China solar panel duties imposed by EU

Provisional anti-dumping duties were recently imposed by the European Commission on imports of solar panels, cells and wafers from China. Following a nine-month intensive investigation, the Commission came to the conclusion that Chinese companies are selling solar panels into Europe at far below their normal market value to the detriment of European solar panel producers.

There are a number of directions which the final decisions might take

Recent statistics show that Chinese imports represent over 80 per cent of the European market with Union industry holding a mere 13 per cent share of the same market. If measures against unfair trading practices by third country exporters are not imposed, there is the very real risk that Europe will become entirely dependent on imports from China with all the consequences as to loss of jobs and product quality that such a situation might bring along. Anti-dumping measures, protectionist as they might seem, are really all about ensuring fair competition and the respect of international trade rules. Indeed, all WTO members, including China, have the right to take action if dumping causes injury to their domestic industry. Such measures aim to restore a level playing field in a market distorted by unfair practices.

Anti-dumping procedures are subject to well-defined rules, both at WTO and at EU level. When an EU industry considers that imports of any product from a non-EU country are subsidised or are being sold at prices lower than the market value and are causing injury to the EU industry producing the same product, it can lodge a complaint with the Commission. In fact, the investigation and consequent decision on solar panels came about as the result of a complaint filed by an association of European solar panel manufacturers. Such a complaint must contain evidence to support the allegations made and be supported by a significant share of EU production, at least by companies accounting for 25 per cent of total EU production of the product. The complaint must also not be opposed by EU companies accounting for a larger production volume than the complainants.

When these conditions are met, the Commission is legally obliged to open an anti-dumping investigation and to pursue such cases. In this particular case, the Commission sent out questionnaires asking for information from various interested parties, including exporting producers, importers, suppliers of components, installers, and their representative associations. Once received, the Commission officials verified the data at the premises of most of the cooperating companies.

On the basis of the information collected, it provisionally established that significant dumping took place and that the material injury suffered by the Union industry is a result of the dumped imports. In all cases, the duty rate is imposed to remove the injury caused to the EU industry and to restore a level playing field, in other words they are never punitive in nature. In fact, the EU goes beyond its WTO obligations and applies the so-called “lesser duty rule duty at a level lower than the dumping margin but sufficient to remove the injury suffered by the EU industry. In this way, EU industry is allowed to sell the same product at a reasonable profit. In addition, the Commission carried out the so-called “Union interest test”, which examines whether the potential imposition of measures would be overall more costly to the EU economy than the benefit of the measures would be to the complainants.

The Commission decided that, in this particular case, the duty will be imposed in two phases: 11.8 per cent until August 6; and thereafter 47.6 per cent. This approach has been adopted to ensure sufficient supply to meet all current demand, while allowing the Union industry to adapt to the situation and increase the supply gradually.

The duty imposed so far is a provisional duty.

In fact, there are a number of directions which the final decision might take. Interested parties are now invited to submit further comments within 30 days and the Commission will address these during the remainder of the investigation before making a proposal on definitive anti-dumping duties.

Within 15 months of initiating the investigation, the Commission may either propose to the Council to terminate the case without measures or to impose definitive anti-dumping measures for a five-year period.

The Council is free to reject the Commission’s proposal by simple majority. The final findings will then be published in the Official Journal of the European Union by December 5, 2013.

The Commission has also expressed its intention to pursue discussions with Chinese exporters and with the Chinese Chamber of Commerce with the objective of finding a solution and suspending the provisional duties imposed.

Both WTO and EU law offer the possibility of a negotiated solution which would involve a voluntary price undertaking by experters, meeting a number of general legal requirements.

The main requirement is a commitment to respect a certain minimum price which removes the injurious dumping level.

Mariosa Vella Cardona is a freelance legal consultant specialising in European law, competition law, consumer law and intellectual property law. She is also the deputy chairperson of the Malta Competition and Consumer Affairs Authority.