Biden Administration Announces Duty-Free Tariff Treatment For Solar Products From Southeast Asia And Issues DPA Determinations – International Trade & Investment

On June 6, 2022, the White House declared a national emergency and took the
unprecedented step of providing duty-free treatment of solar cells
and modules from Southeast Asia for two years, delaying potential
tariffs on certain Chinese-origin products shipped to the United
States through third countries in order to, as alleged, circumvent
existing trade remedy duties. At the same time, President Biden
issued five separate determinations under Section 303 of the
Defense Production Act of 1950, as amended, (DPA) offering
potential financial awards to encourage domestic investments in the
renewable energy sector.

Solar Cells and Modules from Southeast Asia

Proclamation 10414 provides the Secretary of
Commerce with the authority to extend duty-free tariff treatment to
solar cells and modules from certain Southeast Asian countries
until June 6, 2024. Pursuant to 19 U.S.C. § 1318(a), the
President may declare an emergency and authorize the Secretary of
the Treasury to allow “the importation free of duty of food,
clothing, and medical, surgical, and other supplies for use in
emergency relief work.” Relying on this authority, the Biden
Administration declared that the “availability of sufficient
electricity generation capacity to meet expected customer
demand” constituted an emergency. The Biden Administration
cited the inability to import sufficient quantities of solar
components from Cambodia, Malaysia, Thailand, and Vietnam as a
contributor to this shortfall.

Notably, this emergency authorization to provide an exemption
from duties comes shortly after the Department of Commerce
initiated a circumvention investigation into solar cells and
modules from these same four countries. According to the
circumvention petition, Chinese solar producers engaged in limited
assembly operations in Southeast Asian countries to avoid paying
antidumping (AD) and countervailing duties (CVD) on solar cells and
modules produced in China. While the circumvention investigation
will continue despite the Presidential emergency declaration, the
duty-free treatment will delay the imposition of any AD/CVD duties
assessed on solar cell and modules imported from Cambodia,
Malaysia, Thailand, and Vietnam. While previous presidents have
used emergency authority to remove regular customs duties on goods,
this is believed to be the first time presidential authority has
been used to remove potential AD/CVD duties.

It is well-documented that many of these solar products have
come under increased scrutiny by the U.S. government for having
been produced in China using forced labor. Section 307 of the Trade Act, as
amended, and the Uyghur Forced Labor Prevention Act prohibit
the U.S. importation of products manufactured, in whole or in part,
from forced labor.

DPA Determinations

Concurrently, President Biden issued several declarations under
Section 303(a) of the DPA aimed to augment domestic production of
the following five critical technology items:

1. Solar panel parts like photovoltaic modules and module
   components;




2. Building insulation;




3. Heat pumps, which heat and cool buildings super
   efficiently;




4. Equipment for making and using clean electricity-generated
   fuels, including electrolyzers, fuel cells, and related platinum
   group metals; and




5. Critical power grid infrastructure like transformers.

The DPA Title III awards, as these are commonly called, allow
the President to provide the necessary financial incentives to
develop, expand, or modernize the production of materials critical
to national security. Where an “action is necessary to avert
an industrial resource or critical technology item shortfall that
would severely impair national defense capabilities,” the
President may waive more stringent statutory requirements.

These determinations authorize the Department of Energy to
provide financial awards to companies involved in the production of
the five referenced product categories. These awards, however, are
based on appropriations by Congress that have not yet occurred, and
the timing is uncertain. Additionally, the process of obtaining
awards is, at times, lengthy, so it is unclear whether the timeline
for the Biden Administration to obtain the funding authorizations
from Congress, solicit award applications and select recipients,
and oversee the completion of production facilities by the award
recipients will extend longer than the two-year national emergency
window of the Executive Order.

Wiley continues to monitor these and all supply chain and solar
industry developments and will provide updates as they develop.
Wiley’s comprehensive Supply Chain and Transactional Support
practices complement its robust International Trade and National Security practices with significant
expertise in trade remedy proceedings, government funding
processes, and many other industry competitiveness strategies.
Please contact the attorneys listed on this alert if you have any
questions about these or related areas.

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