Friday 22 August 2014

May Cause Side Effects

Solar Anti-dumping's Unforeseen Consequences

The ineffective fudge that came too late for solar module manufacturers is now poised to kill off the European inverter manufacturing industry

As predicted by many, the antidumping measures on Chinese solar modules brought in by the European Union have proved rather too easily circumnavigated.  I've heard of a number of approaches to evasion since the minimum price agreement was reached, but the most recent I've heard about should have Brussels Eurocrats in a cold sweat.

A Flag of Convenience?

I guess the most obvious sign of AD avoidance is the flood of Malaysian solar panels that are now prevalent at the low end of the market.  Many, including myself, strongly suspect that there's far more Malaysian modules being sold than there is manufacturing capacity in Malaysia. The obvious conclusion is that product is being trans-shipped from China via Malaysia and arrives in Europe with  paperwork to prove it's not of Chinese origin.

Some companies try harder than others to maintain the pretence that they have a factory in Malaysia. One company that approached us has gone to the trouble of making a Malaysian website (suspiciously similar to a Chinese manufacturer's and with all the same photos). It was only when we asked to visit the Malaysian factory that we were told that it wasn't company policy to allow visits, and that it was a 'quiet time' anyway so there wasn't anything to see.

Others are less circumspect about what they're doing. Take a look at this email I received offering to illegally rebadge Chinese modules as Malaysian with "all paperwork":

Dear value customer,

Nice to meet you!

Yes, for said product, here we would like to provide the professional trading solution to avoid the high anti-dumping duty that imports from China.

The routine for the containers will be as:

CHINA ---> MALAYSIA(change the containers in the free zone or inland warehouse) ----> England

Document issued details:
a. Malaysia solar panels factory CO
b. Master bill of loading under Malaysia factory
c. Malaysia factory packing list
d. Malaysia factory invoice

And the cost is much favor, it will save a lot of the anti- dumping tax:
1. Ocean freight from China port to Port Klang (west): to be advised
2. All in fee in Malaysia:
a. Include all the local fee for changing containers in Malaysia;
b. Include the above Malaysia factory document fee;
3. Ocean freight from Port Klang to England: to be advised

If you are intrested in such trading solution, kindly pls feel free to contact us anytime.
We have many successful cases to England for this item and other items.

Tks a lot.

Marketing Support

Another ruse is for the Chinese supplier to charge you the full minimum price and then separately remit money back to you against an invoice for "Marketing Support" or "Consultancy". The first invoice less the marketing support is the true price for the modules, but the only paperwork customs and excise sees is the first invoice at the minimum price.

My company has been approached with this offer on numerous occasions.

While this clearly isn't in line with the spirit of the AD legislation, I'm also not sure whether it would be strictly illegal.  After all, what's wrong with a manufacturer offering to part fund marketing initiatives in an export market?  Perhaps we'll see a test case soon?  Then again, perhaps we won't. Having brought in the rules, we've seen little evidence that the Commission has the stomach for the hard graft of enforcement.

Inverter Cross-Subsidy

I only heard about this approach recently, but if it becomes widespread it has the potential to wreak havoc upon European inverter manufacturers.

The way it works is that a Chinese module manufacturer agrees a price below the price undertaking level with you.  It then invoices you at the price  undertaking level and transfers the difference as a payment to an inverter manufacturer up the road. This payment is obviously invisible to EU customs, which only sees the modules being bought at the right price. The inverter manufacturer then sells you a shipment of inverters at a knock-down price (but not too low to be suspicious), with the price subsidised by the 'overpayment' for the modules.

The Antidumping decision came too late for the many, many European manufacturers of modules already in liquidation after years of fierce competition from Chinese competitors, but at least the continent still has world leading inverter manufacturers.

But for how long under the current regime?  SMA is already laying off staff and issuing profit warnings to investors blaming a lessening demand for solar in Europe.   How ironic if the policy intended to protect European solar manufacturing ends up contributing to the destruction of its manufacturers of solar inverters and Chinese dominance of this product segment in addition to solar modules.

The commission should either crack on with enforcing their price undertaking agreement with gusto, or should put the whole thing out of its misery and let Europeans benefit from world pricing on PV modules.  The current situation helps no one.