NOTICES

                         DEPARTMENT OF COMMERCE

                       International Trade Adminstration

            Certain Iron-Metal Castings From India; Preliminary Results of
                  Countervailing Duty Administrative Review

                           Tuesday, October 7, 1986

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 AGENCY: International Trade Administration/Import Administration,
 Department of Commerce.

 ACTION: Notice of preliminary results of countervailing duty administrative review.

 SUMMARY: The Department of Commerce has conducted an administrative review of the
 
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 countervailing duty order on certain iron-metal castings from India. The
 review covers the period January 1, 1984 through December 31, 1984 and ten programs.

 As a result of the review, the Department has preliminarily determined the net subsidy to be
 6.99 percent ad valorem during the period of review. Interested parties are invited to
 comment on these preliminary results.

 EFFECTIVE DATE: October 7, 1986.

 FOR FURTHER INFORMATION CONTACT: Susan Silver or Bernard Carreau, Office of
 Compliance, International Trade Administration, U.S. Department of Commerce,
 Washington, DC 20230; telephone: (202) 377-2786.

 SUPPLEMENTARY INFORMATION:

 Background

 On October 18, 1984, the Department of Commerce ("the Department") published in the
 Federal Register (49 FR 40943) the final results of its last administrative review of the
 countervailing duty order on certain iron-metal castings from India (October 16, 1980,
 46 FR 16921). On October 15, 1985, the petitioner, Pinkerton Foundry, Inc., requested in
 accordance with § 355.10 of the Commerce Regulations an administrative review of the
 order. We published the initiation of the administrative review on November 12, 1985 (50
 FR 46689). The Department has now conducted that administrative review in acordance
 with section 751 of the Tariff Act of 1930 ("the Tariff Act").

 Scope of Review

 Imports covered by the review are shipments of Indian manhole covers and frames,
 clean-out covers and frames, and catch basin grates and frames. Such merchandise is
 currently classifiable under items 657.0950 and 657.0990 of the Tariff Schedules of the
 United States Annotated.
 The review covers the period January 1, 1984 through December 31, 1984 and ten
 programs: (1) The International Price Reimbursement Scheme ("IPRS"); (2) A rebate upon
 export of indirect taxes under the Cash Compensatory Support program ("CCS"); (3)
 Pre-shipment export loans; (4) Income tax deductions; (5) Grants through the Market
 Development Assistance program; (6) The sale of Import Replenishment Licenses; (7)
 Extension of the free trade zones; (8) Supply of raw materials at preferential prices; (9)
 Preferential freight rates; and (10) Import duty exemptions available to 100 percent
 export- oriented units.

 Analysis of Programs

 (1) IPRS Program

 On February 9, 1981, the Government of India introduced the International Price
 Reimbursement Scheme ("IPRS") for exporters of products with steel inputs. The purpose of
 the program is to rebate the difference between higher domestic and lower international
 prices of steel. On September 28, 1983, the Indian government extended the IPRS to
 include pig iron inputs. The funds for the rebate come from a levy on domestic steel and pig
 iron that is paid by all purchasers of those products. The Joint Plant Committee ("JPC"), a
 government- directed organization comprised largely of pig iron and steel producers, sets
 domestic pig iron and steel prices and determines that specific levy for each pig iron and
 steel product based on the anticipated need for each of those inputs in exported products.
 The rebate is based on the differential between domestic and international prices and a
 standard factor for the consumption of each of those inputs in the final product. Castings
 exporters obtained IPRS rebates for pig iron during the period of review.
 We consider the entire rebate payment to be a countervailable benefit because it is
 available only to exporters. We allocated the total amount of rebate received by each
 company during the period of review over each company's total exports of the merchandise
 and weight-averaged the ad valorem benefit by each company's share of exports of the
 merchandise to the United States. On this basis, we preliminarily determine the net subsidy
 to be 6.34 percent ad valorem during the period of review.

 (2) CCS Program 

 The Government of India introduced the CCS program in 1966 with the primary purpose of
 rebating upon exportation indirect taxes on merchandise. The rebates are paid as a
 percentage of the f.o.b. invoice price. In the final results of a previous administrative
 review, we found that the Indian government had satisfactorily demonstrated the requisite
 linkage between the tax incidence on the merchandise and the CCS payment.
 Although the Indian government rebates upon export various indirect taxes through the
 CCS program, the Tariff Act and the Commerce Regulations allow the rebate of only the
 following: (1) Indirect taxes borne by inputs that are physically incorporated in the
 exported product (see Annex 1.1 of Part 355 of the Commerce Regulations); and (2)
 Indirect taxes at the final stage (see Annex 1.2 of Part 355 of the Commerce Regulations). If
 the payment upon export exceeds the total amount of allowable indirect taxes described
 above, the Department considers the difference to be an overrebate of indirect taxes and,
 therefore, a subsidy.
 Since our last review, we have allowed two additional indirect taxes paid by castings
 producers. These are the freight equalization levy of Rs. 320 per metric ton, which is levied
 on pig iron in order to equalize the difference in freight costs among castings producers
 located in different parts of the country, and the turnover tax of one percent, which is
 levied on all purchases of raw materials.
 Because of these additional indirect taxes, the average indirect tax incidence on the
 merchandise for calendar year 1984 exceeded the 5 percent CCS payment. We preliminarily
 determine that there is no overrebate of indirect taxes to castings producers and therefore
 no benefit from this program.

 (3) Pre-Shipment Export Loans 

 The Reserve Bank of India, through commercial banks, provides pre-shipment or "packing"
 credit to exporters, allowing them to purchase raw materials and packing materials based
 on presentation of a confirmed order or letter of credit. In general, the loans are granted for
 a period of 90 to 180 days, with penalty charges for late interest payments. During the
 review period, the rate of interest under this program was 12 percent for 90-day loans and
 14.5 percent for 135-day loans. However, we verified that one firm received 135-day loans
 at 14 percent. The maximum comparable commercial interest rate during the 1984-1985
 fiscal year was 18 percent, as quoted by the Reserve Bank of India in its bulletin entitled
 "Report on Trend and Progress of Banking in India" for fiscal year 1984-1985. The interest
 differential for these loans ranged from 4 to 6 percent during the period of review. We
 allocated the interest benefit for each company over the total value of the firm's exports of
 the subject merchandise to all markets. We then weight-averaged the resulting ad valorem
 benefits by each company's proportion of the value of Indian exports to the United States of
 this merchandise. On this basis, we preliminarily determine the net subsidy from this
 program to be 0.62 percent ad valorem.

 (4) Income Tax Deductions 

 Under section 80HHC of the Finance Act of 1983, the Government of India allowed
 exporters to deduct 50 percent 

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 of taxes on export sales. During fiscal year 1984,
 the Indian government modified the program to allow exporters to deduct one percent of
 taxes paid on export sales during the fiscal year and five percent of taxes paid on the
 increment of export sales over the previous fiscal year. Because this tax deduction is
 contingent upon export performance and available only to exporters, we preliminarily
 determine that it is countervailable.
 After reviewing the tax claims of the castings exporters during the period of review, we
 multiplied the income tax deductions claimed by each company by the corporate income
 tax rate and allocated the resulting benefit over the total value of that firm's exports to all
 markets during the period of review. We then weight-averaged the resulting ad valorem
 benefits by each company's proportion of the value of Indian castings exports to the United
 States. On this basis, we preliminarily determine the net subsidy from this program to be
 0.02 percent ad valorem.
 Under Article 35B of the Finance Act, the Government of India allowed exporters to
 deduct 133 percent of certain expenses related to market development. Effective April 1,
 1983, no income tax benefits were available for expenditures incurred after March 1, 1983.
 One company claimed an Article 33B income tax deduction in its tax return covering fiscal
 year 1983 filed during 1984.
 Because the Indian government allowed deductions for 100 percent for expenses relating to
 domestic sales, we focused on the remaining 33 percent. We allocated one-third of the
 deduction over total exports and weight-averaged the resulting ad valorem benefit by the
 company's share of total Indian exports of the merchandise to the United States. On this
 basis, we preliminarily determine the net subsidy to be 0.005 percent ad valorem.

 (5) Other Programs

 We also examined the following programs, which we preliminarily find exporters of certain
 iron-metal castings did not use during the review period;
 A. Market Development Assistance grants;
 B. Sale of Import Replenishment Licenses;
 C. Extension of the Free Trade Zones;
 D. Supply of raw materials at preferential prices;
 E. Preferential freight rates; and
 F. Import duty exemptions available to 100 percent export-oriented units.

 Preliminary Results of Review

 As a result of the review, we preliminarily determine the net subsidy to be 6.99 percent ad
 valorem for the period January 1, 1984 through December 31, 1984. The Department
 intends to instruct the Customs Service to assess countervailing duties of 6.99 percent
 of the f.o.b. invoice price on any shipments of this merchandise exported on or after
 January 1, 1984, and on or before December 31, 1984.
 The Department intends to instruct the Customs Service to collect a cash deposit of
 estimated countervailing duties, as provided for by section 751(a)(1) of the Tariff Act, of
 6.99 percent of the f.o.b. invoice price on shipments of this merchandise entered, or
 withdrawn from warehouse, for consumption on or after the date of publication of the final
 results of this administrative review. This deposit requirement shall remain in effect until
 publication of the final results of the next administrative review.
 Interested parties may submit written comments on these preliminary results within 30
 days of the date of publication of this notice and may request disclosure and/or a hearing
 within 10 days of the date of publication. Any hearing, if requested, will be held 30 days
 after the date of publication or the first workday afterward. Any request for an
 administrative protective order must be made no later than five days after the date of
 publication. The Department will publish the final results of this administrative review
 including the results of its analysis of issues raised in any such written comments or at a
 hearing.
 This administrative review and notice are in accordance with section 751(a)(1) of the Tariff
 Act (19 U.S.C. 1675(a)(1)) and § 355.10 of the Commerce Regulations (50 FR 32556; August
 13, 1985).
 Dated: October 2, 1986.

 Gilbert B. Kaplan,

 Deputy Assistant Secretary, Import Administration.

 [FR Doc. 86-22699 Filed 10-6-86; 8:45 am]

 BILLING CODE 3510-DS-M