3 min read.Updated: 24 Jun 2021, 02:34 PM ISTKaren Freifeld,Michael Martina,David Shepardson, Reuters
The Xinjiang region accounts for approximately 45% of the world’s solar-grade polysilicon supply, a report by solar industry analysts found
The Biden administration on Wednesday ordered a ban on U.S. imports of a key solar panel material from Chinese-based Hoshine Silicon Industry Co over forced labor allegations, two sources briefed on the matter said.
The US Commerce Department separately restricted exports to Hoshine, three other Chinese companies and the paramilitary Xinjiang Production and Construction Corps (XPCC), saying they were involved with the forced labor of Uyghurs and other Muslim minority groups in Xinjiang.
The three other companies added to the U.S. economic blacklist include Xinjiang Daqo New Energy Co, a unit of Daqo New Energy Corp; Xinjiang East Hope Nonferrous Metals Co, a subsidiary of Shanghai-based manufacturing giant East Hope Group; and Xinjiang GCL New Energy Material Co, part of GCL New Energy Holdings Ltd.
The Commerce Department said the companies and XPCC "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 against Uyghurs, Kazakhs, and other members of Muslim minority groups in" Xinjiang.
At least some of the companies listed by the Commerce Department are major manufacturers of monocrystalline silicon and polysilicon that are used in solar panel production.
The companies or their parent firms did not immediately respond to requests for comment, or could not immediately be reached. XPCC could not immediately be reached for comment.
China's foreign ministry spokesman Zhao Lijian said on Thursday that China will take "all necessary measures" to protect its companies' rights and interests. Beijing has dismissed accusations of genocide and forced labor in Xinjiang as lies.
The immediate effect of the restrictions would be limited as the companies named do not have "vast contracts" with U.S. based wafer companies, Dennis Ip, Regional Head of Power, Utilities, Renewables & Environment (PURE) Research at Daiwa said in a note to clients.
"However, we see possibility for the ban to gradually extend to include restrictions on all solar modules which contain Xinjiang-produced polysilicon," he said.
Chinese module producers could still use polysilicon from Inner Mongolia and Yunnan for their U.S.-bound module shipments, he added.
About 45% of all polysilicon used in solar module production is produced in Xinjiang, with 35% produced in other parts of China. The remainder comes from outside China.
The global solar energy supply chain has been squeezed by record high costs for polysilicon, labour and freight.
The "Withhold Release Order" by U.S. Customs and Border Protection only blocks imports of the material from Hoshine. A source familiar with the order said it does not impact the majority of U.S. imports of polysilicon and other silica-based products.
A second source said the move does not conflict with President Joe Biden's climate goals and support for the domestic solar industry.
The Biden administration in March announced a target to cut the cost of solar energy by 60% within the next 10 years. President Biden has set a goal of a 100% clean electricity grid by 2035.
The sources said the United States is continuing to investigate allegations of forced labor by Chinese companies who supply polysilicon.
The Xinjiang region accounts for approximately 45% of the world’s solar-grade polysilicon supply, a report by solar industry analysts found.
The two sources familiar with the policy said the White House sees the actions as a "natural continuation" of the G7 agreement earlier this month to eliminate forced labor from supply chains.
"We view these three actions as putting that commitment into action," one of the sources said. "We believe these actions demonstrate a commitment to imposing additional costs on the PRC for engaging in cruel and inhumane forced labor practices."
The XPCC, a paramilitary organization sent to Xinjiang in the 1950s to build farms and settlements, remains powerful in the region's energy and agriculture sectors, operating almost like a parallel state.
Foreign governments and human rights activists say it has been a force in the crackdown and surveillance of Uyghurs in the region, running some detention camps. The U.S. Treasury Department last year sanctioned XPCC for "serious rights abuses against ethnic minorities."