China Solar Company, Accused Of Circumventing Tariffs, Wants To Set Up Shop In Texas Free Trade Zone

China Solar Company, Accused Of Circumventing Tariffs, Wants To Set Up Shop In Texas Free Trade Zone

Trina Solar is one of China’s leading solar panel manufacturers, and in the top 10 largest solar companies in the world.

Now, they are hoping to build a 5 gigawatt solar panel assembly plant at a Texas “Foreign Trade Zone” located near the  Dallas/Fort Worth Airport.

Foreign trade zones offer many benefits that tilt the playing field in favor of large, global manufacturers. For example, a smaller manufacturer that needs to import a component will have to pay any applicable tariffs once the component is imported into U.S. commerce. It’s typical for a manufacturer to pay the tariff many months before their end-product is subsequently sold, thus typing up cash flow (assuming any tariff applies).

But if you’re big and powerful enough to house your manufacturing operations in a ‘Foreign Trade Zone’, then you don’t have that problem. And for your exports, you will never have had to pay the tariff in the first place, and request a duty-drawback refund, like a traditional manufacturer would.

Trina said in its filing that it would import the aluminum frames, junction boxes, and solar cells used to make the panels. There are currently 261 FTZs in the United States with hundreds of companies benefitting from the mostly duty-free trade rules within their borders.

Historically, FTZs were areas within or adjacent to actual ports of entry. But like all slippery slopes, they now dot the landscape, making our customs territory look like Swiss Cheese.

Does “Privilege, Not a Right” mean anything anymore?

The Foreign Trade Zones Act, 19 U.S. Code § 81o(c), states that the FTZ Board “may at any time order the exclusion from the zone of any goods or process of treatment that in its judgment is detrimental to the public interest”.

Pursuant to the public interest concern, the FTZ Board, in developing the law’s implementing regulations, stated that “Authorization to conduct manufacturing activity in zones is a privilege, not a right, and in addition to viewing technical requirements, the Board must determine that zone activity is consistent with the public interest.

These heightened requirements make sense, given that the government must place a high level of trust in businesses operating in FTZ.

Trina’s terrible track record on trade

Findings of dumping by a company are serious. Dumping exhibits predatory, anti-competitive conduct by a firm. Dumping was a criminal offense in the United States until 2004, when a ruling by the World Trade Organization forced the United States to repeal the Antidumping Act of 1916. While no longer a criminal offense, it remains an important component of our fair competition and antitrust laws.

The Department of Commerce had found dumping by Trina Solar as far back as 2011, assessing anti-dumping duties of 92.52%.

And more recently, in August 2023, Trina was found to be circumventing tariffs against Chinese solar products by the Commerce Department in August 2023. This stemmed from a 2022 solar circumvention case brought about by Auxin Solar of California, a small American solar producer already playing on a field wildly tilted in favor of China’s largest.

Awaiting FTZ Board Decision

For Trina’s FTZ application, three groups submitted written remarks, all in opposition.

CPA was one of the three.

CPA’s objection to Trina’s application is based in part on its history of losing AD/CVD cases, and also challenged the the pro-Trina position taken by the National Association of Foreign Trade Zones (NAFTZ) which suggests a desire to accommodate firms known to have run afoul of U.S. trade laws. NAFTZ is also decisively weak on the Uyghur Forced Labor law, which bans polysilicon from Xinjiang province, the lead producer of one of the main starting materials used in solar manufacturing.

On August 3, 2023, U.S. Customs and Border Protection (CBP) cautioned importers that FTZs were not to be used to import goods subject to forced labor restrictions or Withhold Release Orders. The following day, NAFTZ issued a statement condemning the “unilateral action taken by CBP”, and wanted a different approach to policing and capturing goods subject to new forced labor rules against China.

CPA believes that the NAFTZ’s hostile stance to CBP on forced labor concerns, combined with the FTZ Board’s possible authorization of solar module productions by Trina Solar, poses serious questions about the ongoing use of foreign trade zones in the United States as a clever end-around existing tariffs and restrictions.

The group Solar Energy Manufacturers for America sent their letter to Liz Whiteman, the Executive Secretary for the U.S. Foreign-Trade Zones Board on April 24, saying “granting Trina production authorization will undermine the domestic solar manufacturing industry, and we recommend the FTZ Board reject Trina Solar’s notice of proposed FTZ production activity.”

The American Alliance for Solar Manufacturing, which is a trade association of U.S. and foreign solar manufacturers, said the FTZ would give Trina an edge in producing and selling solar under the Inflation Reduction Act (IRA). Trina announced in September 2023 that it was building a factory in Wilmer, but never mentioned the FTZ.

“The IRA was designed to assist U.S. solar producers in fighting unfair competition from Chinese-owned solar companies. Certainly, the spirit of the IRA was not designed to permit Chinese companies such as Trina Solar with long records of violating U.S. laws and injuring domestic producers to now use U.S. laws as a way to continue to compete unfairly,” they wrote.

The Department of Commerce has found that Trina Solar engaged in dumping and corporate subsidies for its exports of solar cells and modules since 2011. In their first solar case in 2012, Trina Solar was hit with 92.52% dumping charges and countervailing rates as high as 19.20%.  Then in 2014, Trina received dumping charges of 26.71% and countervailing rates as high as 49.79%. And then Trina was hit again in 2023. 

Granting Trina Solar access to the Texas FTZ despite Trina’s AD/CVD circumvention history would deal a critical blow to the credibility of the FTZ Board and the foreign trade zone program generally. 

If Trina does not get into the FTZ in Texas, they may cancel their September 2023 planned investment. Trina is building a factory in Mexico and can eventually ship solar here duty-free under the USMCA. At least, however, we would not be subsidizing them via the IRA.


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