In the final ruling in a highly politicized trade case, the U.S. Commerce Department on Wednesday dramatically raised tariffs on imports of solar panels by Chinese companies, citing the illegal subsidies they got from their government. At the same time, it cut the duties it planned to charge some Chinese companies for illegal dumping of panels on the U.S. market.

The department was investigating two issues -- illegal subsidies and illegal dumping -- in separate but parallel proceedings. It had issued a preliminary ruling on each issue earlier this year.

In March, it set duties ranging from 2.9 percent to 4.7 percent in the illegal subsidies portion of the case, which were lower than many had anticipated. But on Wednesday, it revised those figures sharply upward, from 14.78 percent for U.S. imports made by China's Suntech to 15.97 percent for imports made by China's Trina Solar.

At the same time, the final duties on anti-dumping were lower than in the preliminary ruling. Some companies actually saw their combined rate go down: Yingli Solar, which had faced tariffs totaling 34.79 percent in the preliminary decision, now faces a combined rate of 30.66 percent.

Suntech and Trina Solar were singled out in the trade case because they were the two biggest exporters during the period of investigation, which covered all of 2010.

Suntech blasted the duties as a trade barrier, and warned that it will make solar less competitive against other forms of electricity. It also noted that it manufacturers some of its solar panels in Arizona.

"We will continue to provide our customers in the U.S. with hundreds of megawatts of high-quality and affordable solar products that will not be subject to tariffs," said E.L. "Mick" McDaniel, Managing Director of Suntech America.

The ruling covers imports of solar cells produced in China and solar panels made in China that use Chinese-made solar cells. It also covers solar panels made outside of China that use solar cells produced in China. But in a critical win for several companies, the Commerce Department did not expand the "scope" of the investigation to look at companies that use solar cells made in other countries, including Korea.

The highly contentious trade case began last year when a group called CASM, or the Coalition for American Solar Manufacturing, filed a petition claiming that Chinese solar companies benefit from subsidies like free land and low-interest government loans and are illegally dumping solar cells in the United States, driving American companies out of business. CASM is largely led by the American arm of Germany's SolarWorld and a small coalition of U.S. solar manufacturers.

"I am glad the administration intends to act against cheating by Chinese solar producers, but fear today's ruling leaves a loophole that will enable these companies to sidestep the impacts," said Senator Ron Wyden, (D-Ore.), SolarWorld's biggest advocate in Congress. "That gap exempts panels from tariffs when only a small portion of panels is made outside of China."

When Fremont-based solar maker Solyndra filed for bankruptcy last year, fierce competition from China was cited as a key factor in the company's implosion. Evergreen Solar also blamed China when it laid off 800 workers and shut down its plant in Massachusetts.

SolarWorld's aggressive stance against China has put it at odds with many other players in the solar industry, who argue that ever-lower panel prices are good for U.S. consumers and are driving the rapid adoption of solar on homes and businesses across the country while creating thousands of installation jobs. The company claimed a partial victory Wednesday.

"We're pleased with the margins calculated by Commerce, particularly in the case of subsidies, which increased significantly," said Tim Brightbill, a trade attorney for Whiley Rein, which is representing SolarWorld. "This is another important step in the process to return fair competition to the solar marketplace. But we're concerned that the scope decision doesn't cover all unfair trade."

A group called CASE, or the Coalition for Affordable Solar Energy, was formed to oppose the trade petition. CASE members include fast-growing Bay Area startups like SolarCity, SunRun and Sungevity that install solar panels, including panels made in China.

"Today's decision means the USA solar industry will pay an even greater price for SolarWorld's focus on lawyers instead of technology," tweeted Jigar Shah of CASE.

Many solar industry advocates had hoped for a negotiated settlement, and warned that trust between the US and China must be restored.

"While today's decision rightly shows that the U.S. will protect its rights in the global trading system, trade litigation alone is not enough to solve the complex challenges that exist between the U.S. and China," said Rhone Resch, president and CEO of the Solar Energy Industries Association. "Prior to these trade cases, the U.S. and Chinese solar industries enjoyed a strong, productive working relationship. For both sides to succeed going forward, we must return to our collaborative roots at both the industry and government levels."

The International Trade Commission's is expected to rule Nov. 7 on whether the trade practices of the Chinese manufacturers and is injuring American companies.

Contact Dana Hull at 408-920-2706. Follow her at Twitter.com/danahull.