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>...accompanied a request to produce the cells in a foreign trade zone within the Buffalo plant that would allow Panasonic to import certain parts tariff-free b

>...accompanied a request to produce the cells in a foreign trade zone within the Buffalo plant that would allow Panasonic to import certain parts tariff-free because the finished cells would be sold overseas, not domestically. That request was granted in April. >The zones help companies avoid, delay or pay reduced tariffs on imported parts in cases where it helps U.S. manufacturers compete with overseas rivals. >“It is fully anticipated that the majority of the cells to be produced” in the FTZ “will be exported,” the company said in its application. >Panasonic’s Canal said foreign solar panel manufacturers want the Buffalo plant’s cells because solar panels assembled abroad with American-made cells can be shipped to the United States tariff-free, according to U.S. trade rules implemented last fall. >Panasonic’s Buffalo operation is one of few U.S.-based solar cell producers because it is traditionally far cheaper to make the components in other countries, putting it in a unique position to serve the foreign demand. This is kinda hilarious. Gotta love incentives.

Klathmon 7y ago
Wait, so if i'm reading this right the process is: * parts can be imported tariff free into the US to be used to manufacturer cells * cells get exported back out to other countries (to enable the tariff free importing of the parts). * cells are then assembled into a final product over seas * the final product is imported tariff-free due to being manufactured in the US. Is that correct? Because if so that's hilarious and horrifying at the same time!
- zaroth 7y ago
  Seems like this is the tariffs doing exactly what they're supposed to do -- incentivize US domestic production. > Panasonic’s Canal said foreign solar panel manufacturers want the Buffalo plant’s cells because solar panels assembled abroad with American-made cells can be shipped to the United States tariff-free, according to U.S. trade rules implemented last fall. > Panasonic’s Buffalo operation is one of few U.S.-based solar cell producers because it is traditionally far cheaper to make the components in other countries, putting it in a unique position to serve the foreign demand. They would have to do the assembly into panels domestically as well if they didn't have the exemption due to the cells being US built.
  - magduf 7y ago
    They're incentivizing domestic production, but at two costs: 1) environmental, from shipping stuff around the world several times (parts into the US to SolarCity, cells out of the US to final assemblers, assembled panels back into the US for final sale and use), and 2) cost to domestic purchasers. Finally there's 3) reduced demand for solar panels due to higher costs, which means we don't produce as much power this way, and instead use other means (generally fossil fuel). All in all, it's a terrible deal for us. If we're going to shoot ourselves in the foot on something made abroad, I propose we do it for smartphones. Slap a giant tariff on any cellphone made outside the US, like 1000%. Let's see how Americans like being stuck with their aging smartphones or having to spend $10k for a new one. Oh yeah, make sure the tariff applies to the LCD/OLED screens too, since we can't make those here.
    - icegreentea2 7y ago
      I think there's a fun angle we could take on this. One could reasonably argue that large solar deployment in major industrialize countries is unlikely to occur "in time" without some sort of government prodding (of some sort). And when that time comes, it's gonna be big. We're going to need crank out solar panels and wind turbines like mad. In that context, basically everything we've done so far is basically warm up. Like 2% of US electrical production is from solar. We're gonna need to install like 25-100x the current installation base to do what we want. A reasonable assumption to make is that by the time the USA gets around to doing that, most other rich countries will be doing that too. This means that global supply is going to be challenged. This means that having the domestic capacity to grow this production is key. This means that being somewhat inefficient at this stage to build knowledge-base and competency in key parts of the supply and operations chain may actually be the long-term optimal solution. Of course, this is all just conjecture.
      - zaroth 7y ago
        Look at “Swanson’s Law” for insight into solar economics. We’re at the order of magnitude where widespread deployment is inevitable. It took a lot of learning curve to get there, there’s barely another order of magnitude left to be had. There are also the supporting infrastructure that needed to get there, such as battery/storage tech and smarter grids to handle the variable load. Governments around the world have put hundreds of billions of dollars into solar R&D. Last year we had 500GW of solar and 600GW of wind, and added 100GW of solar. We should add more than 100GW of new generation to that this year. It’s pretty good progress! I think global generation is about 15TW, and of course solar doesn’t generate 24/7, so there’s plenty of room to grow.
- fjsolwmv 7y ago
  Yes. Manufacture is a multi stage operation. Transportation costs (waste) is balanced against production cost at each stage. Tariffs are one (synthetic) aspect of production costs. This may be a hint that the tariff structure is inconsistent, or perhaps it working fine and transportation waste is an acceptable cost. One way to look at is that it's often cheaper to export inputs (cells) for foreign assemble and then reimport the outputs, even if tariffs are not a factor in the location of the inputs. I believe steel or aluminum or oil is similar in that taw materials are mined/extracted somewhere, sent elsewhere for processing, and then finished products sent back. You yourself might have once sent a piece of equipment or repair via mail order, or sent your children away temporarily for education?
- hef19898 7y ago
  I knew about customs free zones for storage and logistics. That you can do that with manufacturing is news!
- hef19898 7y ago
  Pretty creative way to subsidize "domestic" manufacturing for sure.
dalbasal 7y ago
So... If they imported the same parts and sold locally without first exporting for assembly.. they'd pay tarrifs on the parts? This is funny. Also a reminder that while any given engineering-with-tax policy might make sense, the totality adds up to a mess.
- username444 7y ago
  The issue here is that goods produced or imported into a FTZ should not qualify as American made or origin. The foreign company should not be able to claim a tax exemption on re-importing to the u.s. The simple solution is to have the manufactured/imported goods in a FTZ not qualify as American made. Because they're not, if they haven't been subject to all America's rules and regulations
  - dalbasal 7y ago
    The "simple* solution would be to not have FTZ, or to not have that tarrif exemption. But... Each of these had their reasons. What you're suggesting is having a made-in-america-but-not-exactly category. It might be the right solution, but it's not a simple one.
    - username444 7y ago
      No, I'm suggesting simply "not made in America". The more I think about this, the more I'm convinced it's bad reporting, or misquoting. As a Canadian that exports, I've been to presentations out on by CBP and cross-border warehousing services that covered FTZ. There's no way something this basic gets past them.
      - avar 7y ago
        It's not bad reporting, it's true. This is how "rules of origin" work in general. For an example relevant to Canada pead e.g. what the CETA (EU-Canada) deal has to say about "rules of origin"[1]. For the gory details start reading at page 549 of the full text[2]. Here's an article about how Canadian car manufacturing gets a rebate on raw materials used for exported vehicles[3]. None of this is unusual, having this happen within a FTZ is just a way to speed up the paperwork part of it. You can setup a process where you don't first have to pay tariffs and then seek a rebate, instead you don't pay the tariffs in the first place and the government makes sure the goods are for export. Some of those good then make their way back into the country, at which point you might pay tariffs on them. 1. http://trade.ec.europa.eu/doclib/docs/2017/september/tradoc_156062.pdf http://trade.ec.europa.eu/doclib/docs/2017/september/tradoc_... 2. http://trade.ec.europa.eu/doclib/docs/2014/september/tradoc_152806.pdf http://trade.ec.europa.eu/doclib/docs/2014/september/tradoc_... 3. https://www.reuters.com/article/us-usa-trade-canada-autos/rebates-protect-canadas-auto-industry-from-retaliatory-tariffs-idUSKBN1K60CC https://www.reuters.com/article/us-usa-trade-canada-autos/re...
pbreit 7y ago
This article is trying too hard to paint a negative picture. The Solar Roof was never suggested as a cornerstone of Tesla's near-term solar activity. If the Buffalo factory can produce more than Tesla needs I don't see what the problem is selling to others, in the US or out.

Klathmon 7y ago

Wait, so if i'm reading this right the process is: * parts can be imported tariff free into the US to be used to manufacturer cells * cells get exported back out to other countries (to enable the tariff free importing of the parts). * cells are then assembled into a final product over seas * the final product is imported tariff-free due to being manufactured in the US. Is that correct? Because if so that's hilarious and horrifying at the same time!

zaroth 7y ago
Seems like this is the tariffs doing exactly what they're supposed to do -- incentivize US domestic production. > Panasonic’s Canal said foreign solar panel manufacturers want the Buffalo plant’s cells because solar panels assembled abroad with American-made cells can be shipped to the United States tariff-free, according to U.S. trade rules implemented last fall. > Panasonic’s Buffalo operation is one of few U.S.-based solar cell producers because it is traditionally far cheaper to make the components in other countries, putting it in a unique position to serve the foreign demand. They would have to do the assembly into panels domestically as well if they didn't have the exemption due to the cells being US built.
- magduf 7y ago
  They're incentivizing domestic production, but at two costs: 1) environmental, from shipping stuff around the world several times (parts into the US to SolarCity, cells out of the US to final assemblers, assembled panels back into the US for final sale and use), and 2) cost to domestic purchasers. Finally there's 3) reduced demand for solar panels due to higher costs, which means we don't produce as much power this way, and instead use other means (generally fossil fuel). All in all, it's a terrible deal for us. If we're going to shoot ourselves in the foot on something made abroad, I propose we do it for smartphones. Slap a giant tariff on any cellphone made outside the US, like 1000%. Let's see how Americans like being stuck with their aging smartphones or having to spend $10k for a new one. Oh yeah, make sure the tariff applies to the LCD/OLED screens too, since we can't make those here.
  - icegreentea2 7y ago
    I think there's a fun angle we could take on this. One could reasonably argue that large solar deployment in major industrialize countries is unlikely to occur "in time" without some sort of government prodding (of some sort). And when that time comes, it's gonna be big. We're going to need crank out solar panels and wind turbines like mad. In that context, basically everything we've done so far is basically warm up. Like 2% of US electrical production is from solar. We're gonna need to install like 25-100x the current installation base to do what we want. A reasonable assumption to make is that by the time the USA gets around to doing that, most other rich countries will be doing that too. This means that global supply is going to be challenged. This means that having the domestic capacity to grow this production is key. This means that being somewhat inefficient at this stage to build knowledge-base and competency in key parts of the supply and operations chain may actually be the long-term optimal solution. Of course, this is all just conjecture.
    - zaroth 7y ago
      Look at “Swanson’s Law” for insight into solar economics. We’re at the order of magnitude where widespread deployment is inevitable. It took a lot of learning curve to get there, there’s barely another order of magnitude left to be had. There are also the supporting infrastructure that needed to get there, such as battery/storage tech and smarter grids to handle the variable load. Governments around the world have put hundreds of billions of dollars into solar R&D. Last year we had 500GW of solar and 600GW of wind, and added 100GW of solar. We should add more than 100GW of new generation to that this year. It’s pretty good progress! I think global generation is about 15TW, and of course solar doesn’t generate 24/7, so there’s plenty of room to grow.
fjsolwmv 7y ago
Yes. Manufacture is a multi stage operation. Transportation costs (waste) is balanced against production cost at each stage. Tariffs are one (synthetic) aspect of production costs. This may be a hint that the tariff structure is inconsistent, or perhaps it working fine and transportation waste is an acceptable cost. One way to look at is that it's often cheaper to export inputs (cells) for foreign assemble and then reimport the outputs, even if tariffs are not a factor in the location of the inputs. I believe steel or aluminum or oil is similar in that taw materials are mined/extracted somewhere, sent elsewhere for processing, and then finished products sent back. You yourself might have once sent a piece of equipment or repair via mail order, or sent your children away temporarily for education?
hef19898 7y ago
I knew about customs free zones for storage and logistics. That you can do that with manufacturing is news!
hef19898 7y ago
Pretty creative way to subsidize "domestic" manufacturing for sure.

dalbasal 7y ago

So... If they imported the same parts and sold locally without first exporting for assembly.. they'd pay tarrifs on the parts? This is funny. Also a reminder that while any given engineering-with-tax policy might make sense, the totality adds up to a mess.

username444 7y ago
The issue here is that goods produced or imported into a FTZ should not qualify as American made or origin. The foreign company should not be able to claim a tax exemption on re-importing to the u.s. The simple solution is to have the manufactured/imported goods in a FTZ not qualify as American made. Because they're not, if they haven't been subject to all America's rules and regulations
- dalbasal 7y ago
  The "simple* solution would be to not have FTZ, or to not have that tarrif exemption. But... Each of these had their reasons. What you're suggesting is having a made-in-america-but-not-exactly category. It might be the right solution, but it's not a simple one.
  - username444 7y ago
    No, I'm suggesting simply "not made in America". The more I think about this, the more I'm convinced it's bad reporting, or misquoting. As a Canadian that exports, I've been to presentations out on by CBP and cross-border warehousing services that covered FTZ. There's no way something this basic gets past them.
    - avar 7y ago
      It's not bad reporting, it's true. This is how "rules of origin" work in general. For an example relevant to Canada pead e.g. what the CETA (EU-Canada) deal has to say about "rules of origin"[1]. For the gory details start reading at page 549 of the full text[2]. Here's an article about how Canadian car manufacturing gets a rebate on raw materials used for exported vehicles[3]. None of this is unusual, having this happen within a FTZ is just a way to speed up the paperwork part of it. You can setup a process where you don't first have to pay tariffs and then seek a rebate, instead you don't pay the tariffs in the first place and the government makes sure the goods are for export. Some of those good then make their way back into the country, at which point you might pay tariffs on them. 1. http://trade.ec.europa.eu/doclib/docs/2017/september/tradoc_156062.pdf http://trade.ec.europa.eu/doclib/docs/2017/september/tradoc_... 2. http://trade.ec.europa.eu/doclib/docs/2014/september/tradoc_152806.pdf http://trade.ec.europa.eu/doclib/docs/2014/september/tradoc_... 3. https://www.reuters.com/article/us-usa-trade-canada-autos/rebates-protect-canadas-auto-industry-from-retaliatory-tariffs-idUSKBN1K60CC https://www.reuters.com/article/us-usa-trade-canada-autos/re...

pbreit 7y ago

This article is trying too hard to paint a negative picture. The Solar Roof was never suggested as a cornerstone of Tesla's near-term solar activity. If the Buffalo factory can produce more than Tesla needs I don't see what the problem is selling to others, in the US or out.