The World Trade Organization (WTO) has ruled that US import duties applied to Chinese solar products in 2012 broke global trade rules.

A WTO panel yesterday upheld a complaint from China that the US had violated trade rules when it imposed punitive anti-subsidy duties on solar equipment in 2012.

The US imposed heavy duties after an investigation concluded that state support offered to Chinese PV suppliers had allowed them to undercut American competitors.

Importantly, the WTO yesterday agreed that in certain countervailing or anti-subsidy duties imposed on Chinese companies, the US had wrongly presumed that state-owned or partially state-owned enterprises (SOE) were necessarily “public bodies”.

This assumption was used by the US as part of its justification for the duties, as it maintained that certain SOEs bodies were passing on subsidies from the Chinese government. But the WTO deemed this to be "inconsistent" with its own rules.

In a statement, China’s Ministry of Commerce said the US should revoke all anti-subsidy measures against Chinese products.

"China urges the US to respect the WTO rulings and correct its wrongdoings of abusively using trade remedy measures, and to ensure an environment of fair competition for Chinese enterprises," a MOFCOM statement said.

However, with the WTO throwing out many of the complaints made by China, the US response was largely bullish, with Michael Froman declaring the ruling a “victory for American businesses and workers”.

Froman nevertheless acknowledged that the US government would need to reconsider those duties deemed by the WTO to be in breach of its rules.

“With respect to the other findings in the panel report, the Administration is carefully evaluating its options, and will take all appropriate steps to ensure that US remedies against unfair subsidies remain strong and effective,” he said.

In terms of the 2012 duties and similar levies being considered in the US following fresh complaints by US manufacturer, the implications of yesterday’s ruling are not yet clear.

US trade body the Solar Energy Industries Association said in a statement: “We are continuing to follow developments closely, but today’s WTO decision is not expected to impact either the 2012 US solar countervailing duty (CVD) order against China or any new CVD tied to the ongoing investigation until 2016, at the earliest.

“It’s also important to remember that this decision is subject to an appeals process, which could take approximately 120 days. Assuming the decision is upheld on appeal, the United States would then have approximately one year to implement the decision. But even then, it’s not clear whether the decision will result in any substantive modification of a solar CVD order against China.”

Meanwhile, the Coalition for Affordable Solar Energy (CASE), which is opposing the latest solar trade action by the US against China, endorsed the WTO judgement.

In a statment, CASE president Jigar Shah said: "CASE agrees with the WTO that some important parts of the protectionist 2012 U.S. solar tariffs are inconsistent with our trade commitments to others. Even more importantly, they hurt American solar workers and slow the deployment of clean energy,”

“Yet the American solar industry once again faces uncertainty and unnecessary price hikes due to a new round of legal actions at the Department of Commerce. June’s countervailing duty determination is increasing module prices by 14%, and the Department of Commerce may attempt to further hike rates and expand solar tariffs with a preliminary anti-dumping determination next week.

“Today’s WTO announcement and the broader trade dispute should prompt the Obama Administration to reconsider the wisdom of additional solar tariffs. The Administration should work to bridge the divide between all parties involved, and help to negotiate a win-win settlement that supports growth across all sectors of the U.S. solar industry.”