90-405

NOTICES

DEPARTMENT OF COMMERCE

[C-533-063]

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

Thursday, April 5, 1990

AGENCY: International Trade Administration/Import Administration, Commerce.

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

SUMMARY: The Department of Commerce has conducted an administrative review of the
countervailing duty order on certain iron-metal castings from India. We preliminarily
determine the net subsidy to be 10.22 percent ad valorem for R.B. Agarwalla, 22.99 percent
ad valorem for Carnation, 36.40 percent ad valorem for Crescent, 79.12 percent ad
valorem for Govind, 44.84 percent ad valorem for Kajaria, 9.11 percent ad valorem for RSI,
42.25 percent ad valorem for Serampore and 29.14 percent ad valorem for all other firms
during the period January 1, 1985 through December 31, 1985. We invite interested parties
to comment on these preliminary results.

EFFECTIVE DATE: April 5, 1990.

FOR FURTHER INFORMATION CONTACT:Philip Pia or Paul McGarr, Office of Countervailing
Compliance, International Trade Administration, U.S. Department of Commerce,
Washington, DC 20230; telephone: (202) 377-2786.

SUPPLEMENTARY INFORMATION:

Background

On December 22, 1986, the Department of Commerce ("the Department") published in the
Federal Register (51 FR 45788) 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 September 23, 1988, we amended those final results in accordance with a
decision upon remand from the Court of International Trade (53 FR 37014). On October 15,
1985, the petitioner, Pinkerton Foundry, Inc., requested an administrative review of the
order. We initiated the review on March 4, 1987 (52 FR 6594). The Department has now
conducted that administrative review in accordance with section 751 of the Tariff Act of
1930 ("the Tariff Act").

Scope of Review

The United States, under the auspices of the Customs Cooperation Council, has developed a
system of tariff classification based on the international harmonized system of Customs
nomenclature. On January 1, 1989, the United States fully converted to the Harmonized
Tariff Schedule (HTS), as

*12703

provided for in section 1201 et seq. of the Omnibus Trade
and Competitiveness Act of 1988. All merchandise entered, or withdrawn from warehouse,
for consumption on or after that date is now classified solely according to the appropriate
HTS item number(s).
Imports covered by the review are shipments of Indian manhole covers and frames,
clean-out covers and frames, and catch basin grates and frames. These articles are
commonly called municipal or public works castings and are used for access or for drainage
for public utility, water, and sanitary systems. During the review period, such merchandise
was classifiable under Tariff Schedules of the United States Annotated item numbers
657.0950 and 657.0990. These products are currently classifiable under HTS item
numbers 7325.10.0010 and 7325.10.0050. The HTS item numbers are provided for
convenience and Customs purposes. The written description remains dispositive.
The review covers the period January 1, 1985 through December 31, 1985 and ten
programs.

Analysis of Programs

(1) International Price Reimbursement Scheme ("IPRS")

On February 9, 1981, the Government of India introduced the 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 and August
10, 1987, the Indian government extended the IPRS to include pig iron and scrap inputs,
respectively. The rebate is funded through collection of a levy on all domestic purchases of
steel, pig iron and scrap. The Joint Plant Committee ("JPC"), a government-directed
organization comprised largely of pig iron and steel producers, sets domestic steel, pig iron
and scrap prices and determines the specific levy for each pig iron and steel product based
on the anticipated need for each of those inputs in exported products.
The Engineering Export Promotion Council ("EEPC"), a non-profit organization funded by
the Indian government and private firms, processes the claims for, and disburses, the
rebate. The rebate is calculated by multiplying the differential between the domestic and
international prices of pig iron by a standard factor of 110 percent of the volume of pig iron
in the exported castings (which includes a 10 percent allowance for waste). Castings
exporters obtained IPRS rebates for pig iron during the review period.
We consider a government program that results in the provision of an input to exporters at
a price lower than to producers of domestically-sold products to confer a subsidy within the
meaning of section 771 (5) of the Tariff Act. Therefore, we preliminarily determine the IPRS
program to confer a countervailable export subsidy.
To calculate the benefit from this program, we allocated the total amount of rebate received
by each firm during the review period over each firm's total exports of the subject
merchandise. Because the aggregate net subsidy for seven firms is significantly different
from the weighted-average country-wide rate, we calculated the net subsidy in accordance
with § 355.22(d) of the Commerce regulations. On this basis, we preliminarily determine the
net subsidy from this program to be 9.11 percent ad valorem for R.B. Agarwalla, 21.81
percent ad valorem for Carnation, 30.92 percent ad valorem for Crescent, 65.83 percent ad
valorem for Govind, 39.17 percent ad valorem for Kajaria, 7.98 percent ad valorem for RSI,
41.18 percent ad valorem for Serampore and 25.02 percent ad valorem for all other firms.
At verification, we established that the EEPC stopped accepting any IPRS claims filed on
shipments of the subject merchandise exported to the United States after July 1, 1987.
Therefore, for purposes of the cash deposit of estimated countervailing duties, we
preliminarily determine the benefit from this program to be zero.

(2) Cash Compensatory Support Program ("CCS")

The Government of India introduced the CCS program in 1966 with the primary purpose of
rebating indirect taxes on exported merchandise. The rebates are paid as a percentage of
the f.o.b. invoice price. In "Certain Iron-Metal Castings From India; Final Results of
Administrative Review of Countervailing Duty Order" (48 FR 56092; December 19,
1983), we found that the Indian government had satisfactorily demonstrated the requisite
linkage between the indirect tax incidence on the subject merchandise and the CCS
payment.
Although the Indian government rebates various indirect taxes upon export through the
CCS program, the Tariff Act allows the rebate of only the following: (1) Indirect taxes borne
by inputs that are physically incorporated in the exported product; and (2) indirect taxes at
the final stage. 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.
We consider pig iron, scrap iron, paint and packing and materials as physically
incorporated raw material inputs. The allowable indirect taxes on these materials include
Central and West Bengal sales taxes, octroi tax, central excise tax, turnover tax, the freight
equalization levy, and stamp duties for bills of lading, letters of credit, receipts and drafts.
Because the average indirect tax incidence on the subject merchandise for calendar year
1985 exceeded the five percent CCS payment, we preliminarily determine that there is no
overrebate of indirect taxes to castings producers and, therefore, no countervailable
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 per annum for
90-day, 135-day and up to 180-day loans.
The maximum comparable commercial interest rate during the 1985-1986 fiscal year was
16.50 percent per annum for small-scale industries with loans over Rs 2 lakhs and up to Rs
25 lakhs, as quoted by the Reserve Bank of India in its bulletin entitled "Report on Trend
and Progress of Banking in India" for fiscal year 1985-1986. Since the Government of
India characterized all castings producers/exporters subject to the review as small-scale
industries and because no castings firms reported pre-shipment credit exceeding Rs 25
lakhs during the review period, we have used 16.50 percent as our benchmark interest rate.
Therefore, the interest differential for these loans was 4.5 percent, and we preliminarily
determine this program to confer a countervailable export subsidy.
To calculate the benefit from these loans, we multiplied the interest differential by each
firm's total borrowings and divided the result of each firm's total borrowings and divided the
result by each firm's total exports. In accordance with § 355.22(d), we preliminarily
determine the net subsidy from this program to be 0.49 percent ad valorem for R.B.
Agarwalla, zero for Carnation, zero for Crescent, 4.84 percent ad valorem for Kajaria, 1.48

*12704

percent ad valorem for Govind, 1.13 percent ad valorem for RSI, 0.36 percent ad
valorem for Serampore and 0.49 percent ad valorem for all other firms.

(4) Preferential Post-shipment Financing

The Reserve Bank of India, through commercial banks, provides post-shipment credit to
exporters. Exporters are eligible for post-shipment credit with 60 to 80 day repayment
terms. During the review period, the rate of interest under this program was 12 percent per
annum. The comparable commercial interest rate during the review period was 16.5
percent per annum. Therefore, the interest differential for these loans was 4.5 percent, and
we preliminarily determine this program to confer a countervailable export subsidy.
Three exporters, Kejriwal, Serampore and Super Castings used post-shipment financing
during the review period. To calculate the benefit from these loans, we multiplied the
interest differential by each firm's total borrowings and divided the result by each firm's
total exports. In accordance with § 355.22(d), we preliminarily determine the net subsidy
from this program to be zero for R.B. Agarwalla, Carnation, Crescent, Govind, Kajaria, and
RSI, 0.59 percent ad valorem for Serampore and 0.76 percent ad valorem for all other
firms.

(5) Income Tax Reductions

Under section 80HHC of the Finance Act of 1983, the Government of India allowed
exporters to deduct one percent of taxes paid on export sales and five percent of taxes paid
on the incremental increase of export sales over the previous fiscal year during assessment
years 1983-84, 1984-85 and 1985-86. However, section 80VVA limited the deduction
under section 80HHC to 70 percent of net income. Because this tax deduction is contingent
upon export performance and available only to exporters, we preliminarily determine that
it confers a countervailable export subsidy.
To calculate the benefit, we multiplied the income tax deductions claimed by each firm by
the corporate income tax rate and divided the result by each firm's total exports. In
accordance with § 355.22(d), we preliminarily determine the net subsidy from this program
to be 0.62 percent ad valorem for R.B. Agarwalla, 1.18 percent ad valorem for Carnation,
5.48 percent ad valorem for Crescent, 11.81 percent ad valorem for Govind, 0.83 percent
ad valorem for Kajaria, zero for RSI, 0.12 percent ad valorem for Serampore and 2.86
percent ad valorem for all other firms.

(6) Market Development Assistance ("MDA") Grants

The Ministry of Commerce examines and approves all MDA grants, but the program is
administered by the Federation of Indian Export Organizations. The purpose of the program
is to provide grants-in-aid to approved organizations (i.e, export houses) to promote the
development of markets for Indian goods abroad. Such development projects may include
market research, export publicity, and participation in trade fairs and exhibitions. Because
these MDA grants are available only to export houses, we preliminarily determine that such
grants confer a countervailable export subsidy.
Of the eleven known exporters, only one received MDA grants related to exports of the
subject merchandise to the United States during the review period. To calculate the benefit,
we divided the value of the grant received by the value of the firm's total exports to the
United States. In accordance with § 355.22(d), we preliminarily determine the net subsidy
from this program to be zero for R.B. Agarwalls, Carnation, Crescent, Govind, Kajaria, RSI
and Serampore, and 0.01 percent ad valorem for all other firms.

(7) Other Programs

We also examined the following programs and preliminarily determine that exporters of
certain iron-metal castings did not use them during the review period:
A. Sale of Import Replenishment Licenses;
B. Extension of the Free Trade Zones;
C. Preferential Freight rates; and
D. Import duty exemptions available to 100 percent export-oriented units.

Preliminary Results of Review

As a result of our review, we preliminarily determine that the following net subsidies exist
for the period January 1, 1985 through December 31, 1985:

--------------------------------------------------
Manufacturer/exporter Net subsidy (percent)
--------------------------------------------------
R.B. Agarwalla ............................. 10.22
Carnation .................................. 22.99
Crescent ................................... 36.40
Govind ..................................... 79.12
Kajaria .................................... 44.84
RSI ......................................... 9.11
Serampore .................................. 42.25
All other firms ............................ 29.14
--------------------------------------------------

The Department intends to instruct the Customs Service to assess countervailing duties
at the above percentages of the f.o.b. invoice price on shipments of the subject merchandise
exported on or after January 1, 1985, and on or before December 31, 1985.
The Department also intends, as a result of the termination of benefits attributable to the
IPRS program, to instruct the Customs Service to collect a cash deposit of estimated
countervailing duties of 13.29 percent of the f.o.b. invoice price for Govind and 2.79
percent for all other firms 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.
Parties to the proceeding may request disclosure of the calculation methodology and
interested parties may request a hearing not later than 10 days after date of publication of
this notice. Interested parties may submit written arguments in case briefs on these
preliminary results within 30 days of the date of publication. Rebuttal briefs, limited to
arguments raised in case briefs, may be submitted seven days after the time limit for filing
the case brief. Any hearing, if requested pursuant to § 355.38(b), will be held seven days
after the scheduled date for submission of rebuttal briefs. Copies of case briefs and rebuttal
briefs must be served on interested parties in accordance with 19 CFR 355.38(e). Any
request for disclosure under 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 case or
rebuttal brief 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 19 CFR 355.22.
Dated: March 26, 1990.

Lisa B. Barry,

Acting Assistant Secretary for Import Administration.

[FR Doc. 90-7779 Filed 4-4-90; 8:45am]

BILLING CODE 3510-DS-M