Chinese solar companies evading U.S. tariffs, Commerce Department probe says

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Four major Chinese solar cell manufacturers including Canadian Solar (NASDAQ:CSIQ) circumvented U.S. tariffs by routing some of their operations through Southeast Asia, according to preliminary findings from a U.S. Department of Commerce investigation issued Friday.

Canadian Solar (CSIQ), which ships products through Thailand, would be subject to a 16% tariff rate, according to the findings, while JinkoSolar (NYSE:JKS), with a facility in Malaysia, was found compliant with tariff rules; stocks of both companies are showing strong gains, +5.5% and +11.5% respectively.

Investors may have anticipated tougher conditions, as solar names are trading broadly higher, with Enphase Energy (ENPH) +6% to an all-time high and SolarEdge Technologies (SEDG) +5.2%, both leading the S&P 500; other gainers include SunPower (SPWR) +4.5%, Maxeon Solar (MAXN) +5.9%, Shoals Technologies (SHLS) +6.3%, Array Technologies (ARRY) +9.2%, First Solar (FSLR) +0.6%.

ETF: (NYSEARCA:TAN)

The probe may push companies to spend more on producing their components in the U.S. or find alternative sources from other places abroad to meet soaring demand for solar panels.

The report may portend additional solar tariffs, but not right away, because in June the Biden administration implemented a two-year suspension of duties to give importers time to make adjustments, and invoked the Defense Production Act to help U.S. suppliers compete with Asian rivals and prompt more domestic manufacturing of solar panels.

Industry groups warned the government's actions will slow the pace of solar deployment in the U.S.

The Commerce Department will release the final result of its investigation in May after conducting on-site audits of the companies and gathering public comments.

JinkoSolar's (JKS) "TTM revenue compound annual growth rate of more than 140% makes it a growth stock, [and] the three-year average revenue CAGR is 35.3%," Motek Moyen writes in an analysis posted recently on Seeking Alpha.