WIREDGOV

The European Commission today launched an anti-subsidy ("countervailing duty") investigation into imports of solar panels and their key components (i.e. solar cells and solar wafers) originating in China. EU ProSun, an industry association, claimed in its complaint lodged on 26 September 2012 that solar panels and their key components imported from China benefit from unfair government subsidies. In terms of value of imports affected, this is the most significant anti-subsidy complaint the European Commission has received so far: in 2011, China exported solar panels and their key components worth around €21 billion to the EU. The investigation will take 13 months in total. According to trade defence rules it is possible to impose provisional anti-subsidy duties within 9 months, provided there is sufficient prima facie evidence of subsidisation.

An anti-dumping investigation concerning the same product was initiated on 6 September 2012 and is on-going (see MEMO 12/647).

On what basis is the European Commission opening this investigation?

The European Commission is legally obliged to open an anti-subsidy investigation if it receives a valid complaint from a Union industry which provides evidence that a product exported from one or more countries is being subsidised and causing injury to the Union industry.

Such an anti-subsidy complaint was lodged on 26 September by EU ProSun, an ad hoc association representing more than 20 European companies producing solar panels and their key components. Their collective output represents more than 25% of Union production and the producers opposing the complaint do not represent more Union production than companies supporting the complaint. Both elements are legal requirements under the EU's anti-subsidy Regulation for an investigation to be initiated.

The complainant has brought sufficient elements demonstrating the existence of:

(1) possible subsidisation by the Government of China

(2) injury suffered by the Union industry and

(3) a possible causal link between the subsidised imports and the injury suffered by the Union industry.

Hence, the European Commission has found that there is sufficient prima facie evidence to warrant the opening of an investigation.

What product is under investigation?

The product covered by the investigation is solar panels and their key components, i.e. solar cells and solar wafers. In order to produce a solar panel, solar wafers are converted into cells and then cells are assembled together into modules, i.e. panels. Some producers have integrated production covering all three segments, whilst others produce only wafers, cells and/or modules.

What happens next?

The European Commission will send out questionnaires to various interested parties (e.g. Government of China, exporting producers, Union producers, importers and associations), asking for information relating inter alia to the alleged subsidies, exports, production, sales and imports of solar panels and their key components. Once the interested parties have responded to the questionnaires, the data will be verified by the European Commission, often by means of on-spot verification of company or government data.

On the basis of the information collected, the European Commission will establish if there is subsidisation and whether the injury allegedly suffered has been caused by the subsidised imports. This examination will also include looking at possible other factors that could also have contributed to the injury suffered.

The European Commission will then, within 9 months of the initiation of the investigation (in this case, the deadline is 5 August 2013), issue its provisional findings. There are three possible scenarios:

(a) impose provisional countervailing duties (normally for a four months period)

(b) continue the investigation without imposing provisional duties or

(c) terminate the investigation.

Throughout the investigation, all interested parties have a right to provide comments to the European Commission and participate in hearings to make their views and arguments heard. The European Commission takes account of the comments received and will address these in the remainder of the investigation.

Before deciding on the imposition of any measures, the EU – as the only WTO Member to systematically do so - will conduct the so-called "Union interest test". The European Commission will closely examine whether the potential imposition of measures would be overall more costly to the Union economy than the benefit of the measures would be to the complainants.

On this basis the European Commission may propose to the Council:

(a) to terminate the case without measures or

(b) to impose definitive countervailing measures for a duration of five years.

The Council is legally obliged to take a decision on the imposition of any definitive measures within 13 months of the investigation being started. In the present case, it would be before 5 December 2013. The final findings will be published in the Official Journal of the European Union.

The normal procedure is for the investigation to run its course. That said, legal provisions exist for parties to propose solutions once the European Commission has made its initial findings. The complainant also has the possibility to withdraw its complaint which he may do at any stage of the proceeding. In that case, the European Commission may decide to terminate the investigation.

Under what circumstances can anti-subsidy measures be imposed?

The investigation must conclusively show that:

• there is government subsidisation which benefits the exporting producers in the country/countries concerned

• material injury has been suffered by the Union industry concerned

• there is a causal link between the subsidisation and the injury found

• the imposition of measures is not against the Union interest.

Some facts on the production of solar panels

China is the world's largest producer of solar panels. Approximately 65% of all solar panels are produced in China. The EU is China's main export market for solar panels, accounting for around 80% of all Chinese export sales.

How many anti-subsidy investigations has the European Commission started?

Anti-subsidy investigations, while less common than anti-dumping cases, are still undertaken quite frequently. The EU currently has 10 anti-subsidy measures in force against third countries.

The EU has so far initiated 4 anti-subsidy proceedings against China and currently has measures in force against one product (coated fine paper). In comparison, the US, which is traditionally a more prolific user of anti-subsidy investigations, has imposed 24 anti-subsidy measures against China).

Further information

Notice of initiation (Official Journal publication)

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2012:340:0013:0023:EN:PDF

Anti-subsidy procedures

http://ec.europa.eu/trade/tackling-unfair-trade/trade-defence/anti-subsidy/

Factsheet on anti-subsidy investigations

http://trade.ec.europa.eu/doclib/docs/2012/october/tradoc_149951.pdf