Section 232 Solar Tariffs: the Elephant Hiding in the Chaotic Room
With so much roiling the US solar industry, including tax credit changes, the rush to safe harbor, and other new tariffs, the new Section 232 trade case still needs everyone's full attention.
It has been over two years since I have posted here, but so much is happening in our industry that it is time to resurrect the REA newsletter. The goal will be the same as originally launched in 2022: to provide clear and succinct information for those interested in learning about some of the most important issues facing the renewable energy industry in the United States, with a focus on solar and energy storage supply chains.
In the coming weeks, REA may tackle:
Tariffs: IEEPA “reciprocal” tariffs; the Section 232 trade investigation; the new solar AD/CVD case on Laos, Indonesia, and India; and the anode AD/CVD case on battery storage. We will look at legal issues and commercial impacts.
New FEOC restrictions on equipment components for both solar and storage passed in the One Big Beautiful Bill Act (“OBBBA”).
Practical guidance regarding choosing equipment suppliers and negotiating supply agreements for renewable energy equipment considering the current tariff/FEOC/UFLPA/domestic content landscape.
The commercial contract implications as industry finance and tax experts synthesize any upcoming changes to “commence construction” rules as a result of the Trump executive order issued on July 7, 2025 (the “Commence Construction EO”).
To start this first post in the re-launch, I want to cover what I think is the most underemphasized issue right now in the US solar industry: the newly announced Section 232 investigation on: (i) imports of polysilicon and (ii) imports of derivative products (potentially including ingots/wafers/cells/modules) containing foreign-made polysilicon.
This Section 232 case involves silicon products only, i.e., it will not apply to First Solar’s cadmium telluride products. One other important point is that this case covers all polysilicon and derivative products, including semiconductor-grade polysilicon products, and not just solar-grade polysilicon products. Thus, the impact of this case could be far-reaching, and it remains unclear whether and how much the Commerce department and the President will draw distinctions between semiconductor-grade products and solar products in any remedies imposed. That is a point we will come back to below.
The Section 232 case was filed July 1 and announced for public notice and comment a few days ago, but it comes amid a scramble within the industry because of the tax credit changes in the OBBBA, with potentially more regulatory changes to follow because of the Commence Construction EO. Further, a day after the Section 232 case was announced, the solar antidumping/countervailing duty (AD/CVD) petition was filed against Indonesia, Laos, and India.
As a result, I think that the new Section 232 case may not be getting the attention that it deserves. The new AD/CVD tariff case is important, too, and we will cover that in future posts. But many within the solar industry have been anticipating the new AD/CVD case for some time (at least as to Laos and Indonesia – it was less certain whether India would be included).
But this Section 232 case is a different beast, the likes of which the US solar industry has not seen before. One trade lawyer called it “a Section 201 case on steroids.” Solar industry veterans from 2017 can recall the high uncertainty created by the Section 201 investigation. We are at a similar level of impact and uncertainty with this Section 232 case now, as the 201 case created in 2017.
First, I will cover some basics of the Section 232 case and then its implications.
Overview of Section 232
A Section 232 trade investigation is predicated on the grounds that the imported goods threaten national security. The executive branch has very wide latitude to determine whether goods threaten national security, and wide latitude regarding the types of remedies that may result. I call this Section 232 case a “trade investigation” and not a “tariff investigation” purposefully, as that nuance could be critical: the President has the authority under Section 232 to outright ban imports of foreign polysilicon, and derivative products made with that polysilicon (meaning, with respect to solar, potentially ban cells and modules made with foreign polysilicon), from one or more countries. Less extreme than a total ban could be the imposition of a quota, i.e., a maximum amount of imports of certain products from certain countries.
Then, of course, there is the option to impose tariffs. The President can impose the traditional ad valorem tariffs on products – meaning a tariff that is a percentage of the declared value of the product. But a 232 tariff could be formulated in other ways, such as a dollar amount per kg of polysilicon of imported product, as just one example, or a tariff-rate quota.
The President has wide discretion to decide what remedies (including what tariff levels and/or non-tariff remedies, such as a ban or quota) should apply.
The main threat here is that the Section 232 remedies could apply to “derivative products” containing foreign-made polysilicon. There are little, if any, imports of actual solar-grade polysilicon into the US. But “derivative products” means downstream products made with foreign polysilicon. Thus, any ingots, wafers, cells, or modules imported into the United States that are made with foreign polysilicon could be included under the remedies of this Section 232 case.
And to be clear, as it stands right now, this Section 232 case is not just against only Chinese polysilicon and derivative products. It is against all foreign polysilicon and potentially, all ingots/wafers/cells/modules that are imported into the US that are made with any foreign polysilicon, whether that foreign polysilicon is of Chinese origin or of a foreign origin besides China.
That is what makes the case so impactful. The President has wide discretion to impose tariffs, or other even more extreme remedies, and this case could potentially impact every import of poly/ingot/wafers/cells/modules made with foreign polysilicon. I do not have the exact raw data, but I would estimate that 90% or 95% of the solar modules used in the US market are made with foreign-made polysilicon – whether from China, Malaysia, or Germany as the three most prevalent countries of solar-grade polysilicon production outside of the US.
A “blanket” case but with differing risk levels?
An important point here is that all sources of foreign polysilicon are not necessarily at the same risk level of outcomes in this 232 case. As a buyer, a reaction to this case as it has been initiated should not be: “well, almost all crystalline silicon modules are potentially impacted, so there is not much I can do to mitigate this risk.” That view could turn out to be right, but that view holds much potential peril. One should consider the wide presidential discretion available here, and also the wider geopolitical landscape. Indeed, if the whole premise of a Section 232 case is that it is based on US national security grounds, then one might fully expect different countries to be treated differently in terms of remedies, due to the differences of how any particular country impacts US national security, as determined by the President.
Just like under Section 201 tariffs, under Section 232 the President has discretion to cut deals – for example, to exempt specific countries from the trade remedies but not others. The President can also impose different remedies on different countries of origin. Here, the President could also impose different remedies on different downstream products – for example, the President could impose one type of tariff on imports of cells made with foreign poly, and another type of tariff on imports of modules made with foreign poly.
My hypothesis is that there could be different levels of risk to different solar modules under this 232 case, based on the exact country of origin of the foreign polysilicon used for each module.
As a practical matter, at highest risk are products made with Chinese polysilicon. Prior to this case, a bipartisan group of representatives in Congress wrote a letter to Commerce Secretary Lutnick, flatly asking Commerce to “prohibit the importation of products containing Chinese-origin or Chinese-linked polysilicon or impose a prohibitively high tariff to neutralize China’s unfair trade practices.” They explicitly cited grounds of “national security” - the underlying basis of Section 232.
Aside from the high risk attaching to any products made with Chinese poly, the 232 case could still impose trade remedies on products made with non-China sources of poly, such as from Malaysia (produced by OCI) and Germany (produced by Wacker). Wacker is in an interesting position here given that Wacker has solar-grade polysilicon production in the US as well as Germany. So one can speculate whether Wacker could have influence on the domestic US industry side of this case, and whether Wacker can try to steer a more positive outcome for imports of products made with their German polysilicon.
The letter to Commerce Secretary Lutnick anticipated different treatment of different countries as well, with Congressional members stating that an action against China “could be structured to exclude fairly-traded polysilicon from allied countries and—when coupled with U.S. supply—would ensure more than enough polysilicon to satisfy U.S. demand.” So even in the underlying buildup to this case, at least some members of Congress envisioned different treatment for different products, depending upon whether those products were made with polysilicon from an “allied” country or not. I believe that the assertion in the letter is correct that there is enough solar-grade, non-China poly available globally to meet US aggregate demand for solar modules - but of course at what price and after any 232 tariffs are added on top?
Finally, the zero risk products under this Section 232 case are obviously any solar products made with US poly (e.g., from Wacker US facilities, or Hemlock US facilities, and/or REC Silicon US facilities). Products made with US-made poly are not within the scope of the Section 232 case.
Potential 232 Tariff Remedies
What types of tariffs could result from this case? The case is impactful precisely because of the high uncertainty around that question. Although a 232 case is quite different from an AD/CVD tariff case, the two types of tariff cases are similar in that the resulting tariff amounts are . . . anyone’s guess. For example, it could be a 5% tariff on cells and modules. It could be a 30% or higher tariff on cells and modules. It could be a tariff formulated differently, such as a tariff calculated in terms of dollars per watt of product output for finished modules. Different types of measures and different tariff rates could apply to products with poly from different countries. For example, cells or modules could see different types of tariffs. (That would be like the Section 201 tariffs, where imports of modules have a regular (ad valorem) tariff, but imports of cells have a tariff-rate quota.)
Now I have heard third-hand of at least one module supplier telling potential customers that the impact of this case will be small – say, less than $0.01/W impact. All of the sources I have consulted have suggested that remedies could be much higher than that. A tariff equivalent of $0.01/W or less on modules is possible, to be sure. But it also could be $0.10/W. No one knows yet, and we may not know for sure until the official announcement from the President. So, as a buyer, if the supplier tries to tell you that this case will have only minimal impact, then make that supplier take all of the 232 risk in your supply agreement with them — if this risk is supposedly that small, then the supplier should not have a problem taking that risk. Call their bluff.
To return to one point about the scope and ultimate outcome, further uncertainty exists because we do not know yet whether the semiconductor-grade polysilicon remedies and treatment will de-couple from the solar-grade polysilicon side of things.
Section 232 Timing
Finally, the timing of the Section 232 case, and when tariffs could be imposed, injects further uncertainty. Under Section 232, Commerce has 270 days from commencement of the case (here, it was July 1) to issue a report and recommendation to the President as to what, if any, trade remedies should be imposed. That would put the Commerce report due to the President in late March 2026. At that point, the President has up to 90 days to decide what action, if any, to take, and has discretion to adopt the Commerce recommendation or do something different. Then any trade remedies would be put in place within 15 days of the President’s decision.
But note that the above timeline is the maximum timeline. If Commerce and the President want to move faster, they can. The Trump administration has rumbled that it generally wants 232 cases to move quickly, and the recent 232 case involving copper was approximately four months in duration from initiation to the imposition of a tariff. As such, tariffs or other trade remedies under this case could be imposed before year-end, or even sooner.
To my knowledge, any trade remedies or tariffs will be announced and take prospective effect, with no retroactive application.
In summary, this case should gain more industry attention going forward, and it underscores what I wrote over two years ago in the first post of REA:
But import tariff and forced labor investigations are now drilling very deep into the entire supply chain for each module — deeper than we have ever seen before. Issues now get into polysilicon (even quartzite), ingots and wafers, not just the location of cell manufacture and module assembly. As such, different modules and module vendors now have different risk profiles associated with their differing originating supply chains.
What to Do
First, from a commercial perspective, I would counsel buyers to generally avoid purchasing modules containing Chinese polysilicon, outside of buying product already in US inventory or very nearly so. The risk for product made with Chinese polysilicon is now quite high. Even if the seller agrees to bear all 232 tariff risk, a secondary question is: would the seller still perform if a 232 tariff imposed on products with Chinese polysilicon turns out to be incredibly high? Can the seller even perform at all if the products are banned?
Second, every buyer should contractually specify in the module supply agreement as to the country of origin of the poly, ingots, wafers, cells, and module assembly for the modules that they purchase. This is the only way to have any rational bounds around the tariff risk associated with any crystalline silicon modules, unless the seller assumes 100% of all tariff risk of any kind (including retroactive risk).
Further, as a buyer, you must choose your supplier and particular module with tariff risk in mind before your make the final product decision, as tariff risk varies supplier-by-supplier and sometimes even across different products offered by the same supplier. Even a difference in the delivery timeframe of a few months can have a material impact on tariff risk on certain modules in some cases (thinking about the 232 tariff but also more broadly, including the risk of other tariffs too).
If you choose your module vendor first and then hope that the contract negotiations can mitigate the tariff risk, then you could end up paying an extremely high price for modules. The bottom line is that no amount of legal language in a supply agreement can mitigate the tariff risk if a buyer chooses an inherently high-risk product and an inherently high-risk supplier. The tariff risk is essentially baked into the product itself based on the particular product’s supply chain. So you need to choose wisely, and not be afraid to pivot if needed. I know that once a module is chosen for engineering design, there is friction and not insignificant cost to later changing the project design for a new module. But put together a spreadsheet and compare those design change costs to paying, say, a 100% tariff on a high-risk module, and then rationally decide what to do based on the numbers rather than on a psychological block against backtracking on the original module choice.
The best practice in this environment is a carefully-run RFP process, with legal input and management oversight as part of the selection process. If possible, do not select a final module supplier and module for a project and go to full contract negotiations unless you know all three of:
(i) the price;
(ii) the contractually promised component supply chain for the modules, to assess tariff risk for such modules; and
(iii) a simple bullet point, or plain English summary, of how later changes in tariff will be allocated in the final contract.
You should think about part (ii) and (iii) above as an integral part of the price in part (i). If you only know part (i) above, then your price quoted by the vendor is meaningless, because it could bear no relation to the amount that you ultimately will have to pay after new tariffs are later added to the quoted price.
Be aware that in this environment it becomes more likely that suppliers with higher-risk modules will throw out lower prices in a price quote to try to entice buyers who do not concurrently ask about the origin of the module components and the tariff change assumptions that the supplier has built into such the price quote. One simple number, such as $0.22/W or $0.25/W or $0.32/W, is not enough to make an informed decision in the current market.
Len Conapinski is a partner at DCH Law LLP. All views here are my own personal thoughts, are not intended to be taken as legal advice, and are not reflective of the views of my law firm colleagues, our firm as an organization, or of any client of our firm.