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UPDATE 1-U.S. to pursue trade dispute over Chinese, Taiwanese solar imports

WASHINGTON, Feb 14 (Reuters) - Imported solar energy products from China and Taiwan could harm the local solar industry, U.S. trade officials found on Friday, potentially opening the door to widening the duties on the products.

The U.S. International Trade Commission's decision means the Commerce Department will continue with its investigation into whether the products are being sold in the United States below their fair value, or if their manufacturers receive inappropriate levels of subsidies, and suggest duties.

Follow-up decisions from both the ITC and the Commerce Department are needed before duties are finalized.

The commissioners voted that there was a reasonable indication of injury, following a complaint brought by the U.S. arm of German solar manufacturer SolarWorld AG.

The finding puts Washington on a path toward widening the reach of the steep duties it slapped on products from China in 2012, potentially escalating a tit-for-tat trade spat.

SolarWorld, which makes crystalline silicon solar panels at its factory in Hillsboro, Oregon, has complained that Chinese manufacturers are sidestepping the duties by shifting production of the cells used to make their panels to Taiwan and continuing to flood the U.S. market with cheap products.

Tim Brightbill, a partner at Wiley Rein who represents SolarWorld, said "we look forward to ... continuing to address the unfair trade practices with Chinese and Taiwanese solar imports."

"We are confident that the facts are on our side and the law is on our side as well," he added.

Shayle Kann, senior vice president at solar market research firm GTM Research, said a decision to broaden the duties would have a greater impact than the 2012 decision as manufacturers have no handy escape route.

"Either the manufacturers will have to set up manufacturing elsewhere or they will have to pay the tariff. Either way, the impact will be a lot more than it was the last time around," he said.

"If the Commerce Department imposes tariffs that are significant with the scope SolarWorld has proposed, then prices for solar panels will be noticeably higher than they otherwise would have been."

SolarWorld Chairman Frank Asbeck wrote in a letter to President Barack Obama on Feb. 5 that Chinese subsidies and below-cost pricing had driven "dozens" of U.S. manufacturers out of business.

"Illegal trade practices threaten to destroy any ongoing U.S. role in global solar industry competition," he wrote.

But the Coalition for Affordable Solar Energy, representing about 50 U.S. solar companies that mainly focus on installation, has said installers would suffer if there was another jump in the cost of modules, which had already gone up 10 percent since the complaint was filed on Dec. 31.

SUN SPATS

The value of imports of solar products from China fell by almost a third from 2012 to 2013 and imports from Taiwan rose more than 40 percent, although from a much smaller base, according to ITC data. Commerce Department figures show solar imports from China were worth just over $2 billion in 2012, while imports from Taiwan totaled $510 million.

China, which has criticized the United States over the new investigation, has slapped anti-dumping and anti-subsidy duties on imports of U.S. polysilicon, solar's key raw material.

U.S. solar installations were worth more than $13 billion in 2013, according to research firm GTM. About half the solar equipment installed in the United States last year was made in China. In the fast-growing rooftop solar market, that figure was 71 percent.

The trade group Solar Energy Industries Association has been trying to get SolarWorld, Chinese manufacturers and the Chinese and U.S. governments to settle the dispute.

Under the association's settlement proposal, Chinese companies would agree to pay into a fund that would be used for the benefit of U.S. solar manufacturers. The deal would require China to revoke the restrictions on imports of U.S. polysilicon.