$70 Million Federal Solar Gotcha!

What if the US imposed an import duty, but few knew.  Surprise!!!

That must be how importers of solar panels feel after learning that the US Customs Service started enforcing a 2.5% tariff on imported solar panels last January.  But since the decision was not widely publicized not even Customs Agents knew of it until recently.  The solar business is getting kicked around a lot today, but they didn’t expect to get a tax bill for $70 million from the US government.

According to the New York Times reporting in a September 30th article[1], the US subsidiary of a Spanish manufacturer, GES USA, asked Customs what the tariff is to import solar panels from China.

Simple question, right?

Yea, but in January 2009, US Customs replied that the panels no longer qualified for duty-free import because the panels contain a basic electronic diode device for safety and energy efficiency which allows electric current to flow through shaded areas of the panels, thus US Customs had decided to treat them as electric generators, subject to a duty of 2.5 percent. Adding insult to injury, the use of these diodes is the least cost way for solar panels to meet American safety standards.

The answer begs two questions, first since when were solar panels NOT electric generators as most of us know the meaning of that term, and second, is this the action of some bureaucrat or a political decision since most of these panels are now imported from China?

Spain as you recall, is engaged in a giant froth with China over what it regards as an abuse of the Feed-in-Tariff in Spain to capture market share from Spanish manufacturers.  The Chinese were so clever at using the Spanish law to their competitive advantage that Spain essentially cancelled the FiT in, well, a fit of pique!

That still does not explain why the US decided to suddenly enforce a tariff it has not before. Panels imported without paying the duty are still liable for the tax so the Government will catch up with you eventually.  Industry estimates are that the new import duty and penalties effectively double the cost of importing Chinese solar panels.

One more thing, since the United States exported of $555 million in solar panels for January through July 2009 compared to $605 million in imports according to US Commerce Department, you can bet that we will see “pay-back” in the form of import duties on our exports someplace else.

So what?

So I thought the Obama Administration was in favor of expanding the use of solar power and other renewable, clean energy sources.  If so, then why are they poking a sharp stick in the eye of both solar manufacturers and solar users?

[1] http://www.nytimes.com/2009/10/01/business/global/01tariff.html?_r=2