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UPDATE 1-U.S. finds unfair subsidies of solar imports from China

(Adds background, quote from lawyer)

WASHINGTON, June 3 (Reuters) - The U.S. Commerce Department found there are unfair government subsidies of solar imports from China in a preliminary ruling on Tuesday and suggested duties of up to 35.21 percent on the products.

The U.S. arm of German solar manufacturer SolarWorld AG had complained that Chinese manufacturers are sidestepping duties imposed in 2012 by shifting production of the cells used to make their panels to Taiwan and continuing to flood the U.S. market with cheap products.

The Commerce department imposed preliminary duties of 35.21 percent on imports of panels made by Suntech Power and five other companies, 18.56 percent on imports of Trina Solar and 26.89 percent on imports from other Chinese producers, the department said in a statement.

The case has pitted SolarWorld Industries America, which makes crystalline silicon solar panels at its factory in Hillsboro, Oregon, against a group of U.S. solar companies that mainly focus on installation and who say imposing import duties will only push up the cost of solar power.

But SolarWorld said it is not fair that Chinese solar producers benefit from government aid, including discounted loans and free utilities, making it hard for U.S. firms to compete.

"This is a strong win for SolarWorld and the domestic solar manufacturing industry," said lawyer Tim Brightbill, from Wiley Rein LLP, representing SolarWorld.

In 2013, Chinese imports of the crystalline silicon photovoltaic cells covered in the case, which typically form the basic element of solar panels and modules, were valued at an estimated $1.5 billion.

A preliminary decision on the anti-dumping section of the case, which also includes Taiwan, is due by July 25. The complaint covers panels assembled in China from Taiwanese inputs or third-country cells made from Chinese inputs.

(Reporting by Krista Hughes; Editing by Chris Reese, Bernard Orr)