Commission Implementing Regulation (EU) 2020/776 of 12 June 2020 imposing definitive countervailing duties on imports of certain woven and/or stitched glass fibre fabrics originating in the People's Republic of China and Egypt and amending Commission Implementing Regulation (EU) 2020/492 imposing definitive anti-dumping duties on imports of certain woven and/or stitched glass fibre fabrics originating in the People's Republic of China and Egypt

(741) The premium related to country risk was determined based on the OECD classification of country risk for export credits, as well as the corresponding minimum premium rate set by the OECD (177). The country risk for loans provided by EXIM bank was established at 2,37 % and 2,44 % for loans provided by CDB.

(742) Following final disclosure, Jushi Egypt claimed that the Commission should have used two offers provided by an Egyptian bank in 2013 and 2016 to the company as a benchmark for calculating the benefit on loans. The Commission reviewed these offers, but decided that they were not representative of a comparable commercial loan, which the firm could actually obtain on the market.

(743) The Commission found that the offers do not provide any description of the actual financial product offered to the company, but refer to an interest rate for the provision of “credit facilities” in general. As such, it is impossible for the Commission to determine whether the offer actually refers to a loan as such or to other financial products, such as e.g. the opening of a credit line, trade financing (letters of credit, bills of exchange, factoring, etc…). Even if the offer were considered to relate to a loan, other crucial information is missing, such as the duration of the alleged loan offered by the bank, and the extent of the credit facilities offered (i.e. the maximum amount that the bank would be willing to extend to the company). In this respect, the Commission noted that the loans provided by CDB and EXIM were long-term loans for major fixed assets projects, amounting to several hundreds of million USD. Therefore, the Commission considered that it could not use the proxy provided by Jushi Egypt.

(744) Finally, the Commission observed that even if the Commission would take into account the benchmark provided by the company, it would not result in any significant change in the benefit calculation, since the proposed rate of the Egyptian bank was in line with the base rate established by the Commission for the benchmark, corresponding to a USD loan provided by a Chinese bank to a domestic (Chinese) BB-rated customer. Thus, if anything, those loans confirmed that Jushi Egypt indeed benefit from lower interest rates compared to market benchmarks. Therefore, the company’s claim was rejected.

(745) Over the period 2014-2018, Jushi (China) provided a series of inter-company loans to Jushi Egypt for a total amount of 260 million USD.

(746) The Commission found, however, that Jushi (China) had itself financed these intercompany loans via external financing from Chinese financial institutions. In other words, rather than Jushi Egypt getting the loans directly from the Chinese banks, Jushi (China) obtained the preferential financing from these institutions and then allocated the benefit of those loans to its manufacturing activities in Egypt (Jushi Egypt). This is confirmed by Jushi China’s income tax statement, where the interest income from Jushi Egypt’s loan under the heading “overseas income” is set off against the interest paid by Jushi (China) on its external financing. Moreover, the official documents relating to the start-up and expansion projects in Egypt, such as for example the government approvals from the National Development and Reform Commission (‘NDRC’) and MOFCOM and the various feasibility studies, indicate that two thirds of the Egyptian project are financed via external financing (as opposed to self-generating revenue by the company). The loans provided directly by EXIM and CDB mentioned in Section 4.3.1.1 above, are not in themselves sufficient to provide the total amount of external financing needed to develop the manufacturing activities in the STEC-Zone. Thus, the additional indirect financing through inter-company loans was needed. The Commission could not find a specific bank loan directly linked to the project in Egypt. However, in 2014, Jushi (China) issued a bond to replace various bank loans in order to improve its debt structure. This bond, which makes various references to the capital needs for the project in Egypt, confirms that Jushi (China) was in need of external financial assistance to assist its manufacturing activities in Egypt. Therefore, the Commission considered that the underlying preferential loans channelled through Jushi (China) are also attributable to the GOE in the same way as the direct loans provided to Jushi Egypt by the Chinese financial institutions.

(747) Since all of these loans can in essence be assimilated to loans provided by the GOC to a Chinese company, which then allocates the benefits to its manufacturing activities elsewhere, the Commission decided to treat these loans as any other domestic Chinese loan to a Chinese GFF producer. In this context, as mentioned in recital (266) above, the Commission found that all State-owned Chinese financial institutions that provided loans to Jushi (China) and Jushi Egypt were public bodies in the sense of Article 2(b) of the basic Regulation read in conjunction with Article 3(1)(a)(i) of the basic Regulation and in accordance with the relevant WTO case-law.

(748) The Commission then calculated the amount of the countervailable subsidy. In this respect, the Commission noted that the nominal interest rate charged by Jushi (China) to Jushi Egypt was 7,5 %. However, none of the financing provided to Jushi (China) had such a high interest rate. In fact, the average interest rate charged to Jushi (China) during the IP amounted to 4,4 %. This is again confirmed by Jushi (China’s) income tax statement, in which the financing cost deducted from the taxable income corresponded to an interest rate of 4,3 %. The Commission thus compared the average interest rate that Jushi (China) pays on the outstanding amount of the intercompany loan during the IP with the rate that the company would have to pay for a comparable commercial loan obtainable on the market, in line with the calculation methodology developed in Section 3.4.2.4 above.

(749) The Commission furthermore found that during the investigation period, Jushi Egypt did not honour its debt repayment schedule to the parent company. Indeed, 91 million USD, which was supposed to have been repaid to Jushi (China) during 2018, was still outstanding at the end of the investigation period. In addition, the Commission found several instances in which the funds received via Jushi (China) were provided to repay the outstanding capital on the loans with EXIM and CDB.

(750) In order to take into account the increased risk exposure of the banks highlighted by the existence of revolving loans and debt forgiveness, the Commission thus decided to moved down one notch in the risk rating scale and to use US B (instead of BB) corporate bonds to determine the market–based benchmark, in line with recital (339) above.

(751) All the elements concerning this financing described above in this section clearly show that Jushi (China) allocated all the benefits from the preferential financing received from the Chinese financial institutions to Jushi Egypt. In addition, after Jushi Egypt did not honour the debt repayment schedule towards Jushi (China), this latter company did not adjust the interest rate accordingly and did not take any measures to reflect the real risk of the intercompany loan, whose amount kept increasing over the years. For all these reasons, the benefit thus calculated was attributed to Jushi Egypt (178).

(752) Following definitive disclosure, Jushi Egypt claimed that, contrary to what was stated in the footnote in the preceding recital, the Commission countervailed the loans attributed to Jushi Egypt both in Jushi (China) and in Jushi Egypt. This is factually incorrect, since the benefit calculated on the intercompany loan allocated to Egypt was deducted from the benefit on loans calculated for Jushi (China), as can be seen in Annex 2.3 of the specific disclosure provided to the Chinese company. Therefore, the claim was rejected.

(753) Jushi Egypt also argued that the Commission should not have downgraded Jushi Egypt’s credit rating from AA to B based on the fact that Jushi Egypt did not honour its repayment schedule to its parent company or that, in some instances, Jushi Egypt’s parent company repaid loans on its behalf. The fact that Jushi Egypt’s corporate group decided that it was better for another entity in the group to bear the costs so as to preserve cash flow in another entity does not indicate that this other entity would not have honoured its obligation had this obligation been towards a banking institution. In addition, Jushi Egypt argued that the Commission downgraded Jushi Egypt by four notches, from AA to B, even though recital (750) above stated that Jushi Egypt would only be moved down one notch in the risk rating scale.

(754) First, the Commission noted that it did not find any credit rating awarded by any external party to Jushi Egypt, and that Jushi Egypt did not provide any evidence to this end either. Jushi Egypt therefore never had an “AA” credit rating as a starting point. The Commission thus had to determine Jushi Egypt’s credit rating using the facts available in the case. In view of the significant amount of the intercompany loans from the parent company, as well as the fact that Jushi Group had operated as a guarantor for the loans from CDB and EXIM, the Commission determined that Jushi Egypt’s credit rating was closely linked to the rating of its parent company, which had been set at “BB”, as mentioned in recital (306) above. This BB credit rating was thus the starting point for the Commission.

(755) Second, as explained in recital (750) above, the Commission decided to move down one notch in the rating scale, i.e. from BB to B, in view of the lack of repayment of its liabilities over the years. Indeed, the Commission noted that although the loans to CDB and EXIM were repaid according to schedule, the total liabilities of the company actually increased over the years. As such, Jushi Egypt replaced external debt by intragroup debt, but did not actually honour its liabilities towards the banking institutions itself. Contrary to the statements of Jushi Egypt, there are also indications that the company would not have been able to honour its obligations if all of its creditors had been external banking institutions. For example, although the company was loss-making in the years 2015 and 2016, and had a negative equity in 2016, it still made large capital repayments to CDB, totalling 54 million USD (around 546 million EGP) in these years. The company would thus not have been in a position to honour its external obligations without financial support from the parent company.

(756) In view of the above considerations, the Commission rejected these claims.

(757) The subsidy amounts found for preferential financing through loans from Chinese policy banks, directly or via the parent company Jushi (China), are thus confirmed, and amounted to 4,87 % for Jushi Egypt.

(758) In addition to the direct loans and intercompany loans, Jushi Egypt needed to cover its financial needs also by increasing its capital.

(759) Previous investigations found that substantial subsidies were received at the level of the parent companies of Chinese groups to support foreign investment under the Belt & Road Initiative, in the form of grants, preferential financing and equity injections. This was notably the case in the recently concluded anti-subsidy investigation on Tyres (‘the Tyres case’) (179).

(1) 13th Five-Year Plan for the Development of Foreign Trade, issued by the Ministry of Commerce (‘MOFCOM’), 26 December 2016;

(2) Guiding Opinions of the State Council on the Promotion of International Production Capacity and Equipment Manufacturing Cooperation, issued in 2015 (‘Guiding Opinions’);

(3) Building Materials Industry Development Plan 2016-2020, Ministry of Industry and Information Technology, GXBG [2016] No. 315

(4) The 13th Five-Year Plan for Fibre and Composite Materials Industry

(5) Made in China 2025, State Council, July 7, 2015

(760) During the investigation period, Jushi Egypt benefited from grants channelled by CNBM, a State-controlled entity, through equity injections, specifically via paid-in capital.

(761) In 2012, there was a significant shareholders’ contribution of 42,6 million USD for the founding of Jushi Egypt. Since then, the capital of Jushi Egypt significantly increased up to 162 million USD until the investigation period. At the end of the IP, the capital of Jushi Egypt was approximately four times larger than in 2012.

(762) Jushi Egypt is fully owned by Jushi Group, which is fully owned by China Jushi. The principal shareholder of China Jushi is CNBM holding, which continuously held more than 25 % of its shares since 2010

(763) In parallel to the increase of capital in Jushi Egypt, the participation of CNBM in the capital structure of China Jushi has increased in a similar order of magnitude. Specifically, CNBM increased sixfold its paid-in capital contribution into China Jushi from 2010 to the end of 2018, i.e. during the IP, from 154 million RMB (23,3 million USD) in 2010 to 944 million RMB (142,8 million USD) in 2018.

(764) This similar trend and magnitude in the increase of capital in both Jushi Egypt and China Jushi strongly suggests that CNBM raised funds in order to increase the capital of Jushi Egypt through China Jushi up to the IP.

(765) In addition to the paid-in capital increases, there have been substantive amounts of funds transferred from CNBM to China Jushi and Jushi Group through other types of capital accounts.

(766) In order to determine the nature of the transfers and the circumstances in which the ownership capital within the companies concerned evolved, the Commission sought to have access to the relevant information originated in CNBM. However, as explained in Section 3.2.2, CNBM did not cooperate with the investigation. In the absence of any reply from CNBM, and following the application of the provisions of Article 28 of the basic Regulation, the Commission had to rely partially on facts available for its findings concerning CNBM. In particular, the Commission had to use facts available in order to identify the source of financing of the capital provided by CNBM to Jushi Egypt inter alia via China Jushi.

(767) To reach this conclusion, the Commission established the existence of a clear commitment from CNBM to invest overseas in encouraged industries. In this respect, CNBM advertises itself as an “active practitioner of the Belt & Road Initiative” in its annual report, on its website, and on site in the plants. For example, it “undertook 312 cement projects in 75 countries and regions globally, more than 60 fiberglass projects, the implementation of 33 investment projects, the construction of 5 overseas warehouses, operated 14 overseas building materials supermarket chains, and managed more than 30 factories globally” (180).

(768) More specifically, within the context of GFF, CNBM established Jushi Egypt in 2012, a vertically integrated producer of GFF in Egypt, and a subsidiary of the Chinese exporting producer Jushi. In the subsequent years, several important investment projects were undertaken to expand the production capacity of Jushi Egypt. Furthermore, in 2015, CNBM established Hengshi Egypt, a subsidiary of the Chinese exporting producer Hengshi. This non-vertically integrated producer of GFF in Egypt sources its main raw materials from its related company, Jushi Egypt. In addition, according to publicly available information, contracts have been signed to establish a new company related to Taishan (another one of the exporting producers in the CNBM Group) in Egypt in the near future.

(769) Furthermore, China Jushi has established a number of overseas production and trading subsidiaries in South Africa, South Korea, Italy, Spain, France, Canada, India, Singapore, Japan, USA and Hong Kong. In 2016, the CNBM Group raised over 5 billion RMB (USD 747,38 million) for its globalization strategy in the 13th five years plan (2016 to 2020), among which the Egyptian projects mentioned above, as well as a USD 300 million investment in a factory in the USA, for production starting in 2018 (181). In India, the plan is to put up a manufacturing facility with a capacity of 100 000 tonnes by mid-2020. Further plans for a GFF facility in Turkey were also well underway during the investigation period.

(770) All of these overseas projects fit within the wider context of China’s “going out” policy. In this respect, Song Zhiping, the Chairman of CNBM, stated for example: “The signing of the Jushi US project is a milestone in the strategic development of China Jushi’s globalization, and in the meantime a critical step forward in its pursuit for higher goals. It also has a referential significance for the globalization of CNBM and even of China’s building materials industry as a whole”.

(772) In another interview, Song Zhiping mentioned that from the enterprise point of view, CNBM paid special attention to the national ‘Belt and Road’ related policies, and that ‘Belt and Road’“is really a once-in-a-lifetime opportunity for China's building materials group”. He also pointed out that “going out” is linked to financial cooperation, it only works when ‘we combine finance, sovereign fund cooperation, buyer's credit, financial leasing and other ways, have a mutual cooperation “going out”’. Along the same line, Song Zhiping further stated that ‘International capacity cooperation must be combined with the “Belt and Road” national policy, especially the country's financial policy. We used to make simple investments, borrowing money and lending investments, and that's not going to be massive. I would like to adopt a model similar to that of China's Guoxin Holdings, where companies contribute 10 per cent and the state foreign exchange reserves contributes 90 per cent. We need to change our old reliance on loans and look for new financing business models and organizational models. I think we should give full play to the country's current strong financial advantages, raise the establishment of building materials investment funds, mobilize more capital to participate in investment, to support building materials enterprises to “go out”’.

(773) This vision is supported by the Chinese government, as can be seen in a speech given by Xiao Yaqing, director of the State Council's SASAC at a conference organized by CNBM: ‘central enterprises are the backbone of the national economy, and should be closely integrated with the “Belt and Road” national strategy, making use of advantageous production capacity, highlighting key areas, and promoting international production capacity and equipment cooperation. They take the lead in creating a new business card for the “going out” of the country”…. In recent years, China Building Materials and China Materials Group have accelerated the pace of “going out”, they have achieved outstanding results, and restructuring of the group to lead the internationalization of China's building materials industry is of great significance…. After the reorganization, the new company's initial planned investment projects in countries along the Belt and Road, will amount to an investment of more than 90 billion yuan’ (183).

(774) As explained in recital (93) the investigation revealed that CNBM Building is a Chinese State-owned enterprise owned directly and indirectly by CNBM Parent, which is in turn wholly owned by SASAC. SASAC is the key vehicle through which the Chinese government controls in several ways State-owned enterprises as a means to implement its government policies and plans rather than to follow a market logic in its business operations (184). Without prejudice to the conclusion on the public body nature of CNBM within the meaning of Article 3 of the basic Regulation, on the basis of all of the above evidence it can be concluded that CNBM and the Jushi Group at large pursue industrial and governmental policies including with regard to the ‘Belt and Road’ initiative and the ‘going out’ policies in the production and export of the product concerned.

(775) It is in this context that CNBM received a financial contribution from the government in order to implement these policies, including to fund its investment in Egypt for the production of the product concerned. Due to the complete non-cooperation of the CNBM and of the GOC on this point, the Commission was unable to identify the actual source of financing and substantiate in detail whether this financial contribution was made by SASAC or by the Silk Road Fund (‘SRF’) as the vehicle to implement the ‘Belt and Road’ strategy. However, on the basis of the facts available pursuant to Article 28 of the basic Regulation the Commission concluded that both SASAC (185) and the SRF (186) are considered public bodies within the meaning of Articles 3 and 2(b) of the basic Regulation when providing the financial contribution to CNBM. In any event, even if they would not constitute public bodies, both SASAC and the SRF would be considered as entrusted or directed by the government to carry out governmental policies and functions in accordance with Article 3(1)(iv) of the basic Regulation (187).

(776) Likewise due to the lack of cooperation, based on all the above evidence on the funding under the ‘Belt and Road’ initiative of projects outside of China including Egypt, as well as on the findings in the Tyres case, the Commission concluded that CNBM received a financial contribution in the form of grants that were then used for successive capital contributions to increase the capital available to Jushi Egypt for its operations in Egypt.

(777) In the absence of further evidence provided by CNBM, and based on the publicly available evidence, the Commission decided to countervail the successive capital increases of Jushi Egypt as equity injections supported by the State, with the aim of setting up and expanding the production facilities of CNBM in Egypt. Such support would equally fall under the items agreed upon between China and Egypt in the Cooperation Agreement to set up the SETC-Zone, attributed to Egypt for the same reasons explained in recital (706) above and can thus be allocated to the products exported from Egypt.

(778) The Commission then analysed whether the financial contribution provided by GOC via SASAC and/or the SRF conferred a benefit to Jushi Egypt. Once again, due to the non-cooperation of CNBM the Commission had to base its findings on the provisions of facts available according to Article 28 of the basic Regulation.

(779) The body of evidence in subsection (b) above has shown that the mandate and objective of both SASAC and the SRF is to implement governmental policies and plans, including by providing financial support and funding for the encouraged sectors among which GFF in order to enact the going-out strategy. SASAC and the SRF do not follow market principles and behaviour when providing funding, but operate to implement the respective government policies. A notable example of their operations delinked from a market perspective was found in the Tyres case, where the SRF had provided a grant to the group parent company for an acquisition of a subsidiary in the EU. Furthermore, in the Tyres case the Commission established that such projects followed a similar pattern (188). It is thus reasonable to assume that CNBM, as a major central SOE, would follow the same pattern and would benefit from similar subsidies.

(780) The Commission further noted that the amount of successive parallel capital increases of Jushi Egypt received via China Jushi corresponded approximately to the amount of the funding gap for the investment project in Egypt left after the funding via the preferential financing as described at Section 4.3 above. As explained above in recitals (763) to (766), the successive magnitude and scale of capital increases of CNBM into Jushi Group and China Jushi substantially mirrored the capital increases into Jushi Egypt precisely to close this funding gap. This was fully coherent with the purpose of the functioning and funding of SASAC and the SRF, as also explicitly stated by CNBM representatives and SASAC and SRF officials.

(781) Based on the evidence on file and in accordance with Article 28 of the basic Regulation, the Commission concluded that the financial contribution provided by SASAC and/or the SRF conferred a benefit within the meaning of Article 3(2) of the basic Regulation.

(782) As explained in recitals (207) to (217) above, the parent company of CNBM failed to provide a response to the questionnaire reply. Therefore, it was impossible to verify the subsidies received at the level of the parent company in connection with the group’s foreign investments related to the product concerned, and to determine an accurate benefit amount.

(783) The Commission therefore resorted to facts available in application of Article 28 of the basic Regulation to the determine the subsidy amount conferred by the financial contribution by SASAC or the SRF in the form of grants. As explained above, the Commission found parallel capital increases in the various group companies in China and ultimately channelled to Jushi Egypt in the same magnitude and over the same period. Because CNBM received these funds from SASAC and/or SFR earmarked for the investment in Egypt under the Belt and Road Initiative and the going out policy, it was used simply to channel those funds all the way down to Jushi Egypt without keeping any benefit to itself, as this would be inconsistent with the earmarking. The fact that the amount of the funding gap in the Egyptian investment of Jushi Egypt by and large corresponded to the amount of the capital increases further confirms this.

(784) In order to determine the amount of funds channelled by CNBM to Jushi Egypt as equity injections, the Commission analysed and traced the successive increases in equity in the companies concerned, namely Jushi Egypt, Jushi Group and China Jushi of which CNBM is the main shareholder.

(785) When following the trail of funds, the Commission examined not only the increases in paid-in capital, but also the increases in other equity instruments. Specifically, substantive amount of funds were discovered in the form of capital surpluses in the intermediate companies China Jushi and Jushi Group. With regard specifically to these intermediate companies, the Commission noticed that in certain equity increases the amount of funds transferred to these companies were larger than the amounts the company would later register under paid-in capital. The company would therefore have access to these funds without the expected change on the share of company’s ownership. By taking into consideration the equity injections via paid-in capital and the amounts found under other type of capital accounts, such as capital surplus, the Commission could determine that more than 87 % of the equity of Jushi Egypt could have been imputable to CNBM. The total amount of the benefit to the recipient using this approach would therefore be 142,8 million USD.

(786) However, due to the limited access to more detailed information, the Commission could not determine the exact origin of all these funds, and it thus could not establish with a sufficient standard of likelihood that the all amounts contained in other capital accounts of Jushi Egypt, were channelled and transferred by CNBM.

(787) Therefore, the Commission adopted a more prudent approach, focusing exclusively on the evolution of the paid-in capital amounts that matched the standard of likelihood as to their source from CNBM. More specifically, the Commission simply took into consideration the increase of paid-in capital of CNBM in China Jushi since 2010 and parallel development of capital increases into Jushi Egypt since 2012. As a result, the Commission considered that 51 % of the equity in Jushi Egypt (or 82,7 Million USD) was provided by CNBM through the financial contribution received from SASAC or the SRF.

(788) Once the full amount of the grants were established, the Commission proceeded to calculate the benefit conferred to Jushi Egypt during the investigation period according to Articles 6 and 7 of the basic Regulation. The benefit of the grants via equity increases should be allocated to the IP considering the amortization period of equity, which is not a fixed asset and therefore would normally be subject to the allocation provisions under Article 7(4) of the basic Regulation.

(789) Due to the absence of cooperation from CNBM, the Commission did not have any further information on any specific agreement concerning the use of the grant linked to the equity investments with SASAC or the SRF. In the tyres case, the Commission amortised the grant amount over a period of seven years because this was in line with the average investment duration of SRF investment and with another concurring loan taken out for that transaction (189). However, in the absence of cooperation and specific shareholders agreement in this case, the Commission decided to follow a conservative approach and decided to use the average useful life of the assets of Jushi Egypt on the assumption that the funding was used to fill the gap for the investment project in line with Article 7(3) in conjunction with Article 7(4) of the basic Regulation, which provides that a different amortisation period can be used if the circumstances so justify. On this basis, the Commission used an amortization period of twelve years. This resulted in a subsidisation amount of 1,65 %.

(790) Following definitive disclosure the CNBM group claimed that the Commission failed to demonstrate that the equity is attributable to CNBM and more specifically, that it did not originate from China Jushi or Jushi Group’s profits. In this line the company also claimed that the Commission failed to explain why funds were given by CNBM every year to China Jushi since 2010 but that funds only passed on to Jushi Group and Jushi Egypt during some of those years. Similarly, it argued that the Commission failed to establish that the support for capital investment is attributable to any public body and, as a result, it cannot constitute a subsidy. Finally, CNBM Group requested that, should the Commission maintain its approach, it must disclose how it considers that there is any pattern between the support for capital from CNBM to China Jushi and that between Jushi Group and Jushi Egypt.

(791) Firstly, concerning the origin of the funds, the Commission noted that the company did not provide any additional evidence to substantiate the claim. The Commission nonetheless, has analysed further the accounts of the concerned companies to identify whether increases in equity were sourced by their profits. The Commission observed that none of the increases in equity were originated from the profits or retained earnings accounts. The Commission, nonetheless, has identified that certain equity increases of China Jushi taking place in the years 2012 and 2016 could be attributed to capital reserves. However, the company has not provided information on the origin of the funds of the capital reserve accounts. Furthermore, the investigation established that one of the companies of the CNBM Group had received and booked government subsidies under the capital reserves account. The Commission therefore concluded that undistributed profit or retained earnings are not the attributable source of the funds used for the equity increases in Jushi Egypt since 2012.

(792) Secondly, concerning the moment when the funds were transferred to Jushi Group and Jushi Egypt, the Commission noted that the CNBM Group has not provided any further evidence to substantiate or explain its equity increases scheduling. Similarly, the Commission noted that in addition to the time lags on equity transfers from company to company, equity increases also respond to the different capital requirements in Jushi Egypt linked to the investments over the period analysed.

(793) Thirdly, concerning whether the origin of the funds supporting the capital increase can be attributable to a public body, the Commission noted in recital (775), that, even if they would not constitute public bodies, both SASAC and the SRF would be considered as entrusted or directed by the government to carry out governmental policies and functions in accordance with Article 3(1)(iv) of the basic Regulation

(794) Finally, regarding the disclosure on the establishment of the pattern between the support for capital from CNBM to China Jushi and between Jushi Group and Jushi Egypt, the Commission noted that this information was provided. Recitals (758) to (789) explained in detail the findings and the methodology used to calculate the subsidy amount. Similarly, in the specific disclosure, the company was provided with complete information concerning the evidence at the Commission’s disposal and its analysis regarding the capital support from CNBM to China Jushi and for Jushi Group to Jushi Egypt.

(795) Following all the above-mentioned arguments, the Commission rejected these claims.

(796) CNBM Group also claimed that the Commission failed to establish the amount of the benefit and must demonstrate why each provision of equity capital is not in line with the usual investment practice.

(797) The Commission recalled that during the investigation the case team sought to have access to the relevant information in CNBM. However, as explained in Section 3.2.2, CNBM did not cooperate with the investigation and the Commission had to rely on facts available for its findings concerning CNBM. Moreover, recitals (778) to (781) described how the benefit is established. In essence, it explains that SASAC and SRF did not follow market principles when providing funding, but operated to implement the respective government policies. The Commission therefore rejected the claim.

(798) CNBM Group further argued that it cannot be considered that all funds provided by CNBM originated from public bodies. As a result, the Commission cannot conclude that the entirety of the alleged capital support from CNBM to China Jushi constitutes a subsidy. Therefore, the company argued that the benefit cannot be higher than the subsidy rate found for CNBM in China, multiplied by the amount of capital support. CNBM Group also claimed that the Commission failed to calculate the benefit as it did not consider that the support for capital investment from CNBM came in exchange of shares and, thus, dividends.

(799) First, the Commission noted that the company has not provided any additional evidence to substantiate the claim. Similarly, the Commission recalls that CNBM did not cooperate with the investigation and the Commission had to rely on facts available for its findings concerning CNBM. In this respect, The Commission recalled that the subsidy rate found for CNBM in Sections 3.4 and 3.8 above was based on loans and grants visible in the publicly available audit report of CNBM, and thus it limited its findings in a very prudent manner only to certain subsidies within specific subsidy schemes, which could be easily identified and which are not related to the subsidy scheme at hand. Therefore, if anything the Commission erred on the side of caution.

(800) Finally, the Commission noted that the investigation does not discuss whether the funds transferred from CNBM were done in exchange of shares. On the contrary, the investigation established that CNBM received financial contributions from the government in order to implement its policies, and that these financial contributions were received in the form of grants that were then used for capital contributions to finance the operations of Jushi Egypt.

(801) Following all the above-mentioned arguments, the Commission rejected the claim.

(802) The CNBM Group further asserted that the Commission failed to take into account the value of the EGP at the time when the support for capital investment took place. As the EGP substantially devaluated in late 2016, this, in turn, artificially inflated Jushi Egypt’s benefit under this scheme. The Commission acknowledged that the EGP substantially devaluated in 2016. It also noted that the successive capital increases were indeed recorded in Jushi Egypt’s financial statements during the IP at the historical exchange rates. Following the methodology used in Jushi Egypt’s financial statements, the Commission therefore adapted the exchange rate for the provision of capital accordingly.

(803) Finally, the CNBM Group claimed that the benefit of the support for capital investment should not be allocated over time. The company argued that there is no evidence that links the capital investments received by Jushi with the acquisition of fixed assets.

(804) The Commission noted that no further evidence has been provided to support the claim. In addition, the Commission recalled that the set-up of a new production plant involves the acquisition of fixed assets. Furthermore, the investigation collected substantive evidence that since the establishment of Jushi Egypt, the company has engaged in the acquisition and construction of fixed assets. The Commission therefore rejected the claim.

(805) During the investigation period, Jushi Egypt also benefited from an export credit insurance with Sinosure in the framework of an agreement signed by Jushi China, which covered also exports made by Jushi Egypt. The premium to be paid for exports from Egypt did not differ from the premium requested for exports from the PRC.

(806) As mentioned in Section 3.5 above, Sinosure is owned by the Chinese Government, which exercises meaningful control and hence constitutes a public body. In any event, it is entrusted or directed by the GOC. Furthermore, Section 3.5 above already established that the premiums paid by the GFF producers in China were based on preferential terms. The fact that the premium requested for exports from Egypt does not differ from the premium for exports from China clearly shows that country risk was not taken into account by Sinosure when determining its price for the export credit insurance, and that the findings applicable to the exports from Jushi China also apply to Jushi Egypt.

(807) Consequently, the Commission concluded that Sinosure was a public body in the sense of Article 2(b) of the basic Regulation read in conjunction with Article 3(1)(a)(i) of the basic Regulation and in accordance with the relevant WTO case-law or was entrusted or directed by the GOC. Furthermore, a benefit was provided to the Jushi Egypt, since the insurance was provided at rates below the minimum fee needed for Sinosure to cover its operational costs.

(808) The Commission also determined that the subsidies provided under the export insurance programme are specific, because they could not be obtained without exporting and are thus export contingent within the meaning of Article 4(4)(a) of the basic Regulation.

(809) However, without prejudice to a finding of countervailability of this programme, given that the potential resulting countervailable benefit would be insignificant, the Commission decided not to assess this programme further.

(810) No benefit was found for the provision of electricity for less than adequate remuneration since electricity rates are set at national level in Egypt, and the exporting producers pay the usual rate for industrial users within a certain voltage range.

(811) No benefit was found for the provision of gas for less than adequate remuneration. Rates for gas are set for certain industrial sectors, but the exporting producers fall within the residual category of industrial users, which does not benefit from the lowest rate. Hence, there is no specificity, and no benefit.

(813) According to Article 5 of the Law 83/2002, as amended in 2015, in the SCZone, “the ownership of land shall be vested in the Authority within the zone”. Since 2015, it is not possible anymore to purchase the full ownership of land from the General Authority. Currently, the General Authority only provides usufruct rights of the land to the Main Development Company (‘MDC’), an Egyptian developer. The MDC then puts the usufruct of the land up for bidding to sub-developers such as TEDA. These sub-developers subsequently rent out the land to the companies located in the zone.

(814) However, when Jushi Egypt started to build its plant in 2011, it was still possible to acquire full ownership of land from the Egyptian authorities. At the time, Jushi Egypt bought a plot of land from TEDA. TEDA in turn bought this plot in 1998 through its predecessor, the Egypt China Joint Venture Company, from the Suez Governorate at an extremely low price (less than 1 USD/m2), and without any bidding procedure. Following the initial purchase in 1998, TEDA invested in basic infrastructure to make the undeveloped desert land viable for industrial projects.

(815) In this respect, the Commission ascertained whether the ECJV and TEDA were public bodies within the meaning of Articles 3 and 2(b) of the basic Regulation. The Commission thus sought information about State ownership as well as formal indicia of government control in these entities. It also analysed whether control had been exercised in a meaningful way.

(816) First, the Commission found that ECJV and TEDA were related entities, and that they were both fully State-owned. Indeed, as mentioned in recital (649) above, Tianjin TEDA is an SOE under the Tianjin Municipal Government, which formed a joint venture with the Egyptian Suez Canal Administration, the National Bank of Egypt, and four more Egyptian State-owned enterprises to create the ECJV, in order to develop and construct the economic zone. The Chinese side held 10 % of the shares of the ECJV, and the Egyptian side 90 % (190). Furthermore, as mentioned in recital (651) above, in October 2008, Tianjin TEDA established a joint venture with the China-Africa Development Fund, a subsidiary of the CDB, to set up China-Africa TEDA Investment Co., Ltd. (‘China-Africa TEDA’), as the main Chinese investment entity in the cooperation zone. China-Africa TEDA united with the ECJV to create a new company, TEDA, in order to drive the development of the SETC-Zone in Egypt. This time, the Chinese side held 80 % of the shares, and the Egyptian side (represented by the ECJV) 20 %.

(817) The Commission further established the existence of formal indicia of control by the State of those investors. Since both entities are fully State-owned, the Chinese and Egyptian governments formally have full control over them. In particular, in the absence of specific information indicating otherwise, the Commission considered that managers and supervisors in the entities at issue are assumed to be appointed by and accountable to the State as is the case for State-owned companies in those countries.

(818) The initial allocation of the land to the ECJV for a purchase price of less than 1 USD/m2 in accordance with the applicable legal framework thus certainly involved a financial contribution by the GOE (191). The subsequent transfer of land between the ECJV and TEDA was in fact a transaction between related companies, based on a transfer price involving the same actors on both sides of the transaction.

(819) Finally, concerning the sale of the land by TEDA to Jushi Egypt, the Commission noted that the majority shareholder of TEDA, owning 75 % of the shares, is the China Africa TEDA Investment Company, who also holds the majority of the seats on the Board of Directors of TEDA. The ultimate controller of the China Africa TEDA Investment Company is the CDB, which has already been designated as a public body in recital (257) above. Furthermore, according to the information provided by TEDA in the questionnaire reply, the business activity of the China Africa TEDA Investment Company consists of “investments in various projects within and outside the country (i.e. China)…Such projects are subject to approval in accordance with the law and may be subject to business activities after the approval of the relevant departments”. This wording refers to the approvals required from MOFCOM and the NDRC for any Chinese outward investment, and shows that the China Africa TEDA Investment Company carries out the GOC’s industrial policies by investing in industrial projects approved and encouraged by the GOC. TEDA itself describes its vision and mission as follows: “Vision: becoming an investment and operation player of an international industrial park supporting China, starting from Egypt, and facing Africa and even the whole world. Mission: pushing forward Chinese enterprises going outside, then pushing forward the internalization process of Chinese enterprises” (192) . TEDA also extensively refers in its publications to the attention, motivation and support from MOFCOM and Tianjin Municipal Government in the execution of its activities.

(820) In light of the above considerations, the Commission established that the state controlled entities that provided land to Jushi Egypt are public bodies within the meaning of Article 2(b) read in conjunction with Article 3(1)(a)(i) of the basic Regulation. Indeed, the actions taken by TEDA under the direct control of the GOC and in the context of the GOE-GOC close cooperation can be attributed to the GOE as explained before in Section 4.2.3.1 as part of the set of preferential support to the GFF producers in Egypt.

(821) In addition, even if the State-controlled entities were not to be considered as public bodies, on the basis of the evidence in recitals (815) to (820) as well as the evidence relating to the close cooperation between the GOC and the GOE, the Commission established that they would be considered entrusted or directed by the GOC and the GOE to carry out functions normally vested in the government within the meaning of Article 3(1)(a)(iv) of the basic Regulation. Thus, their conduct would be attributed to the GOE in any event.

(822) Following definitive disclosure, both the GOE and the exporting producers stated that the Commission cannot consider that conducts of Chinese public bodies or private bodies entrusted or directed by the GOC constitute subsidies under the basic Regulation, as these conducts are not attributable to the government of the country of origin or export.

(823) However, as already mentioned in recitals (816) to (820) above, the Commission considered that TEDA is not solely a Chinese public body, but a public body jointly controlled by the GOC and the GOE, and that actions under direct control of the GOC can be attributed to the GOE as well in view of the close cooperation of the GOC and the GOE. In this respect, the Commission noted that the shareholders of TEDA also include state-owned Egyptian public bodies, such as the the Egyptian Suez Canal Administration and the National Bank of Egypt, which are represented in the Board of Directors of TEDA. This shows that the GOE was in a position to acknowledge and adopt actions of TEDA. Finally, as mentioned in recital (821) above, even if TEDA were not to be considered a public body, the Commission considered that it would be entrusted or directed by the GOC and the GOE.

(824) In addition to the provision of the land in 2011, Jushi Egypt purchased an adjacent plot of land from an Egyptian development company in 2016. This Egyptian developer in turn also had bought this land from the same plot of land of land awarded to the Egypt China Joint Venture Company in 1998. The Commission analysed whether the Egyptian developer had been entrusted or directed by the GOE to grant land to Jushi Egypt at preferential terms within the meaning of Article 3(1)(a)(iv) of the basic Regulation.

(825) In this respect, the Commission noted that there was a clear involvement of the authorities of the SCZone in the sales transaction to Jushi Egypt. Indeed, the Egyptian developer needed to sell its plot because it did not have sufficient means to develop the land according to the industrial development clauses of its initial purchase contract with the GOE. The internal correspondence of Jushi Egypt shows that the sale of the plot of land was negotiated with and approved by the General Authority of the SCZone. The management of Jushi Egypt also assessed in this correspondence that the Egyptian developer would probably have gotten a better price for its land if it had been allowed to offer it freely on the market. This is particularly relevant given the fact that the plot owned by the Egyptian developer was adjacent to the plot already owned by Jushi Egypt, and thus would allow Jushi Egypt to expand its production activities within a single location. In this context, article 3 of the purchase contract states that if the contract “is not approved by the General Authority for Suez Canal Special Economic Zone within six months, Party B (Jushi Egypt) shall have the right to consider Party A’s (the developer) breach of this Contract and then this Contract shall be automatically cancelled”. Furthermore, according to article 7 “Party B shall submit a written application to the General Authority for Suez Canal Special Economic Zone for the establishment of an industrial project by Party B on behalf of Party A and obtain approvals…The General Authority for Suez Canal Special Economic Zone agrees to conduct land registration in the name of Party B, examine and approve the final land sales contract, and apply for land certificate in the notary office in the name of Party B.”

(826) In addition, Jushi Egypt offered to pay any penalties, which were due by the Egyptian developer to the General Authority of the SCZone. However, this penalty fee was reimbursed to Jushi Egypt by the General Authority afterwards.

(827) The GOE thus used a private body as a vehicle to carry out a financial contribution whereby the private body had no choice but to sell the land to Jushi Egypt and at the price and other conditions stipulated by the GOE. Therefore, the Commission concluded that, the Egyptian developer had been entrusted or directed by the State in the sense of Article 3(1)(a)(iv), first indent of the basic Regulation to pursue governmental policies also enshrined in the Cooperation Agreement and provide land at a preferential price to Jushi Egypt.

(828) The Commission requested the GOE to provide statistics on land prices applicable in the SCZone, as well as the tender procedures relating to the purchase transactions by the developers. However, the GOE could not provide any statistics or any tender procedures relating to the period or the transactions considered. The GOE was only able to provide information relating to the tender procedures for the award of usufruct to TEDA of another piece of land in 2016.

(830) On the first point, according to the information available to the Commission on the company’s website (193), Wadi Degla is a real estate developer with projects in various locations, including Ain Sokhna, not a producer of pipes and fittings.

(831) On the second point, the Commission does not dispute that Wadi Degla purchased the land in question from the Egyptian Chinese Company. However, the transaction under consideration is a different one, namely the sale from Wadi Degla to Jushi Egypt. Furthermore, if the history of all transactions should be taken into account, it must be added that the Egyptian Chinese Company purchased the land from the GOE in the first place.

(832) On the third and fourth points, the Commission acknowledged that Wadi Degla wanted to sell its land among other reasons because it had not developed it in line with its legal obligations. However, as stated in recital (825), the company could also have sold its land on the free market for a better price. The internal correspondence of Jushi management does not only explain why Wadi Degla wanted to sell its land, but also clearly indicates that the General Authority of the SCZone was involved in the negotiations for the sales transactions. More specifically, these e-mails state among others that Jushi Egypt “reached consensus” with Wadi Degla and the Chief legal counsel of the SCZone, that the contract “has already been approved by the Chairman of SCZone”, and that the SCZone would “submit a special application to the Office of the Prime Minister” for the reimbursement of the fine. Consequently, these claims were rejected.

(833) The Commission also found that Hengshi Egypt rents buildings from TEDA. As mentioned above, TEDA initially purchased the land for these buildings from a related company, which in turn bought it at a preferential price from the Egyptian authorities. The investigation revealed that even though TEDA is making profits on its rental contracts, the rental prices charged by TEDA are still less than half of the average price charged by competitors in the Suez Canal Economic Zone. Thus, as concluded in recitals (820) and (821), the Commission considered that the renting of buildings by TEDA for less than adequate remuneration to Hengshi Egypt is attributable to the GOE.

(834) Following definitive disclosure, Hengshi Egypt stated that the Commission countervailed buildings rented out by Nile Group Plastic Industry to Hengshi Egypt (SN4 and 6 of Annex 2.3 sheet ‘Hengshi Egypt’) without establishing that Nile Group Plastic Industry is a public body or a private body entrusted or directed by the government of the exporting country. In addition, the price requested by Nile Group Plastic Industry was consistently lower than TEDA’s prices.

(835) In fact, the transactions referred to by the company relate to buildings owned by TEDA and rented by TEDA to Nile Group Plastic Industry. These buildings were sublet for a short, temporary period of 2 months by Nile Group Plastic Industry to Hengshi Egypt according to a friendly agreement between the two companies. Indeed, Hengshi Egypt took over the rental from TEDA of the buildings initially occupied by Nile Group Plastic Industry, but moved into the premises slightly before the end of the rental contract between Nile Group Plastic Industry and TEDA. After this short transition period, Hengshi Egypt continued to rent the same space directly from TEDA. Furthermore, the rental price set between Nile Group Plastic Industry and Hengshi Egypt followed the price list set by TEDA for similar buildings in 2017. Since the transaction concerned a temporary arrangement, under which TEDA remained the owner of the buildings rented out, and since the rental prices remained within the rental price range set by TEDA, the Commission did not accept the company’s claim in this respect.

(836) The findings of this investigation show that prices for land provision and acquisition in the SCZone are determined by the Egyptian authorities, and that the pricing applicable in the SCZone is non-transparent. Land was awarded or rented at preferential terms by public bodies or by private bodies entrusted or directed by the State.

(837) The provision of land for less than adequate remuneration by the GOE should therefore be considered a subsidy within the meaning of Article 3(1)(a)(iii) and Article 3(2) of the basic Regulation in the form of provision of goods, which confers a benefit upon the recipient companies.

(838) The programme is specific within the meaning of Article 4(2)(a) of the basic Regulation, since the provision of land to companies in the SETC-Zone for less than adequate remuneration is reserved to certain companies in a particular geographical area.

(839) The amount of countervailable subsidy is calculated in terms of the benefit conferred on the recipients, which is found to exist during the investigation period. The benefit conferred on the recipients is calculated by taking into consideration the difference between the amount actually paid by the exporting producer for land and the amount that should normally have been paid on the basis of a market-based benchmark. The benefit for the purchase of land by Jushi Egypt was calculated as follows:

(840) As mentioned in recital (828) above, the GOE was not able to provide any information or statistics on purchase prices for land. The GOE they only provided information on transactions regarding land usufruct. Indeed, in 2016, a real estate valuation was performed by a committee of experts in order to establish a pricing map for the usufruct of land in the SCZone. Based on this study, the average yearly value of the land usufruct in the wider Suez Canal Economic Zone was determined. On the other hand, TEDA signed a land usufruct contract with the MDC in 2016 to further expand the existing SETC-Zone by 6 km2. The Commission multiplied the average yearly value of the land usufruct in the SCZone by the duration of the land usufruct contract signed with TEDA for the expansion zone of 6 km2. The Commission considered that this represented the total purchase value of undeveloped land for the developer.

(841) In order to take into account the cost for the developer of developing the land, TEDA’s investment cost per m2 was then calculated based on publicly available information. According to this information (194), an investment of 230 million USD was foreseen for the expansion area of 6 km2. A profit for the developer was also added.

(842) The resulting price per m2 of developed land was applied to the area bought by Jushi Egypt, and compared with the purchase price actually paid by Jushi Egypt. For the plot of land bought in 2011, the 2016 purchase price was corrected for inflation and GDP evolution. This evolution was calculated on the basis of inflation rates and evolution of GDP per capita at current prices in USD for Egypt as published by the IMF for 2016. For the plot of land bought in 2016, a mark-up was made to take into account the convenient geographical location of the plot for the buyer (next to Jushi Egypt’s existing facilities).

(843) In accordance with Article 7(3) of the basic Regulation on allocating subsidy amounts for assets, which are not depreciated, the subsidy amount has been allocated to the investigation period by applying to an interest-free loan a publicly available and appropriate lending interest rate in Egypt during the investigation period, as published by the World Bank (195).

(845) On the first point, the Commission could not use the price proposed by the CNBM Group, since it concerned a subjective internal assessment of the exporting producer in question, not corroborated by any supporting evidence based on market parameters, and could thus not be considered a reliable proxy for the value of the plot of land.

(846) On the second point, the Commission acknowledges that full ownership is different from usufructus, but since the GOE was not able to provide any information or statistics on purchase prices for land, the Commission considered that this was the best available information to determine the benchmark.

(847) On the third point, the Commission recalled that the valuation in question consisted of an independent study commissioned by the GOE, which provided the intrinsic value of the land, namely the price at which land should normally be sold. The fact that land parcels were not actually sold at this price by the GOE does not affect its intrinsic value.

(848) On the fourth point, the Commission deemed that the value of a usufruct is normally determined as a percentage of the market value of the underlying asset (i.e. the value of the full ownership) depending on the duration of the usufruct, i.e. the longer the usufruct, the closer the value of the usufruct will be to the value of full ownership. Since full ownership of land is per definition indefinite in time, by multiplying the yearly usufruct rate by 50 years, the resulting benchmark calculated by the Commission would therefore always be below the actual value of the full ownerhip. In addition, the Commission noted that in the concrete example of the usufruct contract signed by TEDA in 2016, the full amount of the usufruct had to paid as a lump sum at the start date of the usufruct right. As there were no yearly rentals as such in practice, the claim thus becomes void.

(849) On the fifth point, the Commission noted that Jushi Egypt indeed purchased land without buildings on it. However, this land already had access to all necessary utilities, roads, sewage treatment, public lighting, security, and other service facilities provided by TEDA. The price for a piece of land in a well-connected and developed zone cannot be compared with the price of a bare piece of desert. In addition, revenues of real estate developers, such as TEDA, normally stem from the sale of land and rental of the buildings and infrastructure provided within the zone. If the development cost was not factored into to the market price of the land, then there would be no incentive for developers to make any investment in the first place.

(850) On the last point, the Commission noted that it adjusted the 2016 price based on the evolution of the Egyptian GDP in real terms since 2011. This means that inflation caused by the devaluation of the EGP compared to the USD was already factored into the GDP adjustment. Further adjustments for the exchange rate changes would thus result in double counting.

(851) Based on the above arguments, the claims of the company were rejected. However, when reviewing the company’s claims, the Commission noted that it made a clerical error in the interest rate used for the benefit calculation. This was adjusted accordingly.

(852) The benefit for the rental of land by Hengshi Egypt was calculated by comparing the average rental price charged by competitors in the Suez Canal Economic Zone, based on a market study commissioned by TEDA in 2018, to the rental price actually paid by Hengshi Egypt in 2018.

(853) Following the definitive and the additional definitive disclosures, the GOE and Hengshi Egypt argued that the Commission failed to establish that the leasing of buildings to Hengshi Egypt conferred a benefit because (i) the Commission did not compare TEDA’s rental prices to Hengshi Egypt with that of a competitor in the Suez Canal Economic Zone, as it used the prices of IDG “6th of October”, which is not located in the Suez Canal Economic Zone, but in a free zone in West Cairo (ii) the Commission relied on an internal indicative study; and (iii) the Commission failed to establish that TEDA Egypt’s prices are more advantageous than the market prices in the same geographical area, because other companies set up in the vicinity, but outside TEDA’s zone, decided not to rent from TEDA even if prices were low.

(854) Concerning the first point, the Commission notes that the company erroneously thought that the Commission based the benchmark rental price on the price of IDG “6th of October”. As mentioned in recital (845) above, the Commission actually used the average rental price, i.e. 88 EGP/m2, charged by several competitors in the Suez Canal Economic Zone during the year 2019, based on a market study commissioned by TEDA. This price was then adjusted by the annual price increase of 10 % mentioned in the same study to bring it back to the investigation period. The resulting benchmark of 80 EGP/m2 happens to be equivalent to the price charged by IDG “6th of October”, but was not based on the price charged by IDG as such.

(855) Concerning the comparability of the competitors in the study in terms of location, the Commission noted that according to its website, IDG has several projects located in various areas, of which one is indeed located in the West Cairo area. However, it also has a project in Port Said in the Suez Canal Economic Zone. On the other hand, another competitor mentioned in the study, SIDC, is 100 % located in the Suez Canal Economic Zone (196). In the end, the Commission considered that all prices for all locations included in the study were comparable, as TEDA itself decided to compare its rental conditions with these companies/projects. In this sense, the Commission disagreed with the second point raised by Hengshi Egypt, namely that an internal study, used to decide on the yearly increase of rental prices, should not have been used to set a benchmark price. The Commission noted that the chapter under which the price comparison was made is called “market study”. TEDA thus considered that it was making a study of the market on which it operates. Furthermore, TEDA included its own rental data in the table, which was used by the Commission, thus showing that it was referencing itself compared to other developers. Finally, in the conclusions, TEDA mentioned that one of the positive points of raising its prices for the year 2019 was to “adapt with the market prices”. Based on this evidence, the Commission concluded that the internal study was a reliable proxy for comparable prices on the market from the perspective of TEDA, and that the claim should consequently be rejected.

(856) With regards to the third point raised by the GOE and Hengshi Egypt, the Commission deemed that the fact that other companies in the vicinity decided not to rent from TEDA is not a reliable indicator of the lack of competitiveness of its rental prices. Indeed, no further evidence was provided on the ownership of the land used by these companies (purchase, usufruct, rental) or on the underlying reasons for their decision to set up outside the TEDA Zone. For example, Saint Gobain is a company located on large premises with a manufacturing activity that would probably have required more space and specific features that could not be offered by TEDA’s standard rental factories. In this respect, the Commission also wishes to highlight that all of the manufacturing entities in the zone managed by TEDA are either fully or partially owned by Chinese legal or natural persons, and that the mission of TEDA is to push forward Chinese enterprises going outside, as mentioned in recital (819) above. To the knowledge of the Commission, none of the companies in the vicinity mentioned by Hengshi Egypt is Chinese-owned.

(857) Finally, Hengshi Egypt objected to the fact that the Commission had used the same rental price for factories and warehouses, as well as for contracts started before the investigation period. The Commission recalls that the market study made by TEDA only provided a price for “factories & warehouses” taken as a whole. As such, the Commission as well could not make a distinction between prices for factories and warehouses. Furthermore, the Commission noted that it used the prices actually charged by TEDA during 2018. The fact that TEDA had not adapted its rental prices in 2018 for certain contracts is in this sense irrelevant. These claims were thus rejected.

(858) As a result, the final subsidy amount found for the provision of land for less than adequate remuneration amounted to 1,93 %.

— The Income Tax Law as enacted by law 91 of 2005; and,

— Ministry of Investment Decree No. 16 of 2017 adding an addendum (A) entitled ‘The effects of changes in currencies exchange rates’ to Egyptian Accounting Standard No. 13.

(859) Jushi and Hengshi Egypt are subject to the normal Egyptian income tax of 22,5 %.

(860) In 2016, the Egyptian government decided to change the fixed exchange rate of the Egyptian pound (‘EGP’) into a floating exchange rate, based on a recommendation from the International Monetary Fund. As a result, the Egyptian pound lost around half of its value against other major currencies such as the USD and the EUR within a month. In order to address this sudden currency fluctuation, the GOE issued a special accounting standard, as well as a special tax rule for treating foreign exchange differences. As a result, companies were allowed to deduct foreign exchange differences due to the devaluation of the EGP from their taxable income more extensively.

(861) Although this legislation was generally applicable to all companies in Egypt and was meant to offset the negative effects of the devaluation of the Egyptian currency, it de facto created a substantial benefit for a limited number of companies in Egypt, i.e. companies that are export oriented and operate their business almost entirely in foreign currencies such as USD or EUR. This particular category of companies did not incur any actual loss as a consequence of the devaluation of the EGP, but could benefit from the special accounting standard issued by the GOE for tax purposes. As a consequence, companies operating their business in a foreign currency appear to be loss making for tax purposes even though their financial situation can show healthy profits. On the contrary, Egyptian companies operating their business in EGP have suffered actual losses that had a real impact on their business, which was addressed by the special tax rule issued by the GOE.

(862) Jushi and Hengshi Egypt benefitted from this measure, since the investigation showed that they operate their business almost exclusively in USD or EUR and have almost no transactions in Egyptian pounds. Indeed, they are almost exclusively export-oriented, import almost all of their equipment, and their loans as well as a major part of their material purchases are denominated in foreign currencies. Indeed, as a result, the losses registered by Jushi and Hengshi Egypt because of the devaluation of the EGP, in particular because of the significant foreign currency loans, are not actual and are only used for tax purposes to decrease the taxable income.

(863) In addition, the tax deduction was supposed to be a temporary measure, applicable only to transactions affected at the time of the devaluation. Nevertheless, in the investigation period, Jushi and Hengshi Egypt still deducted substantial amounts from its taxable income under realized and unrealized foreign exchange differences. As a result, they were less profitable or even loss-making according to their income tax statements, even though their financial statements showed a healthy and sustainable profit.

(864) In light of the above considerations, the Commission concluded that these tax benefits constitute revenue foregone by the GOE in the sense of Article 3(1)(a)(ii) of the basic Regulation and provided a benefit under Article 3(2) of the basic Regulation.

(865) In addition, they are de facto specific to the exporting producers Jushi and Hengshi Egypt, in accordance with Article 4(2)(c) of the basic Regulation, as they are used predominantly by a limited group of companies operating almost exclusively in foreign currencies.

(866) Following final disclosure, the GOE and the exporting producers noted that the 2016 special tax rule for treating foreign exchange losses as a tax loss cannot constitute a subsidy, as it does not confer a benefit and is not specific. First, as this tax rule was adopted to offset a loss caused by the government, no benefit is conferred. Second, as all entities similarly affected by the loss caused by the government could have recourse to this tax treatment, this scheme cannot be considered to be specific

(867) The Commission acknowledged in recital (861) above that this legislation was generally applicable to all companies in Egypt and was meant to offset the negative effects of the devaluation of the Egyptian currency. However, the Commission also stated that companies that are mainly export oriented and operate their business almost entirely in foreign currencies such as USD or EUR benefited disproportionately from this legislation. Indeed, these companies did not incur any significant actual losses as a consequence of the devaluation of the EGP, since the exchange rate losses suffered on their purchases/liabilities in USD could be offset by the exchange rate gains on their sales in USD. As a result, instead of offsetting a loss caused by the government, the legislation actually created a tax benefit, which specifically applied to this type of companies. The claim was therefore rejected.

(868) The benefit to the exporting producers was established on the basis of the information contained in the 2018 income tax declaration. Firstly, the amount deducted from the taxable income under the provision mentioned above was established. Secondly, the generally applicable tax rate of 22,5 % was applied to this deducted amount. Finally, this amount was expressed as a percentage of the total turnover of the exporting producers in the investigation period.

(869) The subsidy amount found for this tax programme is 1,43 %.

(870) This programme provides an exemption from VAT and import tariffs for imports of equipment used in the production process of the companies located in the SCZone.

(872) According to Article 22 of Law 83/2002, as amended by Law 27/2015, the SCZone is part of a separate customs area by virtue of a decree issued by the Minister of Finance. This separate customs area functions under the supervision of a supreme customs committee, established by the Chairman of the Authority of the zone.

(873) Furthermore, according to article 42 of Law 83/2002, imported equipment, tools, or apparatus shall be exempted from taxes and duties as long as they are allocated to produced goods or services for the licensed activity within the SCZone. On the other hand, as the SCZone is not an export only zone, all taxes and duties need to be paid for any products released into the domestic market outside of the SCZone.

(874) Finally, according to the relevant laws, companies located outside of the SCZone pay import VAT upfront and net it against the VAT on their domestic salesor, if applicable, apply for a refund when finished goods are exported. For companies located in the SCZone, VAT is withheld and is thus initially not charged in accordance with the letter of understanding on this point between the Ministry of Finance and the General Authority of the SCZone.

(875) The Commission found that VAT and import duties on imported equipment had indeed been withheld in the sampled companies since 2017 and throughout the investigation period. Before 2017, the companies actually paid their import duties and VAT/general sales tax (‘GST’) on imported equipment, since they had not yet adhered to the SCZone regime. However, through the 2017 opt-in of the company to the SCZone’s tax and administrative regime, the exporting producers benefited from the preferential tax treatments within the zone, including the VAT and tariff exemptions.

(876) As a general rule in Egypt, companies buying machines subject to the 5 % VAT rate should utilize the amounts as a credit against future payments (197). However, where the credit balance is retained for more than 6 consecutive tax periods (months), which is the case of companies heavily engaging in exports that cannot offset any input VAT as a credit against future payments, the registered person shall apply in writing, showing the amount of the credit balance. The Egyptian Tax Authority should check the correctness of the balance and refund within 45 days of the date of submitting the application.

(877) However, the investigation revealed that in practice, the GOE does not reimburse the VAT paid upfront so that the tax constitutes an actual cost for such companies. Indeed, an analysis of the GST/VAT credits of Jushi Egypt listed in the 2016 - 2018 Annual Reports showed that amounts due by the GOE to Jushi Egypt were still outstanding after several years (198) and Jushi Egypt confirmed that it did not expect to receive the reimbursements (199). In the case of Hengshi Egypt, the company applied for a refund of VAT/GST on equipment and materials. A refund was finally received for equipment purchased up to 3 years earlier, but the amounts reimbursed did not cover the amounts requested, and no evidence was provided on the reasons for reimbursing some items, but not others. This shows that reimbursement of VAT by the GOE is at best received with a significant delay, and in any case arbitrary and not transparent.

(878) It also needs to be considered that since equipment used in the manufacturing of products, including the product under investigation, will in all likelihood be used for its entire useful life within the Egyptian territory without being re-exported or sold domestically, there is no rationale for granting an exemption from customs duties and VAT on its purchase, other than benefiting the companies located in the SCZone. This therefore constitutes revenue foregone in the form of customs duties and VAT not payable without any justification, as this equipment is used for the local production of the product under investigation on which customs duty and VAT are normally due for producers located outside of the SCZone.

(879) Therefore, since the exporting producers became subject to the preferential treatment under the legal regime of the SCZone in 2017, they benefitted from a de facto VAT exemption on the import of machinery. This exemption constitutes revenue foregone because, as stated in the preceding paragraphs, even though VAT should eventually be refunded, in essence there is no evidence that the GOE reimbursed Jushi Egypt the VAT paid on machinery in the past. The evidence available indeed showed that Jushi Egypt was not obtaining those refunds when it was located outside the zone.

(880) Companies located in the SCZone, which do not have to pay VAT upfront, receive a de facto VAT exemption that saves them from incurring an actual cost in addition to saving the administrative burden of having to claim VAT reimbursements or offsetting VAT credits. The same conclusion applies even more clearly with respect to the exemption of paying import tariffs on imported equipment.

(881) Following final disclosure, the GOE and the exporting producers raised various issues. First, it is not because Jushi Egypt and Hengshi Egypt did not always receive full timely VAT reimbursements from the GOE in the past (when they were not within the Suez Canal Economic Zone) that there is now a revenue forgone with respect to the tax treatment that applies to them under the Suez Canal Economic Zone.

(882) Second, the Commission compared the challenged tax treatment with a hypothetical tax treatment extrapolated from Jushi Egypt and Hengshi Egypt’s situation before theyentered the Suez Canal Economic Zone, instead of comparing the challenged tax treatment with Egypt’s VAT rules on the importation of equipment and raw materials.

(883) Third, the Commission did not raise any question to, or discuss with, the GOE regarding the administration of VAT in Egypt during the verification visit.

(884) Fourth, the GOE recalled that Article 27 of the SCM Agreement calls for a special and differential treatment of developing country Members of the WTO. The fact that the GOE did not always have the resources to pay back the due amount of VAT credit in time should thus not be punished by the Commission.

(885) Fifth, the Commission itself recognized that Jushi Egypt and Hengshi Egypt eventually received from the GOE part of the VAT paid before joining the Suez Canal Economic Zone. Therefore, the full amount of VAT normally payable could not constitute the benefit. Furthermore, as Jushi Egypt’s VAT credit balance is now decreasing since Jushi Egypt receives more VAT receivable, the full amount of VAT normally payable would have been partially offset against this VAT receivable. Finally, in early 2020, the amounts due for VAT on imports by Jushi Egypt for the period 2017-2018 have been settled and offset against Jushi Egypt’s VAT credit by the GOE. As a result, there is no more benefit.

(886) Sixth, the VAT credit incurred by the exporting producers concerned VAT for machinery and not for raw materials. Due to their large initial investment for fixed assets, the GOE was not in a position to fully reimburse them the VAT incurred on machinery in a timely fashion. However, this was not the case for raw materials so that the VAT exemptions on raw materials did not constitute a subsidy.

(887) Finally, since the Commission correctly considered that no import duties should have been paid with regard to inputs for exported products, the Commission should have applied the same reasoning with regard to VAT on inputs for exported products. It follows that the Commission must, in order to calculate the benefit, allocate the amount of VAT due during the investigation period to the quantities of materials used for the production of goods sold on the domestic market only.

(888) In response to these claims, the Commission would like to clarify that its aim is not to punish the GOE for a lack of resources or to criticize the VAT system in Egypt as such. At the same time, the Commission noted that Article 27 of the SCM Agreement does not play a role in the claim by the GOE in this context. The most relevant provision applicable in countervailing duty proceedings is paragraph (10) of Article 27, which only deals with certain de minimis thresholds, whereas the other provisions of Article 27 mainly deal with export subsidies of developing countries. In this case, the GOE is relying on Article 27 to justify the lack of repayment of VAT credits to taxpayers, for which this provision is irrelevant.

(889) As for the claim concerning information requests on the VAT system, the Commission requested information on the working of the VAT system in Egypt from the start of the investigation, through the questionnaire as well as during the deficiency process. Furthermore, general questions on the amount of taxes collected from the exporting producers were raised during the verification visit. The Commission therefore deemed that it had received sufficient information during the investigation on the VAT framework as such.

(890) However, the Commission noted that the VAT treatment is different for companies in the SCZone. Indeed, companies in the SCZone do not have to pay VAT upfront (‘scenario 1’). In contrast, comparably situated tax payers, namely companies outside the SCZone, do have to pay VAT upfront (‘scenario 2’). Whether this VAT is eventually due or has to be refunded is at that point in time irrelevant. What is important is that no revenue will initially be collected by the GOE in scenario 1, whereas revenue will initially be collected to the GOE in all cases in scenario 2.

(891) According to the relevant normative framework in Egypt, at the settlement date, the final settlement amount would be due by the companies in scenario 1, whereas part of the revenue collected by the GOE would revert back to the companies in scenario 2 (in case VAT has to be refunded). If this settlement process is swift and reliable, then the benefit of not having to pay upfront under scenario 1 would be equal to the cash-flow advantage for all the time that it would have taken for the repayment. The Commission noted in this respect that, as already mentioned in recital (876) above, the statutory deadline for such a settlement is 6 months from the date a credit is created.

(892) However, the Commission found that in practice the settlement and the corresponding refund for companies operating under scenario 2 in Egypt occurred at best with very significant delays, and that the criteria for obtaining a refund were unclear. The Commission noted in this respect that the GOE did not dispute this fact as such. The cash-flow benefit for the companies within the SCZone thus stems from the fact that no VAT revenue is collected by the GOE at all from companies within the SCZone until the final settlement, the date of which is uncertain (scenario 1), in contrast to companies outside the SCZone, where revenue is collected immediately and refunded at a much later, uncertain date in time (scenario 2). As a result, companies within the SCZone benefit from a preferential VAT treatment compared to companies outside the SCZone. The amount not collected by the GOE with respect to companies within the SCZone amount to revenue foregone or not collected in the sense of Article 3(1)(a)(ii) of the basic Regulation.

(893) To further illustrate this, in addition to the relevant VAT framework in Egypt, the Commission looked at the situation of the exporting producers before and after adhering to the SCZone. Indeed, before adhering to the SCZone, their situation was comparable to companies outside the SCZone during the investigation period as per scenario 2. In this respect, the GOE did not dispute the fact that Jushi Egypt had accumulated a very significant VAT credit before it adhered to the SCZone, and that the GOE was not in a position to reimburse this credit. The VAT credit situation of Jushi Egypt, which was created before it adhered to the SCZone, thus shows that the situation described in the previous recital corresponds to reality for companies outside the SCZone during the IP.

(894) Concerning the fifth point raised by the GOE and the exporting producers, the final destination of the goods on which VAT is applied and the fact that Jushi Egypt could offset some VAT payables against its original VAT credit over time does not alter the findings of the Commission, as they do not affect the initial difference in treatment between companies in and outside of the zone, and in any event these offsets are not linked to a proactive refund by the GOE but rather to a VAT liability which happened to have been incurred by these companies.

(895) At the same time, the Commission also acknowledged that one of the two exporting producers did receive once a tax refund concerning some of its equipment purchases, albeit outside the IP and after a delay of several years. In addition, the Commission took note that the new VAT law in Egypt was only enacted shortly before the investigation period, and that the implementing legislation was not fully in place yet during the investigation period. In view of this transitional phase, the Commission understood the GOE’s argument that the settlement period for VAT reimbursements may be significantly delayed, given that the GOE is a developing country with a sub-optimal number of administration personnel in charge of the new system and with possible budgetary shortfalls that make it difficult to issue VAT reimbursements within the prescribed times. Therefore, taking into account these exceptional and hopefully temporary circumstances in Egypt, the Commission decided to take into account only the cash flow advantage to the exporting producers for the calculation of the benefit on VAT exemptions. The calculation methodology for calculating the benefit, as described in recital (899) below, was adapted accordingly.

(896) On the sixth point, the Commission noted that although Hengshi Egypt did receive at some point in time a refund of VAT paid upfront on machinery, it never received any refund for the VAT paid on materials, even though the company applied for it. The findings for VAT on machinery thus apply a fortiori to the VAT on materials. This claim was thus rejected.

(897) In light of the above, the Commission concluded that this programme provides a financial contribution in the form of revenue forgone by the GOE within the meaning of Article 3(1)(a)(ii) as eligible enterprises are relieved from payment of VAT and/or tariffs, which would be otherwise due. It also confers a benefit on the recipient companies in the sense of Article 3(2) of the basic Regulation, since they are placed in a better financial position than they would be absent the scheme. In fact, without the scheme they would have paid the VAT and import tariffs upon importation of the equipment.

(898) The programme is specific within the meaning of Article 4(2)(a) of the basic Regulation, as it is not generally applicable in Egypt, and applies only to the companies located in Economic Zones of a Special Nature, such as the SCZone. The legislation pursuant to which the granting authority operates limits its access to enterprises that are located within the SCZone.

(900) Following definitive disclosure, Jushi Egypt stated that the Commission applied a customs duty of 5 % on imports of bushing in 2018, although they were subject to a 2 % customs duty in 2018. The company also argued that the Commission should have allocated the VAT on imports of machinery based on depreciation during the investigation period in accordance with Article 7.3 of the basic Regulation. The Commission accepted these claims and adapted the calculation of the subsidy amount accordingly.

(901) The amount of subsidy established with regard to this type of subsidies during the investigation period for the exporting producers was 0,13 %.

(902) Pursuant to Law 83/2002, entities operating in a Special Economic Zone are allowed to import raw materials without paying any customs duties, sales taxes or any other taxes or duties, which would otherwise be due, to the extent that these imported products are re-exported as such or as processed into a downstream product which is then exported.

(904) As mentioned in recital (872) above, the SCZone is part of a separate customs area. According to article 42 of Law 83/2002, imported raw materials, supplies, spare parts, and any other material or components imported from overseas shall be exempted from taxes and duties as long as they are allocated to produced goods or services for the licensed activity within the SCZone. On the other hand, all taxes and duties need to be paid for any products released into the domestic market outside of the SCZone.

(905) During the investigation, the Commission found that, in line with the provisions of the above-mentioned article of Law 83/2002, both exporting producers had received waivers of VAT and import duties on imports of input materials used in the production of exported finished goods (and in particular, the product concerned).

(906) Concerning the waiver for import duties, such a setup corresponds to a duty drawback scheme as described in Annex I(i) of the basic Regulation. Pursuant to point (i) of Annex I, substitution drawback systems can constitute an export subsidy to the extent that they result in an excess drawback of the import charges levied initially on the imported inputs for which drawback is being claimed.

(907) In order to determine whether such excess remission existed, in accordance with Annex III, point II of the basic Regulation, the Commission requested additional information from the GOE on the duty drawback scheme in general, and more specifically on the existence and effective application of the accompanying monitoring and verification procedures.

(908) Based on the information initially received, it appeared that the GOE had put a legislative framework in place for monitoring the duty drawback system, including where applicable the refund of import duties paid. However, during the verification visits at the exporting producers, it was found that this framework was not effectively applied in practice. None of the exporting producers paid any import duties or VAT on any of their material purchases in the investigation period, be they used for domestic or for export sales of goods. Normally, a deposit needs to be made on a blocked account of the customs authorities, from which duties can be paid periodically. However, during the investigation period, no deposit was made, and no amounts were collected by the authorities.

(909) After the investigation period, Jushi Egypt made a small deposit to the Egyptian authorities, allegedly to cover excess remission for domestic sales. However, no evidence was provided that this payment was indeed made for excess remission of domestic sales, or related to domestic sales made during the investigation period. Yet, there was also evidence that Jushi Egypt received reimbursement of import duties paid in previous periods, before obtaining a waiver for import duties.

(910) After further exchanges with the GOE, the Commission received additional information, showing that in fact the monitoring and verification framework for the collection of customs duties in the SCZone was still being set up during the investigation period. For example, the Committee for the Adjustment of Import Duties Balances was only established in 2019 according to the Decree of the Head of Customs Authority No. 158, the setup of a customs inspection committee was still ongoing in 2019, and executive procedures had not been issued yet. Thus, the Commission concluded that there was no effective and proper duty drawback system in place.

(911) In addition, as mentioned in recital (876) above, VAT on imported goods is withheld instead of being paid upfront in the SCZone. Tax authorities only retain a right to reclaim VAT afterwards.

(912) The investigation also revealed that for certain inputs that Jushi Egypt used in the production process from Egyptian based suppliers, VAT was charged at the standard rate regardless of the fact that the company was based in the special zone where VAT was not normally due. These transactions did give rise to a VAT credit for Jushi Egypt. Conversely, sales of inputs between companies located within the special zone were not subject to domestic VAT regardless of whether the goods produced with such inputs would be exported or sold domestically.

(913) All these elements show that this special zone is not a classical export-processing zone, and is also different from other special free zones existing within Egypt, but it is a unique and hybrid kind of special zone with several specific features that distinguish it from other zones. The applicable laws and regulations do not appear to be applied in practice in the zone, so the Commission based its findings on its understanding of how operations in the zone work in practice.

(914) In addition and importantly, the absence of administrative authorities in charge of the administration, monitoring and enforcement of the tax system and any of the tax obligations relating to the special tax system applicable in the zone make it a unique area where the companies established therein are entirely free to follow or disregard the tax rules without any possible consequence whatsoever. Therefore, in view of the special circumstances of this zone, and on the basis of the information available, the Commission decided to consider the VAT exemptions on imported inputs as a de facto exemption to pay such VAT, regardless of whether the inputs are later on incorporated into finished products exported or sold domestically.

(915) The Commission thus concluded that the GOE's duty drawback monitoring system was not effectively applied and could not be qualified as such for all the reasons explained in the previous section and summarised at recital (913). In fact, as explained in recitals (908) to (914), the investigation showed that the GOE had not even set up an authority in charge of administering and enforcing any tax obligation for entities located in the zone, including customs duties and VAT due on imported materials.

(916) Furthermore, the Commission determined that the purported duty drawback system for inputs used in exported finished goods led to revenue forgone, which constitute a countervailable subsidy within the meaning of Article 3(1)(a)(ii) of the basic Regulation, as it results in an excess drawback of the import charges levied initially on the imported inputs for which drawback is being claimed. The GOE did not provide a further examination of the transactions at issue either.

(917) These excess remissions are also specific within the meaning of Article 4(2)(a) of the basic Regulation as they are not generally applicable in Egypt, and apply only to the companies located in the SCZone.

(918) Furthermore, the de facto VAT exemption on imported materials constitutes a financial contribution in the form of revenue forgone by the GOE within the meaning of Article 3(1)(a)(ii) of the basic Regulation as eligible enterprises are relieved from payment of VAT, which would be otherwise due. It also confers a benefit on the recipient companies in the sense of Article 3(2) of the basic Regulation. The programme is specific within the meaning of Article 4(2)(a) of the basic Regulation, since the legislation limits the VAT exemption only to enterprises that are located within the SCZone.

(919) Following definitive disclosure, the GOE and the exporting producers argued that Jushi Egypt had paid a deposit for customs duties at the start of 2019. They also provided additional evidence, according to which all customs duties for the years 2017 and 2018 had now been settled and paid. Furthermore, they claimed that even if the amounts due for customs duties had not been settled in 2020, the Commission could not request a perfect tax administration from a developing country, such as Egypt. In this regard, the GOE showed particular diligence in setting up the duty drawback system for Jushi Egypt as consumption reports were already established and monitored by the GOE within a few months after Jushi Egypt entered the Suez Canal Economic Zone. Three years later, the GOE recovered all customs duties and VAT due from Jushi Egypt and Hengshi Egypt. As a result, the GOE submitted that it had a proper duty drawback system in place so that no excess remission occurred.

(920) Furthermore, according to the GOE, pursuant to Article 377 of the Egyptian Civil Code and the ruling of the Monetary Court No. 915/43, the GOE has 5 years to recover import duties. As a result, there could be no revenue forgone from the GOE as long as this period had not expired, as the GOE was still entitled to and did recover the customs duties due on time.

(921) Finally, Jushi Egypt argued that sales to Hengshi Egypt are treated under Egyptian law in the same way as export sales in respect of import duties on raw materials, because Hengshi Egypt is located in the Suez Canal Economic Zone. Furthermore, Hengshi Egypt had no domestic sales at all as it exported all of its production. As a result, had Jushi Egypt not been exempted for import duties on raw materials, it would still not have incurred import duties on raw materials for domestic sales to Hengshi Egypt. Jushi Egypt reiterated this argument following the additional definitive disclosure.