SML 2020 ER: Photovoltaic modules and laminates
Statement of Reasons — Expiry review determination

Products excluded from the CITT’s finding:

• modules, laminates or thin-film products with a power output not exceeding 100W;
• 195W monocrystalline photovoltaic modules made of 72 monocrystalline cells, each cell being no more than 5 inches in width and height; and
• modules, laminates or thin-film products incorporated into electrical goods where the function of the electrical goods is other than power.

Additional product information

[17] The final assembled product sold to end consumers is referred to as a solar module. A laminate refers to the consolidation of various raw materials, including strung-together solar cells, a cover glass and an encapsulant (such as EVA, or ethylene vinyl acetate) which are encapsulated (i.e. consolidated) into a more solid and durable product and most often made into a solar module by affixing to it additional solar module components such as a frame and/or a junction box. The subject goods include both modules and laminates, whether or not the laminate is attached to an electrical junction box or a protective frame or other components, or whether or not the laminate is packaged with any such products or components.

[18] For further clarity, a laminate included in a package of goods or shipped alongside other products serving to create a module (e.g. aluminum extrusions for the frame, and/or an electrical junction box, and/or batteries for electrical storage) falls within the definition of subject goods.

[19] The production of subject goods is measured in watts (W) or megawatts (MW). One megawatt is equivalent to one million watts. Canadian production is also measured in W or MW. Watts are synonymous with peak-watts, which are defined as the direct current (DC) watts output under specified laboratory settings.

[20] As noted above, the definition of subject goods excludes both “modules, laminates or thin-film products with a power output not exceeding 100W” and “modules, laminates or thin-film products where the function of the electrical goods is other than power generation and where these electrical goods consume the electricity generated by the photovoltaic product”. These exclusions serve to exclude small portable modules as well as consumer products and small appliances which use solar modules. For example, items ranging from solar garden lights to calculators, to parking meters, as well as portable modules used as camping equipment, would be excluded from the product definition by virtue of power output, or by virtue of the fact that these goods consume the electricity generated by the product.

Canadian production

[31] The Canadian producers’ domestic sales from domestic production decreased each year of the POR. Between 2017 and 2019 the Canadian producers’ domestic sales from domestic production decreased in terms of value and volume. This decrease is most notable between 2017 and 2018, where the total apparent Canadian market increased significantly and the Canadian producers’ domestic sales from domestic production decreased by a significant amount.

Imports

[32] Total imports also followed a pattern similar to the total apparent Canadian market during the POR, with an increase between 2017 and 2018 in terms of value and volume, and a similar decrease from 2018 to 2019. Total imports captured an additional 8.0% of market share during the period of 2017 to 2019. Subject imports, on the other hand, dropped by over 31.4% in terms of value from 2017 to 2019.^{Footnote 16} As such, the increase in imports was evidently from other countries, and at the expense of both exporters from China and the Canadian industry.

[33] Since the period of investigation (POI) of the original investigation (October 2013 to September 2014), subject imports dropped by over 99.9% in terms of volume, from 57 mega watts (MW) during the POI, to just .035 MW in 2019. This decrease coincided with a 60.5% decreased in the size of the apparent market between the POI and 2019.

[34] The volume of subject imports dropped by 99.9% between the POI (i.e. prior to the finding) and 2019. Subject imports also dropped during the POR, with a reduction of 31.4% between 2017 and 2019. In terms of market share, subject imports represented 7.2% of the Canadian market during the POI, prior to the finding. The market share of photovoltaic modules and laminates from China was reduced to less than 1% of the market in 2017 and further reduced in 2019.

[35] Imports from other countries increased faster than the market increased during the POR. In this regard, imports from countries other than China increased by 13.1% between 2017 and 2019 in terms of volume (vs 3.8% for the total market), and by 13.1% in terms of value (vs 0.3% for the total market).

Administrative Record

[42] The information considered by the CBSA for purposes of this expiry review investigation is contained in the administrative record. The administrative record includes the information on the CBSA’s exhibit listing, which is comprised of the CITT’s administrative record relating to the initiation of the expiry review, the CBSA’s exhibits and information submitted by interested parties, including information which the interested parties feel is relevant to the decision as to whether dumping and subsidizing are likely to continue or resume, if the CITT’s finding is allowed to expire. This information may consist of expert analysts’ reports, excerpts from trade magazines and newspapers, orders and findings issued by authorities of Canada or of a country other than Canada, documents from international trade organizations such as the World Trade Organization and responses to the ERQs submitted by the Canadian producers, exporters and importers.

[43] For purposes of an expiry review investigation, the CBSA sets a date after which no new information submitted by interested parties will be placed on the administrative record or considered as part of the CBSA’s investigation. This is referred to as the “closing of the record date.” This allows participants time to prepare their case briefs and reply submissions based on the information that is on the administrative record as of the closing of the record date. For this investigation, the administrative record closed on July 27, 2020.

Parties Contending that Continued or Resumed Dumping is Likely

[44] The participating Canadian producers made representations as part of their submissions to the CITT in LE-2020-001, in their ERQ responses, and in their case brief supporting their position that the dumping of photovoltaic modules and laminates from China is likely to continue or resume should the CITT’s finding expire. Therefore, they argued that the anti-dumping measures should remain in place.

[45] The main arguments made by the Canadian producers can be summarized as follows:

• Global production, overcapacity and slowing demand
• Producers in China selling subject goods below the cost of production
• Overcapacity of photovoltaic module and laminate production in China
• China’s economic slowdown and its affect on the PV industry
• Export orientation of producers of subject goods in China
• Continued presence in Canada, low-priced import competition in Canada and expected pricing of subject goods
• Inability for exporters of subject goods to sell at normal values
• Trade measures in other jurisdictions

Parties contending that continued or resumed dumping is unlikely

[61] None of the parties contended that continued or resumed dumping of subject goods from China is unlikely if the finding is rescinded.

GOC’s involvement in and influence on the solar industry: Section 20 conditions

[65] Section 20 of SIMA may be applied to determine the normal value of goods where certain conditions prevail in the domestic market of the exporting country. In the case of a prescribed country, under paragraph 20(1)(a) of SIMA, it is applied where, in the opinion of the CBSA, domestic prices are substantially determined by the government of that country and there is sufficient reason to believe that they are not substantially the same as they would be if they were determined in a competitive market. Where section 20 is applicable, normal values for the goods are not determined based on domestic prices or costs in that country.

[66] For the purposes of the final determination^{Footnote 18}, the CBSA was of the opinion that domestic prices in the solar sector in China are substantially determined by the GOC and there is sufficient reason to believe that the domestic prices are not substantially the same as they would be in a competitive market.

[67] When section 20 conditions are found to exist, the CBSA normally determines normal values using the selling price, or the total cost and profit, of like goods sold by producers in a surrogate country designated by the CBSA pursuant to paragraph 20(1)(c) of SIMA. Alternately, normal values may be determined under paragraph 20(1)(d) of SIMA, on a deductive basis starting with an examination of the prices of imported goods sold in Canada, from a surrogate country designated by the CBSA. During the investigation, none of the producers from any of the surrogate countries provided information. Furthermore, suitable information on imported goods sold in Canada from a surrogate country was not provided in the importers’ responses to the questionnaires. Therefore, sufficient information was not available to the CBSA in order to determine normal values using either of these two methods.^{Footnote 19}

[68] As a result, throughout the enforcement period, the normal values for the exporters that provided a complete and reliable response to the questionnaires have been determined using an alternate methodology under a Ministerial Specification, pursuant to section 29 of SIMA. The methodology set out in the Ministerial Specification closely resembles the methodology set out in subparagraph 20(1)(c)(ii), that is, the aggregate of the cost of production, a reasonable amount for administrative, selling and all other costs, and a reasonable amount for profits, in a surrogate country.

[69] The CBSA determined normal values based on information provided in Bloomberg New Energy Finance reports for the period of December 2013 to July 2014. These reports contained the prevailing price data and cost components of photovoltaic modules and laminates from major suppliers and customers in the industry. The CBSA used the monthly cost build-up information, including an amount for profits, for the purposes of determining the normal values of the subject goods.^{Footnote 20}

[70] Evidence on the administrative record does not indicate any significant change in the GOC’s level of involvement in the solar sector in China such that it would change the CBSA’s opinion issued at the time of the Final Determination concerning the conditions of Section 20 in the solar sector in China. Information on the administrative record indicates that the GOC still maintains influence in the solar sector through policies and guidelines which may determine the structure and composition of the solar sector in China, and influence the balance of supply and demand for photovoltaic modules and laminates.^{Footnote 21}

[71] Based on information available to the CBSA, the GOC has introduced measures in 2020 which will restrict production capacity^{Footnote 22} and set minimum efficiency standards for photovoltaic modules^{Footnote 23}. According to industry analysts, these measures may lead to the consolidation of photovoltaic module and laminate producers, and may impact the production and capacity of these producers. Further, based on information on the administrative record, the GOC has also influenced the price of photovoltaic modules and laminates through its subsidization of solar energy production.^{Footnote 24}

[72] As neither the GOC, nor any exporters or producers of photovoltaic modules and laminates in China provided a response to the CBSA’s ERQ, the CBSA has based this opinion on the evidence available on the administrative record.

[73] As such, for the purposes of this expiry review investigation, the CBSA finds that there is no information on the administrative record which would cause the CBSA to change its opinion formed at the conclusion of the original investigation. Further, the CBSA finds that, based on the information on the administrative record, the CBSA would reasonably determine that the domestic prices in the solar sector in China are substantially determined by the GOC and there is sufficient reason to believe that the domestic prices are not substantially the same as they would be in a competitive market.

[74] For the reasons discussed above, the CBSA believes that the normal values for subject goods are likely to continue to be determined on the basis of a surrogate methodology (i.e. pursuant to section 20 or 29 or SIMA) in the foreseeable future. Given the production overcapacity situation in China, the CBSA finds that it is likely that exporters of subject goods will continue to sell goods to Canada at prices lower than the normal values determined on the basis of a surrogate methodology.

Production, capacity and demand for photovoltaic modules and laminates

[75] China is the largest global producer of photovoltaic modules and laminates by a large margin. In 2018, the total global production of photovoltaic modules and laminates was estimated at approximately 116 GW, up nearly 11 GW from 2017. In 2018, China accounted for 72% of global production, producing approximately 83-84 GW of photovoltaic modules and laminates. This represents an approximate increase of 10.6% from 2017 production of 75 GW. Further, in the first half of 2019, production of photovoltaic modules and laminates in China rose to 51 GW, a 31% increase from the first half of 2018. In 2014, prior to the finding, China produced an estimated 32 GW of photovoltaic modules and laminates.^{Footnote 25}

[76] China also has the largest production capacity in the world, again by a very significant margin. In 2018 China had an estimated production capacity of approximately 130 GW per year, which represents approximately 71% of global production capacity (183.8 GW). From 2017 to 2018 China’s PV module production capacity increased by 25 GW, or 23.8%, the highest increase in the world and the largest increase to date.^{Footnote 26}

[77] As a result, China had an excess production capacity of approximately 46 GW in 2018, which, based on the Canadian market data for 2018, is enough to supply the Canadian market more than one hundred times over.^{Footnote 27}

[78] Further, between 2016 and 2018, production capacity in China grew at a faster rate than actual production. This is consistent with global trends as the global utilization rate decreased from 74% in 2016 to 63%. Meanwhile, growth in domestic demand for PV modules in China had decreased. In May 2018, a policy decision by the GOC had significant negative impact on the demand for photovoltaic modules and laminates in China. As a result, the gap between global demand and supply grew from 2017 to 2018 as global production and capacity has increased at a faster pace than global demand^{Footnote 28}. This trend is expected to continue into 2020 as demand is expected to stagnate before potential growth in 2021.^{Footnote 29}

[79] China also leads the world in the production of input materials used in the production of photovoltaic modules and laminates. In 2018, China reported production of 85 GW of solar cells and a production capacity of approximately 128 GW per year. This accounted for 74% of global solar cell production.^{Footnote 30} According to the International Energy Agency, some of the world’s largest producers of photovoltaic modules and laminates which are based in China have continued to expand their capacity to produce input materials such as ingots and wafers. As such, the ability for these large producers to increase production will not be limited by the availability of input materials.^{Footnote 31}

[80] The COVID 19 pandemic appears to have had little impact on the production of photovoltaic modules and laminates in China. Producers in China reported production of 59 GW in first half of 2020, an increase of 15.7% from 2019.^{Footnote 32} The impact on the demand for these products is more uncertain. The global economic contraction and significant decreases in the cost of oil may have negative effects on the demand for photovoltaic modules and laminates in the near term.^{Footnote 33} Further, Jinko Solar, one of the largest producers of photovoltaic modules and laminates in China, noted in their 2019 annual report that demand for photovoltaic modules and laminates is substantially dependent on the availability of government incentives.^{Footnote 34} The availability of these incentives remains a significant risk factor for photovoltaic module producers.

[81] The issue of overcapacity in the photovoltaic module industry appears to have been confirmed by the GOC, as they have introduced measures which may restrict investments in projects which would increase production capacity for photovoltaic modules and laminates.^{Footnote 35}

[82] Given the significant existing production capacity of producers in China, along with the demand uncertainty caused by the COVID 19 pandemic^{Footnote 36}, the CBSA is of the opinion that the conditions in the photovoltaic module and laminate industry in China are conducive to continued downward pressure on the prices of photovoltaic modules and laminates in China.

[83] In the opinion of the CBSA, the combination of the factors described above will likely result in further overproduction and continued overcapacity. In addition, based on the information on the administrative record it appears that demand in China may remain stagnant in the near term. As supply continues to grow at a faster pace than demand, the CBSA is of the opinion that this is likely to result in lower prices for photovoltaic modules and laminates in China, and will also result in Chinese exporters more aggressively pursuing export markets.

Conditions in the photovoltaic module and laminate industry

[84] Based on information on the administrative record, a decision by the GOC in May 2018, to control the development of photovoltaic projects, and to reduce the subsidies available to photovoltaic projects, has had a significant effect on the price of photovoltaic modules and laminates in China and the rest of the world. These measures had a significant negative impact on domestic demand for these products and led to price reductions across the photovoltaic value chain. These effects have extended to the entire photovoltaic value chain as the price of input materials has also dropped. These price concerns may only be exacerbated by the COVID-19 pandemic as production has recovered but demand remains uncertain.^{Footnote 37}

[85] The Canadian producers submitted that global prices for crystalline photovoltaic modules have been on a downward trend since 2016. They further noted that prices appear to have stabilized in 2019 but that the trend of decreasing prices and increasing production would continue, and that this would likely lead to further oversupply issues.

[86] The complainant submitted information from Bloomberg with respect to the average cost of production for photovoltaic modules and laminates in China. This information was based on data collected by Bloomberg. For the purposes of the final determination of dumping, the CBSA relied on information from this publication in determining normal values pursuant to section 29 of SIMA. As such, the CBSA has found, and continues to find, that this publication is a reasonably reliable source of information with respect to the photovoltaic module and laminate sector.

[87] Based on data from Bloomberg, it appears that the decreases in the costs of material inputs have not been as drastic or not substantial enough to offset the decreases in selling prices. For the months April – June 2019, the international spot price for photovoltaic modules was lower than the total cost build up for Chinese photovoltaic modules and laminates.^{Footnote 38} This suggests that producers in China are selling subject goods at a loss, and accordingly, that if the finding were to be rescinded, subject goods may be sold to Canada at dumped prices, or below the cost of production.

[88] In their 2019 annual report, Canadian Solar, a Canadian producer of photovoltaic modules and laminates which also has large production capacity in China, noted a sharp decline in its average selling prices of photovoltaic modules, down from USD 0.51 and USD 0.40 in 2016 and 2017 to USD 0.34 and USD 0.29 in 2018 and 2019. This represents a drop of 43% between 2016 and 2019. Canadian Solar explained that the rapid increase in the production of silicon had caused overcapacity in the markets for photovoltaic modules and laminates and the related material inputs, and led to downward pressure on module prices. ^{Footnote 39}

[89] Jinko Solar, one of the largest producers of photovoltaic modules and laminates in China, noted similar price reductions in their 2019 annual report, stating “The global solar module production capacity exceeded demand in 2019, which further intensified competition over pricing. Consequently, the average selling price of our solar modules, which represented 95.8% of our total revenue in 2019, decreased from 2018 to 2019.” ^{Footnote 40}

[90] Considering the existing substantial overcapacity and the oversupply of photovoltaic modules and laminates in the global market, as well as the decreases in the cost of inputs and substantial reductions in spot prices for photovoltaic modules and laminates, the CBSA finds that it is reasonable to assume that market conditions may continue to deteriorate such that it is likely that producers in China will continue to increasingly focus on the export market to sell their excess capacity.

Export orientation of chinese photovoltaic module and laminate producers

[91] As discussed above, China is the largest producer of photovoltaic modules and laminates in the world. In addition, China is also the world’s largest exporter of photovoltaic modules and laminates.

[92] Based on information on the administrative record, exports of photovoltaic modules by producers in China increased from 2017 to 2018 and from 2018 to 2019.^{Footnote 41} A significant portion of this increase can be attributed to the removal of trade barriers in the European Union (EU) and the resulting significant increase of exports to that region. In September 2018, the EU terminated the anti-dumping and countervailing measures which were applicable to imports of photovoltaic modules and laminates from China.^{Footnote 42}

[93] In May 2018, the GOC issued a notice concerning the control of future photovoltaic development projects in China and a reduction in subsidies. These measures had a significant negative impact on domestic demand for these products and led to price reductions across the photovoltaic value chain.^{Footnote 43}

[94] The reliance on export markets is acknowledged by Jinko Solar, one of China’s largest producers of photovoltaic modules and laminates. In their 2019 Annual Report, Jinko Solar noted “in 2017, 2018 and 2019, we generated 62.8%, 73.6% and 82.5%, respectively, of our total revenue from export sales.” In 2019, one of the world’s largest producers of photovoltaic modules and laminates was almost entirely reliant on export markets for revenue.^{Footnote 44} Further, this information demonstrates a rapid increase in the financial reliance on export markets, as the portion of revenue from export sales increased each year from 2017 to 2019 by a substantial margin.

[95] The information on the administrative record demonstrates the export orientation of producers of photovoltaic modules and laminates in China. Further, given the significant differences between production of photovoltaic modules in China and domestic demand for these products, the CBSA finds that producers in China are likely to rely, or to continue to rely, on export markets for a substantial portion of their sales.

Trade measures in canada and other jurisdictions

[96] In addition to the Canadian measures, several jurisdictions have imposed anti-dumping and other trade measures with respect to photovoltaic modules and laminates from China, as well as other photovoltaic products from China.

[97] The United States currently has two anti-dumping and countervailing measures in place against photovoltaic modules and laminates from China. In addition to anti-dumping and countervailing measures, the United States has also has imposed safeguard measures and additional ad valorem duties under Section 301 of the Trade Act of 1974.^{Footnote 45}

[98] India and Turkey have also implemented trade measure against photovoltaic modules and laminates from China. In April 2017, the Government of Turkey imposed anti-dumping duties on imports of photovoltaic modules from China. In July 2018, the Government of India decided to impose safeguard measures against photovoltaic cells and photovoltaic modules and laminates from China.^{Footnote 46}

[99] The anti-dumping measures in place on photovoltaic modules and laminates from China, and in numerous jurisdictions, are indicative of a propensity of Chinese exporters to dump photovoltaic products. The presence of these anti-dumping measures and the other trade measures that are specific increase the likelihood of dumped subject goods being exported to Canada in light of the trade barriers that exist in these jurisdictions, including such a large and geographically close market as the United States. While the anti-dumping and countervailing measures currently in place in Canada with respect to the subject goods have prevented a diversion of Chinese photovoltaic modules and laminates to Canada, the removal of these measures is likely to result in an increase of shipments to Canada at dumped prices.

Continued presence of chinese photovoltaic modules and laminates in Canada

[100] As mentioned above, the volume of subject imports dropped by 99.9% between the POI (i.e. prior to the finding) and 2019. Subject imports also dropped during the POR, with a reduction of 31.4% between 2017 and 2019. In terms of market share, subject imports represented 7.2% of the Canadian market during the POI, prior to the finding. The market share of photovoltaic modules and laminates from China was reduced to 0.23% of the market in 2017 and further reduced to 0.16% of the market in 2019. This significant reduction is indicative of the effect of the measures, and the inability for most exporters to maintain sales at normal values.

[101] The total amount of anti-dumping and countervailing duties collected on imports of subject goods from China during the POR was just over $700,000. As a percentage of the total value for duty, the combined anti-dumping and countervailing duties assessed during the POR were equal to 54.6%. Based on this information, it appears that the remaining Chinese exporters in the Canadian market have continued to dump subject goods into Canada and are still competing on the basis of their cost advantage in order to maintain a presence in Canada, despite the measures in place. The total amount of dumping duty assessed on those goods suggest that many of the exporters that maintained a presence in Canada while the finding is in place are unable to do so at non-dumped prices.

Competitive conditions in the canadian market

[102] The Canadian market appears to be an attractive target for imports from other countries. During the POR, imports from countries other than China increased at a faster rate than the growth of the total apparent Canadian market. Imports from countries other than China increased by 13.1% between 2017 and 2019 in terms of volume (vs 3.8% for the total market), and by 13.1% in terms of value (vs 0.3% for the total market).

[103] With respect to demand for photovoltaic modules and laminates in Canada, generally speaking, the information on the administrative record is mixed, with projections ranging from limited to negative growth from 2019 to 2020. There appears to be a consistent projection of year over year growth in 2021.^{Footnote 47}

[104] On the supply side, the producers expect increased competitive pressure in the foreseeable future^{Footnote 48}. Domestically, it was noted that there was ample capacity available to satisfy the expected growth in demand.^{Footnote 49} Based on the data available, the increase in domestic capacity was in line with the growth in market demand.

[105] The Canadian producers noted an increase in low price imports from certain Asian countries. This trend is confirmed by the CBSA’s statistical data on volume, which shows an increase of 13.1% in imports from countries other than China between 2017 and 2019, compared to 3.8% for the total market.

[106] With respect to the average price of photovoltaic modules and laminates in Canada, the Canadian producers argued that the presence of low priced imports from other countries has forced domestic producers to decrease their prices in order to maintain market share. The information on the administrative record indicates a decrease in the average price per watt offered by the Canadian producers from 2017 to 2019. The Canadian producers have attributed this decrease to reductions in costs as well as increased pressure from imports.

[107] It was already noted that the Chinese producers of photovoltaic modules and laminates are increasingly export focused, with ample capacity available and a propensity to dump subject goods. As such, if the CITT’s finding was no longer in place, it is likely that the Chinese exporters would be competing with the reported new low priced sources of imports on the basis of price. It was also established that to the extent that the conditions of section 20 of SIMA continue to apply to the Chinese solar sector in China, the normal values for Chinese producers of photovoltaic modules and laminates are not based on the domestic prices or costing data, but rather on the pricing and costing structure in a surrogate country, where competitive conditions exist. As discussed above, the normal values under section 20 are likely to be higher, and hence, the subject goods are more likely to be dumped.

Determination regarding likelihood of continued or resumed dumping

[108] Based on the evidence on the record in respect of: the GOC’s involvement in and influence on the solar industry – Section 20 conditions; the production, capacity, and demand for photovoltaic modules and laminates; the conditions in the photovoltaic module industry; the export orientation of Chinese photovoltaic module producers; the trade measures in other jurisdictions; the continued presence of Chinese photovoltaic module products in Canada; along with the competitive conditions in the Canadian photovoltaic module market, the CBSA determined that the expiry of the finding is likely to result in the continuation or resumption of dumping of certain photovoltaic modules and laminates, originating in or exported from China, into Canada.

Parties contending that continued or resumed subsidizing is likely

[109] The Canadian producers, having made certain representations in their case briefs, argued that the subsidizing of certain photovoltaic modules and laminates from China is likely to continue or resume should the CITT’s finding expire. Therefore, they indicated that the countervailing measures should remain in place.

[110] The main argument made by the Canadian producers is that China has continued to subsidize producers of photovoltaic modules and laminates in China.

Parties contending that continued or resumed subsidizing is unlikely

[115] None of the parties contended that continued or resumed subsidizing of subject goods from China is unlikely should the CITT’s finding expire.

Determination regarding likelihood of continued or resumed subsidizing

[133] Based on the information on the administrative record in respect of the continued availability of subsidy programs for producers and exporters of photovoltaic modules and laminates in China and the countervailing measures against Chinese photovoltaic modules and laminates in other jurisdictions, the CBSA determined that the expiry of the finding is likely to result in the continuation or resumption of subsidizing of certain photovoltaic modules and laminates originating in or exported from China.