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5 Appendix 1: Qualifying Industrial Zones
Egypt signed a Qualifying Industrial Zones (QIZ) protocol with the US and Israel in
December 2004, to avoid the negative impact of the expiration of the ATC quotas and
the threat it poses on the textile and clothing industry in Egypt. This signing came as a
response to demands by producers and workers in the textile industry, which is
considered one of the oldest industries in Egypt. Its assets are estimated to be 15
billion Egyptian pounds, it employees reach almost 1 million and its exports
constitute almost 30 percent of manufactured exports.
QIZ are geographically designated areas in Egypt determined by the Egyptian
government and approved by the US government where industrial products originated
in Egypt and satisfying agreed-upon Israeli content are granted free entry into the U.S.
customs territories.
Products must meet the value content requirements of 35 percent, where the sum of
materials and direct costs of processing in QIZ and Israel must exceed 35 percent of
the finished product’s value (ex. factory price). QIZ factories and Israeli side each
contribute and maintain at least one third (11.7 percent) of the minimum 35 percent of
local content required, on a quarterly basis. Products must be exported to the US
directly from QIZ.
Advantages of QIZ:
Duty free access to the US Market: This preferential treatment entails free access to
all Egyptian products manufactured in QIZ to the US market without tariff or nontariff
barriers, as long as these products comply with ROO requirements.
Simple requirements to benefit from the free access: The required rules state that
35 percent of the commodity's value must be manufactured in an Egyptian QIZ, of
which a minimum of 11.7 percent Israeli inputs. Although, it should be noted that a
number of exporters are complaining from the increase in the prices of Israeli’s inputs
and are asking to reduce the 11.7 percent Israeli content to the 7 percent applied in
Jordan.
Flexible application of the requirements: The protocol has established flexible rules
such that the Israeli content is not revised for every single shipment of exports to the
USA, provided that this factory's cumulative exports every quarter satisfy the agreed
upon ratio.
No quotas on exported products: The free access of the products is not limited by
any quotas on quantities nor seasons.
Open ended validity of the protocol: As can be seen from reading the actual
protocol, it is not timed and has no preset end date.
The Geographic coverage area of QIZ includes some zones of Greater Cairo,
Alexandria, Suez Canal area and four Middle Delta governorates. Industries that can
benefit from QIZ include Textile/Apparel, food and beverage, leather products,
footwear and glassware.