China Will Investigate Whether U.S., South Korea Dumped Polysilicon, As Trade Friction Escalates

The trade dispute over polysilicon is escalating. China will launch investigations into whether solar-grade polysilicon imported from the U.S. and South Korea is being sold below cost, a practice known as dumping. The claims come from Chinese producers of the raw material used to make photovoltaic panels.

China’s Ministry of Commerce says the inquiry will focus on whether the U.S. government is improperly subsidizing domestic polysilicon production, enabling U.S. companies to sell their products in China at less than fair-value prices. Imports from South Korea will also be subject to review.

During the first five months of 2012, U.S. polysilicon products exported to China increased by about 95% but the price decreased by more than 67%, according to customs data cited by the Chinese trade ministry.

China will examine a federal tax credit for the “advanced-energy manufacturing industry” offered by the U.S. government and a number of state-sponsored incentive programs in Idaho, Michigan, Tennessee, and Washington. The trade ministry says the investigation will be completed before July 20, 2013.

U.S. officials view China’s actions as retaliatory. Earlier this year, the U.S. imposed preliminary antisubsidy duties of 3 to 5% on Chinese solar panels, followed by antidumping tariffs ranging from 31 to nearly 250%.

“We’re disappointed by China’s decision to escalate the U.S.-China solar trade conflict,” says Rhone Resch, president and CEO of the Solar Energy Industries Association, a Washington, D.C.-based trade group. “Once again, what’s missing from today’s decision is any effort to find common ground.”

Hemlock Semiconductor, the world’s largest maker of polycrystalline silicon, would be hurt if China adopts punitive tariffs, says Robert D. Hansen, president and CEO of Dow Corning, the majority owner of Hemlock.

“This issue is serious,” Hansen says. “If the Chinese government assesses duties against U.S.-manufactured polysilicon sold into China,” he explains, it “could impact Hemlock Semiconductor’s ability to sell material to China, its largest market.”

Chinese makers of solar cells and modules could also lose access to “the critical technical collaboration and material” that U.S. companies currently provide, Hansen adds. “This case proves that no country or industry wins when trade disputes escalate.”