The European Commission has opened an in-depth investigation to assess, under the Foreign Subsidies Regulation (‘FSR), the activities of Nuctech in the production and sale of threat detection systems (‘TDS) and the provision of related services within the EU. The Commission has preliminary concerns that Nuctech may have been granted foreign subsidies that could distort the EU internal market.
Nuctech is headquartered in the Peoples Republic of China (‘PRC) and forms part of the Tsinghua Tongfang group, which is indirectly controlled by the PRC. Nuctech is active worldwide in the manufacturing and sale of TDS, such as security and inspection scanners for airports, ports, or customs points in railways or roads located at borders, as well as the provision of related services.
The Commissions preliminary concerns
The Commission started this investigation on its own initiative (ex officio) in April 2024 by conducting inspections at the EU premises of Nuctech in Poland and the Netherlands. Based on this preliminary investigation, a number of measures granted by the PRC to Nuctech may constitute foreign subsidies distorting the internal market.
The possible foreign subsidies take the form of grants, preferential tax measures, and preferential financing in the form of loans. The Commission has preliminary concerns that the foreign subsidies may have improved Nuctechs competitive position in the internal market and may have negatively affected competition. This may have happened through Nuctech offering, in tender contracts, prices and conditions that cannot be reasonably matched by other market players, for the supply of large TDS and for the provision of TDS-related services.
In its in-depth investigation, the Commission will assess whether the preliminary findings are confirmed.
The opening of an in-depth investigation does not prejudge the outcome of the investigation.
Company
This ex officio procedure concerns Tsinghua Tongfang and its subsidiaries active in the EU in the TDS sector.
Tsinghua Tongfang is a State-controlled entity headquartered in the PRC, which is active in nuclear technology applications used, among others, for TDS, the information industry, and energy conservation and environmental protection.
Nuctech Technology, headquartered in the PRC, is controlled by Tsinghua Tongfang. Nuctech Technology indirectly controls Nuctech Warsaw, based in Poland, and InsTech Netherlands, formerly known as Nuctech Netherlands, based in the Netherlands. Nuctech Technology and its subsidiaries are active in the production, sale and maintenance of TDS, including security and inspection scanners for airports, ports, or customs points at railways and roads located at borders.
The procedure under the Foreign Subsidies Regulation
The FSR started to apply on 13 July 2023. The Regulation enables the Commission to address distortions caused by foreign subsidies and thereby allows the EU to ensure a level playing field for all companies operating in the internal market while remaining open to trade and investment.
According to the FSR, the Commission has the power to initiate investigations on its own initiative.
Where the Commission, based on the preliminary review, has sufficient indications that a company received a foreign subsidy distorting the internal market, it will adopt a decision to open an in-depth investigation. At the end of its in-depth investigation the Commission may (i) accept commitments proposed by the company if they fully and effectively remedy the distortion, (ii) impose redressive measures, or (iii) issue a no objection decision.
More information is available on the Commissions competition website, in the Commissions public case register under the case number FS.100068.
