module capacity was 63 OW, and global installations in 2015 were 51 OW).

77 See SolarWorld's Injury Prehearing Brief at 16-19; Letter from Wiley Rein LLP to Sec'y Int'l Trade Comm'n re: Crystalline Silicon Photovoltaic Cells (Whether or Not Partially or Fully Assembled Into Other Products): Posthearing Brief on Injury of SolarWorld Americas, Inc. (Aug. 22, 2017) ("SolarWorld's Injury Posthearing Injury Brief') at 3 and Exhibit 1, pg. 42-47. 78 Photon International (Aug. 2017) at 3, excerpts attached at Exhibit 18.

25

Business Proprietary Informalea Has Been Deleted


The cyber, national security, and electrical grid threats are real. Indeed, in 2012, the U.S.

Department of Homeland Security responded to roughly 200 "cyber incidents" across critical

infrastructure sectors, nearly half of which targeted at the electrical grid." According to recent

reports:

A major breach in the electric system could cost as much as $1 trillion. And China, Russia and North Korea are all trying to break into the grid, potentially to disrupt the U.S. electricity supply the way Russia has in Ukraine in recent years.

With increasingly more foreign-made solar cells/panels containing smart chips, these solar

products are ripe for hacking by foreign powers. One does not need to look any further than the

U.S. government's 2014 indictment of several of China's military for hacking SolarWorld as an

example of this risk." A U.S. government study would help further identify and expand upon

these risks, as well as provide recommendations for mitigating them. 82

6. The Commission Should Recommend Immediate Certification of all Shuttered Facilities for Trade Adjustment Assistance

The Commission should recommend that the Department of Labor ("DOL") immediately

certify workers from U.S. solar facilities that shuttered during the POI for benefits and services

under the Trade Adjustment Assistance ("TAA") program. As described by DOL:

The Trade Adjustment Assistance (T AA) Program is a federal program that provides a path for employment growth and opportunity through aid to US workers who have lost their jobs as a result of foreign trade. The TAA program

79 [d.

80 Joshua M. Pearce, How solar power can protect the US military from threats to the electric grid, Los Angeles Times (Sept. 14,2017), attached at Exhibit 19.

81 Diane Cardwell, Solar Company Seeks Stiff Us. Tariffs to Deter Chinese Spying, The New York Times (Sept. 1,2014), attached at Exhibit 20. 82 [d.

26


seeks to provide these trade-affected workers with opportunities to obtain the skills, resources, and support they need to become reemployed. 83

To receive these benefits, affected workers must file a petition with DOL. After the agency

investigates the facts behind the petition, it issues a determination whether to grant the petition to

certify. If DOL grants the petition, only then can the affected workers apply to their State

Workforce agency for T AA benefits and services.I"

To expedite this process, and to ensure that displaced workers in the U.S. solar cell and

module industry are able to get back on their feet as quickly as possible, the Commission should

recommend that DOL immediately certify TAA benefits for the workers in any of the nearly 30

facilities that shuttered during the POI that have not yet been certified.

7. The Commission Should Recommend That the President Begin Settlement Negotiations on the Existing U.S. AD/CVD Orders Against Solar Products from China and Taiwan, and Chinese AD/CVD Orders Against Solar-Grade Polysilicon

SolarWorld has been forced to use trade remedies twice in the last four years to address

dumping and subsidies by two of the largest solar producers in the world - China and Taiwan.

In the first case (i.e., Solar I), targeting solar cells and modules from China, the Commission

found unanimously that the industry was materially injured due to dumped and subsidized

imports, resulting in the imposition of substantial antidumping ("AD") and countervailing

("CVD") duties in 2012.85 In the second case (i.e., Solar II), necessitated by a loophole in Solar

I, the Commission again returned an affirmative finding of injury, due to dumping and/or the

83 Department of Labor Trade Adjustment Assistance, attached at Exhibit 21.

SolarWorld Americas was notified on September 27,2017 that DOL approved its TAA application.

Final Staff Report at 1-8.

84

85

27


provision of subsidies by China and Taiwan, resulting in the imposition of significant AD duties

on Taiwan, and both AD and CVD duties on China. 86

The Commission should recommend that the President pursue potential negotiations to

settle the existing U.S. AD and CVD orders on solar products from China and Taiwan. The

purpose of these negotiations would be to settle both Solar I and Solar II with respect to duty

deposits (and not necessarily to limit Chinese imports of solar products into the United States). 87

The Commission also should recommend that the President pursue settlement

negotiations with respect to China's trade duties on imports of U.S. solar-grade polysilicon. In

January 2014, China imposed provisional antidumping duties of up to 57 percent and a subsidy

rate of 2.1 percent on imports of polysilicon from the United States. 88 These tariffs were

imposed as retaliation for the lawful trade duties imposed by the U.S. Department of Commerce

in Solar I and Solar II. The negative impact of these retaliatory duties on U.S. polysilicon

producers has been harmful to the U.S. industry and its workers, resulting in productions

curtailments, layoffs, and closures, among other injurious effects.t" Therefore, in addition to

negotiating the settlement of the existing duties in Solar I and Solar II, the Commission should

also recommend that the President pursue potential settlement of China's polysilicon trade case,

with the aim of providing the U.S. polysilicon industry meaningful access to the Chinese market.

This remedial measure would serve to benefit the entire U.S. solar value chain.

86 Id. at 1-8 and 1-9.

87 These proposed negotiations should not in any way delay the effective date of relief pursuant to 19 U.S.C.§ 2253(d). 88 Final Staff Report at 1-60. Duties also were imposed on Korean imports of solar-grade polysilicon.

89 See, e.g., William Pentland, China Scores Big Win In Solar Trade Battle As REC Silicon Shutters US Polysilicon Product, Forbes (Feb. 8,2016), attached at Exhibit 22.

28

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8. The Commission Should Recommend That the President Direct the U.S. Department of Energy to Fully Fund Its SunShot Initiative Research Grants During the Remedy Period

DOE's SunShot Initiative is a national effort to support solar energy adoption by funding

cooperative research, development, demonstration, and deployment projects by private

companies and others." Much of this funding includes a cost share component, whereby the

recipient of the funding must contribute, in part, to the cost of the research, development,

deployment, etc.?' [

]. The Commission should therefore recommend that the President direct DOE to

fund the full cost of its grants during the remedy period.

IV. JUSTIFICATION FOR THE REMEDY PROPOSAL

A. A Tariff and Quota Combination is the Most Effective Means of Providing Relief to the Industry

The statutory language provides that the Commission is required to "recommend the

action that would address the serious injury ... to the domestic industry and be most effective in

facilitating the efforts of the domestic industry to make a positive adjustment to import

competition.T'" In other words, the Commission is required to recommend the most efficient

remedy - a solution best matched to the cause of the serious injury. SolarWorld respectfully

submits that a combined remedy of tariffs and quotas is necessary to fulfill this statutory

90 Department of Energy Sunshot Initiative, attached at Exhibit 23.

91 Department of Energy, Department of Energy Announces $7 Million to Reduce Non-Hardware Costs of Solar Energy Systems (Nov. 15,2011), attached at Exhibit 24. 92 19 U.S.C. § 2252(e)(1).

29

Business Proprietary Information Has Been Deleted


directive." Here, the serious injury was caused by increases of low-priced imports of CSPV

cells and panels," forcing domestic prices, sales volumes, and profits to plummet. Foreign

producers have also demonstrated their willingness to ship massive volumes of product to the

United States, irrespective of price, and to absorb duties, as evident from the increase in imports

of Chinese product (by 732.3 percentj" during the POI despite the imposition of antidumping

and countervailing duty orders in 2012 and 2014.96 The remedy necessary to address these

factors is the simultaneous imposition of a tariff and a quota.

The proposed tariff is necessary to increase the price of imports and provide price relief

to U.S. manufacturers. While the tariff by itself would increase prices and volume sold by

domestic producers, a tariff alone will not address the foreign producers' continued efforts to

expand their capacity irrespective of demand and offload their massive excess supply in the U.S.

market. To do so, foreign producers have been willing to drop their prices, leading to the large

price declines and excessive inventories in the U.S. market in 2016, causing serious injury to

U.S. producers. The only way to address this push into the U.S. market and ensure that the large

volumes and deteriorating prices that prevailed in 2016 do not recur is to also impose a quota on

imports. The proposed quota was carefully calculated, as described supra, to ensure sufficient

93 The statute provides for the imposition of tariffs and quotas, among other specified remedies, and "any combination of actions .... " 19 U.S.C. §§§ 2253(a)(3)(A), (a)(3)(C), (a)(3)(J). 94 Final Staff Report at C-3 (Table C-1a) [

Id.

]. 95

96 See Crystalline Silicon Photovoltaic Cells, Whether or Not Assembled Into Modules, from the People's Republic of China, 77 Fed. Reg. 73,017 (Dep't Commerce Dec. 7, 2012) (countervailing duty order) ("Solar I CVD Order"); Crystalline Silicon Photovoltaic Cells, Whether or Not Assembled Into Modules, from the People's Republic of China, 77 Fed. Reg. 73,018 (Dep't Commerce Dec. 7, 2012) (am. final determination of sales at less than fair value and antidumping duty order) ("Solar I AD Order"); Certain Crystalline Silicon Photovoltaic Products From Taiwan, 80 Fed. Reg. 8,596 (Dep't Commerce Feb. 18,2015) (antidumping duty order) ("Solar II Taiwan AD Order"); Certain Crystalline Silicon Photovoltaic Products From the People's Republic of China, 80 Fed. Reg. 8,592 (Dep't Commerce Feb. 18,2015) (antidumping duty order; am. final affirmative countervailing duty determination and countervailing duty order) ("Solar II China AD and CVD Orders").

30


supply in the U.S. market, and when combined with the proposed tariff, is the most effective

remedy to address the causes of the serious injury to the domestic industry, and to allow the

industry to adjust to import competition during the relief period.

Both tariff and quota limits are also justified because many foreign producers may

otherwise simply absorb some or all of a tariff and will continue to ship large volumes to the

United States. The Commission has seen evidence of this in the prior antidumping and

countervailing duty investigations against CSPV imports from China. In 2012 and early 2015,

the Commission and the U.S. Department of Commerce found that imports of CSPV products

from China were subsidized and were being sold at less-than-fair-value in the United States."?

The antidumping margins in the 2012 orders ranged from 18.32 percent to 249.96 percent,"

while the countervailing duty margins ranged from 14.78 percent to 15.97 percent." Similarly,

the antidumping margins in the 2015 orders ranged from 26.71 percent to 165.04 percent and the

countervailing duty margins ranged from 27.64 percent to 49.21 percent.l'" These substantial

margins have not deterred low-priced Chinese imports from the U.S. market, however. In fact,

the data collected by the Commission demonstrates that Chinese imports have increased 732.3

percent since 2012.101 Moreover, producers have demonstrated that they can quickly and easily

shift their production and supply chains to avoid duties, as evident from Chinese producers' shift

to sourcing cells from Taiwan after the first AD/CVD investigation, and their subsequent funding

97

98

99

100

See Solar 1 CVD Order; Solar 1 AD Order; Solar 11 China AD and CVD Orders.

Solar 1 AD Order.

Solar 1 CVD Order.

Solar 11 China AD and CVD Orders.

Final Staff Report at C-3 (Table C-la). 101

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of additional solar capacity in countries like Malaysia, Thailand, and Vietnam, after the second

AD/CVD investigations. 102

B. A Four-Year Period of Relief is Essential to Give the U.S. Industry the Ability to Implement Measures Intended to Allow the Industry to Adjust to Import Competition

The injury to the domestic solar cell and module manufacturing industry is severe,

requiring a full four-year period for producers to recover, implement measures to compete, and

to allow the entire U.S. solar industry to adjust to import competition. The domestic industry's

operating margin in 2016 was [ ] percent, and the U. S. industry [ ].103

Relief should be sufficient to provide durable relief to the domestic industry that allows it regain

profitability, while incentivizing foreign investment in domestic cell and capacity expansion.

Four years of relief is appropriate for two reasons. First, the domestic industry has been

significantly weakened by successive surges of imports. On an operating basis, the domestic

industry [ ] the PO I and should, at a minimum, have four years to

remediate the serious injury. Second, due to the nature of competition in this industry, a four-

year period of relief is needed to incentivize additional domestic and foreign investment in U.S.

cell and module capacity. This investment is much less likely to occur if the remedy is less than

four years due to the time it takes to construct new U.S. facilities, and the limited payback

period.

C. The Proposed Tariff-Quota Combination Will Not Impede Access to Imports

Both SolarWorld's proposed tariff and quota are necessary to effectively remedy the

serious injury experienced by the domestic industry during the POI. Because of the adverse

102 See, e.g., Letter from Wiley Rein LLP to Sec'y Int'l Trade Comm'n re: Crystalline Silicon Photovoltaic Cells (Whether or Not Partially or Fully Assembled Into Other Products): Prehearing Brief on Injury of Solar World Americas, Inc. (Aug. 8, 2017) ("SolarWorld Prehearing Injury Brief') at 1-2, 21-24. 103 See Final Staff Report at C-4 (Table C-1a).

32

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pricing and volume effects resulting from the import surge, many domestic producers were

forced to shut their doors, despite robust and growing u.s. solar demand. While the domestic

producers that have survived did try to expand capacity, continuously falling prices and rapidly

increasing import volumes prevented these efforts from succeeding. The combination of

SolarWorld's proposed tariffs and quotas is an optimal remedy for the domestic industry because

it would ensure that U.S. prices are sufficient for the domestic industry to regain profitability,

while allowing domestic producers to increase their market share and prevent injurious import

surges.

The $0.32 per watt module tariff equates to approximately 44 percent ad valorem, which

is necessary to offset the harm suffered by domestic producers during the POI. Neither a lower

tariff nor a high quota will modify the behavior of foreign producers who have sought to gain a

greater foothold in the U.S. market through distortive trade practices, and have engaged in

rampant circumvention to avoid paying duties. SolarWorld's proposed tariffs and quotas will

also incentivize foreign producers to establish production and invest in the United States. As

previously indicated, several foreign producers are already planning to establish facilities in the

United States depending on the nature of the relief. 104

SolarWorld recognizes that the higher import prices resulting from a tariff may have a

temporary effect on import volumes - 2018 import volumes are expected to be approximately 40

percent lower than 2016 volumes. ios However, the prolonged period of harm resulting from the

import surge can only be adequately addressed, as the safeguard statute requires.l'" though a

104 Julia Pyper, Foreign Solar Manufacturers Weigh Opening US Facilities as Tariff Decision Looms, GreentechMedia.com (Sept. 20, 2017), attached at Exhibit 1. 105 Compare the combined cell module import quota for 2018, [ ], with CSPV product imports in 2016

] of [ ] GW. See Final Staff Report at C-3 (Table C-l).

19 U.S.c. § 2252(e). 106

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sufficiently high tariff. Moreover, notwithstanding this anticipated decline in import volumes,

the Commission should also impose a quota on solar cell and module imports. A quota is

necessary to prevent the type of import surges that seriously harmed the domestic industry both

prior to and during the POI. Foreign producers have demonstrated their ability to move solar

cells and modules into the U.S. market at any price in order to offload excess supply. A quota

will prevent this from occurring. Yet, a quota alone is insufficient to effectuate the statutory

requirement that the remedy "address th{is} serious injury." For example, a quota on its own

would incentivize Chinese producers to compete in higher-priced market segments more

vigorously on price, resulting in lost domestic sales and volume in market segments where U.S.

producers are relatively strong. This would severely undermine the remedial effects of

SolarWorld's proposed remedy. Furthermore, a quota by itself would result in any quota rents

accruing to foreign producers rather than the U.S. government. For these reasons, the

Commission should propose a remedy that includes both a tariff and a quota.

The Commission also should apply the remedial tariffs in addition to existing duties on

CSPV imports from China and Taiwan. As the Commission is aware, producers in both

countries are already subject to significant duties. Nonetheless, both China and Taiwan were

major import sources during the POI. In fact, in 2016, China and Taiwan were the [

] largest sources of solar module imports, respectively, together supplying nearly [

percent of apparent consumption.l''? As a legal matter, the duties on Chinese and Taiwanese

solar products render these U.S. imports fairly traded imports. As such, they are no different

than imports originating from other countries that are not subject to a trade order, and should be

subject to the full remedy proposed by the Commission. Indeed, in the section 201 investigation

107 Final Staff Report at 11-4.

34


on steel, the Commission recommended a safeguards remedy on steel imports in addition to

certain antidumping duties already in place. 108

Significantly, the proposed remedy will have little impact on the adoption of solar energy

in the United States. As is evident from industry publications, installations in 2017 and 2018 are

projected to return to their long-term trend after their record increase in 2016.109 Installations

have been driven, in part, by the lTC, renewable portfolio standards, and various state and local

incentives. This positive demand environment will remain in place throughout the remedy

period (2018-2021). The overall downward trend in solar cell and module prices will remain in

place as well. While Petitioners disagree that these trends had anything to do with the injury

they experienced during the POI, it is well known that production costs of solar cells and

modules have trended lower over time due to efficiency gains and innovation. There are no

signs that this long-term demand trend in the United States will change.

In the short-term, the impact of SolarWorld's proposed remedy on consumption is likely

to be minimal, in part because import inventories are increasing substantially. Because importers

have built up inventories in anticipation of a remedy, as discussed above, and Tesla is increasing

capacity, there is unlikely to be any reduction in the supply available to consumers in 2018. In

2019, consumption is forecast to increase, and Tesla's 2 GW facility is likely to reach its full

capability by the end of the year. SolarWorld has also begun to ramp up its production and

rehire workers.!" Thus, even without any foreign investments in U.S. cell and module

production, which is unlikely if a tariff is imposed, U.S. production capacity will be substantially

108 Steel, Inv. No. TA-201-73, USITC Pub. 3479 (Dec. 2001) at 2.

109 Solar Energy Industries Association and GTM Research, U.S. Solar Market Insight Report Q3 2017: Executive Summary (Sept. 11,2017) ("Q3 2017 U.S. Solar Market Insight Report Executive Summary") at 6-7, 19, excerpts attached at Exhibit 17.

110 See Press Release, SolarWorld Americas, Inc., SolarWorld Americas, responding to trade vote, moves to gear up production, hiring, BusinessWire.com (Sept. 25, 2018), attached at Exhibit 2.

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higher than it was at the end of 2016. In addition, the remedy will encourage the relocation of

solar production, investment, and jobs to the United States. The combination of a tariff and

quota, as well as a progressively higher quota during the remedy period, will ensure that U.S.

consumers will have access to adequate supplies at reasonable prices.

V. THE PROPOSED REMEDY WOULD HAVE POSITIVE EFFECTS ON THE U.S. SOLAR CELL AND MODULE MANUFACTURING INDUSTRY, AND WILL NOT NEGATIVELY IMPACT DEMAND

A. The Projected Effect of the Proposed Remedy on the U.S. Industry Would be Beneficial

The remedy proposed above would allow the domestic eSpy cell and module industry to

increase production, capacity utilization, and employment while earning a sustainable profit on

its operations. As shown in the table below, the proposed remedy would allow domestic

producers to increase cell production by 71 percent and module production by 61 percent. Sales

quantities would increase by 84 percent and revenues would increase by 116 percent. With the

remedy in place, operating margins would increase from [ ] percent of net sales in the base

scenario to [ ] percent of net sales, an increase of 20.1 percentage points. On a per unit basis,

the remedy would permit the domestic industry to earn [ ] in gross profits per watt and

[ ] cents per watt in operating profits.

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Table 1: Effects of the Proposed Remedy on Domestic CSPV Operations, 2016111

Cell Production Module Production Net Sales Quantity

Net Sales Value COGS Gross Profit SG&A Op. Income

Net Sales AUV Unit COGS Unit Gross Profit Unit SG&A Unit Op. Income

Gross Margin COGS / Net Sales Operating Margin

Base S

Remedy S Ch

Percent Change

71%

cenario cenario an2e Quantity (Kilowatts)

Value ($1,OOOs)

Unit Value ($/KW)

Percent of net sales

61% 84%

116% 73%

95%

18% -6%

6%

Percentage Points

20.1% -20.1% 21.3%

In addition, the tariff is expected to promote foreign investment in u.s. cell and module

manufacturing, leading to larger increases in output and domestic employment over the

adjustment period. Indeed, recent reports indicate that several foreign manufacturers are already

III Results of an income statement model assessing the impact of price increase and 100 percent capacity utilization due to the tariff and quota. The model uses firm-specific production and financial data on cell and module operations in 2016. (Final Staff Report at I1I-18 (Table I1I-4), III-24 (Table III-7) and Appendix E.) The tariff allows domestic cell and module prices to increase to the new import AUV (2016 import AUV plus the tariff). Producers with cell capacity greater than module capacity sell their cells commercially in the United States. The model accounts for firm-specific fixed COGS and SG&A expenses, and module COGS increase in response to the increase in cell prices. Results reflect operations on CSPV products: the sum of commercial cell and module operations.

37


considering openmg U.S. facilities if tariffs are imposed.l'? Such investment in U.S.

manufacturing and jobs is key to ensunng a viable U.S. solar industry, and one that can

successfully adjust to imports during the relief period. The proposed tariff and remedy are

needed to spur such investment. Absent this remedy, subsidized foreign producers will continue

to supply the U.S. market from abroad and harm what remains left of the U.S. solar cell and

module industry.

B. The Proposed Remedy is Intended to Ensure That There Is Sufficient Supply in the U.S. Market During the Period of Adjustment

The remedy detailed above is intended to ensure an adequate supply of solar cells and

modules during each year of the adjustment period by expanding domestic production capacity

and output, and implementing annual reductions in the tariff and increases in the proposed quota

level. It is in Petitioners' best interest to ensure that downstream consumers of cells and modules

continue to operate and grow. Thus, SolarWorld has carefully measured and crafted the proposed

remedy to ensure this outcome.

The proposed remedy is intended to prevent the recurrence of import surges arising from

the current global supply-demand imbalance and to prevent the attendant price erosion when

such surges occur, while simultaneously allowing U.S. installations to continue to grow. To this

end, the proposed quota levels would allow sufficient volumes of solar imports to enter the

United States, and are calculated based on projected increases in U.S. demand and future

increases in U.S. production that the remedy will encourage.

As explained above, in 2018, the first year of the remedy, the proposed quota considers

domestic production of solar cells and modules and the volume of imports currently in inventory

112 Julia Pyper, Foreign Solar Manufacturers Weigh Opening US Facilities as Tariff Decision Looms, GreentechMedia.com (Sept. 20, 2017), attached at Exhibit 1.

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to ensure adequate supply in the U.S. market. Specifically, in 2018, domestic production

capacity will be approximately [ ] GW, 113 not including any additional production that Tesla is

expected to bring online. As discussed previously, the sharply increased levels of solar cell and

module imports in inventory would preclude any significant reductions in imports once a tariff is

imposed. The proposed quota was thus calculated to ensure adequate supply of cells and

modules in 2018.

In 2019, demand is projected to increase by [ ] percent, to approximately [ ],114

approximately [ ] higher than in 2018. Tesla has indicated that by 2019, its production

capacity will reach approximately 2 GW,115 or 1.5 GW higher than its estimated production in

2018; this 1.5 GW, along with increased imports resulting from a decline in the proposed tariff

and increase in the proposed quota, will supply additional U.S. demand. Finally, in years 2 to 4

of the adjustment period, U.S. demand will be served by growing U.S. solar cell and module

capacity, which includes the expanded capacity of existing U.S. producers (e.g., Tesla) as well as

new capacity from additional facilities built in the United States. Imports will also increase in

those years due to the declining tariff and increasing quota.

C. The Proposed Remedy is Projected to Create Thousands of Solar Jobs

The tariff-quota remedy combination is projected to increase U.S. production, which will

necessarily require that U.S. companies hire additional workers, creasing both manufacturing and

non-manufacturing jobs at these companies. Based on the projected increase in domestic output

during the remedy period, the number of production-related workers is expected to increase by

113 Final Staff Report at III-24 (Table III-7).

114 See GTM Research, u.s. Solar Outlook Under Section 201 (June 2017) Data Spreadsheet, attached at Exhibit 12.

115 See Fred Lambert, Tesla starts solar cell production at Gigafactory 2 in Buffalo, raises annual capacity goal to 2 GW, Electrek.co (Aug. 31, 2017), attached at Exhibit 25.

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approximately 8,300 to 9,600 workers, as shown in Exhibit 26.116 Capacity expansions would

also increase the number of non-production employees at U.S. CSPV producers by an estimated

3,400 to 3,900 workers.l'? Overall, the proposed remedy would create approximately 11,800 to

13,600 new direct jobs. This is the minimum number of anticipated jobs because it assumes that

CSPV imports fully meet their quota. If domestic production increases beyond the estimated [

GW of assumed for 2021, the direct employment effects will be larger.

Not included in this estimate is the number of indirect jobs that will also be created along

the solar supply chain, particularly in upstream sectors such as polysilicon, glass, aluminum, and

paste. To estimate the indirect jobs supported by the new jobs in solar manufacturing, a supplier

jobs multiplier is applied to the estimated increase in production jobs.!" In total, the remedy is

expected to create a minimum of 30,800 to 35,500 direct and supplier jobs (approximately 7,400

to 8,400 jobs per GW of production). If domestic capacity increases further, the employment

effects will be even larger.

While opponents of Section 201 relief provide inaccurate and speculative predictions of

the price increases and resultant job losses that could occur, their claims fail to adequately

consider the significant expansion in domestic production that is expected during the adjustment

period, the incremental effects of technology improvement on manufacturing costs over the

period, reductions in the balance of system costs during the period, and limited supply-side

substitution that could offset a portion of any decline in installations that would otherwise occur.

D. The Proposed Remedy Would Have Limited, if Any, Effect on Demand and Downstream Consumers

116 This estimate assumes that labor productivity stays the same (high end estimate) or increases by the same rate as it did during the POI (low end estimate). 117 This estimate is based on the [

]. lIS The employment multiplier used is [ ]. See Employment Analysis, attached at Exhibit 26.

40

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The impact of the proposed tariff and quota remedy on downstream sectors depends on

the amount of foregone installations that will result. The effects on downstream consumers are

likely to be insignificant, despite claims to the contrary. As explained below, the proposed

remedy is expected to result in only modest declines in consumption during the adjustment

period. This is particularly true as compared to the relatively steep installation declines already

expected in 2017 year-over-year (and which are entirely unrelated to the proposed remedy).

Put simply, the proposed remedy would have a limited impact on market prices,

consumption levels, consumers, and downstream industries. The proposed tariff is intended to

return U.S. prices to levels reported in late 2015/early 2016, i.e., at a time when U.S. solar

installations were increasing at record pace. Any volume effects of a price increase will be

mitigated by the fact that solar cells/modules represent only a small portion of the total installed

cost of a solar system.

For instance, as Exhibit 11 demonstrates, the proposed $0.32 per watt tariff on solar

modules is expected to return photovoltaic system prices to the levels that prevailed in the first

quarter of 2016.119 At that time, U.S. solar installations were in the midst of their largest

expansion in history, growing by [ ] percent from 2015 to 2016Yo Indeed, in 2016, "solar was

the largest source of new electric generating capacity.t'l'" This demonstrates that U.S. demand

can enjoy sustained growth, even at prices resulting from the proposed remedy.

The volume effect of the tariff increase will be further limited by three fundamental

economic characteristics of the solar industry. First, solar cells/modules represent only a small

119 See System Prices at Exhibit 11.

120 Solar Energy Industries Association and GTM Research, U.S. Solar Market Insight Report 2016 Year in Review: Executive Summary (Mar. 9, 2017) ("2016 U.S. Solar Market Insight Report Executive Summary") at 6, excerpts attached at Exhibit 3 to Prehearing Brief. 121 Final Staff Report at V-11.

41

Business Proprietary Informal .. Has Been Deleted


portion of the total installed cost of a solar system. According to GTM Research, eSpy modules

represent [ ] percent of the overall system price in the residential segment, and [ ] percent in the

utility segment.F' Other installation costs, such as balance of system ("BaS") costs, inverters,

labor, land, financing, and permitting costs, comprise the majority of the consumer's total cost.

This means that an increase in module prices leads to much smaller increases in total solar

installation prices.

The figure below illustrates solar modules' low and decreasing share of total system costs

in the residential, commercial (non-residential), and utility (fixed-tilt and tracking) segments.F'

By the first quarter of 2017, modules comprised [ ] percent of total costs in the residential

segment, [ ] percent in the non-residential segment, and [ ] percent and [ ] percent in the two

utility segments, respectively. Moreover, the module's share of system costs is declining over

time. From the first quarter of 2016 to 2017, the residential share [ ] percentage

points, non-residential share [ ] percentage points, fixed-tilt utility [

percentage points, and tracking utility [ ] percentage points.

122 GTM Research, U.S. Solar Outlook Under Section 201: The Trade Case's Impact on U.S. Solar Demand (June 2017) at 8, excerpts attached at Exhibit 27.

Solar Energy Industries Association and GTM Research, U.S. Solar Market Insight Report Q2 2017: Full Report (June 7, 2017) ("Q2 2017 U.S. Solar Market Insight Full Report") at 67, excerpts attached at Exhibit 7. 123

42

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The second factor limiting consumption declines is the relevance of federal, state, and

local government incentives to demand, particularly in the utility segment. GTM Research

reports that the [

].125 Consumers

using [ ] are less price sensitive, meaning that the proposed remedy will have less impact

on the quantity they consume.

Third, the combination of the low cost-share of solar products and government-mandated

demand means that demand for solar installations is relatively inelastic. For example, one recent

study found the elasticity of demand in the residential segment for solar in Connecticut to be -

124 Q2 2017 U.S. Solar Market Insight Full Report at 69, 71, 73, and 74, excerpts attached at Exhibit 7.

125 GTM Research, U.S. Solar Market Insight: Q4 2016: State and Future of U.S. Solar Markets (Dec. 14, 2016), at 18, excerpts attached at Exhibit 6.

43


0.65.126 In other words, a ten percent increase in the price of a solar installation would lead to a

6.5 percent decrease in the quantity of solar installations.

For these reasons, the proposed remedy is projected to have limited effects on

consumption and downstream consumers.

VI. ANTI-CIRCUMVENTION EFFORTS SHOULD FORM AN INTEGRAL BASIS OF THE COMMISSION'S RECOMMENDATIONS

In its injury vote, the Commission found that two of the United States' Free Trade

Agreement ("FT A") partners - Mexico and South Korea - had contributed importantly to the

serious injury suffered by the domestic solar industry, and determined to include them in

relief. 127 The United States' other FT A trading partners were excluded from the injury finding. 128

However, the remedy recommended by the Commission should affirmatively address the

potential circumvention of relief through those FTA partners, most importantly Canada and

Singapore, that the Commission did not include in its injury finding. 129

As an initial matter, the Commission's injury finding does not foreclose the agency from

tailoring its remedy to address circumvention; further, the injury finding does not limit the

President's authority to take the actions he deems fitting to address increased imports.P" Further,

the NAFTA Implementation Act does not bind the President to the injury determination made by

the Commission with respect to NAFTA-country imports, but permits him to make his own

126 Kenneth Gillingham and Tsvetan Tsvetanov, Hurdles and Steps: Estimating Demand for Solar Photovoltaics, July 8, 2017 (NBER Working Paper), http://environment.yale.edulgiIlingham/GillinghamTsvetanov SolarDemandCT.pdf, excerpts attached at Exhibit 28. Note that the study was done using the Connecticut solar market, a region not known for its consistent sunshine. A similar study of other states (California, for example) would find an even lower elasticity of demand.

127 US lTC, News Release 17-133, Crystalline Silicon Photovoltaic Cells (Whether or Not Partially or Fully Assembled into Other Products) (Sept. 22, 2017), https:llwww.usitc.gov/press room/news release/20171 er09221l832.htm. 128 Id. 129 See Exhibit 31 (detailing SolarWorld's specific recommendations on anti-circumvention efforts).

See 19 U.S.C. § 2254. 130

44


determination.P! Likewise, other U.S. FTAs and their implementation acts generally provide

both the Commission and, independently, the President with great leeway to include the relevant

FTA partners within Section 201 relief, and separately to implement anti-circumvention

programs where imports from such partners have been excluded from such relief. l32

Importantly, the Trade Act of 1974 explicitly provides for action to forestall and combat

circumvention of global safeguard relief. In particular, 19 U.S.C. § 2253(a)(2)(H) requires the

President to take an import relief program's "potential for circumvention" into account when

making a final determination regarding remedy, while 19 U.S.C. § 2254(b)(2) gives the President

the authority to take additional action to eliminate any circumvention.J" Likewise, the NAFT A

Implementation Act permits the President to take action with respect to any NAFTA countries

excluded from Section 201 relief should there be a surge in imports from such countries.P" The

text and implementation acts for other FTAs to which the U.S. is a member do not contain

explicit provisions for addressing circumvention, but neither do they forbid it. Rather, as

131 Compare 19 § U.S.C. 337l(a) with 19 U.S.C. § 3372(a).

132 See, e.g., Free Trade Agreement Between the United States of America and Singapore, U.S.-Sin., Jan. 1, 2004, at art. 7.5 ("SUSFT A"), included as Exhibit 34 to Letter from Wiley Rein LLP to Sec'y Int'l Trade Comm'n re: Crystalline Silicon Photovoltaic Cells (Whether or Not Partially or Fully Assembled Into Other Products): Posthearing Brief on Injury of Solar World Americas, Inc. (Aug. 22, 2017) ("SolarWorld Posthearing Injury Brief'); see also 19 U.S.C. § 3805 note, United States - Singapore Free Trade Agreement Implementation Act, Pub. L. No. 108-78, § 331, 117 Stat. 948, 964 (2003) (requiring Commission and President, in a Section 201 proceeding, to make determination as to whether Singapore is a "substantial cause of serious injury" to a U.S. industry, but making exclusion of Singapore permissive in such cases); Dominican Republic-Central America Free Trade Agreement, Aug. 5, 2004, at art. 8.6 ("DR-CAFTA FTA") , attached at Exhibit 29; 19 U.S.C. § 4001 note, DR-CAFTA Implementation Act, Pub. L. No. 109-53, § 331; 119 Stat. 463, 489 (2009) (requiring Commission and President, in a Section 201 proceeding, to make determination as to whether DR-CAFTA countries are a "substantial cause of serious injury" to a U.S. industry, but making exclusion of such countries permissive in such cases); U.S.-Chile Free Trade Agreement, U.S.-Chile, June 6, 2003, at arts. 8.1 - 8.7 ("U.S.-Chile FT A"), attached at Exhibit 30; 19 U.S.C. § 3805 note, United States - Chile Free Trade Agreement Implementation Act, Pub. L. No. 108-77, Title III, 117 Stat. 909, 933-939 (2003) (providing for bilateral safeguard and textile/apparel safeguard measures, but not disturbing United States' ability to include Chile within global safeguard measures under Section 201). 133 19 U.S.C. § 2253(a)(2)(H); 19 U.S.C. § 2254(b)(2).

19 U.S.C. § 3372(c). 134

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described above, they provide latitude toward the inclusion ofFTA countries within Section 201

relief, and the fashioning of effective monitoring and anti-circumvention mechanisms.!"

As detailed in SolarWorld's injury briefs, the rules of origin for solar products under

certain FT As creates a strong incentive for circumvention of relief through FTA countries,

particularly given the evident ability of foreign solar manufacturers to rapidly relocate

production operations in response to trade remedies.P" Lending even greater urgency to this

issue, producers in certain FTA countries, most particularly Canada, use only third-country cells

in their production, and [

]. It is therefore imperative that the Commission build strong, effective anti-

circumvention monitoring into its remedy recommendation, lest any relief be fatally

compromised.

Indeed, the very nature of global solar production contributes to the risk of

circumvention. As the Staff Report indicates,[ ] into the United States are [

] .137 However, FTA rules aside, it is the location of cell manufacture that

dictates the origin of modules for most imports. Modules may be assembled in countries other

than those where the incorporated cells were produced, and shipped to the United States from

135 See, e.g., SUSFTA at art. 7.5, included as Exhibit 34 to SolarWorld Posthearing Injury Brief; see also 19 U.S.C. § 3805 note, United States - Singapore Free Trade Agreement Implementation Act, Pub. L. No. 108-78, § 331, 117 Stat. 948, 964 (2003) (requiring Commission and President, in a Section 201 proceeding, to make determination as to whether Singapore is a "substantial cause of serious injury" to a U.S. industry, but making exclusion of Singapore permissive in such cases); DR-CAFTA FTA at art. 8.6, attached at Exhibit 29; 19 U.S.C. § 4001 note, DR-CAFTA Implementation Act, Pub. L. No. 109-53, § 331; 119 Stat. 463, 489 (2009) (requiring Commission and President, in a Section 201 proceeding, to make determination as to whether DR-CAFTA countries are a "substantial cause of serious injury" to a U.S. industry, but making exclusion of such countries permissive in such cases); U.S.-Chile FT A at arts. 8.1 - 8.7, attached at Exhibit 30; 19 U.S.C. § 3805 note, United States - Chile Free Trade Agreement Implementation Act, Pub. L. No.1 08-77, Title III, 117 Stat. 909, 933-939 (2003) (providing for bilateral safeguard and textile/apparel safeguard measures, but not disturbing United States' ability to include Chile within global safeguard measures under Section 201).

136 SolarWorld's Injury Prehearing Brief at 57-59; SolarWorld's Injury Posthearing Brief at 13-15 and Exhibit 1, pp. 48-68. 137 Final Staff Report at C-7 (Table C-2) and C-9 (Table C-3a).

46

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those countries. This complicates the ability of CBP and other stakeholders to ensure that

safeguard remedies are being appropriately applied based on the origin of the cells in the

imported modules. These facts also support implementation of a comprehensive import

monitoring program, as well as other efforts to forestall and combat circumvention of relief.

Below, SolarWorld briefly summarizes its analysis of the risk of circumvention through

excluded countries, as well as its suggestions for anti-circumvention efforts. A complete analysis

of the risk of circumvention through excluded countries, as well as SolarWorld's specific

recommendations for anti-circumvention efforts, can be found at Exhibit 31.

Risk of Circumvention Through Canada. NAFTA's rules of origin permit solar products

that have undergone no Canadian production operations to be considered Canadian for duty

purposes, while the agreement's separate marking rules operate so that modules assembled in

Canada using non-Canadian cells qualify not only for duty-free entry but to be marked as

Canadian goods.!" These rules incentivize relocation of module assembly to Canada, without

any Canadian cell production, as well as transhipment of finished goods through Canada. Adding

to this risk, Canadian producers have no cell production of their own, and already [

]_139 Further, Canada's largest

producer, Canadian Solar, is Chinese-owned and has numerous production facilities in China and

other non-excluded countries. 140

138 See Harmonized Tariff Schedule of the United States ("HTSUS") Revision 1 (2017), General Notes, p. 172, ~ 12(t) at Chapter 85, ~ 142; 19, C.F.R. §§ 102.11 and 102.20, https://hts.usitc.gov/view/General%20Notes? release=Revisionl (rules for HTSUS Provisions 8541-8542); see also 50 Cust. B. & Dec. 20 (May 18,2016) at 47- 54 (applying both origin rules and marking rules in assessing eligibility of imported solar products for NAFT A duty free/origin status, attached at Exhibit 32. 139 Final Staff Report at IV -19.

140 Where are Solar Panels Made and Should You Care? EnergySage.com (June 5, 2016), attached to SolarWorld's Injury Prehearing Brief as Exhibit 2-40; Mark Osborne, Canadian Solar making substantial manufacturing capacity expansion in 2016, PV-Tech.org (Nov. 10, 2015), attached to SolarWorld's Injury

47

BuliMss Proprietary InformatiOB Has Been Deleted


Risk of Circumvention Through Singapore. The Singapore-U'S. Free Trade Agreement's

Integrated Sourcing Initiative ("lSI") provides for duty-free entry of any solar product shipped to

the United States from Singapore, regardless of where the product was actually made."" While

U.S. law requires goods not substantially transformed in Singapore to be marked as products of

other countries.l'" the lSI nonetheless incentivizes transshipment of non-excluded goods through

Singapore. Adding to the risk of circumvention, Singapore's sole solar producer is a subsidiary

of a Chinese state-owned enterprise. In 2015, REC Solar was purchased by Bluestar

Elkem/Elkem A.S., wholly-owned subsidiaries of China National Chemical Corporation.v"

Further, the company [ ].144

Risk of Circumvention Through Other FTA Countries. Many of the United States'

other FTAs permit duty-free importation of solar products so long as 30-35 percent of the

products' value is attributable to FTA-territory processing. 145 Recent history confirms that solar

producers are readily able to move production operations, or open new ones in new countries, in

response to trade remedies. This raises the possibility that module assembly operations will be

moved or expanded in those countries, to process non-FI'A cells for export to the United States

Prehearing Brief as Exhibit 2-51. The Staff Report [ ]. Final Staff Report at IV -17 (Table IV -7).

141 SUSFTA at art. 3.2 and Annex 3(B), attached at Exhibit 33; see also 19 U.S.C. § 3805 note, United States - Singapore Free Trade Agreement Implementation Act, Pub. L. No. 108-78, § 202(a)(3), 117 Stat. 948, 952-53 (2003); see also HTSUS Revision 1 (2017), General Notes, pp. 200-01, ~ 25(b), and pp. 209-18, ~ 25(m) (implementing lSI rules).

142 19 U.S.C. § 1304; 19 C.F.R. § 134.1(b); see also CBP Ruling Letter N288870 (Aug. 23, 2017), attached at Exhibit 34; CBP Ruling Letter N217299 (June 4, 2012), attached at Exhibit 35. 143 Final Staff Report at IV -109.

144 See id., Ian Clover, Elkem finalizes REC Solar purchase, PV-Magazine (May 15, 2015), attached at Exhibit 36; see also China's Bluestar to buy REC Solar for $640 million, Reuters.com (Nov. 24, 2014), attached at Exhibit 37.

145 See, e.g., HTSUS Revision 1, General Notes, p.480, ~ 29(b), and pp. 551-52, ~ 29(n) at Chapter 85, ~ 81(C) (2017) (laying out DR-CAFTA rule of origin for solar products); [d. at General Notes, p. 749, ~ 34(b), and p. 808, ~ 34(0) at Chapter 85, ~ 79(C) (laying out U.S.-Colombia FTA rules of origin for solar products).

48


Summary of Recommended Anti-Circumvention Efforts. SolarWorld describes its

recommended anti-circumvention efforts in detail in Exhibit 31. In brief, however, SolarWorld

believes that the Commission should recommend that goods required to be marked as originating

outside of FTA countries be treated as non-FTA goods for purposes of any remedy. Further, an

effective anti-circumvention program should allow for comprehensive monitoring of imports,

similar to the Steel Import Monitoring and Analysis (SIMA) system established by the

Commerce Department after the steel safeguards investigation, so that surges in imports from

FT A countries can be discerned and stakeholders, including the Commission and the President,

can react to such surges in a timely way. It should also provide stakeholders with origin

information regarding imports of solar products, including the origin of the cells and the location

of module assembly, and permit U.S. Customs & Border Protection to identify the origin of cells

through objective evidence (i.e., cell origin marking). The Commission should also recommend

the renegotiation of the NAFT A rules of origin for solar products, as well as the implementation

of special certification procedures for imports alleged to be NAFTA-originating Canadian

products. Finally, the Commission should recommend that the Administration engage with the

government of Singapore for a temporary removal of solar products from SUSFTA's lSI list.

VII. THE DOMESTIC SOLAR INDUSTRY'S ADJUSTMENT TO IMPORTS

The relief recommended by the Commission should be aimed giving the U.S. solar

products industry the "breathing space" to adjust positively to competition with imports.

Elsewhere in this brief, SolarWorld has recommended a variety of options aimed at providing

such relief, as well as forestalling and combatting circumvention. Here, SolarWorld lays out its

vision for what the solar industry in the United States should look like after safeguard relief is

phased out. SolarWorld also recounts the specific actions that the current members of the

49

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industry have committed to undertake during the relief period. These efforts, which involve

expenditures of approximately $[ ], will increase U.S. product range, capacity, and

employment, while enabling cost savings that will permit the U.S. industry to compete more

effectively against imports. Coupled with effective relief, SolarWorld believes that these efforts

are realistically targeted at achieving healthy competitive conditions for the U.S. industry, and

enabling the industry to compete effectively against imports on a going-forward basis.

In assessing the domestic solar industry's plan for adjusting to imports, and its

commitments to undertake significant investment to achieve such adjustment, the Commission

should pay no heed to entities such as the Solar Energy Industry Association, which have

complained that U.S. solar manufacturers did not file an adjustment plan within 120 days of the

petition.!" As even SEIA admits.l"? the Trade Act of 1974 does not require the filing of an

adjustment plan at alL 148 Moreover, a robust, realistic plan adjustment plan depends on the scope

of the injury determination, as well as on a determination of what relief efforts may be most

effective given that scope. A such, it would have made little sense for the domestic industry to

prematurely present a plan that would be overtaken by events, and which would have to be

substantially revised. In this regard, SolarWorld would also like to point out that, [

], incorporating the proposed adjustment plan into the remedy

proposal permits greater accuracy as to the proposed adjustments.

146 See Letter from Hughes Hubbard & Reed LLP to U.S. Int'l Trade Comm'n, re: Crystalline Silicon Photovoltaic Cells (Whether or Not Partially or Fully Assembled into Other Products), Inv. No. TA-201-075; Comments on Petitioners' Failure to Submit Adjustment Plans (Sept. 19,2017) ("Sept. 19 Letter"). 147 Id. at 1. 148 19 U.S.C. §§ 2252(a)(1) & (4).

50


With the benefit of the agency's injury finding, and in light of the domestic industry's

evaluation of potential remedies and its own current position as of the date of this filing,

SolarWorld is able to present an adjustment plan that it believes is both realistic and achievable.

SolarWorld stresses, however, that achievement of this adjustment plan requires effective import

relief that enables u.s. producers to achieve profitability during the relief period. Further, in

light of the technologically complex and competitive nature of this industry, it is not possible to

forecast every investment that will be made by every U.S. producer during the relief period.

Below, SolarWorld first describes the conditions that it believes will characterize a

healthy U.S. solar industry, and which form goals for the domestic industry's position as it

emerges from the relief period. SolarWorld then recounts the commitments that both SolarWorld

and other companies made in their questionnaire responses. Finally, SolarWorld briefly

addresses the fact that both its overall vision for the industry, and the ability of individual firms

to enact the commitments described in their questionnaire responses, necessarily depend on

effective relief.

A. The Conditions That Will Characterize a Healthy Industry

As the Commission has found, the U.S. solar industry has suffered serious injury by

reason of global imports of solar products. Many producers have exited the market entirely;

factories have closed, jobs have been lost, and profits have sunk, even as demand continues to

rise. In order to adapt successfully to imports, the solar industry will need to become profitable

once again, increase production, increase the diversity of its product offerings, and revive

upstream production that has relocated overseas. Below, SolarWorld describes some of the

conditions that will characterize a healthy, post-relief industry that can compete effectively with

imports. SolarWorld believes that these conditions form a reasonable goal for the industry, and

51


can be achieved given the commitments described in subsection VILB below, and given relief

that provides an effective breathing space for the industry to recover from the serious injury that

it has suffered.

More producers. SolarWorld envisions that a healthy industry would be comprised of at

least 5-6 competing U.S.-based cell/module producers. Each of these producers will have 1 GW

or more of capacity, in order to achieve scale and raw material purchasing power. SolarWorld

believes that, with a minimum of 5-6 such producers, the U.S. solar products industry will be

well placed to provide competitively priced product to consumers across the country, and across

distribution channels.

Lowered production costs. U.S. production costs have risen as producers exited the

market in the face of import competition, and the remaining producers were unable to finance

improvements to their facilities that would permit cost savings. A healthy industry, however, will

have lowered production costs that not only enable U.S. producers to compete with imports in

the U.S. market, but abroad. Given growing global solar demand, SolarWorld expects that a fully

adjusted U.S. solar industry will be fully competitive in the U.S. market and able to export a

substantial portion of its yearly production by the end of a safeguards remedy period.

Competitive for government contracts. A healthy U.S. industry should be fully

competitive to supply all U.S. military and federally funded projects. This means an industry that

has multiple producers with sufficient production capacity and product diversity to supply such

projects, and whose cost structure enables it to compete effectively for such business.

A revived upstream production chain. It is not only U.S. production of solar cells and

modules that has suffered during the past five years. U.S. production operations for upstream

inputs into solar production, such as polysilicon, wafers, ribbon, solar glass, and aluminum

52


frames have also suffered, and are currently very limited. SolarWorld envisions a U.S. solar

products industry that can access U.S.-based supply for a growing portion of its needs, and

becomes progressively less dependent on import supply. 149

New R&D partnerships. SolarWorld envisions that each U.S. producer in a revived and

healthy solar industry will be engaged in research & development partnerships with one or more

major U.S. research universities. Such public/private research, including partnerships supported

by the U.S. Department of Energy, will lead to new solar patents, new and more efficient solar

products, and increased cost savings in production operations. SolarWorld notes that independent

commentators have pointed to vigorous R&D as a potent means for restoring U.S. solar

competitiveness. 150

Increased cell and module efficiency. SolarWorld believes that, given effective relief,

the U.S. industry can continue to improve cell and module efficiency every year. The continuing

development of more efficient products will contribute to the overall competitiveness of U.S.

solar products, both in the U.S. market and abroad, and will increase solar product demand.

Long term supply contracts. The enhanced production capacity, product diversity, and

cost savings achieved during the relief period will permit U.S. solar companies to form long-

term, stable commercial supply relationships with major U.S. companies, commercial installers,

and corporate leaders. U.S. producers have already developed top-notch customer service and

relations programs in an attempt to compete with imports, but have lost ground to the low prices

offered by such products, affecting sales, production, and product offerings. During the relief

149 Injury Hearing Transcript, Crystalline Silicon Photovoltaic Cells (Whether or Not Partially or Fully Assembled Into Other Products), Inv. No. TA-201-75 (Injury) (Aug. 15,2017) (Mr. McCarty) at 117-119,216 (testifying to U.S. production losses in upstream inputs into solar manufacturing).

150 6 ways to encourage domestic manufacturing without import duties, GreentechMedia.com (Sept. 25, 2017), attached at Exhibit 16.

53

DR· usiness Proprietary fofor.ai_ as Been Deleted NON-CONFIDENTIAL VERSION

period, the U.S. industry will aim to regain this ground and to transform their superior service

into relationships that will enable to industry to effectively compete with imports after the relief

period ends.

B. U.S. Solar Producers Have Committed to Significant Adjustment Measures During the Relief Period

In their responses to the Commission's questionnaires, the remaining members of the

domestic solar products industry described in detail specific investments that they would be able

to undertake during a relief period. These efforts, which involve expenditures of approximately

$[ ], will increase u.s. product range, capacity, and employment, while enabling cost

savings that will permit the U.s. industry to compete more effectively against imports. Coupled

with effective relief, SolarWorld believes that these efforts are realistically targeted at achieving

healthy competitive conditions for the U.s. industry, and enabling the industry to compete

effectively against imports on a going-forward basis.

1. SolarWorld is Committed to Engaging in Significant Measures During a Period of Temporary Relief to Allow it to Adjust to Imports

In its questionnaire response, SolarWorld described approximately $[ ] in

investments it plans to undertake during the relief period in order to affirmatively adjust to

import competition.P' The proposed investments will increase SolarWorld's [

V52 Indeed, in the few days since the Commission's injury vote, SolarWorld

151 ]. 152 Id.

54

HBusiaae8S Proprietary fnformatiH • een Deleted NON-CONFIDENTIAL VERSION

has already begun hiring back workers and ramping up its production efforts in anticipation of

meaningful relief. 153

SolarWorld proposes to use the relief period to implement investments aimed at

[

].154 In particular, SolarWorld proposes to spend more than $[ ] to

[

].155 In conjunction with this increase in [ ], the company also

proposes to increase its [

In addition to increasing its overall [

], SolarWorld has also committed to [ ] through an approximately

$[ ] investment to produce [ ].157 A further

$[ ] million would go toward increasing [

2. Other Producer Commitments

SolarWorld is not the only U.S. manufacturer that has committed to taking concrete steps

to adjust to import competition, and compete more effectively against imports, during the relief

period. Producers other than SolarWorld have stated that they will invest a collective $[

] in an effort to adjust to import competition.

153 SolarWorld Americas, Responding to Trade Vote, Moves to Gear up Production, Hiring, BusinessWire.com (Sept. 25, 2017), attached at Exhibit 2. 154 ]. 155 Id.

Id.

Id.

Id.

156

157

158

55

aBusiDess Proprietary (ofor.o" as Been Deleted NON-CONFIDENTIAL VERSION

Such adjustments include:

• $[ ] by [ ] to [

• $[ ] by [ ] to [

];160

• $[ ] by [ ] to [ ];161

• $[ ] by [ ] to [ ]; 162

• $[ ] by [ ] to [

],163

• $[ ] by [ ] to [

], and a further $[ ] aimed at [

];164 and

• $[ ] by [ ] to [

],165

159 ]. 160 Id.

Id.

Final Staff Report at 0-9 (Table 0-2).

161

162

163 ]. 164 Final Staff Report at 0-9 (Table 0-2).

Id. 165

56


C. The Measures Described Above are Based on Estimated Profitability During a Temporary Relief Period

The goals and commitments described above are specific and achievable, but only to the

extent that the remedy ultimately recommended and adopted in this case is sufficient to allow the

U.S. industry to generate profits during the relief period. The remedy being proposed by the

industry is aimed at achieving this goal, thus allowing the relief period to be of maximal

effectiveness. Further, in light of the technologically complex and competitive nature of this

industry, it is not possible to forecast every investment that will be made by every new or

existing producer during the relief period. Nonetheless, the commitments laid out above provide

a realistic framework for the U.S. solar industry's actions during the relief period, based on the

current status of their facilities and equipment. If the ultimate remedy is sufficient to allow

sustained operating profitability during the relief period, these adjustments can be implemented

and will equip the producers to compete effectively against imports once relief is phased out.

57


VIII. CONCLUSION

For the foregoing reasons, SolarWorid respectfully requests that the Commission

recommend that the President impose tariffs and quotas on CSPV cells and modules, as well as

the additional remedial elements described above.

imothy C. Brightbill, Esq. Maureen E. Thorson, Esq. Tessa V. Capeloto, Esq. Usha Neelakantan, Esq.



58

NON-CONFIDENTIAL VERSION Business Proprietary Information Has Been Deleted

EXHIBIT LIST

Exhibit Exhibit Security No.

1 Julia Pyper, Foreign Solar Manufacturers Weigh Opening US Facilities Public as TarifJ Decision Looms, GreentechMedia.com (Sept. 20, 2017)

2 Solar World Americas, Responding to Trade Vote, Moves to Gear up Public Production, Hiring, BusinessWire.com (Sept. 25, 2017)

3 Joe Ryan and Chris Martin, Solar Developers Hoard Panels as Us. Public TarifJThreat, BloombergNews.com (Sept. 14,2017)

4 Nichola Groom, Prospect of Trump tariff casts pall over Us. solar Public industry, Reuters (July 25, 2017)

5 Renewablesnow, Panasonic to shut down Oregon ingots factory (Sept. Public 8,2017)

6 Solar Energy Industries Association, Solar Market Insight Report (Q4 BPI 2016) (Excerpt)

7 Solar Energy Industries Association, Solar Market Insight Report (Q2 BPI 2017) (Excerpt)

8 Solar Energy Industries Association, Solar Market Insight Report Q4 Public 2015

9 FBR Capital Markets & Co., Total Eclipse: Previewing Solar 201 Public Trade-Case Options (2017)

10 Frank Andorka, On this episode of solar hoarders: Developers gobble Public panels before possible price hike, pv magazine (Sept. 14, 2017)

11 System Prices BPI

12 [ ] (Excerpt) BPI

Testimony of Colin Meehan, First Director of Regulatory and Public 13 Affairs, regarding Ohio House Bill 114, Ohio House of Public Utilities Public

Committee (Mar. 21, 2017) /

14 Import Surge After Solar I BPI

15 Reserved Public

16 MJ Shiao and Shayle Kann, 6 Ways to Encourage American Solar Public Manufacturing Without Import Duties, GTM (Sept. 25, 2017)

17 U.S. Solar Market Insight Executive Summary Q3 2017 Public

1



18 Photon International (Aug. 2017) (Excerpt) BPI

19 Joshua M. Pearce, How solar power can protect the US military from Public threats to the electric grid, Los Angeles Times (Sept. 14, 2017)

20 Diane Cardwell, Solar Company Seeks Stiff U.S. Tariffs to Deter Public Chinese Spying, The New York Times (Sept. 1,2014)

21 Department of Labor Trade Adjustment Assistance Public

22 William Pentland, China Scores Big Win In Solar Trade Battle As REC Public Silicon Shutters US Polysilicon Product, Forbes (Feb. 8,2016)

23 Department of Energy Sunshot Initiative Public

24 Department of Energy, Department of Energy Announces $7 Million to Public Reduce Non-Hardware Costs of Solar Energy Systems (Nov. 15,2011)

25 Fred Lambert, Tesla start solar cell production at gigafactory 2 in Public Buffalo, raises annual capacity goal to 2 GW, Electrek (Aug. 31, 2017)

26 Employment Analysis BPI

27 GTM Research, U.S. Solar Outlook Under Section 201: The Trade BPI Case's Impact on U.S. Solar Demand (June 2017)

28 Kenneth Gillingham and Tsvetan Tsvetanov, Hurdles and Steps: Public Estimating Demand for Solar Photovoltaics, July 8, 2017

29 Dominican Republic-Central America Free Trade Agreement, Aug. 5, Public 2004 (Excerpt)

30 U.S.-Chile Free Trade Agreement, U.S.-Chile, June 6, 2003 (Excerpt) Public

31 Anti-Circumvention Analysis BPI

32 50 Cust. B. & Dec. 20 (May 18,2016) Public

33 Free Trade Agreement Between the United States of America and Public Singapore, U.S.-Sin., Jan. 1,2004 (Excerpt)

34 CBP Ruling Letter N288870 (Aug. 23, 2017) Public

35 CBP Ruling Letter N217299 (June 4, 2012) Public

36 Ian Clover, Elkem finalizes REC Solar purchase, PV -Magazine (May Public 15,2015)

37 China's Bluestar to buy REC Solar for $640 million, Reuters.com (Nov. Public 24,2014)

2



38 Christian Roselund, Possible exemptions to Section 201: A lifeline for Public the US. market? PV -Magazine.com (Sept. 25, 2017)

39 CBP Ruling Letter HQ H261693 (Sept. 16,2015) Public

40 USTR Fact Sheet, Singapore FTA: Integrated Sourcing Initiative (July Public 2003)

41 CBP Ruling Letter HQ H263571 (Nov. 4, 2015) Public

42 CBP Ruling Letter N055630 (Mar. 31, 2009) Public

43 Synrad Inc., Laser Marking in Manufacturing (last visited Sept. 26, Public 2017)

44 Coherent-ROFIN, Laser Marking of Solar Cells and Modules (last Public visited Sept. 26, 2017)

S. Rein et al., Single-Wafer Tracking in PV Production Lines, Paper 45 presented at 23rd European Photovoltaic Solar Energy Conference and Public

Exhibition (Sept. 1-5, 2008)

Sven Wanka et al., Tra. Q - Laser Marking For Single Wafer

46 Identification - Production Experience From 100 Million Wafers, Paper Public presented at 26th European Photovoltaic Solar Energy Conference and Exhibition (Sept. 5-9,2011)

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