Washington (Platts)--1Feb2013/526 pm EST/2226 GMT

A group of US solar manufacturers Friday sued the Obama administration over a loophole in tariffs announced last year on Chinese-made solar panels and cells, saying a deliberately included exemption in the penalties allows some imports to continue, harming the domestic industry.

The US Department of Commerce in March imposed countervailing duties and anti-dumping tariffs to more than 250% from 24% on solar cells and panels made in China, charging that the Chinese government was illegally subsidizing their manufacture under World Trade Organization rules and that Chinese manufacturers were "dumping" them in the US at below-market prices.

However, Commerce left in a potentially big loophole in its tariffs, by exempting Chinese modules made from cells manufactured in a third country. The exemption will allow Chinese manufacturers to escape the penalties by outsourcing the production of the cells, which is just one part of the panel-making process, the Coalition for American Solar Manufacturing said.

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CASM, which had lobbied the Obama administration to impose the tariffs, is asking the US Court of International Trade to close the loophole.

"With our cases, the US government went a long way in investigating and attempting to halt the anti-competitive and destructive impacts of China's illegal trade practices on America's domestic solar industry," Gordon Brinser, president of Oregon-based SolarWorld Industries America, which led the formation of CASM, said in a statement. "Now we are looking to finish the job. American jobs depend on it."

The tariffs and duties were prompted by a complaint filed last year by CASM, which alleged that China's national and local governments have provided more than $40 billion in illegal annual subsidies to Chinese solar cell and panel manufacturers, including cash grants, loan guarantees, lower-cost inputs, discounted export insurance and other aid.

CASM also accused Chinese manufacturers of "dumping" their products in the US to illegally gain market share.

CASM, in its lawsuit, said its original complaint to Commerce covered both cells and panels manufactured in China and that the agency should have covered both in its tariffs.

"Chinese producers can grow silicon crystal, slice that crystal into solar wafers, outsource conversion of those wafers into cells to Taiwan or elsewhere, then bring them back for assembly into panels for export to the US market without facing any measure to offset the anti-competitive effects of China's illegal subsidies and US pricing," CASM said.

A Commerce Department spokesman referred questions to the Department of Justice, where a spokesman could not immediately be reached for comment.

CASM is also appealing Commerce's decision not to investigate Chinese subsidies on aluminum extrusions and rolled glass, as well as its imposing of separate, lower duty rates for several Chinese panel makers, including Trina Solar, Hanwha SolarOne, Chint Solar and JA Solar.

CASM said those companies should not have qualified for lower rates because they failed to provide sufficient evidence that they are not owned or controlled by the Chinese government.

--Herman Wang, herman_wang@platts.com
--Edited by Richard Rubin, richard_rubin@platts.com

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