Commission Implementing Regulation (EU) 2020/870 of 24 June 2020 imposing a definitive countervailing duty and definitively collecting the provisional countervailing duty imposed on imports of continuous filament glass fibre products originating in Egypt, and levying the definitive countervailing duty on the registered imports of continuous filament glass fibre products originating in Egypt

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Regulation (EU) 2016/1037 of the European Parliament and of the Council of 8 June 2016 on protection against subsidised imports from countries not members of the European Union (1) (‘the basic Regulation’), and in particular Article 15 and Article 16(4) thereof,

Whereas:

(1) On 7 June 2019, the European Commission (‘the Commission’) initiated an anti-subsidy investigation with regard to imports into the European Union (‘the Union’) of continuous filament glass fibre products (‘GFR’) originating in Egypt on the basis of Article 10 of the basic Regulation.

(2) The Commission published a Notice of initiation in the Official Journal of the European Union (2) (‘the Notice of initiation’).

(3) The Commission initiated the investigation following a complaint lodged on 24 April 2019 by the European Glass Fibre Producers Association (‘the complainant’ or ‘APFE’) on behalf of producers representing 71 % of total Union production.

(4) During the investigation, the Commission found additional evidence of relevant subsidies, which were not fully included in the Notice of initiation. Therefore, the Commission decided in accordance with Article 10(7) of the basic Regulation to include these subsidies within the scope of the current investigation and to amend accordingly the Notice of initiation.

(5) On 12 February 2020, the Commission published a Notice amending the Notice of initiation in the Official Journal of the European Union (3). A note to the file was added in this respect and the Government of Egypt (‘GOE’) was invited for consultations on those additional subsidies.

(6) On 7 March 2020, the Commission imposed provisional countervailing duties on imports into the Union of GFR originating in Egypt by Commission Implementing Regulation (EU) 2020/379 (4) (‘the provisional Regulation’).

(7) As stated in recital 27 of the provisional Regulation, the investigation of subsidisation and injury covered the period from 1 April 2018 to 31 March 2019 (‘the investigation period’ or ‘IP’) and the examination of trends relevant for the assessment of injury covered the period from 1 January 2016 to the end of the investigation period (‘the period considered’).

(8) On the basis of the publication of a Notice amending the Notice of initiation in the Official Journal of the European Union (see recital 4 above), the Commission sent a request for information to the GOE, to the exporting producer and the Government of the People’s Republic of China (‘GOC’).

(9) The request for information to the GOE was sent in order to fully investigate the cooperation between the GOE and the GOC to benefit the exporting producer. In view of the GOC’s involvement and close cooperation with the GOE as regards the subsidisation granted to GFR originating in Egypt (‘the product under investigation’), the Commission identified the GOC as an interested party to the investigation and forwarded the request for information sent to the GOE to the GOC with an invitation to cooperate with the investigation. However, the GOC never replied to the invite of the Commission and did not register as an interested party to the investigation.

(10) Following the publication of the Notice amending the Notice of initiation and the request for information received by the GOE, the GOE noted first that it could not be requested to provide information or coordinate the response of entities, either governmental or private, which are outside of its jurisdiction.

(11) Secondly, the GOE noted that the information requested by the Commission were located outside of its jurisdiction. According to the GOE, the Commission placed an unreasonable burden on it by requesting to provide information which is not necessary to the investigation.

(12) Thirdly, the GOE claimed that the Commission was in fact including the People’s Republic of China (‘PRC’ or ‘China’) in the scope of this investigation without inviting it to consultation prior to initiation.

(13) Fourthly, the GOE noted that the basic anti-subsidy Regulation provides that a subsidy exists only if ‘there is a financial contribution by a government in the country of origin or export’. The GOE noted that the Notice amending the Notice of initiation concerned subsidies allegedly granted by the Government of the PRC (‘GOC’). Consequently the Commission via the Notice amending the Notice of initiation violated the basic anti-subsidy Regulation by including in the investigation financial contributions that cannot be considered as subsidies under EU law.

(14) Finally, the GOE argued that the request for information was in reality the initial questionnaire to be sent to the GOC. Therefore, by granting 15 days to reply instead of 30, the Commission had violated Article 12.1.1 of the Agreement on Subsidies and Countervailing Measures (‘SCM Agreement’) and Article 11(2) of the basic Regulation.

(15) The Commission disagreed with the views of the GOE. Concerning the lack of jurisdiction of the GOE and the de facto inclusion of the GOC in the investigation as the country of export, the Commission considered that, the subsidies investigated by the Commission are granted in the framework of a cooperation between the GOE and the GOC. Therefore, the subsidies may have been attributable to Egypt by virtue of the acknowledgment and adoption of the GOC’s measures by Egypt as its own. The findings on this point are developed at length in Section 3.2.2 below.

(16) Moreover, the Commission noted that it asked the GOE to provide the information relating to the general legal framework of the banking sector in China as well as concerning financial institutions in China because the GOE is the government concerned by this investigation and these subsidies may have been attributed to them as explained in Section 3.2.2 below. The information so requested was thus necessary for the Commission to establish the existence of subsidisation.

(17) In addition, the Commission also gave a direct opportunity to the GOC to register as interested party and to provide directly the requested information on these issues. Indeed, as explained in recitals 96 and 97 below, the GOE together with the GOC have established a management mechanism with three administrative levels provided in Article 8 of the 2016 Agreement on Egypt Suez Economic and Trade Cooperation Zone between the Ministry of Commerce of the PRC and the General Authority for the Suez Canal Economic Zone. This mechanism is set up, inter alia, to deal with the issues which may affect the operation of the Cooperation Zone (thereby including the imposition of countervailing duties on exports from that zone).

(18) Therefore, even if some of the information requested to the GOE was not in its possession, the Commission considered that the GOE had all the necessary means to obtain the requested information from the GOC.

(19) Furthermore, the Commission disagreed with the GOE concerning the qualification of the request for information. The sending of such a request occurred months after sending the initial questionnaire intended for the GOE. The request for information responded to the need of the Commission to gather additional data which had become necessary following the additional evidence it had gathered in the course of the investigation. In this context, the Commission noted that the GOE had already received the initial questionnaire and was given 37 days to reply.

(20) Furthermore, the Commission noted that the actual content of the request of information was limited to other relevant subsidies found in the course of the investigation, and the level and amount of information request is in no way comparable to that of an initial questionnaire. The Commission finally noted that the total time granted to the GOE, following an extension request, to reply to this additional request for information amounted to 22 days despite the very late stage of the proceeding.

(21) Thus, when comparing the amount of time allotted to the GOE to reply to the most extensive request for information in the initial questionnaire with the period granted for the additional request for information, the Commission considered that the GOE had been granted sufficient time.

(22) In light of the above considerations, these claims by the GOE were rejected.

(23) Following the disclosure of the essential facts and considerations on the basis of which provisional countervailing duties were imposed (‘provisional disclosure’), the GOE and the Egyptian exporting producer made written submissions making their views known on the provisional findings.

(24) The GOE and the Egyptian exporting producer were granted an opportunity to be heard.

(25) The GOE also had a hearing with the Hearing Officer in trade proceedings.

(26) The Commission considered the comments submitted by interested parties and addressed them as detailed in this Regulation.

(27) Due to the threat of the COVID-19 transmission and the consequent measures taken to deal with the outbreak (5), the Commission was unable to fully verify the data submitted by the exporting producer and the GOE. Given that this situation occurred at a very late stage of the proceeding and that another solution (such as organising a session to cross-check remotely the information submitted with other verifiable sources in accordance with the COVID-19 Notice issued by the Commission) was no longer possible, the Commission exceptionally used the information submitted by these parties for the subsidy calculation, which was verified on the basis of all available information.

(28) The Commission informed all interested parties of the essential facts and considerations on the basis of which it intended to impose a definitive countervailing duty on imports into the Union of GFR originating in Egypt (‘final disclosure’).

(29) Following final disclosure, the GOE, Jushi Group, the complainants and a group of European users and distributors of GFR made written submissions making their views known on the definitive findings.

(30) The parties who so requested were granted an opportunity to be heard. After final disclosure, the Commission services had hearings with the GOE and Jushi Group.

(31) The Commission considered the comments submitted by interested parties following final disclosure and addressed them in this Regulation.

(32) In the absence of comments concerning the investigation period and period considered, recital 27 of the provisional Regulation was confirmed.

(33) In the absence of any comments with respect to the product scope, the Commission confirmed the conclusions set out in recitals 44 and 48 of the provisional Regulation.

(35) The alleged subsidisation in Egypt concerns a company in the China-Egypt Suez Economic and Trade Cooperation Zone (‘SETC-Zone’). The zone covers an area of 7,34 km2, which is divided into a starting area of 1,34 km2 and an expansion area of 6 km2.

(36) This special economic zone was set up together by China and Egypt, and its history goes back to the 1990s. At that time, the then Egyptian President visited China’s special economic zones, and expressed the wish to draw on China’s experience concerning such zones, in order to establish a similar setup in Egypt. As a result, in 1997, the Prime Ministers of China and Egypt signed a memorandum of understanding, in which the two countries ‘agree to cooperate in developing the free economic zone in the north of the Gulf of Suez, by sharing the Chinese experience in establishing special economic zones, participating in modernizing the studies relating to the zone and encouraging relevant business sector in China to provide contributions for the projects to be established within the zone’ (6).

(37) In the wake of this agreement, China appointed Tianjin Teda Investment Holding Co., Ltd. (‘Tianjin TEDA’), an SOE under the Tianjin Municipal Government, to undertake the task on the Chinese side. Tianjin TEDA then joined the Egyptian Suez Canal Administration, the National Bank of Egypt, and four more Egyptian State-owned enterprises to create the Egypt China Joint Venture Company (‘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 %. In 1998, the corresponding land in the Northwest Gulf of Suez Zone was transferred from the Suez Governorate to the ECJV. However, after that, the project did not advance much for several years (7).

(38) In 2002, the wider area of 20 km2, in which the SETC-Zone was located, the Northwest Gulf of Suez Economic Zone, was officially classified as a special economic zone (‘SEZone’) by the GOE (8). As such, the provisions of the Egyptian Law No 83/2002 on Economic Zones of a Special Nature (‘Law 83/2002’) were now also applicable to the SETC-Zone.

(39) A new impetus started in 2006, when China decided to further encourage the ‘Go Global Policy’ for Chinese companies to invest abroad. In this context, the Ministry of Commerce of China (‘MOFCOM’) proposed the establishment of so-called ‘overseas trade and cooperation zones’, and the SETC-Zone became one of the first of 18 officially approved zones (9). At the Beijing Summit of the Forum on China-Africa Cooperation in 2006, Chinese President Hu Jintao announced that ‘three to five overseas economic and trade cooperation zones will be established in African countries in the next three years.’ (10)

(40) In 2007, MOFCOM organized a tender to appoint developers for the second batch of officially approved overseas trade and economic cooperation zones. Tianjin TEDA won the bid for the SETC-Zone. In October 2008, Tianjin TEDA established a joint venture with the China-Africa Development Fund 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, called Egypt TEDA Investment Co. (‘Egypt 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 %. After the company was formally established in 2008, work in the zone advanced rapidly. On 7 November 2009, the then Prime Ministers of the two countries inaugurated the starting area, and listed the SETC-Zone as an important cooperation project of economy and trade between the two countries (11). By the end of 2011, all the infrastructure in the starting area had been completed (12).

(41) In 2012, after the civil unrest in Egypt, President Morsi paid a State visit to China, during which he referred to the Zone as a key project of the bilateral cooperation between the two countries, and hoped that more and more Chinese enterprises would invest in Egypt through the zone and through subsequent projects, and thus participate in Egypt’s Recovery program (13).

(42) In 2013, Egypt TEDA and the Egyptian authorities signed a contract for the land of the 6 km2 expansion area. As of 2013, the overseas trade and economic cooperation zones, such as the SETC-Zone, have also been further developed under the umbrella of the ‘Belt and Road Initiative’. Overseas parks have thus become an important carrier for the ‘going out’ investments of Chinese companies. As a result, especially since 2013, the SETC-zone has been included in almost all important cooperation texts between the two governments (14).

(43) In 2014, Egypt launched the ‘Suez Canal Corridor Development Plan’. In the context of this Plan, the SE Zone was officially incorporated into the wider Suez Canal Economic Zone (‘SCZone’) in 2015, comprising the whole area around the Suez Canal of 461 km2. The entire area is now considered as an ‘economic area of special nature’ in accordance with Law 83/2002 and amendments thereof (15).

(44) In December 2015, President Sisi paid a visit to China, where he declared Egypt’s acceptance of President Xi Jinping’s offer to cooperate in the ‘One Belt, One Road’ initiative and to further develop projects in Egypt. On 21 January 2016, the two Presidents officially inaugurated the SETC-zone expansion project for the expansion area of 6 km2. During the State visit of Xi Jinping in Egypt, the two governments also signed the ‘Agreement between the Ministry of Commerce of the People’s Republic of China and the General Authority for the Suez Canal Economic Zone of the Arab Republic of Egypt on the Suez Economic and Trade Cooperation Zone’ of 21 January 2016 (‘the Cooperation Agreement’). The Cooperation Agreement further clarified the significance and legal status of the SETC-Zone (16).

(45) The main purpose of the Cooperation Agreement was to provide a clear written framework for this cooperation and to formalize it within the framework of the ‘One Belt, One Road’ initiative, including the GOC support to companies abroad. However, no further details were provided on the preparatory works of the Cooperation Agreement despite explicit requests from the Commission.

(46) According to the Cooperation Agreement, the governments jointly develop the SETC-Zone. They do so in line with their respective national strategies (Belt & Road Initiative for China on the one hand, and the Suez Canal Corridor Development Plan for Egypt on the other hand). For that purpose, the GOE provides the land, the labour and certain tax breaks, whereas the Chinese companies operating in the zone run the production facility with their assets and managers. Compensating for a lack of Egyptian funds, the GOC also supports this project by making the necessary financial means available to Egypt TEDA and to the Chinese firms operating in the SETC-Zone.

(47) The GFR producer operating in the SETC-Zone, Jushi Egypt, is incorporated under Egyptian law and was established by Jushi Group, a Chinese parent company. The parent company of the GFR producer is owned by the State-owned assets Supervision and Administration Commission (‘SASAC’). It has received approval from relevant Chinese government authorities (17) for setting up a subsidiary in Egypt. The daughter company is financed with funds coming from China, it is using input materials and equipment imported from China, it is directed by Chinese managers and it is using Chinese know-how. It produces GFR in Egypt, which is exported to the EU from the SETC-Zone.

(48) In order to ensure the smooth implementation of the above-mentioned Cooperation Agreement, the two governments also established a three-level consultation mechanism. In this context, the General Authority for the Suez Canal Economic Zone of the Arab Republic of Egypt and the Tianjin Municipal Commission for Commerce of the People’s Republic of China signed a ‘Cooperation Agreement on Establishment of the Administration Commission for the China-Egypt Suez Economic and Trade Cooperation Zone’ for the first-level inter-governmental consultations. At the second level, the Suez Economic and Trade Cooperation Management Committee was set up to ensure discussions at technical level between China Tianjin Municipality Government’s competent administration departments and the Egypt Suez Canal Economic Zone Authority’s relevant competent departments. Regular meetings of these Commissions have taken place since 2017. At the third level, Egypt TEDA and the relevant Egyptian counterparts report the problems and difficulties arising to the governmental levels above.