EXCLUSIVE- Cabinet approves final amendments on auto manufacturing incentives package: The Madbouly Cabinet has approved final amendments to the Customs Act that will provide customs discounts to car manufacturers in return for increasing their use of local components, two government officials told Enterprise. The updated amendments split customs breaks into three tiers according to the percentage of local content used, streamlining previous plans for a more complex five-tier system. Customs discounts will be awarded according to the following rules:

• Manufacturers sourcing less than 45% of their components from local companies will pay an effective customs rate of 20% instead of 40%, provided they commit to increasing their use of local components;
• Manufacturers using domestic sources for 45% of their components will pay a 5.6% customs rate on imported components;
• Manufacturers sourcing more than 45% of their components domestically will get the choice of paying the 5.6% rate on individual components or paying an effective customs rate of 15-20%;

• A customs rate of 2% will be applied to capital goods and machinery.

Background: The government scrapped the so-called automotive directive last summer due to opposition in the House of Representatives and among auto importers. The package of incentives was designed to allow local manufacturers, whom industry backers argue support tens of thousands of skilled direct and indirect jobs, to better compete with EU, Moroccan and Turkish imports that receive customs breaks here in Egypt. The strategy was sharply opposed by our EU trade partners — particularly Germany, whose chancellor Angela Merkel is said to have addressed the issue directly at the highest levels of government in Egypt.