The United States and Canada reached an agreement earlier this month to remove American tariffs on Canadian-made solar products, including crystalline silicon photovoltaic modules used in solar generation facilities. The tariffs at issue, commonly referred to as “Section 201” tariffs, were imposed in 2018 under Section 201 of the Trade Act of 1974.[1]
The Section 201 tariffs were intended to support American manufactures facing import competition (predominately from Chinese producers) and provided no exemptions for Canadian or Mexican imports.[2] Canada consequently initiated a dispute resolution process under the 2018 U.S.-Mexico-Canada Agreement (“USMCA”), which generally mandates free trade between Canada, the United States, and Mexico, arguing that the Section 201 tariffs violated the terms of that agreement.[3] An independent panel ultimately agreed with Canada, concluding in February that the Section 201 tariffs violated the USMCA.[4]
As a result of the dispute resolution decision, the United States signed onto a memorandum of understanding and agreed to lift the Section 201 tariffs on solar product imports from Canada. However, the agreement contains a mechanism to address Canadian imports should they suddenly become unpredictable and exceed certain thresholds outlined in the agreement.[5]
According to Canadian officials, the Section 201 tariffs reduced Canada-to-United States solar panel trade by over 80 percent.[6] Canadian Trade Minister Mary Ng was pleased with the new agreement, explaining that it is reflective of a commitment by both countries to develop renewable energy.[7] United States Trade Representative Katherine Tai noted that the agreement “will promote greater deployment of solar energy in the United States using products from one of our closest allies.”[8]
[1] Jennifer Doherty, US-Canada Solar Deal Sees Biden Admin. Balance Priorities (July 12, 2022), https://www.law360.com/environmental/articles/1510481/us-canada-solar-deal-sees-biden-admin-balance-priorities?nl_pk=a6d946b4-7624-4a86-be4b-e804ed8077ef&utm_source=newsletter&utm_medium=email&utm_campaign=environmental&utm_content=2022-07-13.
[2] Id.
[3] Id.
[4] AJOT, U.S. and Canada announce MOU for solar products trade (July 8, 2002), https://ajot.com/news/u.s-and-canada-announce-mou-for-solar-products-trade.
[5] Tim Sulvia, US lifts tariffs on solar products from Canada, Mexico (July 11, 2022), https://pv-magazine-usa.com/2022/07/11/section-201-lifted-for-canada-made-solar-products/.
[6] Id.
[7] Id.
[8] Agence France Presse, US To Lift Tariffs On Canadian Solar Products (July 7, 2022), https://www.barrons.com/news/us-to-lift-tariffs-on-canadian-solar-products-01657228508.