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That could leave factories based in the U.S. at a pricing disadvantage.
Photo Credit: iStock
Chinese solar manufacturers are allegedly attempting to use a loophole to bypass sanctions and commit tax fraud, stealing incentives aimed to aid U.S. solar manufacturers.
Federal lawmakers from both parties are asking federal agencies to tighten enforcement around solar imports they say are being incorrectly labeled, allowing components tied to China and other restricted countries to dodge trade penalties and help qualify for U.S. manufacturing tax credits.
The argument focuses on “blue wafers,” which they describe as partially completed solar products that are far enough along in production to already meet the legal definition of a solar cell.
A letter from Representative Ro Khanna of California, the top Democrat on the House Select Committee on the CCP, along with Representatives Mike Bost of Illinois, Pat Harrigan of North Carolina, and Marcy Kaptur of Ohio, urges CBP Commissioner Rodney S. Scott and IRS Chief Executive Officer Frank J. Bisignano to act, according to PV Magazine USA.
The products at issue are silicon “blue wafers” that have already gone through diffusion, creating the P/N junction needed for a device to turn sunlight into electricity.
In the letter, lawmakers cite data from the Solar Energy Manufacturers for America (SEMA) Coalition showing that this stage represents roughly 80% of the equipment investment required to produce a functioning solar cell.
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They allege that some importers bring these items into the United States as though they were still unfinished raw wafers. After import, companies are said to complete only a handful of remaining steps, including anti-reflective coating and metallization, and then sell the result as a “domestically made” product.
Lawmakers say that loophole may allow companies to sidestep anti-dumping and countervailing duties while also collecting federal incentives designed to bolster U.S. manufacturing.
Washington has put billions toward creating a homegrown clean energy supply chain, and the solar manufacturing incentives were meant to benefit companies actually carrying out that production in the United States.
If the lawmakers’ claims are accurate, then much of the real manufacturing work is still being done overseas even as U.S. purchasers and manufacturers seek benefits associated with domestic production. That could leave factories based in the U.S. at a pricing disadvantage.
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The letter also points to a global supply-chain issue. According to lawmakers, firms linked to China produce more than 90% of the world’s wafers and cells, leaving the U.S. vulnerable to external pressure while it tries to build out renewable energy.
A more robust U.S. solar manufacturing base could mean steadier job creation, sturdier supply chains, and cleaner energy growth that is less exposed to geopolitical shocks.
The lawmakers want federal agencies to respond on two fronts.
For CBP, they are seeking enforcement that would single out blue-colored “wafer” imports that already contain a P/N junction and treat them as solar cells, with the appropriate anti-dumping and countervailing duties applied. The letter says Commerce policy has long used the location where the P/N junction is formed to determine a solar cell’s country of origin.
From the IRS, lawmakers want tighter documentation standards before Section 45X Advanced Manufacturing Production Credits are approved. Specifically, lawmakers want companies to show where the P/N junction diffusion occurred so credits cannot be claimed for products that were mostly manufactured abroad.
The letter states that existing duty orders already cover solar cells from the People’s Republic of China and a number of other countries, including Taiwan, Cambodia, Thailand, Vietnam, Malaysia, India, as well as Laos and Indonesia. Copies were also sent to the Commerce Department and the Office of the U.S. Trade Representative.
If agencies take action, the dispute could become a test of how “domestic” solar manufacturing is defined. As the lawmakers wrote, “This duty evasion and tax fraud is harming U.S. energy manufacturers and placing them at a clear competitive disadvantage.”
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