What do solar anti-dumping tariffs mean for Australia?

A little over a year ago, Australia’s only PV module manufacturer initiated an Anti-Dumping claim over the importation of Chinese PV products. In the simplest of terms, the claim is based on the allegation that damage was caused to local industry by importers selling solar product below cost (defined as the Chinese market price) – more commonly known as product dumping.

A whole lot of time has passed and I suspect, tens of thousands of hours and several million dollars too. There has undoubtedly been lots of work for lawyers and people filling out complicated forms. Similar anti-dumping cases were launched and won in the US and Europe over the last couple of years which resulted in an increase in PV prices and deep divisions in the industry who on the one hand, wanted prices to stay low to keep the market stimulated and on the other, wanted a chance to compete fairly. Notably, Canada recently announced preliminary findings in it’s own case but on the flipside, India recently announced it was dropping its tariff case which has been underway since 2011.

The Indian case is interesting one because reading between the lines, the country is so desperate for energy and so hungry for solar, they are prepared to accept solar at any price that they can get it, it would appear and therein lies one of the most challenging moral aspects of this issue.

Intriguingly, with the benefit of hindsight the substantial tariffs applied in other locations (ie price increases) didn’t stop the industry in it’s tracks, but certainly increased prices and in the case of Europe, contributed to a substantial slowdown in the entire market. In Europe’s case, the anti dumping tariffs landed right at the same time as a slowdown in subsidies, fiscal belt tightening and other issues that compounded together and resulted in the loss of tens of thousands of jobs.

Sound familiar?

Although I appreciate it’s hard for Governments to stay on top of all the factors affecting an industry – I wish they bloody well would. In Australia’s case, we have seen virtually all our support mechanisms wound back, the RET and other Government bodies remain under sustained attack and on top of that foreign exchange rates have already risen by around 30% in the last 6 months or so. At the macro level, timing is everything.

Perhaps most sadly of all, these cases inevitably cause bitter divisions within industry. Suffice to say, the process and rules are very complex, not to mention how it all relates to free trade agreements and consequently, political influence.  However, there are essentially two core components to the argument :

1. That the Government of China was somehow complicit in the deal by offering unfairly low finance or other support and,
2. That as a result, or in addition to this some manufacturers sold product materially below the Chinese domestic market price (including a profit margin) during a certain period of time (anything less than 2% dumping margin is defined as immaterial)

The outcome (which must be proven) is that damage was caused to local manufacturing. A couple of weeks ago a preliminary statement was released by the Anti Dumping Commission which said “The Commission also advised that at this stage of the investigation there is insufficient evidence to support the claim that the prices of the PV modules or panels in the domestic Chinese market were influenced by the GOC (Government of China)”

Simply put, the Government of China was found not to have unfairly influenced the price of solar panels being imported into Australia – so strike item 1 off the dumping claim for now.

The second relates to four manufacturers that were selected as being representative of suppliers who provided significant volume into Australia during the investigation period. The four companies investigated were ReneSola, ET Solar, Suntech and Trina Solar. The last of the results from the preliminary investigations were released yesterday and announced that they had found dumping margins of  -0.3%, 3.6%, 8.7% and 4.0% respectively. Critically, several manufacturers I spoke to highlighted that the investigation has seen a lot of toing on froing on the methods, calculations and ultimately the findings. One put it to me that it happened so much, that every time an immaterial number was arrived at the investigators came back for another go, with new formula’s that found it was suddenly material again; as if someone was pushing them to find a material result.

It is important to understand that the preliminary findings published yesterday are subject to revision – it is far from a done deal and I suspect we’ll see continued challenges and debate over the final numbers, and consequent ruling which are due no later than April 7th this year. Once the final number is locked in for the importers under investigation, then the relevant commissioners and ministerial staff will announce a final ruling on what will apply to every solar manufacturer importing into Australia (except those found to be less than 2%) and over what period.

What it means

If we assume that the current dumping margins stick then several things could eventuate. We could hypothetically see an across-the-board tariff of around 5% applied to all affected solar products which equates to around  3c-4c/Watt on the cost. Or, although it looks extremely unlikely, we could see a floor price set with importers forced to pay tariffs until they reach this price (such as is the case in Europe). Either way there could be some additional work to do at the customs point for importers.

It could play out a number of ways and I stress, I’m speculating at this point in the process, so we’ll just have to wait and see. Coming back to the point at hand however, the preliminary findings, even if upheld, make an interesting story because what can see is that compared to other countries, Australia has not seen anything like the same level of dumping on the surface of it. In fact, with just a few percent between material and immaterial, I’d argue that this sample shows that the main players were broadly speaking, doing the right thing. However, for the (predominantly Tier 2 & 3) manufacturers putting disproportionately low cost product into the market, they could be about to see a landslide of change.

Important lessons

In a related local case, we have also seen a similar investigation take place in Australia on aluminium extrusion, which inadvertently crossed over into the solar industry and included some companies who imported solar racking products. This investigation has gone on for years and the preliminary tariffs that were announced, including liabilities for previously imported products was recently cited as the reason for one fairly large solar company’s collapse; this is serious.

One thing that may not be obvious to those uninvolved  in such investigations is that as a mild mannered solar installer, if you directly import products that are subject to investigation you can end up spending an astonishing amount of time and money providing evidence and assisting customs. Think lawyers, trawling through years of records, long meetings and lots of nervous nights wondering about the outcomes. These investigations are not simple and cost everyone dearly, despite their moral value and necessity. One wholesaler I spoke to suggested they’ll probably burn several hundred thousand dollars in lawyers, challenges and defence and a manufacturer I spoke to suggested it would run into the millions.

The big lesson here is that importing goods is far more complex that it may seem on the surface and arguably, why Wholesalers deserve a decent clip of the ticket for taking the risk and stress on your behalf.

Now in principle, I think most people love the idea of having local manufacturing. Having previously worked in, with and for Australian PV manufacturers, I know from first hand experience that it can work and consumers will pay a small premium for locally made products. So good on you Tindo, for having a crack at it and investing so much time and money in building a factory to build Australian made solar panels. But I can’t help but wonder how much benefit Australian solar consumers will receive should this action be successful, and perhaps more poignantly, whether Tindo will get the growth that the action was aimed at.

http://theenergycollective.com/solarbusiness/2203646/what-do-solar-anti-dumping-tariffs-mean-australia