Biden's Solar Crackdown Could Bring Aftershocks

The Biden administration has blacklisted solar panel components from a Chinese firm for alleged forced labor practices, which stops short of the regionwide measures some had anticipated but is expected to send some aftershocks to the solar supply chain. President Joe Biden's Customs and Border Protection said Jun. 24 it is issuing a “withhold release order” under the 1930 Tariff Act against any silica-based products linked to Chinese firm Hoshine, operating in China's Xinjiang province, and its subsidiaries. The measures mean that US customs can stop any shipments believed to contain those components coming through any US port. Hoshine is a major producer of metallurgical-grade silica, a raw material processed for use in polysilicon and finished solar panels. But it is not the only Xinjiang producer where forced labor may be suspected -- and the region accounts for roughly 45% of the polysilicon global supply chain. "The United States believes that state-sponsored forced labor in Xinjiang is both an affront to human dignity and an example" of China's "unfair economic practices,” the White House said. With China a dominant world supplier of solar components, the policy reveals a weak link in global decarbonization and the products needed to accomplish it. Biden has pledged that the US will cut its greenhouse gas emissions by 50%-52% from 2005 levels by 2030. More Actions? So far, the administration is holding off on broader measures such as wider regional sanctions over the alleged human rights abuses that could have more acute impacts on the solar supply chain. Another option bandied about: a sweeping Trump-era directive issued in January targeting cotton and tomato products that originated in Xinjiang. Broader measures aren’t necessarily off the table, Washington observers say. In fact, it may be “only the first step toward broader limits” that target the wider industry in the region, a Clearview Energy Partners research note says, noting that the Trump-era regionwide order on agricultural products was preceded by a narrower action that only targeted certain suppliers. “The threat of regionwide measures still exist,” Ginger Faulk, a partner with the firm Eversheds Sutherland, pointed out, calling last week’s actions more “calibrated actions designed to elicit an industry-wide response” to take a proactive role in vetting their supply chain. Last week’s actions were accompanied by the Commerce Department adding five new entities to its export control blacklist: Hoshine Silicon Industry (Shanshan); Xinjiang Daqo New Energy; Xinjiang East Hope Nonferrous Metals; Xinjiang GCL New Energy Material Technology, and XPCC. The Commerce actions establish new curbs on exports by requiring US entities to obtain a licensed exception to export goods to the listed companies. The Clearview analysis says Commerce's actions may limit US firms’ abilities to source solar imports by “recycling trade balances from sales to listed companies.” Ripple Effects Trade watchers agree that the solar supply chain sees some ripple effect from last week’s maneuvers, but the extent of those impacts are not totally clear. To the extent that Hoshine represents the “trunk” of Xinjiang’s silica supply, strict enforcement of the order could yield sizable downstream impacts, ClearView says. John Smirnow, general counsel and vice president of market strategy at US lobby the Solar Energy Industries Association, says the actions were “not unexpected." Further, that same lack of transparency across the supply chains stemming from Xinjiang makes it too risky for solar firms to operate there. “For that reason, in October, we began calling on solar companies to leave the region and we provided them a traceability protocol to help ensure there is not forced labor in the supply chain.” But the actions are also not happening in a vacuum. The US, EU, UK and Canada in March slapped human rights sanctions against Beijing over Xinjiang human rights violations. And the Congressional Research Service has estimated roughly 98% of solar panels and their components are manufactured outside the US, making them the subject of trade disputes for the past several years (NE Sep.20'18). The Biden administration is facing a decision before next February on whether to extend countervailing duties on certain imports of silicon photovoltaic cells, which took effect in 2018 (NE Nov.9'17). Bridget DiCosmo, Washington