* U.S. importers could face $70 million in tariffs, fines
* Industry hopes to persuade US Customs to reverse ruling
* Some see move counterproductive to global climate goals
(adds comments from tariff supporter)
By Doug Palmer
WASHINGTON, Oct 1 (Reuters) - The U.S. solar energy industry hopes to persuade Customs officials to reverse a decision to impose a 2.5 percent tariff on solar panel imports after more than two decades of duty-free trade in the product, an industry official said on Thursday.
"We're taking it very seriously and we will be responding. ... The industry is in the process of preparing a challenge," said Rhone Resch, president of the Solar Energy Industries Association, whose members include both U.S. and foreign solar energy companies.
In the worst case scenario, U.S. importers of solar panels could face some $70 million in tariffs and penalties for product already imported this year.
The tariff comes at a time when concern about global climate change has prompted the United States and the European Union to push for deal with other leading developed countries and China to eliminate duties on environmental goods.
As the New York Times reported on Wednesday, the U.S. Custom service ruled in January a panel made by Trina Solar (TSL.N) of China was a generator because it contains a diode that allows electric current to pass around shaded areas of the panel.
That ruling was a surprise because "all solar panels contain bypass diodes and have forever. It's a safety issue not to have them," one industry official said.
Although the ruling only applies to the Trina panel, it has implications for other manufacturers, he said.
The industry hopes it can persuade officials at U.S. Customs and Border Protection headquarters in Washington to overturn the ruling made by the New York office.
If that fails, the case could go to the U.S. Court of International Trade in New York.
Mike Wessel, a commissioner on the U.S.-China Economic and Security Review Commission, a congressionally appointed watchdog group, said the duty should stay in place to offset Chinese government subsidies to its domestic producers.
"Customs' decision is the right approach to ensure that the domestic industry we have does not get run further into the ground by China's efforts to dominate this industry," he said.
INCREASINGLY GLOBAL INDUSTRY
The solar power sector is increasingly a global industry, with most panels today being sold into the European market and China expected to grow as a customer for clean energy.
While U.S.-based SunPower Corp SPWRA.O assembles panels at factories in China, the Philippines and Mexico, China's Suntech Power Holdings Co Ltd STP.N is planning to lease or buy a facility to produce its solar panels in the United States and companies like Yingli Green Energy Holding Co Ltd (YGE.N) are setting up distribution lines in the United States.
The tariff could prompt more Chinese companies to set up some sort of U.S. operations. But it also could backfire on the United State if it encourages other countries to hike duties on climate-friendly goods.
"It's unclear that the U.S. would want to enforce this policy long term ... If you move toward a protectionist stance, you also limit what your domestic companies can do abroad," said Christine Hersey, analyst at Wedbush Morgan.
J.P. Morgan analyst Christopher Blansett said the tariffs could be good for First Solar Inc (FSLR.O), Energy Conversion Devices Inc (ENER.O) and Evergreen Solar Inc ESLR.O, since the companies produce some products in the United States.
But the tariffs should not have a large impact, since the benefits that foreign governments give to companies to set up manufacturing in their country -- such as lower corporate tax rates and low-cost financing -- "far outweigh the penalty of a 2.5 percent tariff," Blansett said.
(Additional reporting by Laura Isensee in Los Angeles, editing by Cynthia Osterman)
U.S.. 
The United States continues to implement new trade barriers; the most recent tariffs emerged on Wednesday, targeting solar panels imported from China.

The new tariff is a result of a query submitted in December 2008 by GES USA, an American solar company. The resultant inquiry sought to clarify tariffs levied on solar panels imported from China, imports which, for nearly two decades, were considered a duty-free commodity.

In early January, U.S. Customs officials reportedly informed the company that the solar panels contained electronic devices that place the panels in the electric generator import category which is subject to a 2.5% import tariff.  Specifically, the ruling cited the presence of diodes on the solar panels as evidence of electric generation and hence they must be treated as an electric generator.  Small solar panels already incur a 3.9% tariff.  The January decision was made by a U.S. trade specialist whose rulings can be overturned.

The tariffs will be levied on imported panels that provide electricity for all uses.  Additionally, tariffs will be collected dating from the beginning of 2009.  The Solar Energy Industries Association estimates that the accumulated tariffs from this year may total more than US$ 70 million.  This week's tariff revelation caught many industry leaders off-guard and yesterday the Solar Industries Association moved to block the tariff.  The Association president, Rhone Resch, stated "... We're taking it the tariff very seriously and we will be responding. ... The industry is in the process of preparing a challenge".  The Association intends to file their appeal with senior U.S. Customs officials who have the option to overrule the decision to implement the tariff.  However, if the officials do not revoke the tariff, then the case must go before the U.S. Court of International Trade.

The U.S. amount spent on imported solar panels roughly matches the income from exported panels; US$ 605 million imported versus US$ 555 million exported, according to the Commerce Department figures on the first seven months of this year.  Major solar panel importers have already begun to move their operations to the U.S.