COMMISSION IMPLEMENTING REGULATION (EU) 2020/870

of 24 June 2020

imposing a definitive countervailing duty and definitively collecting the provisional countervailing duty imposed on imports of continuous filament glass fibre products originating in Egypt, and levying the definitive countervailing duty on the registered imports of continuous filament glass fibre products originating in Egypt

THE EUROPEAN COMMISSION,

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

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

Whereas:

1. PROCEDURE

1.1. Initiation

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

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

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

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

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

1.2. Provisional measures

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

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

1.3. Subsequent procedure

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

1.4. Final disclosure

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

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

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

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

1.5. Investigation period and period considered

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

2. PRODUCT CONCERNED AND LIKE PRODUCT

2.1. Claims regarding the product scope

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

3. SUBSIDISATION

3.1. Subsidies and subsidy programmes within the scope of the current investigation

(34) On the basis of the information contained in the complaint, the Notice of initiation, the Notice amending the Notice of initiation and the replies to the Commission’s questionnaire and to the request for additional information, the alleged subsidisation through the following subsidies by the GOE were investigated: (a) Preferential policy loans, credit lines, other financing, insurance and guarantees. (b) Government provision of goods and services for less than adequate remuneration (‘LTAR’) — Government provision of power for less than adequate remuneration; — Government provision of land for less than adequate remuneration. (c) Revenue foregone through Direct Tax Exemption and Reduction programmes — EIT privileges for Enterprises located in a Special Economic Zone. (d) Revenue foregone through Indirect Tax and Import Tariff Programmes — Value Added Tax (‘VAT’) exemptions and import tariff rebates for the use of imported equipment; — VAT exemptions and import tariff waivers for imported input materials used in exported finished goods.

3.2. The Suez Economic and Trade Cooperation Zone (‘SETC-zone’)

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

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

(37) In the wake of this agreement, China appointed Tianjin Teda Investment Holding Co., Ltd. (‘Tianjin TEDA’), an SOE under the Tianjin Municipal Government, to undertake the task on the Chinese side. Tianjin TEDA then joined the Egyptian Suez Canal Administration, the National Bank of Egypt, and four more Egyptian State-owned enterprises to create the Egypt China Joint Venture Company (‘ECJV’), in order to develop and construct the economic zone. The Chinese side held 10 % of the shares of the ECJV, and the Egyptian side 90 %. In 1998, the corresponding land in the Northwest Gulf of Suez Zone was transferred from the Suez Governorate to the ECJV. However, after that, the project did not advance much for several years (7).

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

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

(40) In 2007, MOFCOM organized a tender to appoint developers for the second batch of officially approved overseas trade and economic cooperation zones. Tianjin TEDA won the bid for the SETC-Zone. In October 2008, Tianjin TEDA established a joint venture with the China-Africa Development Fund to set up China-Africa TEDA Investment Co., Ltd. (‘China-Africa TEDA’), as the main Chinese investment entity in the cooperation zone. China-Africa TEDA united with the ECJV to create a new company, called Egypt TEDA Investment Co. (‘Egypt TEDA’) in order to drive the development of the SETC-Zone in Egypt. This time, the Chinese side held 80 % of the shares, and the Egyptian side (represented by the ECJV) 20 %. After the company was formally established in 2008, work in the zone advanced rapidly. On 7 November 2009, the then Prime Ministers of the two countries inaugurated the starting area, and listed the SETC-Zone as an important cooperation project of economy and trade between the two countries (11). By the end of 2011, all the infrastructure in the starting area had been completed (12).

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

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

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

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

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

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

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

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

3.2.1. Partial non-cooperation and use of facts available in relation to the SETC-Zone

3.2.1.1. Application of the provisions of Article 28(1) of the basic Regulation in relation to the GOE

(49) The Commission requested the GOE in its questionnaire, in the request for information and during the verification visit to provide certain information relating to the Suez Economic and Trade Cooperation Zone in Egypt. Those information requests included among others questions on the legal and institutional framework, and the existence of intergovernmental agreements between China and Egypt.

(50) In particular, following the amendment of the Notice of initiation, the Commission asked the GOE information about the functioning of the SETC-Zone and the legal basis that underpins it with particular reference to the cooperation between the GOE and the GOC in setting up and shaping the SETC-Zone as a business environment able to attract investors from China. Moreover, the Commission asked information about the control and administration of the SETC-Zone by the Egypt-TEDA Investment Company, by TEDA holding and by the Egyptian-Chinese Joint Working Group as well as about the role of the China-Africa Development fund (‘CAD’) in the context of Chinese outward investment. Finally, the Commission also asked the GOE about the status of the SETC-Zone as an overseas economic and cooperation zone approved by MOFCOM.

(51) In replying to the request for information, the GOE only provided some of the information demanded while it left a substantial part of the request unanswered.

(52) The GOE provided the information concerning the legal underpinning of the SETC-Zone by providing the international agreements stipulated by the GOE and the GOC that form the legal basis of their cooperation aimed at benefitting companies that are established in the SETC-Zone, such as the exporting producer.

(53) However, the Commission is still missing information relating to any agreements, memoranda of understanding or other documents signed between the GOC and the GOE in relation to the SETC-Zone. As an example, the Commission found publicly available references to the 2016 Five-Year Implementation guidelines for Enhancing the Comprehensive Strategic Partnership between the PRC and the Arab Republic of Egypt.

(54) Furthermore, a joint management committee of the China-Egypt TEDA Suez Economic and Trade Cooperation Zone was formally established in April 2017. In July of 2017, the Intergovernmental Coordination Committee was established and held its first joint meeting. The Commission did not receive written documentation concerning the meetings held under these various consultation mechanisms, except for one meeting held by the Administration Commission.

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

(56) Therefore, the Commission informed the GOE that it might have to resort to the use of facts available under Article 28(1) 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. However, the Commission considered that information about the precise collaboration between the two governments in the set-up and administration of the SETC-Zone was crucial for the legal assessment of the case as explained in the next Section 3.2.2. Unfortunately, it had only received some relevant documents after the respective verification with the consequence that it could not verify the authenticity thereof. Moreover, it could not engage in any follow-up discussion with the GOE about significant details, which could shed light on the extent and, degree of cooperation between the two governments in the zone.

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

3.2.2. Legal assessment

(58) The operation of the SETC-Zone constitutes a close cooperation between the GOE and the GOC, a cooperation that finds expression notably in a joint venture of Egypt and China within the territory of the exporting country. The governments of Egypt and China have pooled their resources to provide the GFR manufacturer in the SETC-Zone with favourable conditions that confer benefits to it. This pooling of resources via such close cooperation serves a common purpose and benefits a common beneficiary Jushi Egypt.

3.2.3. Financial contribution of a government or a public body

(59) According to Article 3(1)(a) of the basic Regulation, a subsidy exists if there is a financial contribution by a government in the country of origin or export. Similarly, Article 1.1(a)(1) of the SCM Agreement states that a subsidy shall be deemed to exist ‘if there is a financial contribution by a government or any public body’.

(60) The GOE has provided to Jushi Egypt land and offered several tax breaks. These subsidies are thus operated and granted directly by the government of Egypt.

(61) However, ever since the conclusion of the MoU in 1997, the GOE has actively sought to support the zone not only directly by the provision of land and tax breaks but also indirectly, through agreed assistance of the Chinese government for the development of the SETC-Zone in its territory. Indeed, under the terms of the MoU, the GOE expressly ‘encourag(ed) relevant business sector in China to provide contributions for the projects to be established within the zone’. Following the visit of President Morsi to China in August 2012, the SETC Zone received ‘unprecedented attention and support from the Egyptian government’ (18). Under Article 1 of the Cooperation Agreement 2016, both sides agreed to develop the zone ‘in accordance with (…) existing laws and regulations of the two countries’.

(62) Article 1 of the legislation implementing the Cooperation Agreement further specifies that ‘The Management Committee [responsible for coordinating and handling daily work of the Cooperation Zone] is established in line with multilateral and bilateral agreements and existing laws and regulations signed or participated by the People’s Republic of China and the Arab Republic of Egypt’. Under Article 4 of the Cooperation Agreement, both sides promise ‘support and facilitation for the construction, business facilitation and operation of the Cooperation Zone’. For that purpose, Egypt has agreed that China designates it as ‘overseas trade and cooperation zone’.

(63) China confirmed in Article 4(1) of the Cooperation Agreement that the zone in question ‘is entitled to relevant policy support and facilitation provided by the Chinese Government for overseas economic and trade cooperation zones’. In addition, in Article 5 of the Cooperation Agreement the GOC explicitly committed that it ‘shall support’ the zone by, among others, ‘encouraging relevant financial institutions to provide financial facility’ for companies and investments in the zone.

(64) Moreover, under Article 2(IV) of Cooperation Agreement on the Establishment of Management Committee for China-Egypt Economic and Trade Cooperation Zone it is the management committee responsibility to ‘Try the utmost efforts to implement all incentive policies of the Chinese and Egyptian laws and regulations in smooth manner’ and under Article 2(V) to ‘Coordinate and facilitate relevant financial institutions, including but not limited to banking institutions, insurance institutions and various funds which provide credit support for the Cooperation Zone and residential enterprises, and help the Cooperation Zone and residential enterprises to explore more financing channels’. Finally, under Article 7 of the same Agreement, both GOE and GOC committed themselves that any existing or future laws, which grant more favourable treatment than the Cooperation Agreement, shall prevail over the latter. The GOC’s preferential financing for the GFR producer in the zone are the result of those engagements and should be seen in that context.

(65) The joining forces by the GOE and the GOC served several purposes.

(66) For the Egyptian side, as expressed at the highest political level (19), the aim was to attract Chinese investments, know-how and capital in order to promote the economic development of the Suez Canal Economic Zone and create jobs. According to the 2022 Egyptian Perspective Long-Term Planning, published by the Planning Department of Egypt in November 2013, the SETC-Zone will play a great role for Egypt’s industry upgrade, earning foreign exchange through export, creating taxation, and solving unemployment (20).

(67) For the Chinese side, the motivation was different. From the perspective of the companies itself, Egypt has certain advantages in terms of lower labour costs and shorter delivery times to main markets, such as the EU. In addition, as mentioned in the bond prospectus issued by Jushi Group in 2014: ‘trade protective barriers have increased the market prices of China’s fiberglass exports in disguise, which has a negative impact on Jushi Group’s fiberglass exports. … after the launch of Jushi Egyptian Glass Fiber Co., Ltd. in 2013, the product demand of the above three regions (21) will be met by Jushi Egypt. The above three regions will not impose anti-dumping duties on Jushi Egyptian products, and the impact of anti-dumping policies on Jushi Group will be greatly reduced. The preliminary pricing principle of Jushi Egyptian fiberglass products for the customers in the above three regions is to share the tariff savings with the customers and to enjoy the savings of anti-dumping duties and shipping costs in full by the issuer’. Indeed, since 2011 (22) and the end of 2014 (23) imports of GFR originating in China have been subject to anti-dumping and countervailing duties in the EU and the EU is one of the ‘three regions’ that is referred to in the bond prospectus.

(68) From the perspective of the GOC, according to MOFCOM’s 13th Five-Year Plan for the Development of Foreign Trade, one of the main tasks under this plan is to enhance the trade cooperation with countries along the ‘One Belt and One Road’ initiative in order to promote and expand exports of, among others, high-tech products, such as GFR. The plan contains the following statement: ‘Stabilize exports of advantageous products such as labor-intensive products to the aforesaid countries, seize the opportunities of constructing infrastructure for such countries, and impel exports of large-sized complete sets of equipment, technologies, standards and services. Adapt to the trend of transformation and upgrade of industries of these countries, and accelerate exports of electromechanical and high-tech products. … Intensify the expansion of emerging markets, and after comprehensively considering economic scale, growth speed, resource endowment, risk degree and other factors, select several emerging markets for primary expansion. Expand exports of advanced technical equipment, and promote exports of high-quality, high-grade and comparatively advantageous industries and products’. Envisaged measures to achieve these tasks include the ‘development of State-level economic and technological development zones and various parks’.

(69) As expressed in one article, ‘Under the government departments’ guidance in the framework of the “One Belt, One Roa d”, and in connection with the host country strategy at the highest level, overseas cooperation zones have become a vehicle to implement the “One Belt, One Roa d” and international production capacity cooperation’ (24).

(70) Overseas zones thus serve several strategic objectives for China. First, they could help increase demand for Chinese-made machinery and equipment. Second, by producing overseas and exporting to Europe or North America, Chinese companies would be able to avoid trade frictions and barriers imposed on exports from China. Third, they could assist China’s efforts to boost its own domestic restructuring and move up the value chain at home (25).

(71) It follows from the above that the Egyptian government was expecting and welcoming Chinese financing for the close cooperation within the SETC-Zone, in order to boost the development of one of its poorest regions. The Chinese government was hoping that Chinese companies could operate outside Chinese territories and expand their exports under the ‘One Belt, One Road’ initiative (possibly to avoid being caught by trade defence measures).

(72) Under these circumstances, the Commission considered that the term ‘by the government’ in Article 3(1)(a) of the basic Regulation should include not only measures directly emanating from the GOE but also those measures by the GOC which can be attributed to the GOE on the basis of the available evidence.

(73) As the Appellate Body (‘AB’) held in the US-Gasoline case (26), WTO law cannot be read in clinical isolation from general international law. In particular, general international law principles thus form part of the WTO legal order, which is not a self-contained regime (27). In line with Article 3.2 DSU and Article 31(3)(c) of the Vienna Convention on the Law of Treaties (VCLT), ‘[a]ny relevant rules of international law applicable in the relations between the parties’ must be taken into account in the assessment of the context of the terms of a treaty.

(74) These ‘rules’ include customary international law (28), which are by definition binding on all WTO members, including Egypt, China and the European Union. An important branch of customary international law is the rules on State responsibility, which have been codified by the International Law Commission (ILC Articles on the Responsibility of States for Internationally Wrongful Acts) (29) in accordance with its mandate under Article 13(1)(a) of the UN-Charter.

(75) The rules in the ICL Articles are also ‘relevant’ within the meaning of Article 31(3)(c) VCLT because they provide guidance for the interpretation of the notion of attribution, i.e. when certain acts or omission can be attributed to one State, even when those acts or omissions do not emanate from that State directly. In this respect, the notion of attribution becomes relevant to interpret the terms ‘by the government’ in the chapeau of Article 1.1(a)(1) of the SCM Agreement, and more in particular, to determine the correct attribution of a conduct in a situation of cooperation between two States with respect to subsidies, as in the case at hand (30).

(76) The ILC Articles can thus be used to interpret the terms ‘by the government’ in the chapeau of Article 1.1(a)(1)of the SCM Agreement in order to attribute the conduct (granting of a subsidy) to the GOE, even in cases where the financial contribution has not been made directly by the GOE.

(77) In this respect, the Commission noted that Article 11 of the ILC Articles provides, in particular, that ‘conduct which is not attributable to a State under the preceding articles shall nevertheless be considered an act of that State under international law if and to the extent that the State acknowledges and adopts the conduct in question as its own’. The commentary of the ILC to Article 11 explains that ‘instances of the application of the principle [of State attribution through acknowledgement and adoption of behavior] can be found in judicial decisions and State practice’ (31). As recalled in recital 6 of the same commentary, it is required that a State ‘identifies the conduct in question and makes it its own’.

(78) From the inception of the project in 1997, the Egyptian government made Chinese financing of Jushi Egypt part of its own policy for the zone. President Morsi publicly welcomed Chinese investment and capital during his visit to China in August 2012, and the Planning Department of Egypt acknowledged in November 2013 that the Chinese financed SETC-Zone will play a great role for Egypt’s industry upgrade. On another visit to China in December 2014, President Sisi ‘expressed that the proposal from President Xi Jinping of jointly establishing the “One Belt and One Roa d” provided a significant opportunity for Egyptian recovery and Egyptian party was ready for active involvement and giving support. Egyptian party wished to cooperate with China in developing the projects of Suez Canal Corridor, Suez Economic and Trade Cooperation Zone and so on, and attract Chinese enterprises to invest in Egypt’ (32).

(79) The characteristics of the Chinese ‘One Road One Belt’ initiative are public knowledge. Articles 30 to 36 of the Guiding Opinions of the State Council on the Promotion of International Production Capacity and Equipment Manufacturing Cooperation of 13 May 2015 list all the policy support that companies ‘going abroad’ can receive. They include fiscal and tax support policies, concessional loans, financial support through syndicated loans, export credits, and project financing, equity investment, and finally export credit insurance. Article 31 thereof refers to ‘concessional loans’ which shall ‘support enterprises to participate in the export of large-scale complete sets of equipment, project contracting and large-scale investment projects’. In practice, this policy has led to numerous preferential financing by banks or the specifically set-up ‘Silk Road Fund’ under Article 35 of the Guiding Opinions, as recently established by the Commission in another case (33).

(80) As the Presidents of Egypt were no doubt aware that the Chinese ‘One Belt and One Road’ initiative involves heavy State financing through preferential financing and other financial instruments, there was hence a clear act of acknowledgment and adoption at the highest political level of such financing support from the GOC by jointly setting up the SETC-Zone with China.

(81) The fact that Egypt acknowledged and adopted Chinese preferential financing is further sustained by the text of the 2016 Cooperation Agreement. As laid down in Article 1 of the Cooperation Agreement, Egypt explicitly accepted that China may apply its laws with respect to operators in the SETC-Zone or relating to operations in the SETC-Zone. For that purpose, the Egyptian government was also in agreement that China designated the SETC-Zone as an ‘overseas investment area’ under its laws. Since ‘overseas investment areas’ are a vehicle of the One-Road One Belt initiative, referred to in recital 66, and since this initiative uses preferential financing as a tool, such designation in Article 4 of the Cooperation Agreement where China also confirmed that the zone in question ‘is entitled to relevant policy support and facilitation provided by the Chinese Government for overseas economic and trade cooperation zones’, had the consequence that Jushi Egypt became eligible to ask for preferential lending from Chinese policy banks and preferential export insurance terms. Egypt also signed off to Article 5, according to which the Chinese Government shall also support the Cooperation Zone by ‘encouraging relevant financial institutions to provide financing facility for … investment projects located within the Cooperation Zone, provided that the lending conditions and the loan use requirements are met’. As already found in a previous investigation, the Chinese preferential financing is not operated by clearly prescribed funding programs with strict eligibility criteria, but rather by the identification at the highest level of a number of encouraged industries (34). The official designation of the SETC-Zone in Egypt as overseas investment area for Chinese companies in the aftermath of a common agreement between the two Presidents and the ‘encouragement’ in Article 5 fits perfectly well into the usual Chinese pattern of activating preferential financing by its policy banks.

(82) The Chinese preferential measures in favour of the Chinese entities established in Egypt were thus ‘identified’ and ‘made its own’ by Egypt.

(83) Moreover, Egyptian officials were continuously present in the three level implementation mechanism mentioned in recital 45. The task of the implementation mechanism is to ‘coordinate and facilitate relevant financial institutions, including but not limited to banking institutions, insurance institutions and various funds which provide credit support for the Cooperation Zone and residential enterprises, and help the Cooperation Zone and residential enterprises to explore more financing channels’ under Article 2(V) of the Implementing Agreement. Article 2(4) of the same document mandates the officials to ‘try the utmost efforts to implement all incentive policies of the Chinese and Egyptian laws and regulations in a smooth manner’. This records the shared understanding of Egypt and China that the Chinese side is not providing money at market rates, which Jushi Egypt could receive from international market investors, but proactively provides State incentives, which is another word for benefits or preferences.

(84) By implementing this provision, Egypt has also expressed its full endorsement of the Chinese preferential financing for the benefit of the GFR producer in the zone. In view of the partial non-cooperation of the GOEs on this crucial aspect of the investigation, the Commission could not establish more details in this respect; however, the evidence available points to the fact that the two governments cooperated as described above for the benefit of the GFR’s exporting producer located in the zone.

(85) It follows from the evidence that the financial contributions in the form of preferential financing from Chinese public bodies to Jushi Egypt can be attributed to the GOE as the government of the country of origin or export under Article 3.1 (a) of the basic Regulation. The evidence showed that the GOE endorsed the preferential financial support to the GFR producer in the zone by the GOC in line with the agreed commitments to develop and support the economic activities within the zone.

(86) In this context, the Commission further noted that the possibility for governments to provide a financial contribution indirectly through private bodies is neither exogenous to the basic Regulation nor the SCM Agreement (35). Indeed, in cases where governments entrust or direct private bodies into a particular conduct, a key issue is that there must be ‘a demonstrable link’ between the government act and the conduct of the private body (36). Similarly, in this case, there is a clear and explicit link between the affirmative actions taken by China in order to provide the agreed financial support to the GFR’s exporting producer and the GOE.

(87) Consequently, the Commission considered that the preferential financing granted by the GOC to the GFR’s exporting producer in the zone amount to financial contributions by the GOE in the sense of Article 3(1)(i) of the basic Regulation (37).

3.2.4. Benefit

(88) The Commission then considered whether these financial contributions attributable to the GOE would confer a benefit on Jushi Egypt under Article 3(2) of the basic Regulation. It recalled that this company is operating in Egypt and incorporated under Egyptian law. Hence, it was in principle appropriate to inquire whether the recipient of the financing received better terms than it would have received on the Egyptian financial market. The Commission verified this point and was satisfied that this was the case by a high margin.

(89) However, the Commission also took into consideration the exceptional circumstances of this case. As noted in recital 44, the exporting producer is ultimately owned by SASAC. Chinese public bodies granted the preferential financing after negotiation and signature of the relevant documents in China, and the recipients received them directly or indirectly through the channel of their parent company in China (inter-company loans). Moreover, as laid down in Article 1 of the Cooperation Agreement, the Egyptian government accepted that those entities receive preferential support, thus including cheap loans in line with Chinese law, i.e. under Chinese conditions. The Chinese public bodies provided such financing in line with Article 5 of the Cooperation Agreement according to the preferential financing policies implemented in China. As explained in recital 42 above, these provisions of the Cooperation Agreement codified prior established practice.

(90) The Commission therefore concluded that the adoption and acknowledgement by the Egyptian government of the financial contributions from the Chinese public bodies to Jushi Egypt included also the benefit element thereof. It hence established market rates for the preferential financing and calculated the benefit accordingly. It noted that this reasonable approach resulted in lower subsidy amounts than the ones derived from applying a hypothetical Egyptian benchmark.

3.2.5. Specificity

(91) Concerning the third point on specificity, the Commission examined whether these subsidies were specific as required by Articles 4(2) through (4) of the basic Regulation.

(92) By way of acknowledgment and adoption, the GOE was the granting authority with respect to the preferential financing. In particular, the GOE has acknowledged and adopted the designation by the GOC of the SETC Zone as an overseas investment territory under Article 4 of the Cooperation Agreement and endorsed the fully-fledged implementation thereof by, inter alia, the GOC’s provision of preferential financing.

(93) These subsidies are only available to Jushi Egypt because the company is operating in the SCZone (of which the SETC-Zone is a part). Consequently, the Commission concluded that they were regional subsidies within the meaning of Article 4(3) of the basic Regulation and falling within the jurisdiction of the granting authority in accordance with Articles 4(2) through (4) of the basic Regulation.

3.2.6. Conclusion

(94) In conclusion, the Commission found that both the subsidies granted to companies operating in the SETC-Zone directly by Egypt (provision of land, tax breaks) as well as the subsidies granted indirectly through the GOC’s preferential financing are countervailable under Articles 2-4 of the basic Regulation. The latter are attributable to Egypt by virtue of the acknowledgment and adoption of the GOC’s measures by Egypt as its own, for example through the Cooperation Agreement, the close cooperation and the various levels of cooperation mechanisms. The financial contributions also conferred benefits and were specific. The Commission examined all the relevant subsidies in more details below.

(95) Following definitive disclosure (38), the GOE and the exporting producer contested these findings by making five points. First, it was impossible under international law to attribute sovereign acts of the Government of China to the Government of Egypt. Second, the Commission had disregarded its own basic Regulation, according to which the granting authority must be an entity within the territory of the country of origin or export, not outside. Third, the attribution of Chinese acts to Egypt also violated WTO law, which could not be interpreted in light of Article 11 of the ILC Articles on State Responsibility. Fourth, Article 11 of the ILC Articles was not even applicable to the facts at hand. Fifth, the financial contributions to Jushi did not meet the requirements of specificity under Article 3 of the basic Regulation.

(96) The GOE and the exporting producer stressed in their first point the principle of sovereignty in international law. From their perspective, an act can only be attributed to a State when that act is vested with authority of that State. Therefore, acts of entities vested with Chinese authority are only attributable to the Chinese State.

(97) The Commission rejected this claim. The principle of sovereign equality in international law, as enshrined in Article 2(1) of the UN-Charter, prohibits that one State exercises its powers on the territory of another State against the will of the territorial State. However, States are free to authorize action of another State within their territory. Action of the invited State on the territory of the host State may then become attributable to the host State. For example, this rule follows directly from Resolution 3314 (XXIX) of the UN General Assembly of 1974 on the definition of aggression, which is widely regarded as codification of customary international law. Under Article 3 lit. (f) of that Resolution, aggression by one State against another State is defined not only as direct attacks through its own State organs, but also as ‘the action of a State in allowing its territory, which it has placed at the disposal of another State to be used by that other State for perpetrating an act of aggression against a third State’. Clearly, if Cuba had allowed the Soviet Union to attack the United States with Russian missiles from Cuban territory in 1962, this would have triggered the international responsibility of Cuba for acts of aggression against the United States. Accordingly, international law recognizes the possibility to attribute action of an invited State to the host State and even sanctions the host State for doing so, if the action of the invited State harms a third State.

(98) Second, the GOE and the exporting producer argued that there is no room for attributing conduct of the Chinese government to Egypt under the EU’s basic Regulation. The definition of ‘government’ under Article 2(b) of the basic Regulation was expressly linked to the territory of the granting authority. The words ‘within the territory’ in that provision were aimed at providing legal security and could not be interpreted away in light of WTO or international law.

(99) In this respect, the Commission noted that Article 2(b) of the basic Regulation provides: ‘“Government” means a government or any public body within the territory of the country of origin or export.’ The Commission agreed that this provision covers action of the government from whose territory the subsidized products are exported to the European Union. This is the case here. The product under consideration is manufactured in Egypt and exported from Egypt to the European Union. The Government of Egypt, as the granting authority, is situated within the territory of Egypt.

(100) However, Article 2(b) of the basic Regulation does not speak to the separate question which action the government may authorize on its territory and acknowledge as its own. Just like with the notion of ‘public body’, the notion of ‘government’ is open to interpretation, taking into account its context and object and purpose. Thus, the actions attributable to the government of the country of origin or export may not only be actions directly emanating from such a government but also actions imputable to such a government. This is further confirmed by the terms in Article 3(1)(a) of the basic Regulation when referring to a financial contribution ‘by’ a government. For the same reasons, the arguments by the GOE invoking several provisions of the SCM Agreement (e.g. Articles 1.1(a)(1), 13, 18.1(a) and footnote 63) are of no avail. While it is true that the basic Regulation ‘must be interpreted, as far as possible, in the light of the corresponding provisions of the SCM Agreement’ (39), these provisions do not argue against the proposition that a financial contribution may be provided by another state which the territorial government acknowledges and adopts as its own.

(101) Consequently, the second claim derived from the alleged strict notion of territoriality under Article 2(b) of the basic Regulation and Article 1.1(a)(1) of the SCM Agreement was rejected.

(102) The third objection related to the significance of the ILC’s Articles on State Responsibility in this respect. In the view of the GOE and of the exporting producer, there is no authority to rely on Article 11 of the ILC Articles since the Appellate Body in US – Anti-Dumping and Countervailing Duties (China) (40) had only referred to Articles 4, 5 and 8 thereof.

(103) The Commission rejected this claim. There is no ground for the assertion that only certain principles of customary international law, as enshrined in Articles 4, 5 or 8 of the ILC Articles on State Responsibility, are relevant for the interpretation of WTO rules, but not others. The WTO Appellate Body has always applied the concepts of general customary law, which were relevant to assess the facts at issue. Next to the rules on attribution, the principles of estoppel or good faith are also part of the WTO legal order, for example. In the present case, the GOE has not contested the factual circumstances of having invited, acknowledged and facilitated the implementation of Chinese preferential financing to companies operating in Egypt. For this set of circumstances, interpretative guidance can be drawn from Article 11 of the ILC Articles, which has also been referred to in international investment jurisprudence (41). Article 11 of the ILC Articles is hence a relevant rule of international law within the meaning of Article 31(3)(c) of the Vienna Convention on the Law of Treaties for interpreting the notion of ‘by the government’ in the SCMA.

(104) According to the fourth objection, Article 11 of the ILC Articles is not applicable to the facts at issue. Under this Article, a State may assume responsibility for conduct as a successor State following the acquisition of land. A government may also acknowledge private conduct of its citizens as its own. However, the Article does not foresee that a State adopts acts of a foreign sovereign as its own.

(105) The Commission also rebutted this objection. The title of Article 11 of the ILC Articles is ‘conduct acknowledged and adopted by a State as its own’, with no qualification as to the author of the original act. This rule follows directly from Resolution 3314 (XXIX) of the UN General Assembly of 1974 on the definition of aggression, which is widely regarded as codification of customary international law. Under Article 3 lit. (f) of that Resolution, aggression by one State against another State is defined not only as direct attacks through its own State organs, but also as ‘the action of a State in allowing its territory, which it has placed at the disposal of another State to be used by that other State for perpetrating an act of aggression against a third State’.

(106) Next to the UN General Assembly in Resolution 3314 (XXIX) of 1974 (see recital 97 above) also the International Court of Justice has affirmed the freedom of States to adopt foreign acts as their own (42). International practice thus does not support Egypt’s view that attribution under Article 11 of the ILC Articles is confined to cases of territorial succession or the Government acknowledging and adopting private wrongful acts on the State’s own territory.

(107) In its fifth objection, the GOE and the exporting producer maintained that the financial contributions by the GOC to entities in Egypt were not specific. They quoted Article 4(2) of the basic Regulation, according to which the recipient of the financial contribution must fall ‘within the jurisdiction of the granting authority’. In their view, the wording ‘granting authority’ does not mean an ‘acknowledging and adopting authority’. In addition, in past investigations, the granting authority for Chinese entities was always the Chinese government. The GOE concluded that the financial contribution of the GOC cannot be specific ‘since enterprises located in Egypt are not within the jurisdiction of China’.

(108) The Commission reiterated that it considered the GOE as the granting authority by virtue of its adoption and acknowledgment of the Chinese preferential lending. As Jushi Egypt is operating in the Special Economic Zone, they fell also within the jurisdiction of the GOE. The receipt of this financial support was also specifically restricted to the companies operating in this zone, and therefore specific.

(109) Even if it was necessary to show that the GOC had exercised jurisdiction over these companies before the GOE could adopt the Chinese conduct on its own, quod non, the result would not change. By signing Articles 1 and 4(1) of the Cooperation Agreement, the GOE had agreed that the companies operating in the Zone would be receiving ‘relevant policy support and facilitation provided by the Chinese government for overseas economic and trade cooperation zones’ and that developing of the zone would be done in accordance with the laws of ‘both countries’. In addition to exercising its own territorial jurisdiction, the GOE therefore also allowed China to provide specific aid for companies only located in ‘overseas economic and trade cooperation zones’. Therefore, this claim is rejected.

(110) In conclusion, the Commission reaffirmed its finding that the GOE acknowledged and adopted as its own the support for capital investment, the loans for Jushi Egypt and the provision of land by TEDA Egypt and thus provided specific subsidies within the meaning of Articles 2-4 of the basic Regulation.

3.3. Preferential financing

3.3.1. Loans from policy banks to Jushi Egypt

3.3.1.1. Partial non-cooperation and use of facts available

Application of the provisions of Article 28(1) of the basic Regulation in relation to the GOE

(111) As mentioned in recital 8 above, the Commission sent a request for information to the GOE in order to fully investigate the cooperation between the GOE and the GOC to benefit the exporting producer.

(112) In particular, part of the request for information dealt with the conduct of the State-owned Chinese financial institutions and in particular their conduct as public bodies in the sense of Article 2(b) of the basic Regulation read in conjunction with Article 3(1)(a)(i) of the basic Regulation and in accordance with the relevant WTO case-law when providing loans to the exporting producer in the framework of the cooperation between the GOC and the GOE.

(113) To this aim, the Commission asked the GOE information about the overview of the financial sector of China, the role of policy banks such as CDB and EXIM in providing loans or export credits to Jushi Group. The Commission asked the GOE directly or through the GOC to forward the Appendix A to the request of information to the abovementioned banks.

(114) The GOE did not provide any of the information requested, and it claimed that it was not in possession of any information regarding entities located in China and rules applicable in China and that it had no jurisdiction to request such information. In the view of the GOE, by requesting such information from the GOE, the Commission violated the GOE’s rights of defence and the principle of sovereignty of states.

(115) The Commission disagreed with this view. As stated before, the GOE and the GOC decided to jointly cooperate to set-up the STEC-Zone so that the GOC’s subsidies could be attributed to the GOE. The Commission further noted that the GOE together with the GOC have established a management mechanism with three administrative levels via Article 8 of the 2016 Agreement on Egypt Suez Economic and Trade Cooperation Zone between the Ministry of Commerce of the PRC and the General Authority for the Suez Canal Economic Zone. This provision refers to the duty to cooperate with respect to issues affecting the operation of the zone (which may include situations were exports from that zone may be subject to countervailing duties by third countries). This mechanism provided the GOE with the ability to gather the requested information from the GOC. The Commission also considered that, in accordance to international law (Article 27 of the 1969 Vienna Convention on the Law of the Treaties), the GOC was deemed to honour its commitments with the GOE in good faith by replying to the request of information forwarded by the GOE.

(116) Therefore, the Commission considered that the GOE was in a position to retrieve the requested information from the GOC but failed to do so. Even if some of the requested information could only be provided by the GOC, the Commission considered that the lack of cooperation by the GOE and the GOC in this respect implied that the Commission could only base its conclusions on this aspect of the investigation on the information available. Neither the GOE nor any interested party (including the GOC) disputed the facts on the basis of which the Commission based its assessment (but only the legal characterisation of those facts).

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

3.3.1.2. EXIM and CDB bank

(118) In light of the non-cooperation of the GOE and the GOC explained in Section 3.2.1, the Commission resorted to the provisions of Article 28 of the basic Regulation in order to assess the conduct of EXIM and CDB as public bodies.

(119) In this respect, the applicable test to establish that a State-owned undertaking is a public body is as follows (43): ‘What matters is whether an entity is vested with authority to exercise governmental functions, rather than how that is achieved. There are many different ways in which government in the narrow sense could provide entities with authority. Accordingly, different types of evidence may be relevant to showing that such authority has been bestowed on a particular entity. Evidence that an entity is, in fact, exercising governmental functions may serve as evidence that it possesses or has been vested with governmental authority, particularly where such evidence points to a sustained and systematic practice. It follows, in our view, that evidence that a government exercises meaningful control over an entity and its conduct may serve, in certain circumstances, as evidence that the relevant entity possesses governmental authority and exercises such authority in the performance of governmental functions. We stress, however, that, apart from an express delegation of authority in a legal instrument, the existence of mere formal links between an entity and government in the narrow sense is unlikely to suffice to establish the necessary possession of governmental authority. Thus, for example, the mere fact that a government is the majority shareholder of an entity does not demonstrate that the government exercises meaningful control over the conduct of that entity, much less that the government has bestowed it with governmental authority. In some instances, however, where the evidence shows that the formal indicia of government control are manifold, and there is also evidence that such control has been exercised in a meaningful way, then such evidence may permit an inference that the entity concerned is exercising governmental authority.’

(120) The Commission sought information about State ownership as well as formal indicia of government control in the State-owned banks. It also analysed whether control had been exercised in a meaningful way. For this purpose, the Commission had to fully rely on facts available due to the refusal of the GOE and the State-owned banks to provide any evidence.

Ownership and formal indications of control

(121) As regards ownership and formal indicia of control by the GOC, in previous anti-subsidy investigations (44), the Commission found out that EXIM was formed and operates in accordance with ‘The Notice of Establishing Export-Import Bank of China’ issued by the State Council, as well as the Articles of Association of EXIM. According to its Articles of Association, the State directly nominates the management of EXIM. The Board of Supervisors is appointed by the State Council in accordance with the ‘Interim Regulations on the Boards of Supervisors in Key State-owned Financial Institutions’ (State Council Decree No 282) and other laws and regulations, and it is responsible to the State Council.

(122) The Articles of Association also mention that the Party Committee of EXIM plays a leading and political core role to ensure that policies and major deployment of the Party and the State are implemented by EXIM. The Party’s leadership is integrated into all aspects of corporate governance. The Articles of Association further state that EXIM is dedicated to supporting the development of foreign trade and economic cooperation, cross-border investment, the One Belt One Road Initiative, cooperation in international capacity and equipment manufacturing. Its scope of business includes short-term, medium-term and long-term loans as approved and in line with the State’s foreign trade and ‘going out’ policies, such as export credit, import credit, foreign contracted engineering loans, overseas investment loans, Chinese government foreign aid loans and export buyer loans.

(123) Moreover, according to its website (45), EXIM is ‘a state-funded and state-owned policy bank with the status of an independent legal entity. It is a bank directly under the leadership of the State Council and dedicated to supporting China’s foreign trade, investment and international economic cooperation’.

(124) With regard to CDB, in previous anti-subsidy investigations the Commission established that this bank is fully owned by the State itself (46). Since no information has been provided indicating otherwise concerning CDB, the Commission maintained the same conclusion in the present investigation.

Exercise of control in a meaningful manner

(125) The Commission further sought information about whether the GOC exercised meaningful control over the conduct of the State-owned bank with respect to its lending policies and assessment of risk, where they provided loans to the GFR industry. Because of the lack of cooperation from the GOE, the Commission resorted to best facts available and in particular to publicly available information and the findings in previous anti-subsidy investigations (47).

(126) The following regulatory documents have been taken into account in this respect: — Article 34 of the Law of the PRC on Commercial Banks (‘Bank law’); — Article 15 of the General Rules on Loans (implemented by the People’s Bank of China (‘PBOC’)); — The Temporary Provisions on Promoting Industrial Structure Adjustment (Decision No 40 2005 of the State Council) (‘Decision No 40’); — Implementing Measures of the China Banking Regulatory Commission (‘CBIRC’) for Administrative Licensing Matters for Chinese-funded Commercial Banks (Order of the CBIRC [2017] No 1); — Implementing Measures of the CBIRC for Administrative Licensing Matters relating to Foreign-funded Banks (Order of the CBIRC [2015] No 4); — Administrative Measures for the Qualifications of Directors and Senior Officers of Financial Institutions in the Banking Sector (CBIRC [2013] No 3).

(127) Reviewing these regulatory documents, the Commission found that financial institutions in the PRC are operating in a general legal environment that directs them to align themselves with the GOC’s industrial policy objectives when taking financial decisions, for the following reasons.

(128) With respect to EXIM, its public policy mandate is established in the notice of establishing the Import Export Bank of China as well as in its Articles of Association.

(129) At the general level, Article 34 of the Bank law, which applies to all financial institutions operating in China, provides that ‘Commercial banks shall conduct their business of lending in accordance with the needs of the national economic and social development and under the guidance of the industrial policies of the State’. Although Article 4 of the Bank Law states that, ‘Commercial banks shall, pursuant to law, conduct business operations without interference from any unit or individual. Commercial banks shall independently assume civil liability with their entire legal person property’, the investigation showed that Article 4 of the Bank law is applied subject to Article 34 of the Bank law, i.e. where the State establishes a public policy the banks implement it and follow State instructions.

(130) In addition, Article 15 of the General Rules on Loans provides that ‘In accordance with the State’s policy, relevant departments may subsidize interests on loans, with a view to promoting the growth of certain industries and economic development in some areas.’

(131) Similarly, Decision No 40 instructs all financial institutions to provide credit support specifically to ‘encouraged’ projects. Decision No 40 Chapter III refers to ‘The Guiding Catalogue of the Industrial Restructuring’ which is composed of three kinds of contents, namely encouraged project contents, limited projects content and eliminated projects content. According to Article XVII of the Decision, if ‘the investment project belongs to the encouragement content shall be examined and approved and put on records according to the relevant national regulations on investment; all financial institutions shall provide credit support according to the credit principles; the self-using equipment imported in the total amount of investment, with the exception of commodities in the Non-exempt Imported Commodities Content of Domestic Invested Projects (amended in 2000) issued by the Ministry of Finance, can be exempt from import duty and import links value-added tax, unless there are new regulations on the non-exempt investment projects content. Other favorite policies on the encouraged industrial projects shall be implemented according to relevant national Regulations’.

(132) The Catalogue for Guiding Industry Restructuring (2011 Version) (2013 Amendment) (48) lists under ‘Category I Encouragement’: ‘XII. Building Materials: […] 6. Technology development and production of alkali free glass fiber tank kiln wire drawing and high-performance glass fiber and products with an annual yield of 50 000 ton’.

(133) Projects relating to the production of GFR are therefore part of the ‘encouraged’ category.

(134) Decision No 40 hence confirms the previous finding with respect to the Bank law that banks exercise governmental authority in the form of preferential credit operations. The Commission also found that the China Banking and Insurance Regulatory Commission (‘CBIRC’) has far-reaching approval authority over all aspects of the management of all financial institutions established in the PRC (including privately owned and foreign owned financial institutions), such as (49): — approval of the appointment of all managers of the financial institutions, both at the level of headquarters and at the level of local branches. — Approval of the CBIRC is required for the recruitment of all levels of management, from the most senior positions down to branch managers, and even includes managers appointed in overseas branches as well as managers responsible for support functions (e.g. the IT managers); and — a very long list of administrative approvals, including approvals for setting up branches, for starting new business lines or selling new products, for changing the Articles of Association of the bank, for selling more than 5 % of their shares, for capital increases, for changes of domicile, for changes of organizational form, etc.

(135) On that basis, the Commission concluded that the GOC has created a normative framework that had to be adhered to by the managers and supervisors appointed by the GOC and accountable to the GOC. Therefore, the GOC relied on the normative framework in order to exercise control in a meaningful way over the conduct of the cooperating State-owned bank whenever it was providing loans to the GFR industry.

(136) In addition to the general legal framework, the following legal context applied to the loans provided by EXIM and CDB to Jushi Egypt.

(137) China-Africa TEDA and EXIM signed a strategic cooperation MOU on 6 November 2009, putting forward a package plan with a total amount of up to 6 billion CNY to carry out overall strategic cooperation in overseas trade and economic cooperation zones.

(138) On 7 November 2009, six African cooperation zones of economy and trade, among which the SETC-Zone, signed the Joint Meeting Pact between the Chinese Overseas (African) Economy and Trade Cooperation Zones and the China Africa Development Fund (‘CADF’), a subsidiary of CDB.

(139) Furthermore, in 2013, MOFCOM issued a ‘Notice on Aspects related to the China Development Bank support to the establishment and development of overseas economic and trade cooperation zones’. According to this Notice, MOFCOM and CDB will ‘provide policy support for investment and financing for enterprises and enterprises entering the zone in eligible cooperation zones’. CDB will ‘clarify the basic conditions for priority financing in the cooperation zone in accordance with the requirements of the Ministry of Commerce and the Ministry of Finance’, and CDB will ‘selectively support the projects under construction and cooperation projects that MOFCOM has paid close attention to with the host governments of the cooperation zone.’

(140) Article 4 of the Cooperation Agreement between China and Egypt 2016 states that ‘the Chinese Government identifies the Cooperation Zone as China’s overseas economic and trade cooperation zone. The Cooperation Zone … is entitled to relevant policy support and facilitation provide by the Chinese Government for overseas economic and trade cooperation zones’. In addition, according to article 5, the Chinese Government shall also support the Cooperation Zone by ‘encouraging relevant financial institutions to provide financing facility for …investment projects located within the Cooperation Zone, provided that the lending conditions and the loan use requirements are met’.

(141) Article 2(IV) of the ‘Cooperation Agreement on the Establishment of a Management Committee for China-Egypt Suez Economic and Trade Cooperation Zone’ implementing the above-mentioned agreement, further specifies that the Management Committee established between the relevant functional departments of Tianjin People’s Government and the General Authority for Suez Canal Economic Zone shall ‘try the utmost efforts to implement all incentive policies of the Chinese and Egyptian laws and regulations in a smooth manner’ and article 2(V) adds that it shall ‘coordinate and facilitate relevant financial institutions, including but not limited to banking institutions, insurance institutions and various funds which provide credit support for the Cooperation Zone and residential enterprises, and help the Cooperation Zone and residential enterprises to explore more financing channels’.

(142) The Commission established that all State-owned Chinese financial institutions, including EXIM and CDB, implemented the legal framework set out above in the exercise of governmental functions with respect to the GFR sector. Therefore, they were public bodies in the sense of Article 2(b) of the basic Regulation read in conjunction with Article 3(1)(a)(i) of the basic Regulation and in accordance with the relevant WTO case-law.

3.3.1.3. State-owned banks acting as public bodies

(143) In line with the conclusions reached in recitals above, the Commission decided to use facts available to determine whether those State-owned banks qualify as public bodies.

(144) In previous anti-subsidy investigations (50), the Commission established that the following banks, which had provided loans to the sampled groups of exporting producers in the investigations at hand, were partially or fully owned by the State itself or by State-held legal persons: China Development Bank, China Construction Bank, Industrial and Commercial Bank of China, Bank of Communications, China Everbright Bank, Postal Savings Bank, China Merchants Bank, Shanghai Pudong Development Bank, China Industrial Bank, Shenyang Rural Commercial Bank, Bank of Shanghai, Ningbo Bank, China CITIC Bank, China Guangfa Bank, China Bohai Bank, Huaxia Bank. Hankou Bank, Hubei Bank, Huishang Bank, Dongying Bank, Bank of Tianjin, Bank of Kunlun, Shanghai Rural Commercial Bank, China Industrial International Trust Limited, Daye Trust Co., Ltd., Sinotruk Finance Co., Ltd. Since no information has been provided indicating otherwise, the Commission maintained the same conclusion in the present investigation.

(145) The Commission further established, absent specific information from the financial institutions at issue indicating otherwise, GOC ownership and control based on formal indicia for the same reasons as set out in Section 3.3.1.2 above. In particular, based on facts available, managers and supervisors in State-owned banks would appear to be appointed by the GOC and be accountable to the GOC in the same manner as in EXIM.

(146) With regard to the exercise of control in a meaningful manner, the Commission considered the normative framework analysed in Section 3.3.1.2 above applies to them in an identical manner. Absent any indication to the contrary, based on facts available, the lack of concrete evidence of creditworthiness assessments is valid for them in the same manner, so that the analysis on the concrete application of the normative framework in Section 3.3.1.2 above applies to them in an identical manner.

(147) On that basis, the Commission concluded that the other State-owned banks, which provide loans to the sampled companies, are public bodies within the meaning of Article 2(b) read in conjunction with Article 3(1)(a)(i) of the basic Regulation.

3.3.1.4. Conclusion on State owned financial institutions

(148) In light of the above considerations, the Commission established that all State-owned Chinese financial institutions that provided loans or financial leasing to the exporting producer or to its group are public bodies within the meaning of Article 2(b) read in conjunction with Article 3(1)(a)(i) of the basic Regulation.

(149) In addition, even if the State-owned financial institutions were not to be considered as public bodies, the Commission established that they would be considered entrusted and directed by the GOC to carry out functions normally vested in the government within the meaning of Article 3(1)(a)(iv) of the basic Regulation for the same reasons, as set out in recitals 131 to 133 below. Thus, their conduct would be attributed to the GOC in any event.

3.3.1.5. Entrustment or direction of private financial institutions

(150) The Commission then turned to the remaining financial institutions. The following financial institutions were considered to be privately owned, based on the findings established in previous anti-subsidy investigations (51), and complemented by publicly available information: China Minsheng Bank, Sumitomo Mitsui Banking (China) Co., Ltd, Standard Chartered Bank, Ping An Bank. The Commission analysed whether these financial institutions had been entrusted or directed by the Government of China to grant subsidies to the GFR sector within the meaning of Article 3(1)(a)(iv) of the basic Regulation.

(151) According to the WTO Appellate Body, ‘entrustment’ occurs where a government gives responsibility to a private body and ‘direction’ refers to situations where the government exercises its authority over a private body (52). In both cases, the government uses a private body as a proxy to make the financial contribution, and ‘in most cases, one would expect entrustment or direction of a private body to involve some form of threat or inducement’ (53). At the same time, paragraph (iv) does not allow Members to impose countervailing measures to products ‘whenever the government is merely exercising its general regulatory powers’ (54) or where government intervention ‘may or may not have a particular result simply based on the given factual circumstances and the exercise of free choice by the actors in that market’ (55). Rather, entrustment or direction implies ‘a more active role of the government than mere acts of encouragement’ (56).

(152) The Commission noted that the normative framework concerning the industry mentioned in Section 3.3.1.2 above applies to all financial institutions in the PRC, including privately owned financial institutions. To illustrate this, the Bank Law and the various orders of the CBIRC cover all Chinese-funded and foreign-invested banks under the management of the CBIRC.

(153) In the absence of any divergent information received from the private financial institutions, the Commission concluded that, in so far as the GFR industry is concerned, all financial institutions (including private financial institutions) operating in China under the supervision of the CBIRC have 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 and provide loans at preferential rates to the GFR industry.

(154) In addition, the normative framework applying to all banks in China is much wider than only the two regulations governing the CBIRC, as shown in recital 106 above.

(155) With regard to the exercise of control in a meaningful manner, the Commission considered that the normative framework analysed in Section 3.3.1.2 above applies to them in an identical manner. Absent any indication to the contrary, based on facts available, the lack of concrete evidence of creditworthiness assessments is valid for them in the same manner as for the cooperating State-owned bank, so that the analysis on the concrete application of the normative framework in Section 3.3.1.2 above applies to them in an identical manner.

(156) On that basis, the Commission concluded that the other State-owned banks, which provide loans 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.

3.3.1.6. Credit ratings

(157) In previous anti-subsidy investigations (57), the Commission already determined that domestic credit ratings awarded to Chinese companies were not reliable, based on a study published by the International Monetary Fund (58), showing a discrepancy between international and Chinese credit ratings, combined with the findings of the investigation concerning the sampled companies. Indeed, according to the IMF, over 90 % of Chinese bonds are rated AA to AAA by local rating agencies. This is not comparable to other markets, such as the EU or the US. For example, less than 2 % of firms enjoy such top-notch ratings in the US market. Chinese credit rating agencies are thus heavily skewed towards the highest end of the rating scale. They have very broad rating scales and tend to pool bonds with significantly different default risks into one broad rating category (59).

(158) In addition, foreign rating agencies, such as Standard and Poor’s and Moody’s, typically apply an uplift over the issuer’s baseline credit rating based on an estimate of the firm’s strategic importance to the Chinese Government and the strength of any implicit guarantee when they rate Chinese bonds issued overseas (60). Fitch for example clearly indicates, where applicable, that such guarantees are a key driver underlying its credit ratings of Chinese companies (61).

(159) On the basis of publicly available information, the Commission first determined that the State can exercise a certain influence over the credit rating market. According to two studies published in 2016, there were around 12 credit rating agencies active on the Chinese market, a majority of which are State-owned. In total, 60 % of all rated corporate bonds in China had been rated by a State-owned ratings agency (62).

(160) In previous investigations (63), the GOC confirmed that there were 12 credit rating agencies active on China’s bond market, among which 10 domestic rating agencies, including Global Credit Rating Co. Ltd, Shanghai Brilliance Credit Rating & Investors Service Co. Ltd, Golden Credit Rating International Co. Ltd, China Chengxin Securities Rating Co. Ltd, Pengyuan Credit Rating Co. Ltd, Shanghai Fareast Credit Rating Co., Ltd, China Bond Rating Co. Ltd, China Securities Index Co. Ltd, Shanghai Credit Information Services Co. Ltd There were also 2 Sino-foreign joint venture credit rating agencies, namely China Lianhe Credit Rating Co. Ltd, and China Chengxin International Credit Rating Co., Ltd. in the absence of information to the contrary, the Commission considered that the situation has not changed.

(161) Second, there is no free entrance on the Chinese credit rating market. It is essentially a closed market, since rating agencies need to be approved by the China Securities Regulatory Commission (‘CSRC’) or the PBOC before they can start operations (64). The PBOC announced mid-2017 that overseas credit rating agencies would be allowed to carry out credit ratings on part of the domestic bond market, under certain conditions. However, during the investigation period, no foreign credit rating agency had been admitted yet (65). Nevertheless, in the meantime, foreign agencies did establish joint ventures with some local credit rating agencies, which provide credit ratings for domestic bond issues. However, these ratings follow Chinese rating scales and are thus not exactly comparable with international ratings, as explained above.

(162) Finally, a recent study performed by the PBOC itself confirms the Commission’s findings, stating in its conclusions that ‘if the investment level of foreign bonds is set to international rating BBB-and above, then the domestic bond investment grade may be rated at AA-level and above, taking into account the difference between the average domestic rating and the international rating of 6 or more notches’ (66).

(163) In view of the situation described in recitals 137 to 142 above, the Commission concluded that Chinese credit ratings do not provide a reliable estimation of the credit risk of the underlying asset. On this basis, even the company of the exporting producer or its group were awarded a good credit rating by a Chinese rating agency, the Commission concluded that such ratings are not reliable. Those ratings were also distorted by the policy objectives to encourage key strategic industries, like GFR.

3.3.1.7. Benefit and calculation of the subsidy amount

(164) As noted in recital 85, the Commission considered that, in principle, for the beneficiary located in Egypt, it would be appropriate to inquire whether these recipients of the loans received better terms than they would have received on the Egyptian financial market. The Commission verified this point and confirmed that the amount of subsidisation would be higher when using comparable borrowing rates in Egypt (17,8 %) (67). However, in view of the exceptional circumstances mentioned in recital 86 above, the Commission calculated the amount of the countervailable subsidy taking into account the fact that the recipients obtained the preferential financing in China. For this calculation, the Commission assessed the benefit conferred on the recipients during the investigation period. According to Article 6(b) of the basic Regulation, the benefit conferred on the recipients is the difference between the amount of interest that the company pays on the preferential loan and the amount that the company would pay for a comparable commercial loan obtainable on the market.

(165) The Commission decided to establish the market rates for the preferential loans of EXIM and CDB with respect to hypothetical benchmarks for Chinese market investors in accordance with Article 6(b) of the basic Regulation. Because of lack of cooperation, no further details were provided by this bank(s). Therefore, the Commission decided to use the same calculation methodology as for other loans denominated in foreign currencies, and issued by Chinese financial institutions in the PRC, and added the risk premium linked to the investment in Egypt as follows.

(166) The Commission thus first established the credit rating of Jushi Egypt, reflecting the financial situation of the company. The Commission noted that the various companies in the CNBM Group were awarded ratings ranging between AA- and AA+ by a Chinese credit rating agency. In light of the overall distortions of Chinese credit ratings mentioned in recitals 137 to 143, the Commission concluded that this rating is not reliable.

(167) Thus, the Commission considered that the overall financial situation of the Jushi Group corresponds to a BB rating, which is the highest rating that does no longer qualify as ‘investment grade’. In view of the existence of revolving loans, the Commission concluded that the use of US B (instead of BB) corporate bonds would be more appropriate to determine the market-based benchmark.

(168) In line with other loans denominated in foreign currencies and issued by Chinese financial institutions in the PRC, B rated corporate bonds issued in USD were thus used to determine an appropriate benchmark. Jushi Egypt is located in a country which was subject to civil and political unrest, as well as various terrorist attacks at the time when the loans were granted, and thus has a credit risk different from Chinese companies related to the external conditions prevailing in the country itself. As a result, the Commission added a mark-up to the benchmark rate in order to integrate the country risk into the market rate.

(169) The premium related to country risk was determined based on the OECD classification of country risk for export credits, as well as the corresponding minimum premium rate set by the OECD (68). The country risk for loans provided by EXIM bank was established at 2,37 % and 2,44 % for loans provided by CDB.

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

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

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

3.3.2. Loans from policy banks to Jushi Egypt via the parent company Jushi in China

(173) Over the period 2014 – end of investigation period, Jushi (China) provided a series of inter-company loans to Jushi Egypt for a total amount of around 281.5 million USD.

(174) The Commission found, however, that Jushi (China) had itself financed these intercompany loans via external financing from Chinese financial institutions. In other words, rather than Jushi Egypt getting the loans directly from the Chinese banks, Jushi (China) obtained the preferential financing from these institutions and then allocated the benefit of those loans to its manufacturing activities in Egypt (Jushi Egypt). The loans provided directly by EXIM and CDB, are not in themselves sufficient to provide the total amount of external financing needed to develop the manufacturing activities in the SETC-Zone. Thus, the additional indirect financing through inter-company loans was needed. The Commission could not find a specific bank loan directly linked to the project in Egypt. However, in 2014, Jushi (China) issued a bond to replace various bank loans in order to improve its debt structure. This bond, which makes various references to the capital needs for the project in Egypt, confirms that Jushi (China) was in need of external financial assistance to assist its manufacturing activities in Egypt. Therefore, the Commission considered that the underlying preferential loans channelled through Jushi (China) are also attributable to the GOE in the same way as the direct loans provided to Jushi Egypt by the Chinese financial institutions.

(175) Since all of these loans can in essence be assimilated to loans provided by the GOC to a Chinese company, which then allocates the benefits to its manufacturing activities elsewhere, the Commission decided to treat these loans as any other domestic Chinese loan to a Chinese GFR producer. In this context, as mentioned in recital 128 above, the Commission found that all State-owned Chinese financial institutions that provided loans to Jushi (China) and Jushi Egypt were public bodies in the sense of Article 2(b) of the basic Regulation read in conjunction with Article 3(1)(a)(i) of the basic Regulation and in accordance with the relevant WTO case-law.

(176) The Commission then calculated the amount of the countervailable subsidy. In this respect, the Commission noted that the nominal interest rate charged by Jushi (China) to Jushi Egypt was 7,5 %. However, none of the financing provided to Jushi (China) had such a high interest rate. In fact, the average interest rate charged to Jushi (China) during the investigation period amounted to around 4 %. The Commission thus compared the average interest rate that Jushi (China) pays on the outstanding amount of the intercompany loan during the investigation period with the amount that the company would have to pay for a comparable commercial loan obtainable on the market.

(177) In order to take into account the increased risk exposure of the banks highlighted by the existence of revolving loans, the Commission thus decided to move down one notch in the risk rating scale and to use US B (instead of BB) corporate bonds to determine the market–based benchmark.

(178) All the elements concerning this financing described above in this section clearly show that Jushi (China) allocated all the benefits from the preferential financing received from the Chinese financial institutions to Jushi Egypt. For all these reasons the benefit thus calculated was attributed to Jushi Egypt.

(179) Following final disclosure, Jushi Egypt argued that the Commission should not have downgraded Jushi Egypt’s credit rating from AA to B based on the fact that Jushi Egypt did not honour its repayment schedule to its parent company or that, in some instances, Jushi Egypt’s parent company repaid loans on its behalf. The fact that Jushi Egypt’s corporate group decided that it was better for another entity in the group to bear the costs so as to preserve cash flow in another entity does not indicate that this other entity would not have honoured its obligation had this obligation been towards a banking institution.

(180) First, the Commission noted that it did not find any credit rating awarded by any external party to Jushi Egypt, and that Jushi Egypt did not provide any evidence to this end either. Jushi Egypt therefore never had an ‘AA’ credit rating as a starting point. The Commission thus had to determine Jushi Egypt’s credit rating using the facts available in the case. In view of the significant amount of the intercompany loans from the parent company, as well as the fact that Jushi Group had operated as a guarantor for the loans from CDB and EXIM, the Commission determined that Jushi Egypt’s credit rating was closely linked to the rating of its parent company, which had been set at ‘BB’, as mentioned in recital 168 above. This BB credit rating was thus the starting point for the Commission.

(181) Second, as explained in recital 178 above, the Commission decided to move down one notch in the rating scale, i.e. from BB to B, in view of the lack of repayment of its liabilities over the years. Indeed, the Commission noted that although the loans to CDB and EXIM were repaid according to schedule, the total liabilities of the company actually increased over the years. As such, Jushi Egypt replaced external debt by intragroup debt, but did not actually honour its liabilities towards the banking institutions itself. Contrary to the statements of Jushi Egypt, there are also indications that the company would not have been able to honour its obligations if all of its debtors had been external banking institutions. For example, although the company was loss-making in the years 2015 and 2016, and had a negative equity in 2016, it still made large capital repayments to CDB, totalling 54 million USD (around 546 million EGP) in these years. The company would thus not have been in a position to honour its external obligations without financial support from the parent company.

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

(183) 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 Union.

(184) The subsidy amounts found for preferential financing through loans from Chinese policy banks, directly or via the parent company Jushi (China), amounted to 6,46 % for Jushi Egypt.

3.3.3. Support for capital investment

(185) In addition to the direct loans and intercompany loans, Jushi Egypt needed to cover its financial needs also by in