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Employees assemble photovoltaic panels at Suntech Power Holdings Co.'s factory in Wuxi, Jiangsu Province, China, on Wednesday, Nov. 16, 2011.Qilai Shen/Bloomberg

Cheap imported solar panels from China may be damaging the business of Canada's domestic panel makers, the Canadian International Trade Tribunal ruled in a preliminary decision, paving the way for the possible imposition of stiff import duties.

The CITT, a quasi-judicial body that deals with trade disputes, said in a ruling Tuesday that "there is a reasonable indication that the dumping and subsidizing of photovoltaic modules and laminates from the People's Republic of China have caused injury or are threatening to cause injury to the domestic industry."

The case now moves to the Canada Border Services Agency, which will decide if those panels are being dumped into Canada or unfairly subsidized. If the CBSA rules that is the case, the tribunal will jump back in, conduct a full inquiry, and eventually make a final, detailed decision on the matter and what should be done about it.

The two agencies waded into the panel-dumping issue after four Ontario-based solar panel-making firms complained that they are getting hurt by competition from cut-priced imports.

The four companies that complained – Eclipsall Energy Corp., Heliene Inc., Silfab Ontario Ltd. and Solgate Inc. – say the unfair competition means they are losing sales and market share, and are under pressure to cut their prices. Panel makers have already been hurt by Ontario's elimination of local-content rules, which had forced solar installers to buy a proportion of their equipment from local manufacturers. Ontario dropped those requirements to satisfy a ruling from the World Trade Organization.

The complaint has split the Canadian solar industry. While duties would help out domestic panel makers, they would add significant costs to solar installers who buy imported panels for their Canadian projects.

Jared Donald, president of solar project developer Conergy Canada, said he is concerned about the potential for higher panel prices if import duties are put in place. In the past few months the falling Canadian dollar has sharply increased the cost of installing imported panels, he said. If there is a duty as well, it could have "a material impact on the viability of a lot of projects," he said.

Ontario's solar panel makers have a reputation for producing high-quality and efficient solar panels using highly automated factories. But they are increasingly facing still competition from very low priced panels from China.

Some companies are on both sides of the issue. Canadian Solar Inc., for example, has panel manufacturing operations in both China and Canada.

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