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

(190) As a consequence, on 18 March 2020 the Commission sent a letter to Jushi Egypt identifying the shortcomings, and informing Jushi Egypt about the possible application of the provisions of Article 28 of the basic Regulation. Among others, the Jushi Group did not provide the information requested concerning the rationale for the changes in capital structure and information about how the capital increases were financed for Jushi Egypt, the Jushi Group, China Jushi Co. Ltd. and CNBM.

(191) In response to this letter, Jushi Egypt provided a submission addressing some of the shortcomings, in particular how the changes in the capital structure were reflected in the financial statements of the various group companies. However, the information provided in respect of the involvement of government and non-government entities (e.g. state-owned commercial banks) were mere statements without supporting evidence, and the information concerning the underlying reasons for the changes and the financial details was very limited.

(192) However, as stated above, the significant state ownership, in CNBM is significant. In addition, according to publically available information on the CNBM website (71), the whole management team of CNBM holds party functions such as Secretary of the Party Committee, Deputy Secretary of the Party Committee or Party Committee Standing Member. Furthermore, Mr Cao Jianglin, Executive Director of CNMB and Party Committee Standing Member also serves as Chairman of China Jushi since 2002 (72). Therefore, the statement that all decisions concerning the capital increases of the companies concerned were made independently by the relevant board of directors without any involvement of government or other non-governmental entities in the process is not credible given the state ownership and party involvement of the management.

(193) In the absence of such information, the Commission considered that it had not received crucial information relevant to this aspect of the investigation.

(194) The Commission thus concluded that it had to rely partially on facts available for its findings concerning the Jushi Group, China Jushi Co. Ltd. and CNBM.

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

(196) In 2012 there was a significant shareholders’ contribution of 42.6 million USD for the funding 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 investigation period the capital of Jushi Egypt was approximately four times larger than in 2012.

(197) 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.

(198) 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 2011 to the end of 2018, from 190 million CNY (30,2 million USD) in 2011 to 944 million CNY (140,9 million USD) in 2018.

(199) 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 investigation period.

(200) 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.

(201) 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 3.3.3.2, Jushi Egypt did not fully cooperate with the investigation and it did not provide the necessary information. In the absence of this information 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. 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.

(202) 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’ (73).

(203) More specifically, within the context of GFR, CNBM established Jushi Egypt in 2012, a producer of GFR 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.

(204) Furthermore, Jushi Group 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 CNY (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 (74). In India, the plan is to put up a manufacturing facility with a capacity of 100 000 tonnes by mid-2020.

(205) 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’.

(206) Furthermore, GFR is also an encouraged industry under the Made in China 2025 initiative (75), and thereby eligible to benefit from considerable State funding. A number of funds had been created to support the Made in China 2025 initiative and hence indirectly the GFR industry such as the National Integrated Circuit fund, the Advanced Manufacturing Fund and the Emerging Industries Investment Fund (76).

(207) GFR is often referred to under the umbrella of ‘new materials’. The Made in China 2025 Roadmap (77) 10 strategic sectors, which are the key industries for the GOC. It describes in Sector 9 ‘new materials’ and its subcategories, including advanced fundamental materials (point 9.1), key strategic materials (point 9.2) including high performance fibres and composite materials, new energy materials (78). New materials thus benefit from the advantages stemming from the support mechanisms listed in the document, including, among others, Financial Support Policies, Fiscal & Taxation Policy, State Council Oversight and Support (79).

(209) 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 ou t”’. Along the same line, Song Zhiping further stated that ‘International capacity cooperation must be combined with the “Belt and Roa d” 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 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 ou t”’.

(210) 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 Roa d” 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 ou t” of the country …. In recent years, China Building Materials and China Materials Group have accelerated the pace of “going ou t”, 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’ (80).

(211) The investigation revealed that China National Building Material (‘CNBM’) is a Chinese state-owned enterprise owned directly and indirectly as to 41,27 % by CNBM Parent, which is in turn wholly owned by SASAC. CNBM owns 26,97 % stake in China Jushi Co., Ltd., which is the sole shareholder of Jushi (81).

(212) Therefore, 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 (82). 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.

(213) 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 lack of complete cooperation of Jushi Egypt 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 (83) and the SRF (84) 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 and directed by the government to carry out governmental policies and functions in accordance with Article 3(1)(iv) of the basic Regulation (85).

(214) 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.

(215) 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 91 above and can thus be allocated to the products exported from Egypt.

(216) 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 Jushi Egypt, the Commission had to base its findings on the provisions of facts available according to Article 28 of the basic Regulation.

(217) The body of evidence in the subsection 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 GFR 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 of 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 (86). It is thus reasonable to assume that CNBM, as a major central SOE, would follow the same pattern and would benefit from similar subsidies.

(218) 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 explained above in recitals 171 to 174, 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.

(219) 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.

(220) As explained in Section 3.3.3.2 above, Jushi Egypt did not provide a full reply to the request of information. 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.

(221) The Commission therefore resorted to facts available in application of Article 28 of the basic Regulation to 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.

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

(223) 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).

(224) 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.

(225) 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 2011 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 81,8 million USD) was provided by CNBM through the financial contribution received by SASAC or the SRF.

(226) 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.

(227) Due to the absence of cooperation from Jushi Egypt in replying to the request for information, 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 (87). 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 12 years.

(228) All subsidies found were established for the total turnover of the company. The subsidy amount was then allocated to the turnover of the product concerned sold to the European Union.

(229) This resulted in a subsidisation amount of 2,01 %.

(230) Following final disclosure the exporting producer 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, the exporting producer 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.

(231) 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, 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, 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 failed to provide information on the origin of the funds of the capital reserve accounts. The Commission therefore concluded that undistributed profit or retained earnings were not the attributable source of the funds used for the equity increases in Jushi Egypt since 2012.

(232) Secondly, concerning the moment when the funds were transferred to Jushi Group and Jushi Egypt, the Commission noted that the exporting producer failed to provide any further evidence to substantiate or explain CNBM equity increases scheduling. Similarly, the Commission noted that in addition to the time lags on equity transfers from company to company, equity increases also responded to the different capital requirements in Jushi Egypt linked to the investments over the period analysed.

(233) Thirdly, concerning whether the origin of the funds supporting the capital increase can be attributable to a public body, the Commission noted in recital 215 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.

(234) 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 186 above to 231 above explained in detail the findings and the methodology used to calculate the subsidy amount. Similarly, in the specific disclosure, the exporting producer 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.

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

(236) The exporting producer 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.

(237) 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 3.3.3.2, neither CNBM nor the Jushi Group cooperated fully with the investigation and the Commission had to rely on facts available for its findings. Moreover, recitals 218 to 221 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.

(238) The exporting producer further argued that it cannot be considered that all funds provided by CNBM originated from public bodies since CNBM is a publicly listed company with several other means of raising funds. 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 in the investigation on Glass Fibre Fabrics Regulation (88), multiplied by the amount of capital support. The exporting producer 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.

(239) First, the Commission noted that the company has not provided any additional evidence to substantiate the claim. Similarly, the Commission recalled that neither CNBM nor the Jushi Group cooperated fully with the investigation and the Commission had to rely on facts available for its findings. In this respect, the Commission recalled that the subsidy rate found for CNBM in Section 3.4 and 3.8 of the glass fibre fabrics Regulation 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 in this investigation. Therefore, if anything the Commission erred on the side of caution.

(240) Finally, the Commission noted that it did not analyse whether the funds transferred from CNMB were done in exchange of shares. In fact, no evidence was provided that indeed CNMB received shares in exchange. 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.

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

(242) 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 producer pays the usual rate for industrial users within a certain voltage range.

(243) 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 producer falls within the residual category of industrial users, which does not benefit from the lowest rate. Hence, there is no specificity, and no benefit.

(245) The Commission sent to the GOE a request for information intended for Tianjin TEDA and asked information necessary to assess the involvement of the GOE or GOC in the control of the company. The Commission considered the request for information necessary in light of the role that the company has had in the in developing and construct the SETC-Zone, as explained in recital 34 above.

(246) In replying to the request for information, TEDA only provided data concerning Egypt TEDA Investment Co., Ltd. which had been already submitted as a reply to the initial questionnaire.

(247) However, the Commission ascertained that very limited information concerning Tianjin TEDA was provided.

(248) In the absence of such information, the Commission considered that it had not received crucial information relevant to this aspect of the investigation.

(249) Therefore, the Commission informed the GOE that it might have to resort to the use of facts available under Article 28 of the basic Regulation when examining the existence and the extent of the alleged subsidisation for companies located in the SETC-Zone. The GOE objected and stressed that it had fully cooperated with the Commission and that it could not provide information about a company outside of its jurisdiction.

(250) However, the Commission considered that the information provided about Tianjin TEDA was not sufficient and that the GOE, as explained in recital 16 above, was in a position to provide the information.

(251) In light of the above considerations, the Commission applied Article 28 of the basic Regulation and relied on facts available with respect to this point.

(252) 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.

(253) 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 Egypt 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.

(254) 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. In view of the lack of cooperation of the GOE, the Commission had to rely on facts available. 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.

(255) First, the Commission found that ECJV and TEDA were related entities, and that they were both fully State-owned. Indeed, as mentioned in recital 33 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 % (89). Furthermore, as mentioned in recital 36 above, in October 2008, Tianjin TEDA established a joint venture with the China-Africa Development Fund, a subsidiary of the China Development Bank, 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 %.

(256) 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.

(257) 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 (90). 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.

(258) Finally, concerning the sale of the land by Egypt TEDA to Jushi Egypt, the Commission noted that the majority shareholder of Egypt 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 China Development Bank, which has already been designated as a public body. Furthermore, 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’ (91). 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.

(259) 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 3.2.3 as part of the set of preferential support to the GFR producer in Egypt.

(260) In addition, even if the State-controlled entities were not to be considered as public bodies, on the basis of the evidence in recitals 219 to 224 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 and 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.

(261) Following final 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.

(262) However, as already mentioned in recitals 258 to 262 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 263 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.

(263) 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.

(264) 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. 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.’

(265) 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.

(266) 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.

(268) On the first point, according to the information available to the Commission on the company’s website (92), Wadi Degla is a real estate developer with projects in various locations, including Ain Sokhna, not a producer of pipes and fittings.

(269) On the second point, 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, the company could also have sold its land on the free market for a better price. The investigation revealed that 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 as the contract was approved by the Chairman of the SCZone.

(270) 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 at preferential terms by public bodies or by private bodies entrusted or directed by the State.

(271) 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.

(272) 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.

(273) 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.

(274) The GOE was not able to provide any information or statistics on purchase prices for land. The GOE 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.

(275) 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 (93), an investment of 230 million USD was foreseen for the expansion area of 6 km2. A profit for the developer was also added.

(276) 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 markup was made to take into account the convenient geographical location of the plot for the buyer (next to Jushi Egypt’s existing facilities).

(277) 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 an available appropriate Egypt’s lending interest rate during the investigation period, as published by the World Bank (94), on an interest-free loan.

(279) On the first point, the Commission acknowledged that full ownership is different from usufruct, 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.

(280) On the second 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.

(281) On the third 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 ownership. 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.

(282) On the fourth 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.

(283) 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.

(284) Based on the above arguments, the claims of the company were rejected.

(285) All subsidies found were established for the total turnover of the company. The subsidy amount was then allocated to the turnover of the product concerned sold to the European Union.

(286) The subsidy amount found for the provision of land for less than adequate remuneration amounted to 2,02 %.

(287) Following provisional and final disclosures, the GOE and the exporting producer 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 taken 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.

(288) The Commission acknowledged in its provisional findings 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. Therefore, the Commission rejected the claim.

(289) Accordingly, the recitals 93 to 102 of the provisional Regulation are hereby confirmed.

(290) Following provisional disclosure, the GOE and the exporting producer raised various issues. First, it is not because Jushi 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.

(291) Second, the Commission compared the challenged tax treatment with a hypothetical tax treatment extrapolated from Jushi Egypt’s situation before it entered 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.

(292) 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.

(293) 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.

(294) Fifth, the GOE recalled that the subsidy benchmark identified by the Commission is the situation of companies before joining the Suez Canal Economic Zone. Companies not under the Suez Canal Economic Zone eventually receive from the GOE part of the VAT paid, although not in a timely fashion and not in full. Therefore, the full amount of VAT normally payable cannot constitute the benefit as Jushi Egypt should receive part of this VAT payable back from the GOE. 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.

(295) 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.

(296) 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.

(297) 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. 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.

(298) 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.

(299) 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 the statutory deadline for such a settlement is 6 months from the date a credit is created.

(300) 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.

(301) 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.

(302) 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 the company.

(303) 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 producer for the calculation of the benefit on VAT exemptions. The calculation methodology for calculating the benefit, as described in recital 258, was adapted accordingly.

(304) Following final disclosure, the complainant claimed that the Commission’s findings are that companies outside the SCZone received VAT and tax refunds ‘at best with very significant delays’ and under unclear criteria, which the GOE did not dispute. It their understanding, any refund request to the Egyptian authorities is assessed and decided upon by a governmental committee specifically established to review refund requests. Under such conditions, and as the GOE stresses that as a developing country its systems are far from perfect, it is reasonable to conclude that the refund process is highly bureaucratic and arbitrary, and that only companies which have the necessary political connections receive a refund within a reasonable time or at all. According to the complainant, there is no evidence on the open file that ‘normal’ companies, i.e. without political connections, receive VAT and import tax repayments at all (or within any reasonable amount of time). The fact that Jushi Egypt has finally in 2020 received a refund for import duties and VAT paid before it became included in the SCZone is not such evidence, but rather supports the conclusion that only political connections allow companies to receive refunds. In other words, the Commission should treat both the SCZone exemption and the refund Jushi Egypt received for the periods before it was in the SCZone as subsidies in the form of revenue foregone.

(305) On this point, the Commission reiterated that it decided to only take into account the cash flow advantage to the exporting producer for the calculation of the benefit on VAT exemptions in light of the fact 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, the claim was rejected.

(306) In light of the above considerations and in the absence of other comments, the Commission confirmed its findings in recitals 53-66 of the provisional Regulation.

(307) Concerning the revenue foregone in the form of a de facto VAT exemption, the benefit was initially calculated by taking the full amount of VAT normally payable but not paid during the investigation period on the purchases of imported equipment (during the IP). However, as mentioned in recital 256 above, following the comment on the provisional disclosure, 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 was adapted accordingly, As a result, the cash flow benefit on the VAT withheld was considered to be equivalent to the average interest rate on deposits in Egypt during the IP (12,03 %), applied to the VAT amounts which were withheld for goods purchased since 2017.

(308) The modified amount of subsidy established with regard to this type of subsidies concerning machinery during the investigation period for the exporting producers was 0,02 % for VAT exemptions and 0,17 % for import tariff waivers.

(309) Following provisional disclosure, the GOE and the exporting producer 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. As a result, the GOE submitted that it had a proper duty drawback system in place so that no excess remission occurred.

(310) 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.

(311) Finally, Jushi Egypt argued that sales to Hengshi Egypt, a company buying GFR from Jushi Egypt and also established in the SCZone, 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.

(312) The Commission reviewed the evidence provided on the payment of the customs duties, and found that the GOE had initiated a verification at the premises of the exporting producer at the end of 2019, due to the Commission’s investigation. As a result of this verification, the GOE reclaimed a certain amount of customs duties on imported materials from the company, relating to the years 2017, 2018 and 2019. Based on the evidence provided, and given the impossibility to verify on spot this new evidence due to travelling restrictions linked to the COVID-19 pandemic, the Commission accepted the claim and deducted the amount of customs duties paid on imported materials relating to the investigation period in accordance with Article 15(1) of the basic Regulation.

(313) However, the Commission did not consider that these settlements put into question the findings on the subsidy scheme as such. In this respect, the Commission noted that the recovery of the customs duties was triggered by the Commission’s investigation activities, rather than by the GOE’s own monitoring and verification framework for the collection of customs duties. The GOE also did not dispute the fact that there was no such framework in place during the investigation period. Concerning the temporary nature of the lack of a monitoring and verification, the Commission noted that although Jushi Egypt only joined the SCZone in 2017, the last legislative change in the framework for the collection of the customs duties already happened in 2015, when the responsibility for collecting customs duties was transferred to the General Authority of the SCZone. In addition, the detailed report of the Customs Authority, provided by the GOE as annex I of its comments on provisional disclosure, confirmed that the overall legislation for the collection of customs duties was already in place since 2006. The GOE thus had ample time to implement a functioning system for collecting customs duties.

(314) Concerning sales from Jushi Egypt to Hengshi Egypt, the Commission noted that sales of inputs between companies located within the special zone were never subject to any taxes, thus showing that the SCZone was a special zone with several specific features that distinguish it from other zones.

(315) Therefore, the fact that Hengshi Egypt only has export sales is in this sense irrelevant, and does not alter the Commission’s conclusions. The claims of the GOE and of the exporting producer concerning the validity of the Commission’s findings in general, and on the sales to Hengshi Egypt more specifically, were thus rejected.

(316) Following the final disclosure, the complainant claimed that this is not a case where a government terminates a defined subsidy scheme as a consequence of an anti-subsidy investigation and that scheme is consequently no longer available. According to the complainant, the GOE has simply collected funds from Jushi Egypt in order to provide a benefit to the latter in the EU investigation, but without putting in place a proper collection framework. As there is no legal framework in place, it cannot be ensured that the GOE will collect future duties and VAT from Jushi Egypt suo moto, or even that the GOE will not pay back the collected funds to Jushi Egypt as soon as the Commission’s investigation is concluded. In other words, in the context of a cooperation agreement between China and Egypt, the GOE’s actions simply reflect an established and ongoing pattern of ad hoc benefits granted to Jushi Egypt, and in no way justify a different valuation of the benefit received by Jushi Egypt.

(317) On this point, the Commission reiterated that it reviewed the evidence provided on the payment of the customs duties, and based on the evidence provided, and given the impossibility to verify on spot this new evidence due to travelling restrictions linked to the COVID-19 pandemic, the Commission accepted the claim and deducted the amount of customs duties paid on imported materials relating to the investigation period in accordance with Article 15(1) of the basic Regulation. In addition, it is factually not correct that there is no legal framework in place as evidenced by the legal basis described in recital 70 of the provisional Regulation. Also, the legislation is currently being implemented as explained in recitals 78-82 of the provisional Regulation. Finally, the claims that the GOE will pay back the collected funds to Jushi Egypt was not backed by any evidence. Consequently, these claims were rejected.

(318) Following final disclosure, Jushi Egypt repeated the same comments regarding the calculation of VAT and import duty exemptions, ignoring the factual information and explanations disclosed by the Commission. As the comments submitted had already been dealt with, no further explanation was required.

(319) In light of the above considerations and in the absence of other comments, the Commission confirmed its findings in recitals 69-86 of the provisional Regulation.

(320) Following provisional disclosure, the Commission adapted the calculation methodology for the calculation of the benefit on the de facto VAT exemption, as mentioned in recital 256 above. As a result, the cash flow benefit on the VAT withheld was considered to be equivalent to the average interest rate on deposits in Egypt during the IP (12,03 %), applied to the VAT amounts which were withheld for materials purchased since 2017, and calculated pro rata for VAT amounts which were withheld during the IP. Since no information was available on the amount of the materials purchased before the IP, the Commission considered that this amount would be equivalent to the amounts found during the IP, adjusted by the difference in the cost of goods sold between the two periods.

(321) The amount of subsidy established with regard to this type of subsidies concerning materials during the investigation period for the exporting producers was 1,08 % for VAT exemptions and 0,24 % for import tariff waivers.

(323) In the absence of any comments with respect to the definition of the Union industry and Union production, the Commission confirmed its conclusions set out in recitals 106 to 109 of the provisional Regulation.

(324) In the absence of any comments with respect to Union consumption, the Commission confirmed its conclusions set out in recitals 110 to 112 of the provisional Regulation.

(325) The Commission received comments from the Egyptian exporting producer Jushi Egypt regarding price undercutting after provisional disclosure.

(326) Jushi Egypt noted that when the Commission had calculated undercutting, they had removed sales costs and a reasonable amount of profit from the sales price of their related sales companies to the independent customer in the Union.

(327) Jushi Egypt stated that they considered that this methodology did not comply with the judgement of the General Court in the case T-301/16, Jindal Saw Ltd and Jindal Saw Italia v European Commission, paragraph 187 (‘Jindal Saw’) (95).

(328) The Commission disagreed with the relevance given by Jushi Egypt to the judgement in Jindal Saw in this case. In Jindal Saw, the General Court considered that the Commission had committed an error by deducting the selling expenses of Jindal’s related importers in the Union from the sales to the first independent buyer, while the selling expenses of the Union industry related selling entities were not deducted from the Union industry sales prices to the first independent customer.

(329) The Court therefore considered that the two prices were not compared symmetrically at the same level of trade in a situation where the exporting producers mostly sold into the Union through related selling entities, compared to the situation how the Union producers sold the product concerned.

(330) The Commission noted that a comparison between this case and the Jindal case is not relevant, as the respective configuration of the export sales was different. While the sales of Jushi Group are predominantly direct sales from Egypt to the first independent customer in the Union, in the Jindal case almost all of the export sales of that exporting producer were made via related entities established in the EU.

(331) Indeed, in this case two of the three sampled Union producers do not have related sales companies, and the third has a centralised sales and invoicing system with products shipped directly from the manufacturing plants. The Commission therefore considered that in this case there was no asymmetry with the sales channels of the exporting producer, and therefore the Jindal case is not applicable. Moreover, the use of the prices of the Jushi Group related sales entities would not have any relevant impact on the price effect analysis (96).

(332) Furthermore, the Commission also refers to recital 157 of the provisional Regulation that dealt with the conclusion that there was clear price depression during the investigation period. Therefore, in any event this claim is irrelevant as this finding of price depression would already be in itself sufficient to show the adverse price effects of subsidised imports according to Article 8(2) of the basic Regulation.

(333) The Commission therefore confirmed its conclusions set out in recitals 122 and 123 of the provisional Regulation that the imports from Egypt during the investigation period significantly undercut the sales of the Union industry, and noted that in any event the finding on price depression set out at recital 157 of the provisional Regulation rendered this claim irrelevant.

(334) Following final disclosure, Jushi Egypt repeated the same comments regarding the calculation of undercutting, ignoring the factual information and explanations disclosed by the Commission. As the comments submitted had already been dealt with, no further explanation was required.

(335) In the absence of comments, the Commission confirmed recitals 124 to 129 of the provisional Regulation.

(336) In the absence of any comments with respect to production, production capacity and capacity utilisation, the Commission confirmed the conclusions set out in recitals 131 to 132 of the provisional Regulation.

(337) In the absence of any comments with respect to sales volume and market share, the Commission confirmed the conclusions set out in recital 134 of the provisional Regulation.

(338) In the absence of comments with respect to employment and productivity, the Commission confirmed the conclusions set out in recital 136 of the provisional Regulation.

(339) In the absence of any comments, the Commission confirmed its conclusions set out in recitals 138 and 139 of the provisional Regulation.

(340) Following final disclosure, Jushi Egypt commented on the calculation of the microeconomic indicators that were set out in the provisional Regulation, and requested more information on how these indicators were calculated.

(341) The Commission referred Jushi Egypt to recital 126 of the provisional Regulation, which made clear that the microeconomic indicators were based on the data from the sampled Union producers, verified and then aggregated together.

(342) The object of the aggregation was to ensure that the sample was treated as one data source, and not as three separate data sources with company-specific trends to explain. Aggregation allowed the Commission to take the entire sample as representative of the Union industry and use the data as a guide to the performance of all producers.

(343) In the absence of any comments, the Commission confirmed its conclusions set out in recitals 141 to 142 of the provisional Regulation.

(344) In the absence of any comments, the Commission confirmed its conclusions set out in recital 144 of the provisional Regulation.

(345) In the absence of any comments, the Commission confirmed its conclusions set out in recital 146 of the provisional Regulation.

(346) In the absence of any comments on profitability, cash flow, investment, return on investments and ability to raise capital, the Commission confirmed its conclusions set out in recitals 149 to 153 of the provisional Regulation.

(347) In the absence of any comments, the Commission confirmed its conclusions on injury set out in recitals 154 to 161 of the provisional Regulation.

(348) In the provisional Regulation, the Commission provisionally concluded that the subsidised imports from Egypt were causing material injury to the Union industry.

(349) The Commission concluded that the increase of imports during the investigation period and the undercutting and depression of Union industry prices by the subsidised imports caused the Union industry to lose market share and profitability.

(350) In the absence of comments the Commission confirmed its conclusions set out in recital 164 of the provisional Regulation.

(351) In the absence of comments the Commission confirmed its conclusions set out in recitals 167 to 171 of the provisional Regulation.

(352) The Commission received no comments on the exports of the Union industry.

(353) In the absence of comments the Commission confirmed its conclusions set out in recital 174 of the provisional Regulation.

(354) The Commission confirmed its conclusions on causation set out in recitals 175 to (176) of the provisional Regulation.

(355) In the absence of comments, the Commission confirmed its conclusions set out in recitals 185 to 186 of the provisional Regulation.

(356) In the absence of any further comments, the Commission confirmed its conclusions set out in recital 192 of the provisional Regulation.

(357) In the absence of any further comments, the Commission confirmed its conclusions set out in recital 207 of the provisional Regulation.

(358) In the absence of any further comments, the Commission confirmed its conclusions set out in recital 209 of the provisional Regulation.

(359) In the absence of any further comments, the Commission confirmed its conclusions set out in recitals 210 to 213 of the provisional Regulation.

(360) As mentioned in recital 220 of the provisional Regulation, the Commission made imports of GFR subject to registration during the period of pre-disclosure under the requirements of Article 24(5a) of the basic Regulation by publishing Commission Implementing Regulation (EU) 2020/199 (97) (‘the registration Regulation’).

(361) As set out in recital 222 of the provisional Regulation, the Commission has to decide whether anti-subsidy measures shall be retroactively collected on imports during the three week period of registration, given that there are imports of GFR from Egypt that have been registered.

(363) The Commission considers that the registration Regulation complies with criterion (a), namely that the imports of GFR originating in Egypt have been registered in accordance with Article 24(5) of the basic Regulation.

(364) The Commission considers that importers have been given an opportunity for comment under criterion (b) with the publication of the provisional Regulation and with the publication of the registration Regulation.

(365) Following final disclosure, the Commission received comments from European users and distributors of GFR, stating that they considered that such opportunity to comment was not based on the Commission’s decision to register, but on the Commission’s proposal to collect duties.

(366) While the Commission agrees that criterion (b) of Article 16(4) must be interpreted as giving an opportunity to parties to comment on the retroactive collection of duties on imports registered during the pre-disclosure period at this stage, the Commission notes that it disclosed the full analysis justifying the retroactive collection with all the most recent data available in Section 7 of the definitive disclosure. By doing so the Commission therefore gave all parties, including these users and distributors, an opportunity to comment as provided for by this provision, as also shown by the arguments and rebuttals detailed at recitals 322 to 326. Therefore the Commission rejected this claim.

(368) A total of 11 574 tonnes of GFR was imported from Egypt during the three weeks of pre-disclosure. Given that this is a non-standard period, and in itself not comparable to other periods, the comparison has been done in terms of weeks (so 21 days divided by 3) and in terms of months (considering that a month is on average 4 weeks). Note that although the pre-disclosure period is 21 calendar days, the Surveillance 2 database contains only 15 data points, making daily calculations impractical.

(369) Table 2 shows that in terms of quantity, imports of the product concerned were massive. The period of three weeks before the imposition of provisional measures shows a sharp upward trend, compared to those imports during the investigation period, and also during the period between April 2019 and January 2020, that is after the investigation period up until registration.

(370) Therefore, the Commission concluded that imports during the three weeks of pre-disclosure were significantly higher on average than those during the investigation period. This finding supports the conclusion that imports during the three week period of pre-disclosure can be considered as massive under criterion (c).

(371) Table 2 above also shows that imports continued after the end of the investigation period, in massive quantities.

(372) The Commission also took note of the daily import data from the Surveillance 2 database.

(373) The data shows that on one day of the three week pre-disclosure period, just over 3 000 tonnes of GFR was imported from Egypt, which is significantly higher than the average weekly importation during the investigation period.

(374) This led further support to the conclusion that imports during the three week period of pre-disclosure can be considered to be massive under criterion (c) above.

(375) The next stage of the test under criterion (c) is whether these imports, now considered massive, can have caused ‘injury which is difficult to repair’.

(376) The Commission first noted that imports during the investigation period undercut and depressed the prices of the Union industry. The volume and prices of the imports of the product concerned have had a negative impact on the quantities sold and level of the prices charged in the Union market and the market share held by the Union industry. This resulted in substantial adverse effects on the overall performance and the financial situation of the Union industry. Thus, imports of the product concerned have been found to cause the injury suffered by the Union industry during the investigation period.

(377) As shown in Table 2 above, the import price of GFR from Egypt continued to fall after the end of the investigation period, and in particular during the three weeks of pre-disclosure. The Commission therefore considered that imports during the pre-disclosure period were made at increased volumes and even at lower prices than during the investigation period, thereby causing further injury to the Union industry which will be difficult to repair but for the collection of those duties.

(378) The Commission also found that given the quantities of GFR from Egypt imported into the Union during the three weeks prior to imposition of provisional duties, it could also be considered that importers were stockpiling Egyptian GFR, knowing on February 14 that provisional measures were to be imposed on March 6.

(379) The Commission therefore considered that imports during the three-week period of pre-disclosure caused injury to the Union industry, which is difficult to repair, both in terms of quantity and in terms of price.

(380) The Commission therefore concluded that criterion (c) was met and that in order to preclude the recurrence of injury these imports should have duties retroactively collected as per criterion (d).

(381) Following final disclosure, the Commission received comments from importers and distributors of GFR, challenging several aspects of the Commission’s assessment above.

(382) First, those importers and distributors disputed that the imports during the three-week period of pre-disclosure could be considered massive. Their submission suggested that the Commission should consider ‘massive imports’ to mean ‘there should be an increase of imports that is both sudden and dramatic’ and by comparing various data to the three-week period of pre-disclosure, including comparing monthly peak imports to other peak imports. On this basis, the submission suggests that no such increase has taken place.

(383) Second, they also claimed that the Commission had not defined ‘injury which is difficult to repair’ and suggested their own definition, ‘permanent and irreparable harm to the Union industry’.

(384) Third, the importers and distributors noted that the increase in imports during the three week period of pre-disclosure is equivalent to 0,4 % of yearly Union consumption. Given that the registration period is so short, this is to be expected and does not therefore enter into the analysis of whether injury is caused or otherwise.

(385) Fourth, they further alleged that the reason that import prices fell after the end of the investigation period was because of price-cutting by the Union industry in order to maintain market share.

(386) Fifth, those importers and distributors disagreed with the Commission’s finding that given the quantities of GFR from Egypt imported into the Union during the three weeks prior to imposition of provisional duties, it appeared that importers were stockpiling Egyptian GFR, having been informed on February 14 that provisional measures were to be imposed on March 6.

(387) They stated that this was not the case, because imports in December and January were much lower, and therefore the imports just before the imposition of provisional duties were to make up for the lower imports previously.

(388) According to their arguments set out above, the Commission should consider whether or not it is necessary to collect duties on the registered imports, as set out in Article 16(4)(d).

(389) They asked the Commission to consider that, given that registration during the pre-disclosure period is in effect mandatory, that collection of duties on those registered imports should not also be in effect mandatory, otherwise the benefit of the pre-disclosure period for importers and distributors would be lost.

(390) These comments are addressed below.

(391) In relation to the first claim, the Commission disagrees with those parties’ interpretation of the term ‘massive imports’, which is legally baseless. The basic Regulation does not refer to an increase of imports, let alone placing any condition on ‘massive imports’ having to be ‘sudden and dramatic.’ As shown in Table 2 above, the Commission has compared already at a very granular level average quantities imported from Egypt per month and per week in order to determine whether imports were massive or not.

(392) All the data confirm that these imports were massive and on an upward trend, as clearly explained in recitals 315 to 317. The Commission sees no reason to base its methodology on a comparison between peaks to other peaks. In any event, the fact that there may have been some peaks and troughs as selectively singled out by these parties in no way affects the conclusion that the requisite standard of ‘massive imports’ was met in these circumstances.

(393) Furthermore, whether or not the massive imports during the three week period of pre-disclosure were ‘to compensate’ for the lower imports in December 2019 and January 2020 as also argued by these parties is irrelevant, as the basic Regulation does not discriminate regarding the motive for such massive imports.

(394) The Commission therefore maintained its conclusion that the imports during the three-week period of pre-disclosure were massive under Article 16(4)(c) of the basic Regulation. This finding is further confirmed by the reasons described in recitals 402-405 below.

(395) With regard to the second claim, once again, these parties suggested a definition that does not correspond to what is written in the basic Regulation. They then built their arguments on this incorrect standard. Specifically, injury that is difficult to repair as stated in the basic Regulation cannot be arbitrarily interpreted as meaning ‘permanent and irreparable injury’. This claim is therefore without legal basis. In any event, the Commission explained in recital 376 in conjunction with the analysis of various elements in the injury assessment how this requirement was considered to be met in this case.

(396) In addition, the third claim concerning the market share of imports and questioning their potential for causing injury to the Union industry in such a short period is misleading.

(397) First, the figure of 0,4 % presented by the parties as the imports market share for the registration period is completely speculative, since there is no information available in the file on the EU consumption after the investigation period. For the sake of argument, even considering that EU consumption had not changed after the investigation period as proposed by these parties, which again is speculative, imports during the three-week period of pre-disclosure would account for 1,12 % of EU consumption during the three-week period alone. This level of market share is normally considered not negligible and capable of causing injury during a whole year. In any event, already the absolute level of imports in itself as indicated in Table 2 above, which is a verified figure, is certainly not negligible.

(398) Thus, the assertion that import volumes equivalent to 1,12 % market share in the period of merely three weeks could not be considered massive and would be insufficient to cause injury to the Union industry is in clear contradiction with the basic Regulation and the Commission’s consistent practice regarding negligible imports.

(399) Secondly, the Commission restates its findings at recital 376 above and refers to all the elements proving how these massive imports from Egypt caused injury difficult to repair. This analysis is a holistic one based on an assessment of all the relevant evidence.

(400) On the basis of this assessment, the Commission concluded that the quantities imported, in particular considering the significant volumes imported in this short period of time, were in absolute and relative terms significant enough to be considered massive within the meaning Article 16(4)(c) of the basic Regulation and thus able to cause injury difficult to repair.

(401) With regard to the fourth claim of price-cutting by the Union industry in order to maintain market share, the Commission found that injury has been caused to the Union industry by the imports from Egypt taking market share from the Union industry, forcing them to cut prices to compete, even at the expense of their profitability. Therefore, the Commission cannot accept the justification that import prices have decreased as a response to a decrease in price by Union producers when in fact it found that subsidised imports were the cause of price depression in the Union market. On this basis, this claim had to be dismissed.

(402) Finally, regarding the fifth claim, the Commission has no need to put the massive imports during the pre-disclosure period into a context and, therefore, the fact that import volumes just before the imposition of provisional duties were to make up for lower import volumes in December and January is irrelevant.

(403) The Commission also disagrees with the premise by these parties that registration during the pre-disclosure period is in effect mandatory and that collection of duties on those registered imports should not also be in effect mandatory, and with their subsequent conclusion that this mean that the benefit of the pre-disclosure period for importers and distributors would be lost. First, the registration during the pre-disclosure period is not ‘in effect’ mandatory, but it is subject to the strict conditions listed in Article 16(4) based on all data and evidence available at the time of pre-disclosure. This has been confirmed in practice, when there was no registration in the pre-disclosure period when these conditions were not met (98).

(404) Second, the Commission is well aware that the retroactive collection of duties registered in the pre-disclosure period is also not mandatory, but is strictly subject to the fulfilment of all the relevant conditions laid down in Article 16(4) of the basic Regulation on the basis of the most recent data available at definitive stage. This can also be confirmed in practice (99).

(405) Third, the Commission refers to recital 4 of the Modernisation Regulation (100) last amending the basic Regulation, which gives the reason for both the pre-disclosure period and the registration thereof. The recital directly states that ‘in order to limit the risk of a substantial rise in imports in the period of pre-disclosure, the Commission should register imports where possible’ considering ‘a prospective analysis of the risks associated and the likelihood that these circumstances would undermine the remedial effects of the measures.’

(406) Even where the registration in this pre-disclosure period is not possible for instance because the relevant legal conditions are not met, the Commission should afterwards reflect the additional injury caused to the Union industry by a further substantial rise in imports during this period according to the same recital and Article 15(1), fifth subparagraph of the basic Regulation.

(407) Therefore, the retroactive collection of duties in these situations, far from being automatic, is subject to massive imports during the pre-disclosure period, or to the additional injury caused by such increase in the absence of registration, and also the other conditions listed in Article 16(4) of the basic Regulation.

(408) Contrary to what these parties argued, the rationale and the benefit of the pre-disclosure for importers and distributors introduced by the Modernisation Regulation was ‘to improve the transparency and predictability’ for the parties affected by the investigations, ‘in particular importers’ (101). The rationale for pre-disclosure was thus certainly not to give them an instrument to massively increase imports during the pre-disclosure period to benefit from the last window before the imposition of duties as they suggest. Therefore, this argument was also dismissed.

(409) On the basis of all the above the Commission sees no evidence to change the conclusion that duties should be levied on the registered imports.

(410) In accordance with Article 16(3) of the basic Regulation, the level of the duty to be collected retroactively should be set at the level of the provisional duties imposed by Implementing Regulation (EU) 2020/379, because the definitive countervailing duty imposed by this Regulation is higher than the provisional duty.

(411) In view of the conclusions reached with regard to subsidisation, injury, causation and Union interest, definitive countervailing duties should be imposed to remove the material injury caused to the Union industry by the subsidised imports from Egypt.

(412) Article 15(1), third subparagraph of the basic Regulation states that the amount of the countervailing duty shall not exceed the amount of countervailable subsidies established.

(413) Article 15(1), fourth subparagraph then states that ‘Where the Commission, on the basis of the information submitted, can clearly conclude that it is not in the Union’s interest to determine the amount of measures in accordance with the third subparagraph, the amount of the countervailing duty shall be less if such lesser duty would be adequate to remove the injury to the Union industry.’

(414) No such information has been submitted to the Commission, and therefore the level of the countervailing measures will be set with reference to Article 15(1), third subparagraph.

(415) Given that the definitive measures in this case will be based on the amount of countervailable subsidies established, the injury margin was not established.

(416) Definitive countervailing measures should be imposed on imports of GFR originating in Egypt in accordance with the rules in Article 15(1) of the basic Regulation, which states that the definitive duty shall correspond to the total amount of countervailable subsidies established.

(418) The individual company countervailing duty rates specified in this Regulation were established on the basis of the findings of this investigation. Therefore, they reflect the situation found during that investigation with respect to those companies. Those duty rates (as opposed to the countrywide duty applicable to ‘all other companies’) are thus exclusively applicable to imports of the product concerned originating in Egypt and produced by those companies. Imported products concerned produced by any other company not specifically mentioned in the operative part of this Regulation, including entities related to those specifically mentioned, cannot benefit from those rates and shall be subject to the duty rate applicable to ‘all other companies’.

(419) A company may request the continued application of those individual duty rates despite subsequently changing its name or the name of one of its entities. The request must be addressed to the Commission. The request must contain all the relevant information enabling the company to demonstrate that the change does not affect the right of the company to benefit from the individual duty rate which applies to it. If the change of name of the company does not affect its right to benefit from the duty rate which applies to it, a notice informing about the change of name will be published in the Official Journal of the European Union.

(420) Should developments after the investigation period lead to a change in circumstances of a lasting nature, appropriate action in accordance with Article 19 of the basic Regulation may be taken.

(421) In view of Article 109 of Regulation (EU, Euratom) 2018/1046 of the European Parliament and of the Council (102), when an amount is to be reimbursed following a judgment of the Court of Justice of the European Union, the interest to be paid should be the rate applied by the European Central Bank to its principal refinancing operations, as published in the C series of the Official Journal of the European Union on the first calendar day of each month.

(422) Article 16(2) of the basic Regulation states that it is for the Commission to decide what proportion of the provisional duty is to be definitively collected.

(423) Given the findings of this case, the amounts secured by way of the provisional countervailing duty, imposed by the provisional Regulation, should be definitively collected.

(424) The measures provided for in this Regulation are in accordance with the opinion of the Committee established by Article 15(1) of Regulation (EU) 2016/1036 of the European Parliament and of the Council (103),

HAS ADOPTED THIS REGULATION:

Article 1

Article 2