While no industry has been immune to the general supply chain woes plaguing the global economy, the solar panel market has had to deal with some unique problems of its own.
Chief among them is the Uyghur Forced Labor Prevention Act (UFLPA), which bans all goods manufactured in China’s Uyghur region unless the supplier can prove no slave labor was involved.
Nearly half of the world’s supply of polysilicon—the main component of solar panels—comes from the sanctioned region. So, as you can imagine, the potential for UFPLA to further deplete the already strained U.S. solar panel supply is very real.
UFPLA's effect
Though signed into law by President Biden in December, UFLPA didn't go into effect until June 23.
Within a week, two of the world’s top three solar panel manufacturers, Jinko Solar and Trina Solar, reported that their shipments had been seized at the U.S. border.
The fact that U.S. Customs acted so quickly against two of the world's largest manufacturers painted a bleak picture of the effect UFLPA would ultimately have on the already diminished solar panel supply chain.
But U.S. Customs Department doesn't make any official announcement when it detains a shipment at the border. Instead, we've had to rely entirely on reports from the sanctioned companies.
So, it's been tough to gauge exactly what UFLPA's ultimate effect on the solar panel market will be.
Thousands of shipments detained
Now, however, thanks to a Freedom of Information Act request filed by Reuters, we know that UFPLA's effect has been considerable.
Reuters reports that:
"U.S. Customs and Border Protection has seized 1,053 shipments of solar energy equipment between June 21, when the Uyghur Forced Labor Protection Act went into effect, and Oct. 25, it told Reuters in response to a public records request, adding none of the shipments have yet been released."
Sources at the Customs Department also told Reuters that the seized shipments included solar panels and polysilicon cells that totaled 1 GW of capacity. According to Reuter's sources, the detained solar shipments mostly came from made Trina Solar, Jinko Solar, and Longi, which together account for about one-third of the U.S. panel supply.
Back in August, ROTH Capital Partners estimated that UFPLA could wind up preventing as much as 12 GW of solar modules from entering the U.S. this year alone.
China denies
China has, of course, vigorously denied the slave labor allegations, labeling them “the lie of the century fabricated by a small group of anti-China individuals. According to Chinese foreign ministry spokesperson, Zhao Lijan:
“The U.S. side should immediately stop the unreasonable suppression of China’s photovoltaic enterprises and release the seized solar panel components as fast as possible."
Burden of proof
UFPLA places a difficult burden on goods being imported from the affected region by creating a “rebuttable presumption” that slave labor was involved. The burden of proof, thus, winds up being placed on U.S. importers to show the goods their taking in have no connection to forced labor whatsoever.
In order for goods coming from China's Uyghur region to clear U.S. customs, importers have to prove no slave labor was involved by providing:
A comprehensive supply chain mapping.
A complete list of all workers at a facility.
Proof that workers were not subject to conditions typical of forced labor practices and are there voluntarily.
This makes the presumption that goods coming from the Uyghur region were produced with slave labor very difficult for importers to defeat. There's also no way of knowing whether U.S. customs will be satisfied until after the proof has been submitted and they've reached a decision.
Supply chain crunch
The extent to which slave labor is involved in China's solar panel market is very tough to gauge.
But, regardless, there's little question that the Uyghur Forced Labor Prevention Act is going to further tighten the already strained solar panel market for the foreseeable future.