[Federal Register: April 20, 2001 (Volume 66, Number 77)]
[Notices]
[Page 20240-20251]
DEPARTMENT OF COMMERCE
International Trade Administration
[C-533-821]
Notice of Preliminary Affirmative Countervailing Duty
Determination and Alignment of Final Countervailing Determination With
Final Antidumping Duty Determinations: Certain Hot-Rolled Carbon Steel
Flat Products From India
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of preliminary affirmative countervailing duty
determination.
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EFFECTIVE DATE: April 20, 2001.
FOR FURTHER INFORMATION CONTACT: Eric B. Greynolds at (202) 482-6071 or
Robert Copyak (202) 482-2209, Office of AD/CVD Enforcement VI, Group
II, Import Administration, International Trade Administration, U.S.
Department of Commerce, Room 4012, 14th Street and Constitution Avenue,
NW., Washington, DC 20230.
Preliminary Determination
The Department of Commerce (the Department) preliminarily
determines that countervailable subsidies are being provided to certain
producers and exporters of certain hot-rolled carbon steel flat
products (subject merchandise) from India. For information on the
estimated countervailing duty rates, please see the ``Suspension of
Liquidation'' section of this notice.
SUPPLEMENTARY INFORMATION:
Petitioners
The petition in this investigation was filed by Bethlehem Steel
Corporation, Gallatin Steel Company, IPSCO Steel Inc., LTV Steel
Company, Inc., National Steel Corporation, Nucor Corporation, Steel
Dynamics, Inc., U.S. Steel Group, a unit of USX Corporation, Weirton
Steel Corporation, Independent Steelworkers Union, and the Independent
Steelworkers of America (the petitioners).
Case History
Since the publication of the notice of initiation in the Federal
Register (see Notice of Initiation of Countervailing Duty
Investigations: Certain Hot-Rolled Carbon Steel Flat Products from
Argentina, India, Indonesia, South Africa, and Thailand, 65 FR 77580
(December 12, 2000) (Initiation Notice), the following events have
occurred: On December 7, 2000, we issued countervailing duty
questionnaires to the Government of India (GOI).\1\ On January 26,
2001, we received questionnaire responses from the Steel Authority of
India Limited (SAIL), Essar Steel Limited (Essar), Ispat Industries
Limited (Ispat), the Tata Iron and Steel Company Limited (TISCO),
(collectively, producers/exporters of subject merchandise), and the
GOI. Beginning on February 16, 2001, we issued supplemental
questionnaires to SAIL, Essar, Ispat, TISCO, and the GOI. Beginning on
March 9, 2001, we received supplemental questionnaire responses from
the GOI and the producers/exporters of subject merchandise.
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\1\ Upon the issuance of the questionnaire, we informed the GOI
that it was the government's responsibility to forward the
questionnaires to all producers/exporters that shipped subject
merchandise to the United States during the period of investigation.
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We note that the GOI's January 26, 2001 questionnaire response
indicated that Jindal Iron and Steel (Jindal) shipped subject
merchandise to the United States during the POI. However, we did not
receive a questionnaire response from Jindal.
On February 22, 2001, petitioners submitted financial information
for Ispat and Essar and requested that the Department initiate
creditworthy investigations for the two companies for fiscal years 1997
through 2000. In the same submission, petitioners submitted additional
financial information for SAIL covering fiscal years 1997 and 1998 and
requested that the Department reverse its decision in the Initiation
Notice and initiate creditworthy investigations of SAIL for these
years.
On January 18, 2001, we issued a partial extension of the due date
for this preliminary determination from February 7, 2001, to March 26,
2001. See Certain Hot-Rolled Carbon Steel Flat Products from India,
Indonesia, South Africa, and Thailand: Extension of Time Limit for
Preliminary Determinations in Countervailing Duty Investigations,
(Extension Notice) 66 FR 8199 (January 30, 2001).
On March 26, 2001, we amended the Extension Notice to take the full
amount of time to issue this preliminary determination. The extended
due date is April 13, 2001. See Certain Hot-Rolled Carbon Steel Flat
Products From India, Indonesia, South Africa, and Thailand:
[[Page 20241]]
Extension of Time Limit for Preliminary Determinations in
Countervailing Duty Investigations, 66 FR 17525 (April 2, 2001).
Scope of the Investigation
The merchandise subject to this investigation is certain hot-rolled
flat-rolled carbon-quality steel products of a rectangular shape, of a
width of 0.5 inch or greater, neither clad, plated, nor coated with
metal and whether or not painted, varnished, or coated with plastics or
other non-metallic substances, in coils (whether or not in successively
superimposed layers), regardless of thickness, and in straight lengths,
of a thickness of less than 4.75 mm and of a width measuring at least
10 times the thickness. Universal mill plate (i.e., flat-rolled
products rolled on four faces or in a closed box pass, of a width
exceeding 150 mm, but not exceeding 1250 mm, and of a thickness of not
less than 4 mm, not in coils and without patterns in relief) of a
thickness not less than 4.0 mm is not included within the scope of this
investigation.
Specifically included within the scope of this investigation are
vacuum degassed, fully stabilized (commonly referred to as
interstitial-free (IF)) steels, high strength low alloy (HSLA) steels,
and the substrate for motor lamination steels. IF steels are recognized
as low carbon steels with micro-alloying levels of elements such as
titanium or niobium (also commonly referred to as columbium), or both,
added to stabilize carbon and nitrogen elements. HSLA steels are
recognized as steels with micro-alloying levels of elements such as
chromium, copper, niobium, vanadium, and molybdenum. The substrate for
motor lamination steels contains micro-alloying levels of elements such
as silicon and aluminum.
Steel products to be included in the scope of this investigation,
regardless of definitions in the Harmonized Tariff Schedule of the
United States (HTS), are products in which: (i) Iron predominates, by
weight, over each of the other contained elements; (ii) the carbon
content is 2 percent or less, by weight; and (iii) none of the elements
listed below exceeds the quantity, by weight, respectively indicated:
1.80 percent of manganese, or
2.25 percent of silicon, or
1.00 percent of copper, or
0.50 percent of aluminum, or
1.25 percent of chromium, or
0.30 percent of cobalt, or
0.40 percent of lead, or
1.25 percent of nickel, or
0.30 percent of tungsten, or
0.10 percent of molybdenum, or
0.10 percent of niobium, or
0.15 percent of vanadium, or
0.15 percent of zirconium.
All products that meet the physical and chemical description
provided above are within the scope of this investigation unless
otherwise excluded. The following products, by way of example, are
outside or specifically excluded from the scope of this investigation:
Alloy hot-rolled steel products in which at least one of
the chemical elements exceeds those listed above (including, e.g., ASTM
specifications A543, A387, A514, A517, A506).
SAE/AISI grades of series 2300 and higher.
Ball bearings steels, as defined in the HTS.
Tool steels, as defined in the HTS.
Silico-manganese (as defined in the HTS) or silicon
electrical steel with a silicon level exceeding 2.25 percent.
ASTM specifications A710 and A736.
USS Abrasion-resistant steels (USS AR 400, USS AR 500).
All products (proprietary or otherwise) based on an alloy
ASTM specification (sample specifications: ASTM A506, A507).
Non-rectangular shapes, not in coils, which are the result
of having been processed by cutting or stamping and which have assumed
the character of articles or products classified outside chapter 72 of
the HTS.
The merchandise subject to this investigation is classified in the
HTS at subheadings: 7208.10.15.00, 7208.10.30.00, 7208.10.60.00,
7208.25.30.00, 7208.25.60.00, 7208.26.00.30, 7208.26.00.60,
7208.27.00.30, 7208.27.00.60, 7208.36.00.30, 7208.36.00.60,
7208.37.00.30, 7208.37.00.60, 7208.38.00.15, 7208.38.00.30,
7208.38.00.90, 7208.39.00.15, 7208.39.00.30, 7208.39.00.90,
7208.40.60.30, 7208.40.60.60, 7208.53.00.00, 7208.54.00.00,
7208.90.00.00, 7211.14.00.90, 7211.19.15.00, 7211.19.20.00,
7211.19.30.00, 7211.19.45.00, 7211.19.60.00, 7211.19.75.30,
7211.19.75.60, and 7211.19.75.90. Certain hot-rolled flat-rolled
carbon-quality steel covered by this investigation, including: vacuum
degassed fully stabilized; high strength low alloy; and the substrate
for motor lamination steel may also enter under the following tariff
numbers: 7225.11.00.00, 7225.19.00.00, 7225.30.30.50, 7225.30.70.00,
7225.40.70.00, 7225.99.00.90, 7226.11.10.00, 7226.11.90.30,
7226.11.90.60, 7226.19.10.00, 7226.19.90.00, 7226.91.50.00,
7226.91.70.00, 7226.91.80.00, and 7226.99.00.00. Subject merchandise
may also enter under 7210.70.30.00, 7210.90.90.00, 7211.14.00.30,
7212.40.10.00, 7212.40.50.00, and 7212.50.00.00. Although the HTS
subheadings are provided for convenience and U.S. Customs purposes, the
Department's written description of the merchandise under investigation
is dispositive.
In the scope section of the Initiation Notice for this
investigation, the Department encouraged all parties to submit comments
regarding product coverage by December 26, 2000. The Department is
presently considering a request to amend the scope of these
investigations to exclude a particular specialty steel product. We will
issue our determination on this request prior to the final
determination.
The Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions effective January 1, 1995, the effective
date of the amendments made to the Tariff Act of 1930 (the Act) by the
Uruguay Round Agreements Act (URAA). In addition, unless otherwise
indicated, all citations to the Department's regulations are to the
regulations codified at 19 CFR part 351 (2000).
Injury Test
Because India is a ``Subsidy Agreement Country'' within the meaning
of section 701(b) of the Act, the International Trade Commission (ITC)
is required to determine whether imports of the subject merchandise
from India materially injure or threaten material injury to a U.S.
industry. On January 4, 2001, the ITC published its preliminary
determination finding that there is a reasonable indication that an
industry in the United States is being materially injured, or
threatened with material injury, by reason of imports from India of
subject merchandise. See Hot-Rolled Steel Products from Argentina,
China, India, Indonesia, Kazakhstan, Netherlands, Romania, South
Africa, Taiwan, Thailand, and Ukraine, 66 FR 805 (January 4, 2001).
Alignment With Final Antidumping Duty Determination
On March 23, 2001, petitioners submitted a letter requesting
alignment of the final determination in this investigation with the
final determination in the companion antidumping duty investigation.
Therefore, in accordance with section 705(a)(1) of the Act, we are
aligning the final determination in this investigation with the final
determination in the
[[Page 20242]]
antidumping duty investigation of hot-rolled carbon steel flat products
from India.
Period of Investigation
The period of investigation (POI) for which we are measuring
subsidies is April 1, 1999, through March 31, 2000, which corresponds
to the period for producers/exporters' most recently completed fiscal
year.
Use of Facts Available
Jindal failed to respond to the Department's questionnaire.
Sections 776(a)(2)(A) and 776(a)(2)(B) of the Act require the use of
facts available when an interested party withholds information that has
been requested by the Department, or when an interested party fails to
provide the information requested in a timely manner and in the form
required. Jindal failed to provide information explicitly requested by
the Department; therefore, we must resort to the facts otherwise
available. Because Jindal failed to provide any requested information,
sections 782(d) and (e) of the Act are not applicable.
Section 776(b) of the Act provides that in selecting from among the
facts available, the Department may use an inference that is adverse to
the interests of a party if it determines that a party has failed to
cooperate to the best of its ability. In this investigation, the
Department requested that all producers/exporters in India that shipped
subject merchandise to the United States during the POI submit the
information requested in our initial questionnaire. However, Jindal, a
producer/exporter that shipped subject merchandise to the United States
during the POI, did not participate in the investigation.
The Department finds that by not providing the necessary
information specifically requested by the Department and by failing to
participate in any respect in this investigation, Jindal has failed to
cooperate to the best of its ability. Therefore, in selecting facts
available, the Department determines that an adverse inference is
warranted.
Section 776(b) of the Act indicates that, when employing an adverse
inference, the Department may rely upon information derived from (1)
the petition; (2) a final determination in a countervailing duty or an
antidumping investigation; (3) any previous administrative review, new
shipper review, expedited antidumping review, section 753 review; or
(4) any other information placed on the record. See also 19 CFR
Sec. 351.308(c). As adverse facts available in this preliminary
determination, we have calculated Jindal's net subsidy rate by taking
the sum of the highest company-specific rates calculated under each
program. We note that, in determining Jindal's adverse facts available
rate, we did not include in our calculations any net subsidy rates
stemming from programs that were provided exclusively to public sector
companies such as under the GOI's loan guarantee program or to a
particular producer/exporter of subject merchandise such as under the
GOI's forgiveness of loans to SAIL. In addition, we also did not
include a subsidy rate for the Steel Development Fund because,
according to the response of the GOI, Jindal was not eligible for this
program. We further note that none of the company-specific program
rates used to derive Jindal's net subsidy rate were determined on the
basis of facts available.
For more information on the rate attributed to Jindal, see the
``Suspension of Liquidation'' section of this preliminary
determination.
Subsidies Valuation Information
Allocation Period
Under section 351.524(d)(2) of the CVD Regulations, we will presume
the allocation period for non-recurring subsidies to be the average
useful life (AUL) of renewable physical assets for the industry
concerned, as listed in the Internal Revenue Service's (IRS) 1977 Class
Life Asset Depreciation Range System, as updated by the Department of
the Treasury. The presumption will apply unless a party claims and
establishes that these tables do not reasonably reflect the AUL of the
renewable physical assets for the company or industry under
investigation, and the party can establish that the difference between
the company-specific or country-wide AUL for the industry under
investigation is significant.
In this investigation, the Department is examining non-recurring
subsidies. Regarding non-recurring subsidies, we have allocated, where
applicable, all of the non-recurring subsidies of the producers/
exporters of subject merchandise over the AUL listed in the IRS tables
for the steel industry and used in a recently completed administrative
review for Indian steel companies (see Final Affirmative Countervailing
Duty Determination: Certain Cut-to-Length Carbon-Quality Steel Plate
from India, 64 FR 73131 (December 29, 1999) (CTL Plate from India)).
Therefore, in accordance with section 351.524(d)(2) of the CVD
Regulations, the Department is using an allocation period of 15 years.
Benchmarks for Loans and Discount Rate
In accordance with section 351.505(3)(i) of the CVD Regulations,
for those programs requiring the application of a short-term benchmark
interest rate, we used company-specific, short-term interest rates on
commercial loans as reported by producers/exporters of subject
merchandise. With respect to the rupee-denominated, short-term
benchmark, we used the weighted-average of the companies' cash credit
loans. We note that in CTL Plate from India, we found that the cash
credit loans provide the most comparable type of short-term benchmark
when calculating the benefit under the GOI's short-term loan programs.
64 FR at 73137.
For those programs requiring a rupee-denominated discount rate or
the application of a rupee-denominated, long-term benchmark interest
rate, we used, where available, company-specific, weighted-average
interest rates on commercial long-term, rupee-denominated loans. We
note that some producers/exporters of subject merchandise did not have
rupee-denominated, long-term loans from commercial banks for all
required years. Therefore, for those years, we had to rely on a rupee-
denominated, long-term benchmark interest rate that is not company-
specific, but provides a reasonable representation of industry
practice, in order to determine whether a benefit was provided to the
companies from rupee-denominated, long-term loans received from the
GOI. Pursuant to 19 CFR Sec. 351.505(a)(3)(iii), we first sought to use
national average interest rates for those years in which the producer/
exporters did not report company-specific interest rates on comparable
commercial loans. However, the GOI did not provide in its questionnaire
response national average interest rates on long-term, rupee-
denominated financing for those years. Therefore, in keeping with the
Department's past practice, we used as our benchmark in these instances
the weighted-average interest rates of commercial rupee-denominated,
long-term loans that were received by the other respondent companies in
this investigation. This approach is consistent with the Department's
practice in recent investigations. See e.g., Final Affirmative
Countervailing Duty Determination: Stainless Steel Sheet and Strip in
Coils from the Republic of Korea, 64 FR 30636, 30640 (June 8, 1999) and
Final Affirmative
[[Page 20243]]
Countervailing Duty Determination: Structural Steel Beams From the
Republic of Korea, 65 FR 41051 (July 3, 2000).
SAIL used a countervailable program requiring the use of long-term
interest rate benchmarks that were denominated in foreign currencies.
Because SAIL did not have any comparable, commercial loans denominated
in the appropriate foreign currencies, we used currency-specific
``Lending Rates'' from private creditors as published in the
International Financial Statistics as the benchmark for SAIL's foreign
currency loans. See, e.g., CTL Plate from India, 64 FR at 73133. During
verification, we will seek additional information on interest rates
charged by commercial banks on foreign currency loans provided within
India.
Creditworthiness
In the November 13, 2000 petition and the November 22, 2000
supplement to the petition, petitioners alleged that SAIL was
uncreditworthy for the years 1989 through 2000. Based upon the
information provided by petitioners we initiated creditworthy
investigations of SAIL for only the fiscal years 1999 and 2000. We
declined to initiate a creditworthy investigation for the years 1989
through 1998 because the information provided in the petition did not
support the allegation that SAIL was uncreditworthy for that period.
See Initiation Notice, 65 FR 77580, 77583.
As discussed in the ``Case History'' section of this preliminary
determination, on February 22, 2001, petitioners submitted additional
financial information for SAIL covering the years 1997 and 1998 and
requested that the Department reverse its finding in the Initiation
Notice and initiate creditworthy investigations of SAIL for these two
years. Petitioners also alleged on February 22, 2001, that Ispat and
Essar were uncreditworthy during the years 1997 through 2000.
Pursuant to section 351.505(a)(4)(i) of the CVD Regulations, the
Department will generally consider a firm to be uncreditworthy if,
based on information available at the time of the government-provided
loan, the firm could not have obtained long-term loans from
conventional commercial sources. To make this determination, the
Department may examine, among other factors, the following:
(A) The receipt by the firm of comparable commercial long-term
loans;
(B) The present and past financial health of the firm, as reflected
in various financial indicators calculated from the firm's financial
statements and accounts;
(C) The firm's recent past and present ability to meet its costs
and fixed financial obligations with its cash flow; and
(D) Evidence of the firm's future financial position, such as
market studies, country and industry economic forecasts, and project
and loan appraisals prepared prior to the agreement between the lender
and the firm on the terms of the loan.
With regard to items (B) and (C), above, it is necessary to examine
financial ratios of a firm not only as they stand alone, but also
within the context of the industry in which it operates. Petitioners
have calculated numerous financial ratios for Ispat, Essar and SAIL
based on the companies' balance sheets during the years in question.
The Department has confirmed these figures. The key ratios calculated
and reported by petitioners are debt/equity, total liabilities/net
worth, fixed assets/net worth, current liabilities/net worth, quick
ratio and current ratio. However, in our creditworthy analysis we have
placed little reliance on the debt/equity ratio because the other five
ratios are more important in determining the solvency and
creditworthiness of a company.
As explained in the April 13, 2001, creditworthiness memorandum to
Melissa G. Skinner, Director of the Office of AD/CVD Enforcement VI, a
public document on file in the Department's Central Records Unit, Room
B-099 (Preliminary Creditworthiness Memorandum), for purposes of this
preliminary determination, we find that SAIL was creditworthy during
the fiscal years 1999 and 2000 based on the company's financial ratios
for the period and on the fact that SAIL was able to secure commercial
financing during fiscal years 1999 and 2000 without the aid of GOI
guarantees.
As also explained in the Preliminary Creditworthy Memorandum, the
information submitted by petitioners is not sufficient to warrant a
reversal of the Department's decision in the Initiation Notice not to
initiate a creditworthy investigation of SAIL for fiscal years 1997 and
1998. As noted in the Preliminary Creditworthy Memorandum, SAIL's
financial ratios for fiscal years 1997 and 1998 are not indicative of
an uncreditworthy company. On this basis, we preliminarily find that
SAIL was creditworthy for fiscal years 1997 and 1998 and, therefore, we
are not initiating a creditworthy investigation of SAIL for these
fiscal years.
Regarding petitioners' allegation that Ispat and Essar were
uncreditworthy during fiscal years 1997 through 2000, our review of the
companies' financial ratios do not lead us to conclude that the
companies were uncreditworthy. Moreover, the companies' financial
statements as well as their questionnaire responses indicate that they
were able to secure commercial financing without GOI guarantees during
the years alleged. For more information, see the Preliminary
Creditworthy Memorandum. Thus, for purposes of this preliminary
determination, we find that Ispat and Essar were creditworthy during
the fiscal years 1997 through 2000.
Programs Preliminarily Determined To Confer Subsidies
1. Pre-shipment and Post-shipment Export Financing
The Reserve Bank of India (RBI), through commercial banks, provides
short-term pre-shipment financing, or ``packing credits,'' to
exporters. Upon presentation of a confirmed export order or letter of
credit to a bank, companies may receive pre-shipment loans for working
capital purposes, i.e., for the purchase of raw materials, warehousing,
packing, and transporting of export merchandise. Exporters may also
establish pre-shipment credit lines upon which they may draw as needed.
Credit line limits are established by commercial banks, based upon a
company's creditworthiness and past export performance, and may be
denominated either in Indian rupees or in foreign currency. Companies
that have pre-shipment credit lines typically pay interest on a
quarterly basis on the outstanding balance of the account at the end of
each period. Commercial banks extending export credit to Indian
companies must, by law, charge interest on this credit at rates
determined by the RBI. During the POI, the rate of interest charged on
pre-shipment, rupee-denominated export loans up to 180 days was 10.0
percent. For those loans over 180 days and up to 270 days, banks
charged interest at 13.0 percent. During the POI, the interest rate
charged on foreign currency-denominated export loans up to 180 days was
a rate not to exceed the LIBOR/Euro or LIBOR/Euribor rate plus 1.5
percent. Any extension of a foreign currency-denominated pre-shipment
loan outstanding during the POI was subject to the same terms and
conditions as were applicable for an extension of rupee-denominated
packing credit, with an additional cost of two percent above
[[Page 20244]]
the rate for the initial 180-day period prevailing at the time of the
extension.
Post-shipment export financing consists of loans in the form of
discounted trade bills or advances by commercial banks. Exporters
qualify for this program by presenting their export documents to their
lending bank. The credit covers the period from the date of shipment of
the goods to the date of realization of export proceeds from the
overseas customer. Under the Foreign Exchange Management Act of 1999,
exporters are required to realize export proceeds within 180 days from
the date of shipment, which is monitored by the RBI. Post-shipment
financing is, therefore, a working capital program used to finance
export receivables. This financing is normally denominated either in
rupees or in foreign currency, except in those instances when an
exporter uses foreign currency pre-shipment financing and is then
restricted to post-shipment export financing denominated in the same
foreign currency.
In general, post-shipment loans are granted for a period of no more
than 180 days. The interest rate charged on these foreign currency
denominated loans during the POI was LIBOR plus 1.5 percent. For loans
not repaid within the due date, exporters lose the concessional
interest rate on this financing.
The Department has previously found both pre-shipment export
financing and post-shipment export financing to be countervailable,
because receipt of export financing under these programs was contingent
upon export performance and the interest rates under this program were
lower than the rates the exporters would have paid on comparable
commercial loans. See, e.g., CTL Plate from India, 64 FR at 73137. No
new substantive information or evidence of changed circumstances has
been submitted in this investigation to warrant reconsideration of this
finding. Therefore, in accordance with section 771(5A)(B) of the Act,
we continue to find that pre- and post-shipment export financing
constitute countervailable export subsidies.
To determine whether a benefit was conferred under the pre-export
financing program for rupee-denominated loans, we compared the interest
rate charged on these loans to a rupee-denominated, short-term
benchmark interest rate, as described in the ``Benchmarks for Loans and
Discount Rate'' section above. We compared this company-specific
benchmark rate to the interest rates charged on the producer/exporter's
pre-shipment rupee loans and found that the interest rates charged were
lower than the benchmark rates. Therefore, in accordance with section
771(5)(E)(ii) of the Act, we preliminarily determine that this program
conferred countervailable benefits on producers/exporters of subject
merchandise during the POI because the interest rates charged on these
loans were less than what the companies otherwise would have had to pay
on comparable short-term commercial loans.
To calculate the benefit conferred by these pre-shipment loans, we
compared the actual interest paid on the loans with the amount of
interest that would have been paid at the benchmark interest rate.
Where the benchmark interest exceeds the actual interest paid, the
difference is the benefit. We then divided the total amount of benefit
by each producer/exporter's total exports. On this basis, we
preliminarily determine the net countervailable subsidy under the pre-
shipment export financing program to be 0.13 percent ad valorem for
SAIL, 0.16 percent ad valorem for Essar, 1.28 percent ad valorem for
Ispat, and 1.21 percent ad valorem for TISCO. As facts available, we
preliminary determine a rate of 1.28 percent ad valorem for Jindal.
With regard to rupee-denominated post-shipment loans, we calculated
the benefit using the same methodology described above. With respect to
our calculation of the net subsidy rate, respondents have indicated
that post-shipment financing can be tied to specific exports contracts.
Therefore, when calculating the net subsidy rate under this program, we
divided the benefits received by each producer/exporter under this
program by their respective sales of subject merchandise made to the
United States during the POI.
During the POI, SAIL also took out post-shipment export financing
denominated in U.S. dollars. To determine the benefit conferred by
SAIL's U.S. dollar-denominated post-shipment financing, we again
compared the program interest rates to a comparable benchmark interest
rate. As explained in the ``Benchmarks for Loans and Discount Rate''
section above, we used as our benchmark the weighted-average interest
rate of SAIL's company-specific, U.S. dollar-denominated short-term
loans received from commercial banks. We compared this company-specific
benchmark rate to the interest rates charged on SAIL's post-shipment
U.S. dollar-denominated loans and have determined that the interest
payments under the program were less than what would have been paid on
a comparable commercial short-term loan. Because respondents have
indicated that post-shipment loans are tied to particular shipments, we
divided SAIL's benefits under this program by its sales of subject
merchandise to the United States during the POI.
On this basis, we preliminarily determine the net countervailable
subsidy under the post-shipment export financing program to be 0.02
percent ad valorem for SAIL, 0.10 percent ad valorem for Ispat, and
0.33 percent ad valorem for TISCO. As facts available, we preliminary
determine a rate of 0.33 percent ad valorem for Jindal.
2. Duty Entitlement Passbook Scheme (DEPS)
The DEPS formerly was the Passbook Scheme (PBS), which was enacted
by the GOI on April 1, 1995. Administered under auspices of the
Directorate General of Foreign Trade (DGFT), the PBS enabled GOI-
designated manufacturers/exporters, upon export of finished goods, to
earn import duty exemptions in the form of credits which could be used
to pay customs duties on subsequent imports. The amount of PBS credit
granted was determined according to the GOI's ``Standard Input/Output
Norms Schedule'' (SIO Norms), which contains GOI-determined breakdowns
of inputs needed to produce finished products. Rather than receiving
cash, companies record their PBS credits in ``passbooks'' and then
offset import duties on subsequent GOI-approved imports by making debit
entries in their passbooks.
The PBS was discontinued on April 1, 1997. In its January 26, 2001,
response to the Department's original questionnaire, the GOI stated
that credit available under the PBS had to be utilized by September 30,
1999, after which date any outstanding credits lapsed. No producer/
exporter reported using this program during the POI.
India's DEPS was enacted on April 1, 1997, as a successor to the
PBS. As with PBS, the DEPS enables exporting companies to earn import
duty exemptions in the form of passbook credits rather than cash.
Exporting companies may obtain DEPS credits on a pre-export basis or on
a post-export basis. Eligibility for pre-export DEPS credits is limited
to manufacturers/exporters that have exported for a three-year period
prior to applying for the program. The amount of pre-export DEPS
credits that could be earned during the POI was ten percent of the
average of total export performance of the applicant during the
preceding three years. Pre-export DEPS credits are not transferable.
[[Page 20245]]
All exporters are eligible to earn DEPS credits on a post-export
basis, provided that the exported product is listed in the GOI's SIO
Norms. Post-export DEPS credits can be used for any subsequent imports,
regardless of whether they are consumed in the production of an export
product. Post-export DEPS credits are valid for 12 months and are
transferable. With respect to subject merchandise, exporters were
eligible to earn credits equal to 14 percent of the f.o.b. value of
their export shipments during the fiscal year ending March 31, 2000.
During the POI, SAIL, Essar, Ispat, and TISCO all earned post-export
DEPS credits.
The criteria regarding the remission, exemption or drawback of
import duties is set forth in 19 CFR 351.519. Pursuant to this
provision, the entire amount of an import duty exemption is
countervailable if the government does not have in place and apply a
system or procedure to confirm which imports are consumed in the
production of the exported product and in what amounts, or if the
government has not carried out an examination of actual imports
involved to confirm which imports are consumed in the production of the
exported product.
In CTL Plate from India, we determined that the DEPS does not meet
either of these standards. 64 FR at 73134. In that investigation, we
found that the exporter, upon exportation, submits a listing of inputs
used to produce the export shipment. Id. at 73134. While some of these
inputs may be imported items, we found in CTL Plate from India that the
GOI has no way of knowing whether the inputs were imported or purchased
domestically. Id. Therefore, we concluded in CTL Plate from India that
the GOI did not have a system in place for determining whether the
value of credits issued is equal to the amount of import duties that
was payable on any imported items which were consumed in the production
of the export shipment. Id. In addition, we further concluded that the
GOI does not carry out, nor has it carried out, examinations of actual
inputs involved. Id.
Consequently, in CTL Plate from India we determined that under
section 351.519(a)(4) of the CVD Regulations, the entire amount of
import duty exemption earned by producers/exporters during the POI
constitutes a benefit. Id. In addition, we further found that a
financial contribution, as defined under section 771(5)(D)(ii) of the
Act, is provided under the program because the GOI provides producers/
exporters with credits for the future payment of import duties. Id. We
further found in CTL Plate from India that this program can only be
used by exporters and, therefore, is specific under section 771(5)(A)
of the Act. Id.
We note that, in this investigation, the GOI and the producers/
exporters of subject merchandise have claimed that the DEPS is not
countervailable. However, we find that these claims are not sufficient
to demonstrate that a different decision is warranted at this time.
Therefore, for purposes of this preliminary determination, we find that
the DEPS conferred countervailable export subsidies upon producers/
exporters of subject merchandise during the POI. However, during
verification we will carefully examine how this program operates.
We have determined that benefits from the DEPS are conferred as of
the date of exportation of the shipment for which the pertinent DEPS
credits are earned rather than the date DEPS credits are used. At that
time, the amount of the benefit is known by the exporter. The benefit
to producers/exporters under this program is the total value of DEPS
import duty exemptions that producers/exporters earned on their export
shipments of subject merchandise to the United States during the POI.
We have also determined that the application fees paid by producers/
exporters qualify as an ``* * * application fee, deposit, or similar
payment paid in order to qualify for, or to receive, the benefit of the
countervailable subsidy.'' See section 771(6)(A) of the Act. We note
that this approach is consistent with the methodology employed in CTL
Plate from India. See 64 at 73134.
Under 19 CFR Sec. 351.524(c), this program provides a recurring
benefit because DEPS credits provide exemption from import duties. To
derive the DEPS program rate, we first calculated the value of the pre-
and post-export credits that producers/exporters earned for their
export shipments of subject merchandise to the United States during the
POI by multiplying the f.o.b. value of each export shipment by 14
percent, the percentage of DEPS credit allowed under the program for
exports of subject merchandise. We then subtracted as an allowable
offset the actual amount of application fees paid for each license in
accordance with section 771(6) of the Act. Finally, we took this sum
(the total value of the licenses net of application fees paid) and
divided it by each producer/exporter's total respective exports of
subject merchandise to the United States during the POI.
On this basis, we preliminarily determine the net countervailable
subsidy from this program to be 10.55 percent ad valorem for SAIL, 6.06
percent ad valorem for Essar, 14.02 percent ad valorem for Ispat, and
1.43 percent ad valorem for TISCO. As facts available, we preliminary
determine a rate of 14.02 percent ad valorem for Jindal.
3. Advance Licenses
Under India's Duty Exemption Scheme, exporters may also import
inputs duty-free through the use of import licenses. Using advance
licenses, companies are able to import inputs ``required for the
manufacture of goods'' without paying India's basic customs duty.
Advance intermediate licenses and special imprest licenses are also
used to import inputs duty-free. The GOI reported that advance
intermediate licenses and special imprest licenses are not related to
exports. During the POI, Essar and TISCO used advance licences and
TISCO also sold some advance licenses. Producers/exporters did not use
or sell any advance intermediate licenses or special imprest licenses
during the POI.
The Department has previously determined that the sale of import
licenses confers a countervailable export subsidy. See, e.g., CTL Plate
from India; Certain Iron-Metal Castings from India: Final Results of
Countervailing Duty Administrative Review, 63 FR 64050 (November 18,
1998) (1996 Castings) \2\; and Certain Iron-Metal Castings from India:
Final Results of Countervailing Duty Administrative Review, 62 FR 32297
(June 13, 1997) (1994 Castings). No new or substantive evidence of
changed circumstances has been submitted in this proceeding to warrant
reconsideration of this determination. During the POI, TISCO sold
advance licenses or portions of advance licenses. Therefore, in
accordance with section 771(5)(B) of the Act, we preliminarily
determine that TISCO's sales of advance licenses are countervailable as
export subsidies.
---------------------------------------------------------------------------
\2\ The year refers to the period covered by the administrative
review, not to the date of publication.
---------------------------------------------------------------------------
Essar and TISCO used advance licenses during the POI. In CTL Plate
from India, we found that products imported under an advance license
need not be consumed in the production of the exported product.\3\ 64
FR at 73134. Furthermore, in CTL Plate from India, we found that, upon
exportation, the exporter, in order to obtain an advanced license,
submits a listing of inputs used to produce the export shipment. Id. We
[[Page 20246]]
concluded in CTL Plate from India that, while some of these inputs may
be imported items, the GOI had no way of knowing whether the inputs
were imported or purchased domestically. Id. Because we found that the
GOI then issued the advanced licenses based on this list of inputs, we
determined in CTL Plate from India that the GOI did not base the
licenses it issued on the amount of import duties that were payable on
the imported items that were consumed in the production of the exported
merchandise. 64 FR at 73135.
---------------------------------------------------------------------------
\3\ We note that in this investigation, TISCO has reported that
the GOI does not place any restriction on the use of goods imported
under the advanced license program.
---------------------------------------------------------------------------
In addition, we further determined in CTL Plate from India that,
because the licenses specify ranges of quantities to be imported rather
than an actual amount of duty exemption that can be claimed, the actual
value of an advanced license was not known at the time the license was
issued. Id. Therefore, in CTL Plate from India, we determined that the
GOI had no system in place to confirm that the inputs are consumed in
the production of the exported product. Id. In that investigation, we
further determined that the GOI did not carry out examinations of
actual inputs involved. Id.
Consequently, we determined in CTL Plate from India that, pursuant
to 19 CFR 351.519(a)(4), the entire amount of the import duty exemption
earned under the advanced license program conferred a benefit. Id. We
further found that, because only exporters can receive advance
licenses, the program constituted an export subsidy under section
771(5A)(B) of the Act and constituted a financial contribution under
section 771(5)(D)(ii) of the Act in the form of revenue forgone. Id.
Respondents have stated that some adjustments have been made to
this program; however, these claims are not sufficient to demonstrate
that a different decision is warranted at this time. On this basis, we
continue to determine that the advance license program is a
countervailable program. However, during verification will we closely
examine any changes made to the program since CTL Plate from India.
Under 19 CFR 351.524(c), this program provides a recurring benefit
because advance licenses provide import duty exemptions. Essar and
TISCO used advance licenses during the POI on exports of subject
merchandise to the United States. As in CTL Plate from India, we
continue to determine that benefits from advance licenses are conferred
as of the date they are used, not the date of exportation of the export
shipment for which the pertinent advance license is earned (see 64 FR
at 73135). We also determine that the application fees paid by Essar
and TISCO qualify as an ``* * * application fee, deposit, or similar
payment paid in order to qualify for, or to receive, the benefit of the
countervailable subsidy'' under section 771(6)(A) of the Act, and,
therefore, should be treated as an offset to the duty exemptions.
To calculate the benefits conferred to Essar and TISCO from their
use of the advance licenses, we first calculated the total amount of
import duty exemptions realized by Essar and TISCO (net of application
fees). Regarding TISCO's sale of advanced licenses, we determine that
the benefit is equal to the revenues (net of application fees) that
TISCO realized on its sale of the licenses. In CTL Plate from India, we
found that advance licenses are issued on a shipment-by-shipment basis,
thereby enabling companies to tie their receipt and sale of advance
licenses to their sales of subject merchandise to the U.S. Id.
Accordingly, we divided the total benefits Essar and TISCO received
under this program by the companies' respective sales of subject
merchandise to the United States during the POI. On this basis, we
preliminarily determine the net countervailable subsidy from this
program to be 1.78 percent ad valorem for Essar and 1.12 percent ad
valorem for TISCO. As facts available, we preliminary determine a rate
of 1.78 percent ad valorem for Jindal.
4. Special Import Licenses (SILs)
During the POI, producers/exporters of subject merchandise sold
through public auction two types of import licenses--SILs for Quality
and SILs for Star Trading Houses. SILs for Quality are licenses granted
to exporters which meet internationally-accepted quality standards for
their products, such as the IS0 9000 (series) and ISO 14000 (series).
SILs for Star Trading Houses are licenses granted to exporters that
meet certain export targets. Both types of SILs permit the holder to
import products listed on a ``Restricted List of Imports'' in amounts
up to the face value of the SIL. Under the program, the SILs do not
exempt or reduce the amount of import duties paid by the importer.
Producers/exporters reported that they sold SILs during the POI.
The Department's practice is that the sale of SILs constitutes an
export subsidy because companies receive these licenses based on their
status as exporters. See, e.g., CTL Plate from India, 64 FR at 73135.
No new substantive information or evidence of changed circumstances has
been submitted in this investigation to warrant reconsideration of this
determination. Therefore, in accordance with section 771(5A)(B) of the
Act, we continue to find that this program constitutes a
countervailable export subsidy, and that the financial contribution in
the form of the revenue received on the sale of licenses constitutes
the benefit.
During the POI, producers/exporters sold numerous SILs. Because the
receipt of SILs cannot be segregated by type or destination of export,
we calculated the net subsidy rate by dividing the total amount of
proceeds each producer/exporter of subject merchandise received from
its sales of these licenses by its respective total export sales for
the POI. On this basis, we preliminarily determine the net
countervailable subsidy to be 0.16 percent ad valorem for SAIL and 0.02
percent ad valorem for TISCO. As facts available, we preliminary
determine a rate of 0.16 percent ad valorem for Jindal.
5. Export Promotion Capital Goods Scheme (EPCGS)
The EPCGS provides for a reduction or exemption of customs duties
and an exemption from excise taxes on imports of capital goods. Under
this program, producers may import capital equipment at reduced rates
of duty by undertaking to earn convertible foreign exchange equal to
four to five times the value of the capital goods within a period of
eight years. For failure to meet the export obligation, a company is
subject to payment of all or part of the duty reduction, depending on
the extent of the export shortfall, plus penalty interest.
In CTL Plate from India, we determined that the import duty
reduction provided under the EPCGS was a countervailable export
subsidy. Id. No new information or evidence of changed circumstances
has been provided to warrant a reconsideration of this determination.
Therefore, we continue to find that import duty reductions provided
under the EPCGS are countervailable export subsidies.
Producers/exporters reported that they imported machinery under the
EPCGS in the years prior to the POI and during the POI. For some of
their imported machinery, producers/exporters met their export
requirements. As a result, the GOI completely waived the amount of
import duties. However, producers/exporters have not completed their
export requirements for other imports of capital machinery. Therefore,
although producers/exporters received a reduction in import duties when
the capital machinery was imported, the final waiver on the potential
obligation to repay the duties has not yet been made by the GOI.
[[Page 20247]]
We determine that producers/exporters benefitted in two ways by
participating in this program. The first benefit to producers/exporters
is the benefit from the waiver of import duty on imports of capital
equipment. SAIL was the only producer/exporter of subject merchandise
to meet some of its export requirements with respect to certain imports
of capital equipment. Because the GOI has formally waived the unpaid
duties on those imports, we have treated the full amount of the waived
duty exemptions as a grant received in the year in which the GOI
officially granted the waiver. For other imports of capital machinery,
producers/exporters have not completed their export commitments and the
final waiver of the potential obligation to repay the duties on those
imports has not yet been made by the GOI.
The criteria to be used by the Department in determining whether to
allocate the benefits from a countervailable subsidy program is
specified under 19 CFR 351.524. Specifically, recurring benefits are
not to be allocated but are to be expensed to the year of receipt,
while non-recurring benefits are to be allocated over time. In this
investigation, non-recurring benefits will be allocated over 15 years,
the AUL of assets used by the steel industry as reported in the IRS
tables.
Normally, tax benefits are considered to be recurring benefits and
are expensed in the year of receipt. Since import duties are a type of
tax, the benefit provided under this program is a tax benefit, and,
thus, normally would be considered a recurring benefit. However, our
CVD regulations recognize that, under certain circumstances, it is more
appropriate to allocate over time the benefits of a program
traditionally considered a recurring subsidy, rather than to expense
the benefits in the year of receipt. Section 351.524(c)(2) of the CVD
regulations provides that a party can claim that a subsidy normally
treated as a recurring subsidy should be treated as a non-recurring
subsidy and enumerates the criteria to be used by the Department in
evaluating such a claim. In the Preamble to our regulations, the
Department provides an example of when it may be more appropriate to
consider the benefits of a tax program to be non-recurring benefits,
and, thus, allocate those benefits over time. Countervailing Duties;
Final Rule, 63 FR 65348, 65393 (November 25, 1998). We also stated in
the Preamble to our regulations that, if a government provides an
import duty exemption tied to major capital equipment purchases, it may
be reasonable to conclude that, because these duty exemptions are tied
to capital assets, the benefits from such duty exemptions should be
considered non-recurring, even though import duty exemptions are on the
list of recurring subsidies. Id. Because the benefit received from the
waiver of import duties under the EPCGS is tied to the capital assets
of SAIL, and, therefore, is just such a benefit, we determine that it
is appropriate to treat the waiver of duties received by SAIL as a non-
recurring benefit. We note that our approach on this issue is
consistent with that taken in CTL Plate from India, 64 FR at 73136.
In their questionnaire responses, producers/exporters reported all
of the capital equipment imports they made using EPCGS licenses and the
application fees they paid to obtain their EPCGS licenses. We
preliminarily determine that the application fees paid by SAIL qualify
as an ``* * * application fee, deposit, or similar payment paid in
order to qualify for, or to receive, the benefit of the countervailable
subsidy.'' See section 771(6)(A) of the Act.
In order to calculate the benefit received from the waiver of
SAIL's import duties on its capital equipment imports, we determined
the total amount of duties waived in each year (net of application
fees). Consistent with our approach in CTL Plate from India, we
determine the year of receipt to be the year in which the GOI formally
waived SAIL's remaining outstanding import duties. See 64 FR at 73136.
Next, we performed the ``0.5 percent test,'' as prescribed under 19 CFR
351.524(b)(2) for each year in which the GOI granted SAIL an import
duty waiver.\4\ Those waivers whose face values exceeded 0.5 percent of
SAIL's total export sales in the year in which the waivers were granted
were allocated over 15 years, the AUL used in this investigation, using
the Department's standard grant allocation methodology.
---------------------------------------------------------------------------
\4\ Under this section, non-recurring subsidies will be expensed
in the year of receipt rather than allocated over time if the
benefit from the non-recurring subsidy is less than 0.5 percent of
the company's sales.
---------------------------------------------------------------------------
A second type of benefit conferred under this program involves the
import duty reductions that producers/exporters received on the imports
of capital equipment for which producers/exporters have not yet met
their export requirements. For those capital equipment imports,
producers/exporters have unpaid duties that will have to be paid to the
GOI if the export requirements are not met. Therefore, we determine
that the companies had outstanding contingent liabilities during the
POI. When a company has an outstanding liability and the repayment of
that liability is contingent upon subsequent events, our practice is to
treat any balance on that unpaid liability as an interest-free loan.
See 19 CFR Sec. 351.505(d)(1).
We determine that the amount of contingent liability to be treated
as an interest-free loan is the amount of the import duty reduction or
exemption for which producers/exporters applied but, as of the end of
the POI, was not finally waived by the GOI. Accordingly, we determine
the benefit to be the interest that producers/exporters would have paid
during the POI had they borrowed the full amount of the duty reduction
at the time of import. We note that this approach is consistent with
the methodology employed in CTL Plate from India. See 64 FR at 73136.
Pursuant to 19 CFR 351.505(d)(1), the benchmark for measuring the
benefit is a long-term interest rate because the event upon which
repayment of the duties depends (i.e., the date of expiration of the
time period for producers/exporters to fulfill their export
commitments) occurs at a point in time more than one year after the
date the capital goods were imported.
To calculate the program rate, we combined, where applicable, the
sum of the allocated benefits received on waived duties and the
benefits conferred on producers/exporters in the form of contingent
liability loans. We then divided each producer/exporter's total benefit
under the program by its respective total export sales during the POI.
On this basis, we preliminarily determine the net countervailable
subsidy from this program to be 0.30 percent ad valorem for SAIL, 1.08
percent ad valorem for Essar, 16.60 percent ad valorem for Ispat, and
2.42 percent ad valorem for TISCO. As facts available, we preliminarily
determine a rate of 16.60 percent ad valorem for Jindal.
6. Loans From the Steel Development Fund (SDF)
The SDF was established in 1978 during a time when the steel sector
in India was subject to price and distribution controls. From 1978
through 1994, India's integrated steel producers, SAIL, TISCO,
Rashtriya Ispat Nigam Limited (RINL), and India Iron & Steel Company
Limited (IISCO), were mandated by the GOI to increase the prices for
the products they sold. The proceeds from the price increases were
remitted to the SDF. Under the SDF program, companies that contributed
to the fund are eligible to take out long-term loans at advantageous
rates.
[[Page 20248]]
Loans from the SDF are made for the following purposes: (1)
Financing capital improvements and research and development projects;
(2) providing funding for rebates to the Small Scale Industries
Corporations on supplies by those companies; and (3) meeting the
expenditures of the Economic Research Unit of the Joint Plant Committee
(JPC).
The Commission for Iron and Steel, which is known as CI&S, is led
by the Secretary of the Ministry of Steel. This official is an ex-
officio member of the SDF Managing Committee, and Chairman of the JPC.
The issuance and administration of loans under the SDF program are
supervised by the JPC. However, according to the GOI, all of the SDF's
lending decisions are subject to the review and approval of the SDF
Managing Committee.
In CTL Plate from India, we determined that the SDF was financed by
producer levies and other non-GOI sources. In addition, we determined
that there was no information on the record of that investigation to
indicate that the GOI contributed tax revenues, either directly or
indirectly to the fund, or that the GOI exerted any control over the
fund. On this basis, we determined that loans under the SDF were not
countervailable. See CTL Plate from India, 64 FR at 73143.
However, new information on the record of this investigation has
led us to reverse the non-countervailable finding we made in CTL Plate
from India. As stated above, our determination in CTL Plate from India
was based on the claims of the GOI and SAIL that contributions to the
SDF were made without the direct or indirect involvement of the
government. In this investigation, new information from the GOI and the
producers/exporters of subject merchandise indicate that the levies
originated from producer price increases that were mandated and
determined by the JPC. Because the Secretary of the Ministry of Steel,
in his capacity as the head of the CI&S, acts as an ex-officio member
and Chairman of the JPC, we determine, for purposes of this preliminary
determination, that the GOI, through the JPC, has a controlling
interest in the manner and amount of contributions that are made to the
SDF.
In particular, during the period in which the funds for the SDF
were provided, the GOI controlled the price of steel products in India.
In order to create the SDF, the GOI, acting through the JPC, mandated
steel price increases which were earmarked for the SDF. Steel producers
collected this price increase, which was paid by steel consumers in
India, and these additional funds were then placed into the SDF as a
source of concessional financing for the Indian steel industry.
Therefore, information on the record, information which was not on the
record in CTL Plate from India, demonstrates that the GOI played a
direct role in the creation of the SDF by mandating price increases on
steel products which were authorized for use solely as a source of
funds for the SDF.
Under section 771(5)(B) of the Act, a subsidy can be found whenever
the government makes a financial contribution, when it provides a
payment to a funding mechanism to provide a financial contribution, or
when it entrusts or directs a private entity to make a financial
contribution. We preliminary determine that the GOI directed the
contribution of funds for the SDF within the meaning of section
771(5)(B) of the Act, by levying price increases on steel products
which were routed into the SDF. Furthermore, because the Secretary of
the Ministry of Steel has a major leadership role in the JPC and the
SDF Managing Committee, the bodies that issue and administer loans
under the SDF, we preliminarily determine that the GOI exercises
control over the way in which funding is disbursed under this program.
Therefore, we preliminarily determine that loans under the SDF
constitute a financial contribution within the meaning of section
771(5)(D)(i) of the Act. According to information from the GOI,
eligibility for loans from the SDF is limited to steel companies. Thus,
we also preliminarily determine that loans under this program are
specific within the meaning of 771(5A)(D)(i) of the Act. SAIL and TISCO
received loans under the SDF program. However, SAIL has indicated in
its questionnaire response that it had no outstanding SDF loans with
interest payments due during the POI. Therefore, we preliminarily
determine that these loans did not provide a benefit to SAIL during the
POI. We will examine the terms of the loans in detail during
verification.
In order to determine whether TISCO's loans under the SDF program
conferred a benefit within the meaning of section 771(5)(E)(ii) of the
Act, we compared the actual interest rates charged to the benchmark
interest rates that would have been charged on a comparable commercial
loan. As discussed in the ``Benchmarks for Loans and Discount Rate''
section of this preliminary determination, where available we used as
our benchmark the weighted-average interest rates on TISCO's rupee-
denominated, long-term loans. For those years in which no company-
specific long-term benchmark was available for TISCO, we used the
weighted-average interest rates of commercial rupee-denominated, long-
term loans that were received by the other producers/exporters of
subject merchandise. Our comparison of the interest rates indicates
that the interest rate payments that TISCO made under the SDF program
were less than what it would have otherwise paid on a comparable
commercial loan. Thus, we preliminarily determine that the interest
savings realized under this program conferred a benefit upon TISCO. We
then divided the total amount of interest savings TISCO obtained under
this program by TISCO's total sales for the POI. On this basis, we
preliminarily determine the net countervailable subsidy to be 1.45
percent ad valorem for TISCO.
7. The GOI's Forgiveness of SDF Loans Issued to SAIL
In October of 1998, SAIL, which was facing financial problems,
proposed a turnaround plan to the GOI, through the SDF Managing
Committee, in which it outlined its financial and business
restructuring. The goals of the restructuring plan were to restore the
profitability and competitiveness of the company. In order to achieve
these goals, SAIL included in its proposal to the GOI provisions for
the forgiveness of portions of its outstanding SDF debt. As SAIL's
principal shareholder, the GOI reviewed and approved SAIL's overall
restructuring plan. However, the approval for the actual forgiveness of
SAIL's SDF loans lay with the SDF Managing Committee. SAIL has reported
that on February 17, 2000, the SDF Managing Committee issued a
resolution in which it waived Rs. 50.73 billion of SAIL's SDF debt. In
addition, SAIL indicated that it received from the GOI three other
waivers on its SDF loans in the years immediately preceding the POI.
As explained above, we have determined that because the Ministry of
Steel has a major leadership role in the SDF Managing Committee, the
actions of the SDF Managing Committee are subject to the influence and
control of the GOI. Therefore, we preliminarily determine that the
forgiveness of SAIL's Rs. 50.73 billion in SDF debt that took place
during the POI, as well as the SDF waivers that occurred in prior
years, constitute a financial contribution within the meaning of
section 771(5)(D)(i) of the Act. Furthermore, because the waivers of
the SDF loans were limited to SAIL, we determine that they were
specific to a particular enterprise within the meaning of section
771(5A)(D)(i) of the Act.
[[Page 20249]]
In its questionnaire response, SAIL has claimed that a portion of
the GOI debt forgiveness it received during the POI was contingent on
the company assisting its subsidiary, IISCO, with its debts. Thus, SAIL
argues that this portion of the SDF debt was effectively provided to
IISCO and, therefore, did not benefit SAIL.
For purposes of this preliminary determination, we have determined
that all of the Rs. 50.73 billion in SDF debt forgiveness that SAIL
received during the POI constitutes a countervailable benefit conferred
upon SAIL in the form of a grant. Information from the GOI indicates
that, absent government involvement, SAIL would have borne the burden
of IISCO's inability to repay its debts. Thus, we preliminarily
determine that the full amount of the SDF loan waiver provided during
the POI is attributable to SAIL. We will carefully examine this entire
transaction during verification.
To calculate the benefit under this program, we treated the amount
of debt forgiveness SAIL received in each year under this program as a
non-recurring grant. For each of those years, we performed the ``0.5
percent test'' as prescribed under 19 CFR 351.524(b)(2). For those
grants whose face values were larger than 0.5 percent of SAIL's total
sales in the year the grant was approved, we allocated the face amounts
of the grants over 15 years, the AUL applied in this investigation,
using the Department's standard allocation methodology. We then divided
the amounts of the benefits attributable to the POI by SAIL's total
sales during the POI. On this basis, we preliminarily determine the net
countervailable subsidy to be 6.27 percent ad valorem for SAIL.
8. GOI Forgiveness of Other Loans Issued to SAIL
In the 1970s, IISCO, a subsidiary of SAIL, was an ailing private
sector company, the management of which was assumed by SAIL in the
early 1970s at the direction of the GOI. According to the GOI, pursuant
to a 1978 Act of Parliament, IISCO was made a wholly-owned subsidiary
of SAIL. However, IISCO continued to incur losses, and, in order to
meet its capital expenditures and to finance its debts, the GOI issued
loans to the company in the late 1980s and early 1990s. According to
the GOI, these loans were ``routed'' through SAIL. The GOI eventually
forgave these loans as part of SAIL's financial restructuring package.
In its questionnaire responses, SAIL has claimed that IISCO was the
sole recipient of the GOI's debt forgiveness and that SAIL did not
benefit from the waiver of the GOI loans in any way. However, according
to the questionnaire response of the GOI, due to IISCO's troubled
financial situation, IISCO was not able to repay the outstanding debt
it owed to SAIL. Thus, according to the GOI, IISCO's inability to repay
its debts meant that SAIL, as the controlling entity of IISCO, was
``burdened with loans with no prospect of their recovery.'' In order to
provide relief to SAIL and IISCO, the GOI approved a waiver of SAIL's
GOI debts in the amount of Rs. 3.81 billion so that SAIL could
immediately thereafter waive loans in the same amount that IISCO owed
to SAIL.
Based on the information provided by the GOI, we preliminarily
determine that this program conferred countervailable benefits upon
SAIL. Absent the involvement of the GOI, IISCO would have not been able
to repay the loans it owed to SAIL. In other words, the actions of the
GOI enabled SAIL to avoid bad debt expenses. Thus, we preliminarily
determine that this program constitutes a financial contribution within
the meaning of section 771(5)(D)(i) of the Act. Furthermore, because
the waiver of the GOI loans was limited to SAIL, we determine that it
was specific to a particular enterprise within the meaning of section
771(5A)(D)(i) of the Act.
To calculate the benefit under this program, we treated the amount
of debt forgiveness SAIL received as a non-recurring grant. We then
performed the ``0.5 percent test,'' as prescribed under section
351.524(b)(2) of the CVD Regulations. Because the amount of the grant
was larger than 0.5 percent of SAIL's total sales in the year the debt
forgiveness was approved, we allocated the face amount of the grant
over 15 years, the AUL applied in this investigation, using the
Department's standard allocation methodology. We then divided the
amount of the benefit attributable to the POI by SAIL's total sales
during the POI. On this basis, we preliminarily determine the net
countervailable subsidy to be 0.45 percent ad valorem for SAIL.
9. Loan Guarantees from the GOI
In its questionnaire response, the GOI reported that it does not
extend loan guarantees under a particular program. Rather, it provides
loan guarantees on a case-by-case basis only after companies have
explained in their loan applications the situation and circumstances
justifying the guarantee. According to the GOI's response, loan
guarantees are normally extended to ``Public Sector Companies'' in
particular industrial sectors. SAIL was the only producer/exporter of
subject merchandise that reported loans outstanding during the POI on
which it had received GOI loan guarantees. These long-term loans were
denominated in several foreign currencies.
In CTL Plate from India, we determined that the loan guarantees
issued by the GOI constitute a financial contribution within the
meaning of section 771(5)(D)(i) of the Act. 64 FR at 73137. In
addition, in that investigation we determined that the GOI's provision
of loan guarantees were specific under section 771(5A)(D)(iii)(II) of
the Act because they were limited to certain companies selected by the
GOI on an ad hoc basis. 64 FR at 73134. No new information has been
submitted on the record of this investigation to warrant any
reconsideration of these findings.
Under 19 CFR 351.506, a benefit exists from a loan guarantee to the
extent that the total amount a firm pays for the loan with a
government-provided guarantee is less than the total amount the firm
would pay for a comparable commercial loan that the firm could actually
obtain on the market absent the government-provided guarantee,
including any differences in guarantee fees. Thus, to determine whether
a government loan guarantee confers a benefit, we compare the total
amount paid by the company (i.e., the effective interest and guarantee
fees) for the loan with the total amount it would have paid for a
comparable commercial loan.
Using the foreign currency denominated, long-term interest rate
benchmark for SAIL that was discussed in the ``Benchmarks for Loans and
Discount Rate'' section of this preliminary determination, we found
that the total amounts SAIL paid for its GOI-guaranteed loans were less
than the total amounts SAIL would have otherwise paid for comparable
commercial loans. Thus, we preliminarily determine that the loan
guarantees from the GOI conferred a benefit on SAIL equal to the
difference between these two amounts. We then divided the benefit SAIL
received under this program by its total sales for the POI. On this
basis, we preliminarily determine the net countervailable subsidy from
this program to be 0.06 percent ad valorem for SAIL.
SAIL also received several GOI-guarantees on loans that were issued
by international lending and development institutions. In CTL Plate
from India, 64 FR at 73137, we did not include in our benefit
calculations the loans that SAIL received from international lending
and development institutions. In the
[[Page 20250]]
concurrent CVD investigation of the subject merchandise from South
Africa, the Department has preliminarily determined that the government
loan guarantees provided to South African companies on loans from
international lending and development institutions are countervailable
to the extent that the guarantee fees charged by the government are
lower than the fees which would have been charged by commercial banks.
Based on the decision in CTL Plate, we did not solicit information on
guarantee fees charged by commercial banks in India. Therefore, we are
unable to determine whether the GOI guarantees provided to SAIL on
loans from international lending and development institutions provide a
countervailable benefit.
During verification we will gather information on guarantee fees
charged by commercial banks in India. We will report this benchmark
information in our verification report and encourage interested parties
to comment on this issue in their case and rebuttal briefs.
10. Exemption of Export Credit From Interest Taxes
Under the Interest Tax Act of 1974, a tax is levied on the
chargable interest accruing to a credit institution in a given year.
Under Section 28 of the Act, the GOI may exempt any credit institution
or class of credit institutions, or the interest on any category of
loan or advances from the levy of the interest tax. Pursuant to this
section of the Act, the GOI has exempted working capital loans taken
from banks for supporting exports from the interest tax. Loans obtained
by producers/exporters of subject merchandise from banks under the pre-
and post-shipment export financing program are covered by this
exemption. All producers/exporters of subject merchandise used this
program.
In the Final Results of Countervailing Duty Administrative Review:
Certain Iron-Metal Castings From India, 61 FR 64676, 64686 (December 6,
1996) (1993 Castings), we determined that, in the absence of this
program, banks would pass along this interest tax to borrowers in its
entirety. As a result, in 1993 Castings, we determined that this tax
exemption is an export subsidy, and thus countervailable, because only
interest accruing on loans and advances made to exporters in the form
of export credit is exempt from the interest tax. We reached the same
conclusions in Certain Iron-Metal Castings from India: Final Results of
Countervailing Duty Administrative Review, 65FR 31515, May 18, 2000
(1997 Castings). No new information or evidence of changed
circumstances has been submitted in this investigation to warrant
reconsideration of this finding. Therefore, in accordance with sections
771(5)(D) and (E) of the Act, we continue to find this program
countervailable because it results in a financial contribution by the
government in the form of revenue forgone and provides a benefit to the
recipient in the amount of the interest tax savings. Moreover, because
receipt of the interest tax exemption is contingent upon export
performance, we continue to find the program to be an export subsidy
under section 771(5A)(B) of the Act.
To calculate the benefit for each producer/exporter of subject
merchandise, we first determined the total amount of interest paid by
each producer/exporter during the POI by adding the interest payments
made on all pre- and post-shipment export loans. We then multiplied
this amount by the tax rate to which the interest amount would have
been subject, if not for the exemption during the POR. In its response,
the GOI indicated that during the POI the rate of interest tax exempted
was two percent of the basic interest rate. Next, we divided the
benefit by the value of each producer/exporter's total exports or total
exports of subject merchandise to the United States, depending on the
type of sales to which the export financing was tied. On this basis, we
preliminarily determine the net countervailable subsidy from this
program to be 0.01 percent ad valorem for SAIL, less than 0.005 percent
ad valorem for Essar, 0.05 percent ad valorem for Ispat, and 0.10
percent ad valorem for TISCO. As facts available, we preliminary
determine a rate of 0.10 percent ad valorem for Jindal.
The GOI indicated that pursuant to the Finance Act of 2000, the tax
exemptions under this program were discontinued as of April 1, 2000.
However, the GOI has not yet submitted a copy of the Finance Act of
2000 to substantiate the termination of the program. During
verification we will seek to confirm whether this program has been
terminated and whether its termination qualifies as a ``program-wide
change'' under 19 CFR Sec. 351.526. If we can substantiate during
verification that there has been a program-wide change, we will adjust
the cash deposit rates to reflect the termination of this program in
our final determination.
Program Preliminarily Determined Not To Be Not Used
1. Income Tax Deductions Under Section 80 HHC
2. Grant-In-Aid Reported on SAIL's Annual Reports
SAIL's Annual Reports for fiscal years 1995 through 1999 indicate
that the company received ``grant-in-aid'' from the GOI under several
programs ranging from environmental and labor welfare assistance to
research and development grants. We conducted the ``0.5 percent test''
on each of these grants, as prescribed under 19 CFR Sec. 351.524(b)(2).
The face amounts of the grants received during the fiscal years 1995
through 1999 did not exceed 0.5 percent of SAIL's total sales. Thus, we
determine that these grants would have been expensed in the years of
receipt. Because any benefits attributable to these grants would not be
allocable to the POI, we find that the program is not used during the
POI; therefore, it is not necessary to determine whether these grants
are countervailable.
Verification
In accordance with section 782(i) of the Act, we will verify the
information submitted by respondents prior to making our final
determination.
Suspension of Liquidation
In accordance with 703(d)(1)(A)(i) of the Act, we have calculated
individual rates for the companies under investigation--SAIL, Essar,
TISCO, Ispat, and Jindal. To calculate the ``all others'' rate, we
weight-averaged the individual rates of SAIL, Essar, TISCO, and Ispat
by each company's respective sales of subject merchandise made to the
United States during the POI. We note that we did not include Jindal's
net subsidy rate in the ``all others'' rate because Jindal's net
subsidy rate was calculated on the basis of facts available. These
rates are summarized in the table below:
------------------------------------------------------------------------
Net subsidy rate
Producer/exporter (percent ad
valorem)
------------------------------------------------------------------------
Steel Authority of India Limited (SAIL)............. 17.95
Essar Steel Limited (Essar)......................... 9.08
Ispat Industries Limited (Ispat).................... 32.05
Tata Iron and Steel Company Limited (TISCO)......... 8.08
Jindal Iron and Steel (Jindal)...................... 34.27
All Others.......................................... 15.72
------------------------------------------------------------------------
[[Page 20251]]
In accordance with section 703(d) of the Act, we are directing the
U.S. Customs Service to suspend liquidation of all entries of the
subject merchandise from India, which are entered or withdrawn from
warehouse, for consumption on or after the date of the publication of
this notice in the Federal Register, and to require a cash deposit or
bond for such entries of the merchandise in the amounts indicated
above. This suspension will remain in effect until further notice.
ITC Notification
In accordance with section 703(f) of the Act, we will notify the
ITC of our determination. In addition, we are making available to the
ITC all non-privileged and nonproprietary information relating to this
investigation. We will allow the ITC access to all privileged and
business proprietary information in our files, provided the ITC
confirms that it will not disclose such information, either publicly or
under an administrative protective order, without the written consent
of the Assistant Secretary for Import Administration.
In accordance with section 705(b)(2) of the Act, if our final
determination is affirmative, the ITC will make its final determination
within 45 days after the Department makes its final determination.
Public Comment
In accordance with 19 CFR 351.310, we will hold a public hearing,
if requested, to afford interested parties an opportunity to comment on
this preliminary determination. Any requested hearing will be
tentatively scheduled to be held 57 days from the date of publication
of the preliminary determination at the U.S. Department of Commerce,
14th Street and Constitution Avenue, N.W., Washington, D.C. 20230.
Individuals who wish to request a hearing must submit a written request
within 30 days of the publication of this notice in the Federal
Register to the Assistant Secretary for Import Administration, U.S.
Department of Commerce, Room 1870, 14th Street and Constitution Avenue,
N.W., Washington, D.C. 20230. Parties should confirm by telephone the
time, date, and place of the hearing 48 hours before the scheduled
time.
Requests for a public hearing should contain: (1) The party's name,
address, and telephone number; (2) the number of participants; and, (3)
to the extent practicable, an identification of the arguments to be
raised at the hearing. In addition, six copies of the business
proprietary version and six copies of the non-proprietary version of
the case briefs must be submitted to the Assistant Secretary no later
than 50 days from the date of publication of the preliminary
determination. As part of the case brief, parties are encouraged to
provide a summary of the arguments not to exceed five pages and a table
of statutes, regulations, and cases cited. Six copies of the business
proprietary version and six copies of the non-proprietary version of
the rebuttal briefs must be submitted to the Assistant Secretary no
later than 5 days from the date of filing of the case briefs. An
interested party may make an affirmative presentation only on arguments
included in that party's case or rebuttal briefs. Written arguments
should be submitted in accordance with 19 CFR 351.309 and will be
considered if received within the time limits specified above.
This determination is published pursuant to sections 703(f) and
777(i) of the Act. Effective January 20, 2001, Bernard T. Carreau is
fulfilling the duties of the Assistant Secretary for Import
Administration.
Dated: April 13, 2001.
Bernard T. Carreau,
Deputy Assistant Secretary for Import Administration.
[FR Doc. 01-9860 Filed 4-19-01; 8:45 am]
BILLING CODE 3510-DS-P