U.S. Raises Tariffs on Chinese Wind-Turbine Makers

Source: By DIANE CARDWELL, New York Times • Posted: Monday, July 30, 2012

Tim Rue/Bloomberg News.  Tower sections for wind turbines made in China were unloaded at Long Beach, Calif., in 2010. The government said it increased the duties because China sold the towers at less than fair value.

Chinese manufacturers have been illegally selling steel towers for wind turbines below the cost of production and will have to pay duties of 20.85 to 72.69 percent on imports, the United States Commerce Department said Friday in a preliminary ruling in an antidumping case brought by four American tower manufacturers.

The department said it found similar dumping on the part of Vietnamese manufacturers and set duties at 52.67 percent for CS Wind, a major supplier to the American market, and 59.91 percent for all other Vietnamese companies.

The finding is the fourth this year in favor of American wind and solar manufacturers and is likely to intensify tension with the Chinese, who have been rapidly expanding manufacturing capacity for alternative energy technologies and flooding global markets with inexpensive products, especially solar panels.

Earlier this year, the Commerce Department ruled that China was dumping solar panels on the American market and imposed duties of 31 percent on most of the imports, which added to earlier duties imposed over what the department said were unfair subsidies for its manufacturers.

On Thursday, a group of about 20 European solar manufacturers announced that they had filed an antidumping case against the Chinese with the European Commission.

The Chinese government has responded to the trade complaints by beginning its own investigation into whether American and Korean manufacturers of polysilicon, the main ingredient in the solar panels, were selling the material below cost. Dumping occurs when a company sells a product in another country at less than fair value.

In the wind tower case, the decision is preliminary, but the Commerce Department will direct customs agents to begin collecting cash deposits equivalent to the tariffs, which are in addition to duties of 13.7 to 26 percent that the department imposed in May for what it said were unfair subsidies of the industry by the Chinese government. The department set the tariffs for the companies that account for the bulk of Chinese exports at 20.85 to 30.93 percent. Any others would be required to pay the highest rate.

“Commerce has taken an important step to address the significant dumping that is taking place,” said Alan H. Price, a lawyer at Wiley Rein, which is representing the American wind manufacturers that brought the complaint. The duties “will help to remedy the material injury already suffered by the U.S. industry and force the Chinese and Vietnamese producers to compete fairly,” he said.

The Chinese embassy in Washington did not respond to an e-mail seeking comment on the decision.

How the tariffs will affect the market is unclear. Like solar, the wind industry has been under pressure to bring down the cost of producing power to better compete with conventional fuels, a task made more difficult by the low price of natural gas and the expiration of an important subsidy at the end of this year. Wind industry executives say that the looming end of the support, a production tax credit, has already led to a decrease in demand for equipment and layoffs.

“On one hand, you say this is good for American manufacturing to have tariffs if they’re truly dumping towers below their cost into the U.S.,” said Michael Garland, chief executive of Pattern Energy, a wind developer. “On the other hand, it’s not going to solve the bigger problem we have, which is a dysfunctional Congress that can’t get anything passed. Because there’s this cliff that everybody’s facing at the end of the year, you’re not going to have any manufacturing in the U.S. anyway.”

The towers, which can cost $600,000 each, often account for 20 percent of the cost of a turbine. So although the tariffs might end up adding only a small percentage to the overall cost of a project, they could cut substantially into profits because that margin is only 7 to 10 percent, Mr. Garland said.

On the solar side, there are also questions about the impact of the duties. The major Chinese solar manufacturers have been able to keep prices low and skirt the tariffs by purchasing cells, the component of the panels to which the tariffs apply, elsewhere.

Imports of Chinese panels and cells decreased in May to $124 million from $226 million the year before, according to the Coalition for American Solar Manufacturing, an industry group that supports the trade cases. But shipments from other countries like Malaysia, Taiwan and the Philippines were up sharply. In the case of Malaysia, shipments were up by 950 percent over the previous May, to $135.5 million, exceeding China, according to the coalition.

Although the overall solar market continues to grow, executives and analysts warned that uncertainty about the outcome of the trade cases, which are only at the preliminary stage, could damp enthusiasm for future projects because costs are unclear.

“I’m paying X rate today. Am I going to have to pay a duty on that six months, a year down the road?” asked John Smirnow, a vice president of the Solar Energy Industries Association, a trade group that is advocating for negotiations between China and the United States to occur simultaneously to the legal cases.

But those who brought the trade cases say it comes down to adhering to the law.

“We have to be doing legal activity when we’re doing business,” said Steve Ostrenga, chief executive officer of Helios Solar Works, a panel manufacturer based in Milwaukee. “It’s not trying to penalize them. It’s just trying to make it right.”