Carmanah Technologies: Duty rates on photovoltaic modules

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VICTORIA, British Columbia - On March 5, 2015 Canada Border Services Agency released its preliminary ruling under Canada’s Special Import Measures Act concerning alleged dumping and subsidizing of certain photovoltaic modules and laminates originating in the Peoples Republic of China. The preliminary ruling concludes that these modules have been dumped and subsidized and all such modules imported from March 5, 2015 will be subject to the collection of provisional duties pending the final outcome of the investigation. The specific provisional duty rates on these imports is 281%.

On January 31, 2015, the US Department of Commerce made a final ruling that photovoltaic cells from the Peoples Republic of China and Taiwan have also been dumped and are subsidized. As a result, the US International Trade Commission has imposed countervailing duties. Those products or components within the scope of the ruling are now subject to duties of 91%.

The Company currently imports photovoltaic modules, some of which are subject to countervailing duties in the United States and some of which are subject to Canada’s provisional duties. This release is to discuss the impact of these measures on Carmanah Technologies Corporation’s (CMH.TO) (Pink Sheets:CMHXF) (the “Company”) business.

Overall the impact of these measures on Carmanah’s business is expected to be very limited. A specific discussion of each of the Company’s Divisions and the rationale for this statement follows:

    Power Division – The Company’s Solar EPC business operates only in Canada and has, up until now, purchased solar PV modules manufactured under Canadian content guidelines for the Ontario Feed-in Tariff Program. However, the Ontario program has relaxed future Canadian content requirements and the solar developers, for whom Carmanah completes projects, were anticipating the use of lower cost PV modules.

Canadian module manufacturers and non-Chinese foreign suppliers are active competitors in the market and the Company believes there will still be abundant competition which will prevent significant increases in module cost. As well, the Company will suffer no profit margin losses as, by contract, all component costs are passed along to solar developers.
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The Company’s Mobile Power business imports flexible solar panels, solar power modules and solar power portable kits into both the United States and Canada. Historically the modules and kits have been obtained from Chinese suppliers, but there are abundant manufacturers of non-Chinese origin. The Company is actively evaluating modules from these suppliers and expects that it can alter its supply chain with little or no impact on cost.

However, this is not the case for flexible solar panels which are only available in reliable form from Chinese suppliers. In order to preserve reasonable profit margins on these products, the Company has increased its prices on the products that use flexible components by approximately 15%. While such increase will not impact the Company’s competitive standing, the increase may cause some reduction in sales which is impossible to quantify at this time. Given that flexible panel based products are only about 2.5% of overall sales, the Company expects no meaningful financial impact.

    Illumination Division – The Company’s Illumination Division utilizes modules from a variety of countries of origin including the Peoples Republic of China. The Company’s supply management is content that it can obtain modules at competitive prices and quality levels from sources that are not subject to Canadian and US duties described herein for its US and Canadian customers. Sales made to the rest of the world, where the Company expects growth, are unaffected by the duties. Accordingly, the Company expects these measures to have virtually no impact on Carmanah’s Illumination Division.
    Signals Division – Carmanah’s signals products manufactured in the United States utilize solar cells that attract import duty in accordance with the rulings. The solar PV component represents a very small part of the overall manufacturing cost and the duty on these components will add approximately 1% to the overall cost of manufacturing in the United States.

    Prior to the duty issue, the Company made the strategic decision to transition a significant portion of its Signals manufacturing to Canada. Given that the solar PV components are under the power threshold in the scope of the Canadian ruling, there is no duty impact on these products. The Company’s Canadian-based contract manufacturer has commenced production and the transition to Canada is expected to be complete by mid-year, thereby eliminating the small impact the US import duty has on Signals cost when manufactured in Canada.

Overall, the imposition of duties in Canada and the United States will have limited overall impact on Carmanah’s business once all supply chain adjustments described herein are fully in place. For a short period of time the Company may incur some additional costs resulting from duties that will be absorbed in order to continue service to customers without interruption. The Company expects its total unbudgeted cost exposure in the adjustment period to be approximately $150,000.

About Carmanah Technologies Corporation

Since its founding in 1996, Carmanah has become one of the most trusted names in solar technology, delivering reliable and cost-effective solar powered products and systems for industrial applications worldwide. To date, Carmanah's solutions for marine navigation, airfield ground lighting, aviation obstruction, roadway illumination, parking lot lighting, as well as on and off-grid power generation, have been successfully deployed in over 400,000 installations in 110 countries with proven performance in conditions ranging from desert heat to arctic cold.

Carmanah Technologies Corporation
Stuart Williams, (250) 380-0052
Chief Financial Officer/Corporate Secretary
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