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Can Biden end the Auxin solar tariff investigation?

The president wants to prioritize climate action and solar power. That’s running up against the Commerce Department’s enforcement of a 1930 trade law. Now what?

The front of the Commerce Department building, with four white columns and a U.S. flag
(John Sonderman/Flickr)
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The Commerce Department’s solar tariff investigation is already leading to a huge dropoff in solar installations. So why is the White House letting it happen?

In February, boutique U.S. module manufacturer Auxin Solar petitioned the Commerce Department to investigate whether factories in Cambodia, Malaysia, Thailand and Vietnam are essentially pass-throughs for Chinese solar products, which would mean the manufacturers are circumventing the decade-old anti-dumping tariffs imposed by the U.S. Commerce decided in March that this claim merited a formal probe. 

If that probe concludes that circumvention is afoot, not only would future solar imports from those four countries be subject to new tariffs, but tariffs could be retroactively applied to panels imported as far back as November 2021. That government-induced pricing uncertainty has already brought the booming U.S. solar market to a jarring halt.

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The U.S. has become such a policy risk and a financial risk that manufacturers are going to other countries” to sell their wares, said Abby Hopper, CEO of the Solar Energy Industries Association, in an interview with Canary Media’s Political Climate podcast. There are literally no panels to be had.” 

That’s terrible news for none other than President Biden, who wants to see the U.S. powered by 100% clean electricity by 2035. His landmark climate legislation stalled last year when fellow Democrat Joe Manchin, senator from West Virginia, refused to support it. Now Biden’s own Commerce Department is thwarting the growth of solar power plants, which had been expected to be the largest source of new power capacity installed this year.

But the trade lawyers at Commerce answer to a solemn duty, enshrined into law by Congress nearly a century ago, to fight for American workers when other countries don’t play fair. 

Supporting U.S. workers and businesses to compete and win globally is at the core of Commerce’s mission,” a Commerce Department spokesperson told Canary Media. American businesses are sharpened, not threatened, by competition, so long as that competition is not rigged through unfair practices that distort the free flow of goods.”

That conviction appears unmoved neither by the solar industry’s near-unanimous insistence that it doesn’t want this kind of support, nor by the nature of the U.S. solar industry, which employs far more people to develop and install solar projects than to manufacture cells and panels.

Here’s what the Biden administration can and can’t do about the solar tariff inquiry, and what comes next in this federal intervention in the solar market. 

Can Biden just cancel the solar tariff inquiry?

From the outside, it’s hard to imagine why Biden would sit back and let his own Commerce Department threaten the mass adoption of solar power, a pillar of his own climate strategy.

Yes, Biden has advocated for renewed American manufacturing, and Auxin is nominally pushing for the same. (Its litter-strewn factory could use some renewal, certainly.) Yes, Biden is interested in standing up to China, as demonstrated in his recent comments on defending Taiwan from military invasion. (Many of the solar manufacturers in Southeast Asia are offshoots of China’s industry, though the tariff inquiry affects others, such as South Korea’s Hanwha Q Cells.) 

But cutting off supply of imported solar panels when domestic production can’t fill the gap is no way to run industrial policy. Why not step in and quash the tariff probe?

Because that would conflict with the principles of bureaucratic independence and rule of law that are back in vogue in Biden’s Washington. Auxin filed a petition under terms laid out in the U.S. Tariff Act of 1930. The Commerce Department chose to heed the petition and initiate the investigation, so now it has to follow the rules for a tariff circumvention probe. 

There’s a process; there’s a law. I have to implement the law,” Commerce Secretary Gina Raimondo said in Senate testimony earlier this month.

This process, by the way, is handled by career civil servants, not by political appointees charged with furthering the president’s agenda. These bureaucrats are required to issue a preliminary finding within 150 days of launching their investigation, meaning by late August in this case. 

U.S. anti-dumping and countervailing duty laws are completely removed from political considerations,” the Department of Commerce spokesperson said. This process is transparent, internationally accepted, and has been the law of the land since 1930.”

If the department were to cancel the inquiry or otherwise deviate from the procedures laid out in the law, it could expose itself to judicial review. Auxin or someone else could sue over the matter at the federal Court of International Trade. 

If challenged in court, Commerce would have to show it acted based on substantial evidence” and in accordance with law.” 

The Biden administration — both the Commerce Department and the White House — appear to believe that Biden cannot simply call off the inquiry, even if it counteracts his other policy goals. 

But some advocates of clean energy beg to differ. They argue that the Commerce Department does indeed have the statutory authority to call off the investigation.

The language [of the Tariff Act] on its face provides tremendous discretion,” said Gregory Wetstone, CEO of the American Council on Renewable Energy, in an interview. It seems like the Commerce Department is over and over again tying its own hands.”

ACORE requested that Commerce wield its statutory discretion in a May 20 letter, citing Canary Media reporting that the rationale for Auxin’s petition was based in part on data from BloombergNEF research that the researchers themselves said was mischaracterized.

Commerce has express legal authority to rescind this inquiry immediately,” Wetstone wrote to Raimondo. Where evidence is mischaracterized and misused to propel the agency into action, it is incumbent on the agency to stop such action as soon as the problem with the evidence comes to light.”

Canceling the probe is an appealing scenario for solar professionals who want to get back to business as usual. But if Commerce handled the process improperly, or even merely appeared to, it could draw out the period of uncertainty by sending the matter to court.

Can the administration speed up the tariff inquiry?

Solar trade groups report that every passing week under threat of potential future tariffs means more projects are delayed or canceled. Utilities are being forced to meet their needs without the energy produced by planned solar plants. For instance, Indiana utility Nipsco has decided to burn coal longer than it had intended to because it can’t complete its solar projects on schedule. 

If the investigation won’t be called off, the next best thing for the industry would be a speedy resolution.

That’s what Hopper is arguing for: wrapping up the inquiry immediately. The secretary has the authority to end this case now,” Hopper said. She can decide that there’s no circumvention happening, issue a preliminary negative finding, and then follow that up with a final determination.”

A bipartisan group of 22 U.S. senators requested the same in a letter dated May 2, and 85 of their House counterparts followed suit on May 17

And it’s well within the department’s purview to move expeditiously on its investigation. Senator Brian Schatz (D-Hawaii) extracted an acknowledgment of that point while questioning Raimondo recently.

Raimondo initially argued that bureaucratic rules prevented her from intervening personally in the quasi-judicial proceeding. But when Schatz cited the governing statute and asked if anything prevented the secretary from speeding up an investigation of national importance, she accepted the point.

There is nothing that prevents us from going faster,” Raimondo said. If we can do better than August, we certainly will.”

What comes next?

Auxin acknowledged in its petition that it doesn’t have any inside scoops on what’s happening in its competitors’ factories in Southeast Asia. Instead, it relied on public statements by other firms and general data points from industry publications.

Canary Media reported last week that the source cited numerous times in Auxin’s petition, energy research firm BloombergNEF, disagrees with the conclusions Auxin drew from the firm’s research. But the process for filing this kind of complaint does not require the petitioner to prove anything.

Since Commerce found Auxin’s narrative compelling enough, it’s now investigating with a special set of governmental powers. The department sent detailed questionnaires to manufacturers in each of the four countries named in the inquiry. Those companies wouldn’t need to respond if Auxin asked what they were up to, but when the U.S. government wants answers to decide whether or not to impose tariffs, it’s a different story.

Commerce will consider those responses and analyze the components that go into the companies’ solar cells and modules. Then it will decide if the work being done in the four countries is minor or insignificant.” That’s a key threshold for determining if Chinese firms are using the factories to circumvent U.S. tariffs imposed on their home country or if the work is insignificant enough that tariffs are not warranted.

Auxin is a very lonely voice claiming that the Southeast Asian factories’ work is relatively minor. Almost everybody else in the U.S. solar industry argues that turning raw ingredients into finished products that can generate electricity is, by definition, major and significant work, which means it would not be considered circumvention under the Tariff Act.

Now Commerce Department lawyers will decide the fate of most of the U.S. solar panel supply based on wherever their technocratic process leads them. Commerce is not charged with actually jump-starting new American solar factories. It has the power to make foreign imports more expensive and to temporarily scare away imports due to pricing uncertainty. But actually increasing domestic supply to fill the gap is someone else’s job.

And Commerce seems intent on maintaining a narrow focus on the multipronged test for whether circumvention is taking place. The 1930 Tariff Act doesn’t mention how to weigh factors such as an urgent climate crisis or a U.S. industry that employs far more people to develop and install solar projects than to manufacture them.

As Wetstone quipped, It’s puzzling that the Commerce Department isn’t looking at the impacts of its actions on commerce.”

Julian Spector is senior reporter at Canary Media.