Solar Tariffs and Section 201 Update*

On January 22, 2018, the Trump Administration imposed 30 percent tariffs on foreign-made solar cells and modules. The decision follows a unanimous decision by the U.S. International Trade Commission (USITC) recommending trade remedies, including tariff-rate quotas and ad valorem tariffs of up to 35% on solar goods. 

The Trump Administration’s solar tariffs were implemented in response to a Section 201 petition filed jointly by Suniva, a Chinese-owned, U.S.-based solar company, and SolarWorld Americas, Inc., an American subsidiary of a German solar company. Both of these solar companies have filed for bankruptcy in the U.S. 

These temporary remedies are authorized under Section 201 of the Trade Act of 1974 (“Section 201”). Section 201 is based on Section XIX of the General Agreement on Tariffs and Trade (“GATT”), as further defined in the WTO Agreement on Safeguards and requires the U.S. International Trade Commission (USITC) to investigate petitions filed by an industry or private company that seek a determination of injury caused by imports. Unlike antidumping and countervailing duty laws, Section 201 does not require a finding of unfair trade practices to substantiate the use of import remedies. Instead, Section 201 authorizes the President to grant temporary relief by raising duties or implementing nontariff barriers to trade if private complainants can demonstrate that increased imports are or threaten to be a “substantial cause of serious injury” to a domestic company or industry. 

Section 201 has seen very scant use, especially when compared to more conventional trade remedies such as antidumping or countervailing duty measures. Out of a total of 72 Section 201 investigations filed since 1974, only nine have resulted in actionable policy. Therefore, the current use of safeguard measures in the solar industry is an anomaly in US trade law and policy. 

These solar tariffs are likely to face legal opposition from trading partners. A previous safeguard case occurred in 2001 when the Bush Administration imposed high tariffs on steel imports. This move resulted in swift condemnation from the international community: the European Community (“EC”) sued the U.S. for violating international trade law and the WTO’s dispute settlement body found in favor of the EC. The Bush Administration ultimately relented and removed the tariffs.

When countries implement WTO-compliant tariffs, the WTO stipulates that the implementing country must compensate their trading partners in other areas or concede to trading partners implementing their own barriers. The European Union has recently suggested that it would not challenge the solar tariffs if the U.S. were to compensate the EU in other trade areas. The U.S. has indicated that it will not compensate in other areas, meaning that the solar tariffs are likely to face legal challenges at the WTO.  

Sequoia Legal can help you and your trading partners navigate the legal requirements and ongoing changes relating to tariffs.

*This publication does not necessarily deal with every important topic or cover every aspect of the topics with which it deals. It is not designed to provide legal or other advice.