Solar panels are essential in reducing carbon in US energy production, but there is a clear understanding that the global solar panel supply chain relies heavily on forced labor from China. Polysilicon is a key raw material in the solar photovoltaic supply chain and China is its major producer. Now, the US solar industry and design firms that specify the use of solar panels can no longer avoid addressing the gross violations of human rights in the Xinjiang Uyghur Autonomous Region where the US government says China is committing genocide against the Uyghur people.
Uyghur Forced Labor Prevention Act enforcement begins
On December 23, 2021, President Biden signed into law the Uyghur Forced Labor Prevention Act (Act). Enforcement of the new law started on June 21, 2022, and has implications for solar panels. The Act establishes a rebuttable presumption that any goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region of the People’s Republic of China are not entitled to entry at any US ports. Those goods, wares, articles, and merchandise include those mined, produced, or manufactured wholly or in part with forced labor by Uyghurs, Kazakhs, Kyrgyz, Tibetans, and members of other persecuted groups in China, and especially in the Xinjiang Uyghur Autonomous Region.
The Act requires US Customs and Border Protection to apply the rebuttable presumption unless the importer can overcome the presumption of forced labor by establishing through clear and convincing evidence that forced labor did not mine, produce, or manufacture wholly or in part the good, ware, article, or merchandise. This elevated standard will require the importer to not only use due diligence in evaluation of its supply chain, but also to respond completely and substantively to government requests for information regarding entries it may review.
Design firms and clients face reputational damage
Along with the possibility of government action, US design firms and their clients face the dilemma of installing solar panels associated with forced labor from China or avoiding one method of reducing carbon emissions. For both design firms and their clients, the specification and use of imported solar panels create a challenge to their commitments to environmental and social progress, including damage to their reputations by being linked to the gross violations of human rights in China. Because of the reluctance of major US manufacturers to compete in the solar panel market, the dilemma will last into the future.
China dominates the market and evades US constraints
According to a German research firm that provides information on the global solar industry, China has between 71% and 97% of the world’s capacity for various solar panel components, and Xinjiang alone produces nearly half of the world’s solar grade polysilicon and is the location of factories for some of the industry’s largest manufacturers.
The Obama Administration established tariffs of up to 250% as anti-dumping duties. Earlier this year, the US Commerce Department launched an investigation in response to a complaint from a California solar module manufacturer to determine if solar companies are circumventing the existing tariffs on Chinese panels imposed by anti-dumping duties. The investigation found that rather than boost US domestic solar panel manufacturing, the tariffs drove Chinese companies to move the vast majority of production to Southeast Asia. While China now makes up a mere 1% of solar imports to the US, panels produced in Malaysia, Vietnam, Thailand, and Cambodia provide 83% of imported solar panels.
The Biden Administration extended the tariffs for four years on February 7, 2022, and recently issued a declaration of emergency under the Tariff Act of 1930, creating a moratorium of tariffs on solar cells and modules from the four Southeast Asian nations for two years. Biden also invoked the Defense Production Act of 1950 to spur domestic solar panel and other clean energy technology manufacturing.
US courts could restrict application of the forced labor law
It is likely that both of the actions discussed above will face challenges in the federal courts as importers attempt to control the solar panel market using Chinese materials or products while US manufacturers hesitate to invest in production facilities. With the assistance of importers, Chinese companies appear to have effectively evaded existing solar economic tariffs. The Biden Administration, however, may hinder those Chinese companies by enforcing the “very high” human rights bar of the Uyghur Forced Labor Prevention Act.