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European Commission

MEMO

Brussels, 4 June 2013

Memo : EU imposes provisional anti-dumping duties on Chinese solar panels

The European Commission today decided to impose provisional anti-dumping duties on imports of solar panels and key components (i.e. cells and wafers) from China. An investigation found that a Chinese solar panel is sold to Europe far below its normal market value. The duties will be imposed to alleviate the harm that is caused to the European industry by this unfair trade practice, dumping.

Whereas the dumping rate is at 88% on average, the anti-dumping duties imposed will only be set at an average of 47.6%, which is required to remove the harm caused by the dumping to the European industry. In addition, a transitional period of two months with a reduced duty level of 11.8% will be introduced as of 6 June. The duty will have to be paid as an “ad valorem” duty; in other words, as a percentage of the import value. It is provisional and imposed in total for a period of maximum six months.

The investigation will now continue. Definitive measures applying for five years, if any, would have to be imposed within 15 months of initiation, i.e. by early December 2013.

The products covered by the investigation are solar panels and their key components, i.e. solar cells and solar wafers. In order to produce a solar panel, solar wafers are converted into cells and then cells are assembled together into modules, i.e. panels. Some producers have integrated production covering all three production steps, whilst others produce only wafers, cells and/or modules.

The investigation and the findings

The investigation was initiated on 6 September 2012 following a complaint lodged by EU ProSun, an industry association, which claims solar panels from China are being dumped in the EU at prices below market value and causing material injury to the EU photovoltaic industry (MEMO/12/647).

The investigation was carried out within a strict legal framework covering a full analysis of dumping by Chinese exporting companies, injury suffered by the EU photovoltaic industry as a result of that dumping, and the interest of all EU players (Union producers, suppliers of components such as silicon, installers, importers, users and consumers). It showed that:

  1. there is dumping by the exporting producers in China: Chinese solar panels are sold on the European market far below their normal market value, resulting, on average, in dumping margins of 88%, which means that the fair value of a Chinese solar panel sold to Europe should actually be 88% higher than the price to which it is sold. In some cases, dumping margins of up to 112.6% were found.

  2. Material injury has been suffered by the Union industry concerned translated in loss of market shares in the EU, decrease in sales prices and decrease in profitability leasing to a number of insolvencies of Union producers

  3. there is a causal link between the dumping and injury found

  4. the imposition of measures is not against the Union interest.

On the basis of these findings, it has been decided to impose an anti-dumping duty in a two-staged process: for two months, a duty of 11.8% will have to be paid, whereas from 6 August, duties ranging from 37.3% to 67.9% (averaging 47.6%) will be levied on solar panels from China. From 6 August, those Chinese companies which have co-operated in the investigation will face lower tariffs, whereas those which have not cooperated will face the higher tariffs.

How has the duty been calculated?

In general, duty rates are set by reference to the “lesser duty rule”. The "lesser duty rule" is a so-called "WTO-plus" commitment of the EU, i.e. which allows the Commission to set a duty at a level lower than the dumping margin when this lower level is sufficient to remove the injury suffered by the Union industry. This fair approach benefits the exporters and goes beyond what is required by our WTO obligations. In practice, the injury margin is the amount "removing the injury", i.e. it aims at increasing prices to a level allowing EU industry to sell at a reasonable profit.

In addition, in view of exceptional circumstances and, in particular, the need to ensure the stability of supply in the short term, it is considered appropriate to phase-in the provisional duties and to introduce them in two steps. A period with a lower duty will ensure sufficient supply to meet all the demand, while allowing the Union industry to adapt to the situation and increase the supply gradually.

Since the EU does not recognise China as a “market economy”, India has been chosen as the most appropriate and reasonable analogue country. This choice is not disputed by the Chinese side. In effect, a number of parties – including Chinese – have proposed India and expressed a clear preference over other alternatives such as the USA.

On what basis does the European Commission decide to impose provisional duties?

Anti-dumping procedures are subject to well defined rules, both in WTO rules and in EU legislation, the two most detailed set of rules of any trade policy area.

When an EU industry considers that imports of a product from a non-EU country are subsidised or are being sold at prices lower than the market value and are causing injury to the EU industry producing the same product, it can lodge a complaint with the European Commission. EU ProSun, an industry association, lodged such a complaint regarding Chinese solar panels and key components. It provided evidence of potential dumping and subsidies that were causing injury for European producers. The Commission initiated anti-dumping and anti-subsidy proceedings on 6 September 2012 and 8 November 2012 respectively.

Throughout the procedure, all parties are heard. The European Commission sent out questionnaires to various interested parties, such as exporting producers, Union producers, importers, suppliers of components such as silicon, installers, and their representative associations. It asked for information relating to the exports, production, sales and imports of solar panels. After having received replies from the interested parties, the Commission officials verified the data on-the-spot, at the premises of most of the co-operating companies.

Throughout the investigation, all interested parties have the right to present their views and submit information to the Commission and/or taking part in hearings. The Commission took account of all the comments received so far and addressed them in the provisional Regulation.

Interested parties are now invited to submit further comments within 30 days and the Commission will address these during the remainder of the investigation.

The Commission applies calculation methods that are transparent and consistent in all cases. All interested parties have access to the non-confidential version of the file. Duties are decided according to detailed calculations based on data submitted by the parties and verified by the Commission. The duty rate, if any, is imposed in order to remove the injury caused to the EU industry and to restore a level playing field – no more, no less. So duties are never punitive. In this case, an even more moderated approach has been chosen, with the imposition of a 11.8% duty for the first two months.

On the basis of the information collected, the Commission provisionally established that significant dumping took place and that the material injury suffered by the Union industry is a result of the dumped imports. The examination also included other factors that might have contributed to the injury.

In addition, the Commission carried out the so-called "Union interest test", which examines whether the potential imposition of measures would be overall more costly to the Union economy than the benefit of the measures would be to the complainants. The EU is the only WTO Member to systematically carry out such tests and by doing so systematically goes beyond its WTO obligations. The Commission provisionally considered that any potential negative effects of the measures would be outweighed by the economic benefits for Union producers.

The Commission assessed the level of duty needed to counteract the injurious effects of dumping. Measures were imposed at injury level (on average 47.6%), which is lower than the dumping level (an average of 88%), thus applying the so-called 'lesser duty rule'. This means that the level of the duty is sufficient to restore a level playing field for the EU industry concerned.

What happens next?

Provisional anti-dumping duties are imposed for a six months period. The 11.8% duty enters into force on 6 June at midnight and one minute local time, i.e. the anti-dumping duty is applied on solar panel imports one hour later in Dover than for example at the port of Rotterdam.

Following today’s decision, the Commission will disclose the findings to interested parties who will then have one month to comment. The investigation will continue and definitive measures, if any, would have to be imposed by 5 December 2013.

Once the Commission has made its initial findings, legal provisions exist for both parties to suggest negotiated solutions. The Commission has indicated it is open to discuss with China other measures which would be equivalent to the 47.6% duty. Both WTO rules and EU law (Art. 8 of the EU’s Basic Anti-Dumping Regulation) open this possibility in the form of a price undertaking – an agreement not to sell below a minimum price. There are a number of legal requirements for such an undertaking, the main ones being that the measure offered must remove the injurious dumping level, that it can work in practice and that its implementation can be monitored.

The complainant also has the possibility to withdraw its complaint which he may do at any stage of the proceeding. In that case, the Commission may decide to terminate the investigation.

By 5 December 2013, the European Commission may propose to the Council (a) to terminate the case without measures or (b) to impose definitive anti-dumping measures for a duration of five years. According to the current rules, the Council can reject the Commission’s proposal by simple majority. The final findings will be published in the Official Journal of the European Union.

Key facts to put this investigation into context

Market share:

The Chinese imports represented over 80% of the Union market in 2011/12. It is likely that Chinese market shares will grow even further if measures are not imposed. Consequently, there is a risk that the Union industry, which held a 13% share of the EU market during the same period, will quickly cease to operate altogether. In 2009, EU producers still had a 19% share of the EU market.

Overcapacities in China:

In 2012, Chinese production capacity was over 55 gigawatt (GW), representing around 150% of global consumption. In other words, China can today produce one and half times the amount of solar panels the world is demanding. Excess Chinese production capacity was around 27 GW or some 90% of global demand in 2012. EU consumption was around 15 GW in 2012. Excess Chinese production capacity, therefore, represented almost the double of entire EU demand in 2012. This overcapacity is the result of a massive, government-supported investment boom in the last few years. Note that three years ago, in 2009, Chinese production capacity only amounted to 6.5 GW.

Insolvencies in the EU:

According to available data during the period considered (2009-July 2012):

  1. around 40 EU producers declared insolvency

  2. around 6 EU producers stopped production (some partially)

  3. around 2 EU producers quit solar business

  4. around 4 EU producers were taken over by Chinese investors

Impact on employment:

The study published by the consultancy Prognos and commissioned by an interest group opposed to the anti-dumping investigation suggested that 242,000 jobs are at risk if measures are imposed. The Commission believes this study significantly over-estimates the job losses in the EU in the event of measures being imposed. Among other things, it is based on 2011 data when demand was particularly high. Consumption decreased substantially in the following year and consequently the number of jobs decreased too. The Prognos study does not take into account such evolution. Moreover, a majority of project developers and installers do not exclusively depend on the solar sector as have other business activities. Suppliers of components (e.g. polysilicon, machinery) are present globally and should be able to offset the partial loss of the Chinese market by increasing supplies to other markets, while importers should also be able to source from other third countries.

Another study issued by PriceWaterhouseCoopers concluded that the methodology used in Prognos study is unreliable and inconsistent and that the measures will have an overall positive impact on employment.

EU-China trade:

In 2012 the EU imported goods from China worth €289.7 billion, while EU exports to China amounted to €143.8 billion. Bilateral trade in goods between the EU and China already well exceeds €1 billion per day. In 2012, the EU imported solar panels from China worth about €11.5 billion.

Registration of imports

Following the request of the Union industry, and on the basis of the evidence provided, a Regulation to register imports of solar panels from China was published on 5 March 2013 (Publication in the EU’s Official Journal). This was an administrative step. If the definitive measures stage of the proceedings is reached, it will make it possible to decide whether measures should be imposed retroactively (up to 3 months prior to provisional duties, i.e. possibly dating back to 5 March 2013).

Anti-subsidy investigation

A parallel anti-subsidy investigation which was initiated on 8 November 2012 following a complaint lodged by the same complainant is on-going (MEMO/12/844). Provisional anti-subsidy measures, if any, should be imposed by 7 August 2013. As in the anti-dumping investigation, definitive measures, if any, would have to be imposed by early December 2013.

For further information

IP/13/501: Press release

MEMO/13/499: Remarks by EU Trade Commissioner Karel De Gucht on the decision

MEMO/13/498: Questions and answers on the EU’s decision to impose provisional anti-dumping tariffs on Chinese solar panels

MEMO/12/647: EU initiates anti-dumping investigation on solar panel imports from China, 6 September 2012

On anti-dumping investigations:

http://ec.europa.eu/trade/tackling-unfair-trade/trade-defence/anti-dumping/

On-going investigations on imports of solar panels and their main components (i.e. modules and cells) from China:

Anti-dumping

http://trade.ec.europa.eu/tdi/case_details.cfm?ref=ong&id=1895&sta=21&en=31&page=2&c_order=date&c_order_dir=Down

Anti-subsidy

http://trade.ec.europa.eu/tdi/case_details.cfm?ref=ong&id=1932&sta=1&en=20&page=1&c_order=date&c_order_dir=Down

Official Journal of the EU:

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:152:0005:0047:en:PDF


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