Two major areas of international trade that will remain causes of concern for energy storage projects are the application of tariffs and supply chain integrity. While it remains to be seen what the US administration might impose under new or expanded tariff measures, companies can take steps in developing their project documents and supply chain strategy to positively position themselves.
Storage batteries have been indicated as a priority for border detentions for forced labor evaluation, and we expect to continue to see those goods identified as a concern. It will be key for companies to understand their supply chain for materials and finished goods and be prepared to respond quickly should US Customs and Border Protection (CBP) issue a questionnaire regarding the use of forced labor in the production of imported merchandise.
Companies with experience responding to these questionnaires understand the time and effort required to complete them to CBP’s satisfaction. Importers who are not manufacturers may struggle to obtain the information that CBP needs to release merchandise from customs custody. Obtaining CBP approval to release merchandise can take several months or more. It will be critical for such importers to work with suppliers to prepare and submit relevant information, which may be provided directly to CBP to protect business proprietary information.
Application of US Import Tariffs
An interesting issue will be the imposition of tariffs. There are existing tariffs pursuant to Section 301 of the Trade Act of 1974 on some Chinese-origin lithium-ion EV batteries and non-lithium-ion battery parts, which were increased to 25% in September 2024. Tariffs on Chinese-origin lithium-ion non-EV batteries are scheduled to increase to 25% effective January 1, 2026. Otherwise, batteries of non-Chinese origin storage batteries have not been subject to multi-front targeted tariff or duty actions.
There have also been indications that the US administration may consider other tariff proposals impacting energy storage, such as a 10–20% universal tariff, tariffs of up to 60% across the board on Chinese-origin goods, and tariffs of 25% on Mexican and Canadian origin goods. Our International Trade and National Security group has published a series of LawFlashes with accompanying webinars highlighting the tariff landscape generally, the manners in which the US Government may impose tariffs, tools importers have to reduce tariff impact, enforcement considerations, and global implications of US trade policy.
As seen in the first few weeks of the Trump administration, some tariff actions can be imposed with near immediacy through executive order, then implemented by the responsible agencies. With the tariffs imposed on February 1, 2025, President Trump was the first president to utilize the International Emergency Economic Powers Act (IEEPA) to impose a 25% tariff on goods from Mexico and Canada (other than a lower 10% tariff on Canadian energy and energy resources) and an additional 10% tariff on goods from China. While the actions against Mexico and Canada have been paused for 30 days, the additional tariff action against China is effective as of February 4. Others may follow a months-long process including investigations, industry participation, and a determination of the specific injury, after which remedial actions, including tariffs, could be imposed.
In December 2024, Reuters published a report indicating that the incoming US administration was contemplating sweeping changes to reduce support for electric vehicles and charging stations and block cars and components, including batteries, of Chinese-origin, from entering the United States. The document recommended imposing tariffs on all battery materials globally to boost US production, with negotiated exemptions for US allies. The document indicated that the tariffs should be imposed using Section 232 of the Trade Expansion Act of 1962, which is what was used to impose global tariffs on steel and aluminum during President Donald Trump’s first term.
Section 232 allows the president to impose tariffs if an article is being imported into the United States in such quantities or under such circumstances as to threaten or impair the nation’s national security. Under this section, the process starts when the US Department of Commerce (DOC) initiates an investigation. It then has 270 days to report its findings to the president. If the report concludes that imports threaten to impair the national security of the United States and the president agrees, he may take several actions to eliminate the negative effects of such imports on US national security. These actions can include the imposition of tariffs, the use of tariff rate quotas (meaning imports from a designated country are allowed duty-free up to a certain threshold, after which tariffs are imposed), or absolute quotas (meaning that imports from a designated country are allowed up to a certain threshold, after which no imports are allowed until the next quarter), among other strategies.
On February 10, 2025, President Trump published two Presidential Proclamations, expanding the Section 232 tariffs on imported steel, aluminum, and derivative articles. These proclamations also eliminated existing exclusions and exemptions—both at the country-wide and importer-specific levels. It remains to be seen whether exclusions or exemptions are later offered under the expanded tariff application.
President Trump, in his first term, used tariffs both as a bargaining tool and as a measure for regulating certain industries, and it is apparent after only a few weeks that President Trump continues to view tariffs as methods of both negotiation and revenue generation. With respect to energy storage development—and particularly, the supply of batteries and components—which were a priority over both the Trump-Pence and the Biden administrations, it seems more likely that tariffs would be utilized as regulatory control rather than a negotiating tactic. The tactical strategy will be in the use of exemptions or exclusions, either on a countrywide basis or through individual application.
Antidumping and Countervailing Duties
Antidumping and countervailing duties (AD/CVD) are intended to offset the value of foreign dumping and/or subsidization, leveling the playing field for domestic industries injured by unfairly traded imports.
Dumping occurs when a foreign producer or exporter sells a product in the United States at a price that is below “normal value.” Normal value may be the price at which the foreign producer sells the merchandise in its own domestic market or a third-country market, or may be a constructed value based on its production costs plus an amount for profit. A separate surrogate-value based methodology is used to establish normal values for nonmarket economies (like China). This entails valuing the nonmarket economy producer’s factors of production using prices or costs from one or more surrogate market economy countries considered to be (1) at a level of economic development comparable to that of the nonmarket economy country of the producer and (2) a significant producer of comparable merchandise. Antidumping duties are intended to raise the prices for foreign imports to align with the “normal value.”
Governments subsidize enterprises or industries when they provide financial assistance to benefit the production, or exportation of goods through (e.g., direct cash payments, credits against taxes, and loans at terms that do not reflect market conditions). To be countervailable, a subsidy must involve a government financial contribution that confers a benefit specific to a certain enterprise, industry, or region in that country or that is contingent upon the export or use of domestic goods over imported goods in production.
On December 18, 2024, the American Active Anode Producers filed antidumping and countervailing duty (AD/CVD) petitions with the DOC and US International Trade Commission (USITC) alleging unfair imports of active anode material from China, with claimed dumping margins of 828% and 921%. DOC initiated AD/CVD investigations on January 15, 2025, and the USITC determined that there is a reasonable indication that the domestic industry is being injured, so both proceedings will move forward. We can expect the preliminary determinations around May 27, though this deadline may be extended.
The investigations target active anode materials of the type used in lithium-ion batteries for Battery Energy Storage Systems, electric vehicles, consumer electronics, medical equipment, and other appliances. The scope of the product is identified as follows:
Active anode material, whether synthetic, natural, or a blend of synthetic or natural; with or without coating; regardless of whether in powder, dry, liquid or any other form. Subject merchandise typically has a maximum size of 80 microns. Subject merchandise has an energy density of 330 milliamp hours per gram or greater and a degree of graphitization of 80% or greater. Subject merchandise can be referred to as “active anode material.”
In addition, subject merchandise is covered regardless of
Active anode material subject to the investigations may be classified under the Harmonized Tariff Schedule of the United States (HTSUS) subheadings 2504.10.5000, 3801.10.5000 or 3801.90.0000. The HTSUS subheadings are provided for convenience and customs purposes only. The written description of the scope of the investigations is dispositive.
If AD/CVD are imposed, Chinese-origin active anode material would be subject to duties. It will depend on the language in any preliminary or final determinations to determine whether AD/CVD may apply to active anode material that may be incorporated or transformed into other merchandise outside of China.
Mitigating tariff risk in battery energy storage system (BESS) projects is crucial for ensuring project financial viability, as tariff changes can significantly affect cost structures and overall project economics. BESS projects often involve the importation of specialized equipment and materials, such as batteries, inverters, transformers, and control systems. These components are typically sourced from international suppliers (with China being responsible for around 85% of global battery cell production capacity), which exposes BESS projects to risks arising from changes in import tariffs, duties, and trade regulations, as described above. Such tariff fluctuations can significantly impact project costs, potentially leading to delays, budget overruns, and financial uncertainty.
In the context of engineering, procurement, and construction (EPC) contracts and equipment supply agreements, mitigating the risks associated with tariff and duties changes for imported goods is critical to ensure the financial stability and timely completion of the project.
Developers are typically responsible for securing financing, managing project development, and ensuring that the project is operational within budget and schedule. While tariff and trade changes are usually perceived as a project risk, EPC contractors generally have discretion as to the timing and sourcing of project equipment and materials and, arguably, can reduce their exposure to tariff changes and trade policy.
Nevertheless, given the Chinese dominance in the BESS component markets, BESS EPC contractors are faced with limited supply alternatives and significant tariff and trade risk. As such, it is not uncommon for BESS EPC contractors to shift some or all of the tariff risks to developers by contract (as discussed below), or for developers to independently procure critical equipment for BESS projects, which are then carved out from a contractor’s scope. This strategy reduces project costs by eliminating any markups that contractors would typically charge developers for procuring critical equipment, which markups may not translate into meaningful enhancement of (i.e., wrap) of the original warranties provided by the original equipment supplier.
Given this particular aspect of BESS projects, BESS developers are increasingly opting for direct procurement of equipment at the beginning of the project development lifecycle, securing critical project components (such as batteries, inverters, and other long-lead items) early in the project development process, before market conditions or tariffs change. This approach, coupled with clear contractual frameworks with careful allocation of risk among applicable stakeholders, may help to manage tariff fluctuations.
Among its benefits, early procurement provides price certainty and reduced exposure to market volatility, locking in prices of key components before potential increases in material costs or tariff hikes, reducing the risk of unexpected cost escalations due to changes in tariffs or commodity prices. It also provides supply chain stability, managing potential supply chain delays, which may be caused by price fluctuations, tariff changes, trade disruptions or longer-than-expected lead times for international shipments ensuring timely delivery of components and preventing project delays. In addition, depending on the scale of the developer, purchasing in bulk or committing to large quantities can result in discounts from suppliers, further insulating a project from future price increases as suppliers may offer volume-based discounts or price stability commitments when contracts are signed early, further reducing the risk of tariff-induced price hikes.
While early procurement may mitigate some risks, potential changes in tariffs and trade policy still need to be addressed and the applicable supply and construction agreements. These risks must be allocated between the developer and the equipment supplier or contractor, as applicable. Negotiating fixed-price supply agreements with suppliers and EPC contracts with contractors allows developers to shield themselves from the impact of tariff increases. In these contracts, the price of the equipment or materials is set for the duration of the agreement, protecting the developer from import costs.
Suppliers and contractors typically assume some level of risk related to price increases in raw materials or changes in tariffs, however if they are unable to commercially provide a fixed-price contract inclusive of all procurement costs, especially given the particularities of the BESS components market, parties may negotiate risk-sharing clauses in their contracts to pass some of the risk back to the developer if tariffs or trade regulations cause some level of unforeseen price increases.
Tariff pass-through clauses can allocate either the entirety or a portion of the tariff risk back to the developer. They can be structured in different forms, such as a change in law, force majeure event or a specific provision addressing the particular risk and need to be carefully negotiated to ensure that risks are addressed in a transparent and predictable manner. The clause should clearly define the events that trigger the pass-through, such as the imposition of new tariffs or changes in existing tariffs that impact the cost of imported materials or equipment. The clause should also outline how the increased tariff cost will be calculated and quantified. This may include providing documentation from suppliers or customs authorities to justify the price increase.
To avoid disputes, the pass-through clause should include provisions for transparency and communication, ensuring that both parties are aware of the tariff changes and their impact on the overall project cost. Finally, developers can negotiate limits on the amount or percentage of tariff increases that can be passed through (such as floors, caps, and/or percentage splits), ensuring that suppliers and contractors do not excessively inflate costs and that the burden of tariff changes is shared between the developer and supplier/contractor, rather than being entirely absorbed by one party.
Alternatively, the parties can introduce flexible contractual terms and renegotiation clauses within the supply agreements or EPC contracts, including price adjustment mechanisms that trigger renegotiation in response to significant tariff changes. For instance, if tariffs on key materials increase by a certain threshold, the contract can be adjusted to reflect the new cost structure. If the parties are unable to agree upon the renegotiation terms, the agreement can provide for a roadmap to termination, which may include partial termination if some deliveries of equipment not affected by the tariff changes have already been made. The particularities of each project and the bargaining power of the parties will dictate the extent that the reopeners of contract terms will apply. Ideally, parties should strive for a detailed contractual structure, if possible, to avoid length negotiations or potential disputes.
Developers, suppliers, and contractors can reduce their exposure to the tariff-related risks particular to BESS projects by employing strategies such as early procurement of critical components, long-term supply agreements, tariff pass-through clauses, and flexible contractual terms. Clear communication, risk-sharing mechanisms, and a proactive approach to supplier collaboration can reduce the vulnerability of BESS projects to tariff and duties changes and improve their chances of financial success, even in volatile energy markets.