(Bloomberg) -- The U.S. is poised to bar some solar products made in China’s Xinjiang region, according to several people familiar with the matter, marking one of the Biden administration’s biggest steps yet to counter alleged human rights abuses against China’s ethnic Uyghur Muslim minority.
Factories in Xinjiang -- where advocacy groups and a panel of United Nations experts say Uyghurs and other Muslim minorities have been subjected to human-rights abuses and forced to work against their will -- produce roughly half of global supply of polysilicon, a material critical for solar panels and semiconductors. China has denied the allegations, saying they’re an attempt to undermine successful businesses.
The move, which is expected to be announced Thursday, has implications for solar’s supply chain and could force U.S. companies to find material elsewhere. It comes after both the Trump and Biden administrations accused China of “genocide” in a campaign to erase the culture of the predominantly Muslim Uyghurs.
A White House spokeswoman had no immediate comment. Details of the plans were described by people who asked not to be identified prior to the announcement.
Customs and Border Protection is expected to announce a “withhold and release order,” targeting Hoshine Silicon Industry (Shanshan) Co., Ltd. Imports from that company would be blocked from entry at U.S. ports and only released if they can prove the goods are not made with forced labor.
Separately, the Commerce Department will add five Chinese entities to its export blacklist. According to a notice set to be published in the government’s Federal Register on Thursday, they are Hoshine; Xinjiang Daqo New Energy, Co. Ltd; Xinjiang East Hope Nonferrous Metals Co. Ltd.; Xinjiang GCL New Energy Material Technology, Co. Ltd; and Xinjiang Production and Construction Corps. American companies that sell to those entities will then require approval from the U.S. government.
Daqo New Energy fell 2% and JinkoSolar Holding Co. dropped 2.4% in late trading after Bloomberg reported the news. Arizona-based First Solar Inc.’s shares edged 0.8% higher.
One of the people familiar with the planned move said the administration is responding to what it sees as forced labor practices that run counter to U.S. values and force American companies to compete on an uneven playing field by allowing Chinese firms to artificially suppress wages.
The order follows intensifying pressure from human rights advocates, organized labor and lawmakers to cut off solar products from Xinjiang. Richard Trumka, the leader of the AFL-CIO, in March told the Biden administration that solar panels containing polysilicon from the region “must have no place in our efforts to fight climate change.”
In May, U.S. climate envoy John Kerry said officials “believe in some cases” that Chinese solar products are being produced by forced labor and confirmed the administration was mulling restrictions. Also in May, the Senate Finance Committee added language to an energy tax bill that would bar the import of renewable power components manufactured by slave or force labor. Top congressional Democrats also implored Customs and Border Protection to block imports in a letter earlier this month, insisting that “it is time to act” in the face of “overwhelming evidence of the use of forced labor in polysilicon production.”
But Group of Seven leaders clashed earlier this month over how strongly to rebuke China over alleged force labor practices. In the final communique, the G-7 called” on China to respect human rights and fundamental freedoms, especially in relation to Xinjiang.”
U.S. solar companies, which rely heavily on imported photovoltaic panels, had already begun shuffling supply chains in anticipation of the action. And at least one polysilicon producer in Xinjiang -- Daqo New Energy Corp. -- had opened itself to audits and outside scrutiny in a bid to shield itself from U.S. sanctions.
The Solar Energy Industries Association, a Washington-based trade group, recently unveiled a traceability tool aimed at helping solar importers and manufacturers track the supply of materials they use. More than 175 solar companies have already signed a non-binding pledge to avoid forced labor.
Still, the Biden administration’s move is a blow to the solar industry. Solar is in the midst of a rare period of increasing costs that threaten to delay new clean energy installations. Polysilicon prices have recently surged amid strong demand, and solar panel costs are up since the start of the year, according to PVInsights.
While Xinjiang is a major polysilicon hub, the material is sent for further processing in factories in other parts of China and other countries before it’s ultimately assembled into the solar panels that are shipped to the U.S.
A 1930 trade law bars the importation of goods that are mined, produced or manufactured by forced labor -- and empowers the federal government to seize the products or block their entry into the U.S. Under former President Donald Trump, the U.S. Customs and Border Protection in January issued a withhold release order targeting cotton and tomato products produced in Xinjiang.
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