U.S. Department of Commerce to Issue Regulations Temporarily Permitting Duty-Free Imports of Solar Modules from Southeast Asia

On June 6, 2022, President Joe Biden issued a declaration of emergency (Declaration) under the Tariff Act of 1930 with respect to “threats to the availability of sufficient electricity generation capacity to meet expected customer demand.” The Declaration is an effort by the administration to alleviate some of the uncertainty around the recent announcement by the U.S. Department of Commerce (Commerce) that, in response to a request by Auxin Solar Inc. (Auxin), it would be opening an inquiry to determine whether certain solar cells and modules, produced in Cambodia, Malaysia, Thailand, and Vietnam and using components from China, are circumventing existing antidumping (AD) and countervailing (CV) duty orders on solar cells and modules from China (the Inquiry). Commerce’s announcement, which is further discussed in this Sidley Client Alert, caused an uproar in the solar market as developers, lenders, investors, and suppliers all grappled with the uncertainty of AD and CV duties, including the potential assessment of cash deposits in excess of 250% and the threat of retroactive application.

In the Declaration, the President authorized the Secretary of Commerce (the Secretary) to respond to the declared emergency and directed the Secretary to consider taking appropriate action to temporarily permit importation, “free of collection of duties and estimated duties,” of certain solar cells and modules exported from Cambodia, Malaysia, Thailand, and Vietnam that are not already subject to an AD or CV duty order.

Following the Declaration, Commerce released a press release on June 6, 2022, stating that it “will issue regulations to temporarily permit for up to 24 months duty-free access to solar cells and modules from Cambodia, Malaysia, Thailand, and Vietnam.” The Department also stated that “[i]n accordance with the President’s declaration, no solar cells or modules imported from Cambodia, Malaysia, Thailand, and Vietnam will be subject to new antidumping or countervailing duties during the period of the emergency.”

The department stated that the inquiry “continues uninterrupted, and whatever conclusion Commerce reaches when the investigation concludes will apply once this short-term emergency period is over.” The department is slated to issue a preliminary decision in the inquiry in August 2022. A final decision will likely be issued in early 2023.

As of this writing, Commerce has not yet issued any regulations authorizing temporary duty-free imports of solar cells and modules from Southeast Asia. However, we note the following takeaways as of this morning:

• Scope. The President’s Declaration specifically asks the Secretary to consider taking action to permit solar cell and module imports “free of collection of duties and estimated duties.” This language appears to cover cash deposits during the emergency period. But it is not clear from the department’s statement whether the forthcoming regulations will cover both cash deposits and final duties.
• Timing. The department stated that its regulations will permit duty-free imports for “up to 24 months.” This suggests that entries occurring prior to June 6, 2024, will be covered under the forthcoming regulations, but it is possible that the department will elect a shorter time period. The President could also terminate the declared emergency before the end of the 24 months.
• Authority. The President stated that his action was taken pursuant to his authority under Section 318(a) of the Tariff Act of 1930, or 19 U.S.C. § 1318. This section generally permits the President to authorize duty-free importation of “food, clothing, and medical, surgical, and other supplies for use in emergency relief work.” A stakeholder may challenge the President’s authority to issue the Declaration by arguing that the importation of solar cells and modules to address insufficient electricity generation capacity does not fall within the scope of this phrase.

The President’s Declaration was issued alongside various White House actions taken on Monday to facilitate domestic solar manufacturing and spur clean energy production within the United States. In addition to issuing the Declaration, the President authorized use of the Defense Production Act to accelerate domestic production of various clean energy technologies and issued federal procurement directives aiming at boosting demand within the U.S. solar manufacturing industry. The White House has characterized the authorization of temporary duty-free solar module imports as a “24-month bridge as domestic manufacturing rapidly scales up to ensure the reliable supply of components that U.S. solar deployers need to construct clean energy projects.”