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Egyptian exports have Israeli component

Many brands have links to a scheme that allows Egyptian manufacturers to export garments to the US tax-free so long as Israeli materials are used.

The program, known as Qualifying Industrial Zones (QIZ), was enacted by the US in 1996 in an effort to normalise relations between Israel, Egypt and Jordan through economic cooperation.

Through QIZs, Israeli manufacturers supply at least 10.5 per cent of the products used in a garment. Then Egyptian factory workers sew the final product which is exported to the US and exempted from taxes of between five per cent and 40 per cent, but typically at a 15 per cent average.

When a consumer buys garments from brands that include Gap, Levi’s and Ralph Lauren, there is no mention of the Israeli component on clothes’ labels. They only say Made in Egypt.

Since its launch in Egypt, the program has more than doubled garment exports to the US.

Products enter the US as Egyptian, but if a product is 100 per cent Egyptian, so not part of QIZ, it is not exempt from tax.

However QIZ is hated in Egypt for linking Egypt to the Israelis.

Egypt is highly attractive as a sourcing hub for garment and textile companies as a result of its low wages and duty-free access to the US market, the largest clothes buyer on the planet.

 
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