A global safeguard investigation, launched by the U.S. International Trade Commission (USITC) on May 17, may provide the President with the opportunity to apply a trade law that has not been used for 15 years. The investigation is based on Sections 201-202 of the Trade Act of 1974, which the Trump Administration called “a vital tool for industries needing temporary relief from imports to become more competitive”. The investigation responds to a petition by Suniva, Inc. for import relief for crystalline silicon photovoltaic (CSPV) cells and modules. This post examines the potential use of Section 201 to provide relief to the solar industry and looks at the last use of this law in 2002, when the U.S. withdrew increased tariffs to avoid retaliation following an adverse WTO ruling.
Section 201 authorizes domestic industries that are seriously injured or threatened with serious injury by increased imports to petition the USITC for temporary relief from imports. Following a Section 201 investigation, the Commission determines whether an article is being imported in such increased quantities that it is a substantial cause of serious injury, or a threat of serious injury, to the U.S. industry producing an article like or directly competitive with the imported article. Unlike other trade remedy laws, Section 201 does not require a finding of an unfair trade practice.
If the agency finds that the domestic industry is seriously injured or threatened with serious injury by increased imports, it recommends to the President relief that would prevent or remedy the injury and facilitate industry adjustment to import competition. The President makes the final decision of whether to provide relief and the amount of relief needed to protect American producers from a surge of imports. The relief available to the President includes a tariff increase, quantitative restrictions or orderly marketing agreements. Any relief must be limited initially to four years, but may be extended to a maximum of eight years.
The United States provided the following summary of the allegations in Suniva, Inc.’s petition, in a May 25 filing with the WTO:
- Increased imports of CSPV cells and modules over the past five years.
- Serious injury or threat of serious injury to the domestic industry, including that “increasing imports have taken market share from domestic producers and have led to bankruptcies, plant shutdowns, layoffs, and a severe deterioration of the financial performance of the domestic industry”, noting that Suniva, Inc. had filed for Chapter 11 bankruptcy in April 2017.
- Developments that were unforeseen by the domestic industry, including that “foreign producers, in response to the various antidumping and countervailing duty orders that were imposed on imports from China and Chinese Taipei, have opened new production facilities in third countries”.
The U.S. notification of the initiation of the safeguard investigation and the reasons for it meets a requirement of the WTO Agreement on Safeguards.
The petition is not without controversy as is has generated strong opposition from other members of the U.S. solar industry. Solar Energy Industries Association, the national trade association of the U.S. solar energy industry, in a letter to the USITC, opposed the import relief requested by Suniva. It contended that the petitioner was not representative of the solar industry, a requirement for Section 201 action, and that the requested import relief would be harmful, especially for U.S. module assembly operations.
The Commission designated the investigation as “extraordinarily complicated” as a consequence of the complexity of the issues, including the existence of antidumping or countervailing duty orders on certain imports covered by this investigation and the global supply chains for the imported articles under investigation. That designation allowed it to extend deadlines. The Commission will make its injury determination by September 22, 2017 and submit its report to the President by November 13, 2017.
The WTO allows members to take safeguard actions by restricting imports of a product temporarily to protect a specific domestic industry from an increase in imports. However, the exporting country or countries that are affected by the resulting import restrictions may seek compensation for their trade lost as a result of the safeguard measures. If they are unable to reach agreement with the country undertaking the measure, they can retaliate by taking equivalent action, such as raising tariffs on exports from the country taking the measure.
The last time the United States relied on Section 201 to protect a domestic industry from import surges was in 2002 when President George W. Bush imposed tariffs of up to 30% on imports of certain steel products to respond to a surge in imports. The safeguard action was part of a broader initiative to address challenges facing the U.S. steel industry. The European Union and other countries challenged the tariffs in the WTO, where a dispute settlement panel found that the safeguard measures were inconsistent with U.S. obligations under the WTO Agreement on Safeguards. Facing threats of retaliation of more than $2 billion from the EU and other WTO members, the United States withdrew the tariffs in December 2003.
The ITC has scheduled public hearings as part of its investigation: a hearing on the injury phase on August 15, 2017 and a hearing on the remedy phase on October 17, if it makes an affirmative injury determination.
Jean Heilman Grier
May 31, 2017