Biden to Deter Forced Labor With Ban on China’s Solar-Panel Materials

Date: Friday, June 25th, 2021
Source: The Wall Street Journal

WASHINGTON—The Biden administration broadened its campaign against the use of forced labor in China’s Xinjiang region on Thursday by imposing penalties on some companies that produce raw materials used to make solar panels.

The U.S. Customs and Border Protection said it is immediately barring imports of metallurgical-grade silicon mined by Hoshine Silicon Industry (Shanshan) Co., as well as products made from it, unless the company can prove the material isn’t produced with forced labor.

The Commerce Department is adding Hoshine and four others involved in silicon production to its entity list, which requires U.S. companies to get a license to sell them products or technology; such licenses are rarely granted. The Labor Department is also adding polysilicon made in China to its list of products made by forced labor.

The actions are likely to be largely symbolic. CPB estimates that Hoshine exported just $6 million worth of silicon to the U.S. over the past 2½ years, and about $150 million of solar products exported to the U.S. over that time period contained Hoshine raw materials, a fraction of total imports. An agency official said solar companies have been shifting to other suppliers.

Homeland Security Secretary Alejandro Mayorkas said he didn’t expect imports of all solar products produced in Xinjiang to be blocked, unlike the blanket ban on cotton and tomato products put in place earlier. “This is not necessarily calibrated to geography, but calibrated to conduct,” he said at a news briefing.

Still, the actions reinforce the administration’s concern about human rights in Xinjiang, where the U.S. says China is engaged in genocide against the region’s Uyghur population. Uyghurs and members of other largely Muslim ethnic groups have been rounded up in mass, placed in detention centers and subject to political indoctrination.

The new actions are unlikely to hobble China’s solar industry or make it difficult for U.S. businesses to build or sell solar panels, though they will have to ensure the materials they import comply with the order.

About 85% of the panels sold in the U.S. are imported, with many of those made by Chinese companies. Many other companies make metallurgical silicon in China, the U.S. and elsewhere in Asia, so supply shouldn’t be seriously disrupted, according to U.S. officials.

A Chinese Foreign Ministry spokesman in Beijing called the allegations of genocide and forced labor in Xinjiang “the lie of the century” and accused the U.S. of misusing human rights.

“From cotton to photovoltaics, from agriculture to industry, the U.S. uses human rights as a guise to suppress the development of Xinjiang’s industries by any means,” spokesman Zhao Lijian told a press briefing in Beijing.

Targeting China’s solar industry is difficult for an administration that also wants to make the U.S. electric grid carbon-free by 2035.

Solar accounts for more than half of all U.S. renewable-energy projects scheduled to come online soon, according to a recent report by the American Clean Power Association, an industry group.

“Environmental goals are a priority” for the administration, said Mr. Mayorkas. “Our environmental goals will not be achieved on the backs of human beings in a forced labor environment.”

The vast majority of solar panels sold globally rely on technology dominated by China. The process starts with what is known as metallurgical-grade silicon, which is often mined and processed into polysilicon in Xinjiang. Through several additional steps, those raw materials are turned into solar cells and assembled into solar panels. China is the leader in all parts of the supply chain, especially in the production of silicon wafers that are turned into solar cells.

The U.S. solar industry has been concerned that the administration would block imports. The Solar Energy Industries Association has provided a methodology for members to trace the origin of the goods they produce or assemble. But it is far from clear whether Beijing will allow outside auditors to play a significant role checking supply chains.

John Smirnow, the SEIA’s general counsel, said the group supports the Biden administration actions and has urged “solar companies to leave the [Xinjiang] region.”

Some non-Chinese companies complain that a crackdown could make them even more dependent on Chinese suppliers, who would have to provide documentation that their goods are made outside Xinjiang.

The Commerce Department is adding four companies and one organization to its entity list. They are the polysilicon producers Xinjiang GCL New Energy Material Technology Co. and Xinjiang Daqo New Energy Co. and the metallurgical silicon producers Xinjiang East Hope Nonferrous Metals Co. and Hoshine. The fifth is Xinjiang Production & Construction Corps, a state-owned paramilitary organization that runs a swath of state farms and businesses, including industrial parks where solar silicon processing takes place. It has been previously placed on the entity list.

According to a Federal Register entry late Wednesday, all five “have been implicated in human rights violations and abuses in the implementation of China’s campaign of repression, mass arbitrary detention, forced labor and high-technology surveillance” in Xinjiang.

The impact, however, is unclear. The companies are engaged in mining, processing and construction, areas where China is a leader and doesn’t appear to depend on U.S. technology.

The Biden administration has built on the Xinjiang campaign started by the Trump administration and looks to enlist allies in increasing pressure against China to change its practices.

At the recent meeting of the Group of Seven wealthy democracies, the group released a statement opposing forced labor, though it didn’t identify China by name, reflecting the reluctance of Europe and Japan to confront China on the issue.


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