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Biden weighs Chinese solar equipment ban on forced labor

For months, a bipartisan group of lawmakers pushed Biden to impose polysilicon import restrictions similar to those the Trump administration has placed on cotton, tomatoes and other products exported from Xinjiang.

Now the White House is considering an effective region-wide polysilicon ban in Xinjiang, according to four industry and Capitol Hill sources with knowledge of the administration’s plans.

The ban, known as the withholding tax order, would allow customs and border protection to seize at U.S. ports any imports they suspect were made with forced labor. While the agency is considering a region-wide ban, it may also opt for closer action against specific factories or businesses in Xinjiang, two of the sources said. This would be in line with the strategy used by the Trump administration, when it sanctioned shipments by a large paramilitary enterprise in Xinjiang before imposing a regional ban on cotton products.

A spokesperson for CBP said the agency was not commenting on whether specific entities were under investigation.

The timing of any potential order is uncertain. While some industry lobbyists have been expecting action for weeks, Congressional sources say they have yet to be briefed on impending CBP action, a typical agency courtesy before major actions.

Democrats on the House Ways and Means Committee last week called on the Biden administration to block imports of Chinese solar panels and other polysilicon-containing products made with forced labor in Xinjiang. They said during a briefing earlier this year with congressional offices, CBP claimed enforcement action regarding polysilicon was coming – but CBP has yet to take such action.

“There is a bit of frustration that as it is so poorly that the world now understands things in Xinjiang and the effect it has, not only from a human rights perspective but from an economic impact point of view, we feel like there’s a lot of information that gives them what they need to take action, ”said Kildee, who led the letter alongside President Richard Neal (D-Mass.).

Democrats say there is “overwhelming evidence” of the use of forced labor in the production of polysilicon that exceeds the standard of action under Section 307 of the Tariff Act of 1930, which prohibits the importation of goods extracted, produced or manufactured in any country by force or contract labor.

“I understand that customs sometimes take a long time to investigate and make a decision,” said Senate Finance Chairman Ron Wyden (D-Ore.), Who separately raised the issue in the Senate. “Supply chain issues can be incredibly complicated, and in some cases it’s hard to get reliable information, especially if you’re talking about Xinjiang,” [where] their information is tightly controlled. But aggressive and relentless application is, for me, the prescription for it. “

Biden and the rest of the G7 brought the issue to the forefront at the recent summit when the countries signed a carefully drafted joint statement calling on China to “respect human rights and fundamental freedoms, in particular with regard to Xinjiang “. It did not foresee any specific action for the United States, nor did it specifically link Xinjiang to concerns of forced labor in solar supply.

“The basic notion in the press release was [to] denounce Xinjiang in terms of human rights violations, then establish a neutral principle that all democracies can support, ”National Security Advisor Jake Sullivan recently said aboard Air Force One. “We will take concrete measures and countermeasures against forced labor in these areas, and when you apply this in practice, it will have an impact on Xinjiang. “

But some in the industry are skeptical of a WRO’s effectiveness in eradicating forced labor in the complex solar supply chain given limited visibility into China’s business.

“This [WRO] can’t be the only mechanism because it’s a thin reed on which we suspend all our enforcement efforts, ”said a trade association official. “This is not the strong international mechanism we need to send a message to China that this is unacceptable. “

CBP’s enforcement strategy for any upcoming trade bans is not yet clear. But in the case of Xinjiang’s cotton ban, the agency took a hard line, forcing companies that import cotton products from China to trace their fibers throughout growth and processing. If companies cannot prove that their fibers are not from Xinjiang, customs seize the shipment.

For the solar industry, which is emerging from its last record year of installations and expected to see capacity quadruple this decade, the potential threat to supplies could hurt the supply chain which is already slowing projects and increasing costs. This could slow the deployment of the technology and help boost Biden’s efforts to put the country on track to eliminate carbon dioxide emissions from the power grid by 2035.

The Solar Energy Industries Association led a pledge signed by hundreds of solar companies earlier this year, pledging to ensure the solar supply chain is free from forced labor. It also released a supply chain traceability protocol to help companies track products and components to source, and called on its members to leave Xinjiang by the end of this month.

SEIA President and CEO Abigail Ross Hopper said that while the administration pursues a WRO targeting either specific companies or Xinjiang, U.S. solar panel companies are already taking steps to avoid disruption in the supply chain. supply.

“We have spent the last nine months pointing out to our businesses that whatever action the federal government takes, they need to take action to get out of it,” she said. “And I think the vast majority of them did.”

About 45% of the global supply of solar-grade polysilicon was produced by the four Xinjiang-based manufacturers in 2020, according to Germany-based Bernreuter Research. Another 35 percent came from other parts of China, while the remaining 20 percent came from outside China. SEIA said that was enough to supply the United States without polysilicon from Xinjiang.

Yet the US solar industry is already starting to feel broader constraints in the solar supply chain.

A quarterly report from SEIA released last week warned that while average prices for solar systems have remained relatively stable from the last quarter of 2020 to the first quarter of this year, major inputs for solar modules and installations, including polysilicon, face constraints.

Nikos Tsafos, acting director and senior researcher of energy security and climate change programs at the Center for Strategic and International Studies, warned in a recent blog post that it will be difficult for the United States to quickly restart domestic manufacturing and leave Xinjiang without affecting the deployment. .

The majority of the current global ingot and wafer production capacity is in China, making polysilicon manufacturers also dependent on China.

“You can’t really reshape industries that quickly,” Tsafos told POLITICO. “I think there is an underlying reality, which is that China is very important in this industry, and you are not going, within a reasonable time, to be able to get out of this dependence or co-dependency. . “

Kildee warned that any concerns about rising prices should not exceed the moral need to fight forced labor.

“First of all, the prices are going to be a function of a lot of different variables. One is scale and volume, and the other is certainty,” he said. “But third, and probably most importantly, the lower price from slave labor is not justifiable.”

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