Congress Votes In Favor Of Ending Biden’s Solar Emergency

The House of Representatives took its cue from last week’s Ways & Means Committee hearing and opted to rescind President Biden’s June 6, 2022 solar emergency declaration on Friday.

The voting largely fell along party lines, with roughly 7 Democrats voting to end Biden’s solar emergency and 160 voting to keep it. Only two Republicans voted against the resolution H.J. Res. 39, to remove the emergency declaration. The final vote tally was 221 in favor of rescinding and 202 against.

What was this all about?

The solar declaration was declared based on concerns that the Ukraine war would disrupt America’s electricity grid somehow, and so the White House ordered a two year pause, ending in June 2024, on all tariffs on solar imports from Southeast Asia.

The move was important because it came at a time when Biden’s own Commerce Department was investigating whether Chinese companies were circumventing anti-dumping penalties and solar tariffs imposed by both the Obama and Trump administrations.

On Dec. 27, Commerce found in its preliminary report that four companies were doing so, including BYD Solar, Trina Solar, Vina Solar, a subsidiary of Longii, and Canadian Solar, which manufactures only in Asia despite its name.

Commerce was investigating a case brought up by California-based solar producer Auxin Solar. A final determination is expected as early as May. Should Commerce stick with its preliminary finding, the White House declaration means they would not be punished with any import duties, as is customary.

Auxin called the June 2022 declaration in favor of Chinese companies a “get out of jail free card.” The company’s statement of record was read on the House floor today.

China is the world’s leading solar manufacturer. Eight of the top 10 solar manufacturers are Chinese. Only one, First Solar
FSLR
of Ohio, is American.

The Democrats that were against rescinding the Biden declaration all cited climate change and concerns over U.S.-based solar manufacturers unable to meet demand.

Rep. Jimmy Panetta (D-CA), who actually represents Auxin in his district, voted no to killing the two-year tariff pause.

“If we repeal this…American solar importers will be hit with a billion dollars in retroactive duties and stall all future solar deployment,” Panetta warned. This is true. Importers of record would have to pay retroactive duties. If the Commerce Department’s final decision is to impose anti-circumvention tariffs on Chinese solar companies in Vietnam, Cambodia, Malaysia and Thailand, then these charges will retroactively apply to importers of record for solar cells and modules starting on April 1, 2022, or even as far back as November 4, 2021. “We want to decouple from China on solar, but American solar companies need more time to adapt and reduce Chinese components in our solar panels,” Panetta said.

However, the two-year pause has also given Chinese companies a chance to invest more heavily in Southeast Asia and move other parts of the solar supply chain there as well. This includes things like solar wafers needed to make the solar cells plugged into solar panels. Most of that is done in mainland China now, which faces tariffs. This investment will likely negate investments made by U.S.-based companies as China is a known endless source of money and over capacity.

Earl Blumenauer (D-OH) represented the opposition to the resolution, saying Biden’s decision “struck the right balance.”

“There is no doubt China cheated,” Blumenauer said, dressed in his usual bowtie and trademark pin of a bicycle on his suit jacket lapel. “The White House is not planning on extending the two-year freeze beyond June 2024. And he has said that he will veto this when it gets to his desk.”

Rep. Jason Smith (R-MO) represented those in favor of the resolution, saying Biden’s emergency declaration “sends the wrong signal” to other companies and countries that it is okay to break U.S. trade laws so long as you match a political agenda.

“This resolution is a way to stand up to China,” Smith said. “The White House made a misguided decision to pause tariffs.”

Rep. Claudia Tenney noted that Chinese companies would already benefit from the Inflation Reduction Act. Chinese solar giants Longii and JA Solar are setting up factories in Ohio and Arizona, respectively, to qualify for tax breaks.

“Commerce says China companies are evading trade laws. Biden’s declaration is a slap in the face to American manufacturers,” Tenney said. “Chinese companies will already benefit from the Inflation Reduction Act (IRA). Now they have another giveaway with this emergency declaration.”

IRA tax benefits are estimated to be around $125 billion for Chinese solar companies, who will also be on the receiving end of new orders for solar cells and modules as big utility companies get tax breaks for building solar power plants. China is seen as their go-to source of supply.

The voting now heads to the Senate, where at least three leading Democrats — Sens. Ron Wyden (D-OR), Joe Manchin (D-WV) and Sherrod Brown (D-OH) are expected to vote in favor of rescinding the emergency declaration.

Jinko Solar shares fell over 4% on Friday, likely on the news that tariffs are returning for Chinese companies. Jinko has not been implicated in the Commerce Department’s preliminary finding of Chinese solar manufacturers circumventing U.S. trade laws by moving some manufacturing to Vietnam, Cambodia, Thailand and Malaysia. Ironically, Canadian Solar has been found by Commerce to be doing just that, and their share price is down only 2.95% as of mid-morning in New York. First Solar shares are down over 13% after missing their earnings.