As we described here, on August 16 a group of U.S. companies called the American Solar Manufacturers Against Chinese Circumvention (A-SMACC) filed anti-circumvention petitions related to AD/CVD orders that had been imposed in December 2012 on photovoltaic cells from China. The petitions relate to imports from Malaysia, Thailand, and Viet Nam, and allege that Chinese producers shifted production to these countries for subsequent export to the United States in order to circumvent the AD/CVD duties. An issue that has arisen in the case is whether the petitioners may keep their identities secret in order to avoid retaliation by China. In a September 29 letter, the Commerce Department asked the petitioners for more information on the reasons for this secrecy. The petitioners responded on October 13 with a detailed explanation, which we describe in this piece, using the case related to the AD/CVD order against Thailand (with exhibits removed in order to reduce file size) to illustrate the issue.
In its August 16 request for a circumvention ruling, A-SMACC said that it "requests business proprietary treatment for the identities of the companies that are part of A-SMACC, as disclosure of this information could lead to retribution against these companies and cause substantial harm." In its September 29 letter, Commerce told A-SMACC that "we require additional information to address certain threshold issues before we can consider the merits of your requests for anticircumvention rulings." One of the questions asked by Commerce was the following:
Please explain in more detail why you believe each member of A-SMACC will face retaliation and other forms of harm as a result of its status as a member of A-SMACC. Please provide any reasonably available evidence supporting your claim of potential retaliation with respect to each member of A-SMACC. This can include information and evidence pertaining to each member’s current or potential future business relationships, sourcing patterns, customers, etc.
In its October 13 submission, A-SMACC provided a detailed response that offers a range of general and industry-specific evidence about Chinese government behavior and actions.
The response begins at the general level, stating that "[i]t is well established that the Chinese government uses economic coercion in various forms to pursue its strategic objectives, ... ." It argues that "[t]he Chinese government deploys tactics of economic coercion at both the macro and micro levels to pressure countries and companies alike," and "relies on both formal state authority and its ability to spur Chinese enterprises (both state-owned and nominally private) into action to advance the state's strategic interests."
With regard to the solar industry, the response contends that "[t]he U.S. solar industry specifically has been a victim of Chinese retaliation," noting that "in 2012, the Government of China hacked into the computer systems of SolarWorld Americas ('SolarWorld'), the largest solar panel manufacturer in the United States at the time, and stole sensitive, proprietary information." It also noted that "[t]he Justice Department indicted five Chinese hackers who were members of the People's Liberation Army for breaking into SolarWorld's computers," but that because "there is virtually no chance that the Chinese would turn over the five People's Liberation Army members named in the indictment," this hacking "has largely unfolded without consequences and is thus likely to recur."
More broadly, the response argues that "[f]or at least the past decade, the Chinese government has leveraged the size of China's consumer markets and the centrality of Chinese production to global supply chains to retaliate against foreign governments that are even tangentially related to actions that run counter to China's objectives." Among the examples it offers are: "[c]utting off exports of rare earth minerals to Japan after a confrontation between a Japanese coast guard vessel and a Chinese fishing boat in disputed waters around the Senkaku/Diaoyu islands"; and "[u]sing customs inspection measures to slow imports of Norwegian salmon after the Nobel Prize Committee awarded the Nobel Peace Prize to dissident Liu Xiaobo."
Beyond efforts to influence foreign governments, the response also notes that "the Chinese government's willingness and ability to retaliate against private companies that advocate or support actions seen as adverse to China are also well recognized." And it suggests that "China's behind-the-scenes pressure can sometimes make it difficult to discern to what extent a U.S. company's representation of its economic and business interests in China also may be shaped by undisclosed Chinese government pressures, demands, or threats, issued directly or through Chinese companies and business partners," including in this case with respect to the "major opponents of A-SMACC's petition, including the Solar Energy Industries Association ('SEIA')."
The response also indicates that the Chinese government uses AD/CVD actions as retaliation. Here, after the United States issued AD/CVD orders on solar products, "the Chinese government responded ... by initiating antidumping and countervailing duty investigations on solar-grade polysilicon from the United States and South Korea."
Returning to the more general, the response states that "Chinese policy has increasingly emphasized utilizing China's centrality in global supply chains to coerce favorable policy outcomes abroad," citing a 2020 speech by Chinese President Xi Jinping in support. It notes that "[t]his articulation of a strategy to effectively weaponize international supply chain reliance on China has been accompanied by the creation of legal regimes that would formalize and facilitate economic retaliation against parties deemed to be acting contrary to Chinese interests." In this regard, it cites to MOFCOM's Provisions on the Unreliable Entity List and Rules on Counteracting Unjustified Extra-Territorial Application of Foreign Legislation and Other Measures. These new legal regimes, it said, "clarify and formalize the threat of retaliation for pursuing remedies against Chinese interests," but "[w]hether or not these new provisions are invoked, the Chinese government retains an array of formal and informal means to intervene and force even nominally private Chinese enterprises to act in the state's strategic interest." At the firm level, these include "direct or indirect ownership stakes by state-owned enterprises ('SOEs'), joint venture agreements with SOEs or government entities, and direct Chinese Communist Party ('CCP') oversight of corporate governance and decision making."
On this basis, the response contends that "A-SMACC members thus reasonably fear retaliation in response to these anticircumvention petitions," as "China's history of resorting to economic coercion in response to unfavorable foreign policy developments, its previous attacks on individual firms pursuing trade remedies in this industry, its recent expansions of legal and extra-legal means to retaliate, and the importance of the industrial policy strategies that gave rise to this case all suggest that retaliation is likely if not inevitable if A-SMACC's members are publicly identified."
In its letter requesting additional information, Commerce noted that "the 45-day time period contemplated by 19 CFR 351.225(c)(2) for Commerce to issue final rulings or initiate anti-circumvention inquiries will begin on the date that A-SMACC submits its response." Thus, the decision on whether to issue final rulings or initiate anti-circumvention inquiries will come at the end of November, barring further extensions.