Monthly Archives: May 2012

United States to impose anti-dumping duties on Chinese solar panels

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On Thursday, May 17th, the United States announced that it will impose anti dumping tariffs of more than 31 percent on solar panels from China. This decision, likely to ratchet up the trade tensions between the US and China, is the result of the US Department of Commerce finding several Chinese solar panel companies guilty of dumping their goods (selling them at below fair-market value).

The United States bought $3.1 billion worth of Chinese solar cells in 2011, which comes to more than half the American market for these devices. The anti-dumping duties are intended to level the playing field for US solar panel makers who may be undermined by Chinese competition, but may not necessarily be high enough to drive the Chinese makers out of the business altogether. Regardless, this imposition is said to be one of the strongest by the Obama administration in addressing complaints of unfair Chinese trade and economic practices.

This change also comes with opposition from many solar panel installers in United States who have opposed anti-dumping duties. They believe the inexpensive imports have helped spur many homeowners and businesses to put solar panels on their rooftops. However, this change is likely to mean a substantial increase in the price of solar panels going forward. High duties are likely to raise costs, slowing demand for the polysilicon that is used to make solar panels.

As per the Department of Commerce, merchandise covered by this investigation is currently classified in the Harmonized Tariff System of the United States (HTSUS) under subheadings 8501.61.0000, 8507.20.80, 8541.40.6020, 8541.40.6030, and 8501.31.8000.

The Commerce Department said a final determination on tariffs would be made in early October.

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Understanding the Tax Implications of Related Party Transactions and Transfer Pricing

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Supply Chain Managers need to Balance the Goals of Tax-Effective supply chain management with the Organization’s Compliance Requirements

Many multinational organizations are embracing tax-effective supply chain management to reduce costs and increase margins. Supply chain managers need to understand the ramifications of their tax-based strategies when it involves the transfer of tangible and intangible goods to their own foreign subsidiaries or parent companies. Reducing taxes is a desirable outcome, but not when it runs afoul of related party transaction regulations.

Doing cross-border business with a related party, which includes foreign subsidiaries and parent companies, can be complicated. A related party is any entity that can exercise control or significant influence over the operating policies of another entity. In global trade, it’s an individual or business that exercises a 10 percent interest in both the exporter and the ultimate consignee.

A related party transaction occurs during the transfer of resources, services, or obligations between related parties — regardless of whether a price is charged. The term “transfer price” refers to the price at which one company sells goods or services to a related affiliate in its supply chain. While the transfer price may be negligible, the obligations and reporting requirements that go along with the transaction are not.

Countries have adopted various laws and practices to ensure transferred goods and services are appropriately priced based on market conditions. The goal of this legislation is to ensure that revenue generated within a country, and thereby taxable by that country, is not inappropriately transferred to a related party outside that country to avoid taxes. Therefore, in a related party transaction, taxes are assessed on transferred goods or intangibles regardless of whether money changes hands. In any related party transaction, disclosing the relationship, reporting the transactions and conducting business “at arm’s length” are important ways to mitigate audit risks.

Supply chain managers need to balance the goals of tax-effective supply chain management with the organization’s compliance requirements. Solely focusing on reducing taxes may not result in the most efficient supply chain and could potentially result in non-compliance with related party transaction regulations. A collaborative approach that engages all parties — supply chain managers, senior executives and tax specialists – will ensure successful results.