NOTICES
DEPARTMENT OF COMMERCE
[C-533-063]
Preliminary Results of Countervailing Duty Administrative Review: Certain
Iron-Metal Castings From India
Tuesday, November 6, 1990
AGENCY: Import Administration, International Trade Administration, Commerce.
ACTION: Notice.
SUMMARY: We preliminarily determine that net subsidies are being provided to
manufacturers or exporters in India of certain iron-metal castings (castings), as described
in the "Scope of the Review" section of this notice. We invite interested parties to comment
on these preliminary results. If this review proceeds as expected, we will issue final results
on or before January 11, 1991.
EFFECTIVE DATE: November 6, 1990.
FOR FURTHER INFORMATION CONTACT: Michelle L. O'Neill or Margot Paijmans,
*46700
Office of Countervailing Investigations, Import Administration, International Trade
Administration, U.S. Department of Commerce, Washington, DC 20230 on (202)
377-1673 or (202) 377-1442.
SUPPLEMENTARY INFORMATION:
Preliminary Results
We preliminarily determine that net subsidies within the meaning of section 701 of the
Tariff Act of 1930, as amended (the Act), are being provided to manufacturers or exporters
in India of certain iron-metal castings. This review covers the period of January 1, 1986
through December 31, 1986 and the following programs:
- International Price Reimbursement Scheme
- Cash Compensatory Support Scheme
- Pre-Shipment Export Loans
- Income Tax Reductions
- Market Development Assistance Grants
- Sales of Import Replenishment Licenses
- Extension of Free Trade Zones
- Preferential Freight Rates
- Import Duty Exemptions Available to 100 Percent Export-Oriented Units
- Post-Shipment Financing
The weighted-average net subsidies are shown in the "Preliminary Results of Administrative
Review" section of this notice.
Case History
On October 16, 1980, the Department published its countervailing duty order in its
investigation of certain iron-metal castings from India. On December 22, 1986, the
Department published the final results of its most recently completed administrative review
for the period January 1, 1984 through December 31, 1984 (51 FR 45780). The preliminary
results of the administrative review for the period January 1, 1985 through December 31,
1985 were published on April 5, 1990 (55 FR 12702).
Since the notice of initiation for this administrative review (52 FR 441614, November 18,
1987), the following events have occurred. On June 10, 1988, we presented the
questionnaire to the Government of India and the manufacturers and exporters of the
subject merchandise. On October 4, 1988, we received the government and company
responses. On May 23, 1990, we delivered a supplemental/deficiency questionnaire to the
Government of India and the manufacturers and exporters of the subject merchandise. We
received responses to this supplemental/deficiency questionnaire on August 8, August 24,
August 28, September 28, October 2, October 3, and October 22, 1990.
Scope of Review
The imports covered by this 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, this merchandise
was classifiable under "Tariff Schedules of the United States Annotated" item numbers
657.0950 and 657.0990. This merchandise is currently classifiable under "Harmonized
Tariff Schedule" (HTS) item numbers 7325.10.0010 and 7325.10.0050. The TSUSA and HTS
item numbers are provided for convenience and Customs purposes. The written description
remains dispositive.
Analysis of Programs
Based on our analysis of the responses to our questionnaires, we preliminarily find the
following:
I. Programs Preliminarily Found to Confer Subsidies
A. 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, the
Government of India extended the IPRS to include pig iron.
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 and pig iron prices.
The JPC also determines the specific levy for each pig iron and steel product based on the
anticipated need for these inputs in exported products.
The Engineering Export Promotion Council (EEPC), a non-profit organization funded by the
Government of India and private firms, processes the claims for, and disburses, the IPRS
rebate. The IPRS rebate is based on the differential between domestic and international
prices of pig iron, using a standard pig iron consumption factor of 110 percent, which
includes a ten percent allowance for waste. Based on our analysis of questionnaire
responses, we preliminarily determine that all castings exporters covered by this review
obtained IPRS rebates for pig iron.
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)(A) of the Act. We consider the benefit to be the entire IPRS
rebate between the domestic and international price of pig iron. Therefore, we preliminarily
determine the IPRS program to confer a countervailable export subsidy.
Respondents reported IPRS rebates as received on a shipment-specific basis for exports of
the subject merchandise to the United States. Therefore, we allocated the total amount of
rebates received by each firm during the period of review over total exports of the subject
merchandise to the United States.
Where the information provided by a respondent company was incomplete or insufficient,
we relied on best information available in accordance with 776(c) of the Act. For Govind
Steel Co. Ltd. (Govind), the response did not state whether IPRS rebates received were for
exports of the subject merchandise to the United States. As best information available, we
have allocated the total amount of the IPRS rebates received over the firm's exports of
subject castings to the United States. For RSI India Pvt. Ltd., we did not receive data
regarding IPRS rebates received during 1986 for which claims were made prior to 1986.
Therefore, in addition to benefits received in 1986 pursuant to claims filed in 1986, as best
information available, we have included IPRS rebates received in 1987 pursuant to claims
filed in 1986.
Where responding firms made different presentations of IPRS rebate information, we have
used the most recent and/or the most specific data available.
We preliminarily determine the net subsidy from this program to be 21.16 percent ad
valorem for all manufacturers and exporters in India of certain iron-metal castings except
for those firms listed below which have significantly different aggregate benefits. The net
subsidy for these firms is the following:
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Company Net ad valorem subsidy (percent)
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1. R.B. Agarwalla & Company .................................. 16.35
2. Crescent Foundry Co. Pvt. Ltd ............................. 14.81
3. Govind Steel Co. Ltd ..................................... 223.40
4. Kejriwal Iron & Steel Works ............................... 44.42
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At verification in the 1985 review, we established that the EEPC stopped accepting
any IPRS claims filed on shipments of the subject merchandise exported to the United
States after July l, 1987. Therefore, for purposes of the cash deposit of estimated
countervailing duties, we preliminarily determine the benefit from this program to be
zero.
B. Cash Compensatory Support (CCS) Program
In 1966, the Government of India established the CCS program as a mechanism by which to
rebate 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 Government of India satisfactorily demonstrated the requisite
linkage between the indirect tax incidence on the subject merchandise and the CCS rebate.
We have no information indicating any change in this requisite linkage.
The Government of India rebates various indirect taxes upon export through the CCS
program. However, the Department allows an adjustment for a rebate only when the
following criteria are met: (1) The indirect taxes are borne by inputs that are physically
incorporated into the exported product; and (2) the indirect taxes are assessed only at the
final stage of production. If a rebate exceeds the total amount of allowable indirect taxes as
defined above, the Department considers the difference to be an overrebate of indirect
taxes and, therefore, a subsidy that provides a countervailable benefit.
We consider pig iron, scrap iron, paint and packing materials to be raw material inputs that
are physically incorporated into the subject merchandise. The allowable indirect taxes on
these materials include Central and West Bengal sales taxes, octroi tax, central excise tax,
turnover tax, and stamp duties for bills of lading, letters of credit, receipts and drafts.
To determine the average taxes incurred on the subject merchandise, we calculated taxes
incurred on a company-specific basis for each input mentioned above. Where companies
reported volume and value of opening and closing inventories and purchases of pig iron
during the review period, we calculated an average price per metric ton and then calculated
the tax incidence on these inputs. For those companies that did not report specific taxes
incurred, the average price per metric ton for pig iron and scrap was increased by ten
percent to allow for wastage. We divided total taxes incurred by the value of one metric ton
of the subject merchandise to arrive at the total tax incidence, expressed as a percentage.
We then compared this tax incidence percentage to the CCS rebate, including the excise tax
drawback.
Where the information provided by a respondent company was incomplete or insufficient,
we applied best information available in accordance with 776(c) of the Act. One company,
Super Castings (India), provided only the value, but not the volume, of opening and
closing inventories and purchases. Another company, Govind Steel Co. Ltd., provided only
the volume, but not the value, of opening and closing inventories and purchases. Therefore,
we based the calculation of Super Castings' and Govind's tax incidence on the average
domestic price of pig iron reported by the Government of India in its original
questionnaire response.
Although its response indicated use of the CCS program, Select Steels Ltd. did not provide
any data regarding this program. Therefore, as best information available, we are assigning
Select Steels Ltd. the overrebate found in the administrative review for the period, January
l, 1982 to December 31, 1982, the most recent review in which an overrebate was found
under this program.
For all companies, except Select Steels Ltd., the average indirect tax incidence on the
subject merchandise for the period of review exceeded the five percent CCS payment.
Therefore, we preliminarily determine the net subsidy from this program to be 0.44 percent
ad valorem, which is de minimis, for all manufacturers and exporters in India of certain
iron-metal castings except for those firms listed below which have significantly different
aggregate benefits. The net subsidy for these firms is the following:
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Company Net ad valorem subsidy (percent)
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1. R.B. Agarwalla & Company ................................... 0.00
2. Crescent Foundry Co. Pvt. Ltd .............................. 0.00
3. Govind Steel Co. Ltd ....................................... 0.00
4. Kejriwal Iron & Steel Works ................................ 0.00
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C. Pre-Shipment Export Loans
The Reserve Bank of India, through commercial banks, provides pre-shipment or "packing"
credits to exporters. With these pre-shipment loans, exporters may purchase raw materials
and packing materials based on presentation of a confirmed order or letter of credit. In
general, the pre-shipment loans are granted for a period of 90 to 180 days, with penalty
charges for late interest payments. During the review period, the interest rate under this
program was 12 percent per annum for the period of January through July 1986, and 9.5
percent per annum for the period of August through December 1986, for 90-day, 135-day,
and up to 180-day loans. Because only exporters are eligible for these pre-shipment loans,
we determine that they are countervailable to the extent that they are provided at
preferential rates.
We did not receive information regarding the comparable commercial interest rate during
the review period as requested in the original and supplemental questionnaires. In
accordance with section 776(c) of the Act, as best information available, we have used the
benchmark applied in the 1985 review, 16.50 percent. (See, "Certain Iron-Metal Castings
From India: Preliminary Results of Countervailing Duty Administrative Review"55 FR
12702, April 5, 1990.) This was the comparable commercial interest rate during fiscal year
1985-1986 for small-scale industries with loans from 200,000 to 2,500,000 rupees, 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. This was also the short-term interest rate for
India listed in the "IMF International Financial Statistics" for 1986. Since all castings
manufacturers and exporters subject to this review are characterized as small-scale
industries and because no castings firms reported pre-shipment loans exceeding 2,500,000
rupees during the review period, we have used 16.50 percent as our benchmark interest
rate. Therefore, the interest differential for these loans ranged from 4.5 to 7.0 percent.
To calculate the benefit on loans for which interest was paid during 1986, we followed the
short-term loan methodology which has been applied consistently in our past
determinations and is described in more detail in the "Subsidies Appendix" attached to the
notice of "Cold-Rolled Carbon Steel Flat-Rolled Products from Argentina: Final Affirmative
Countervailing Duty Determination and Countervailing Duty
*46702
Order" (49 FR
18006, April 26, 1984); see also, Alhambra Foundry v. United States, 626 F. Supp. 402
(CIT, 1985).
Accordingly, we compared the amount of interest actually paid during the review period to
the amount that would have been paid at the benchmark rate. Depending on the manner in
which respondent companies reported these loans, we allocated the benefit to either total
exports or total exports of the subject merchandise to the United States.
We preliminarily determine the net subsidy from this program to be 1.18 percent for all
manufacturers and exporters in India of certain iron-metal castings except for those firms
listed below which have significantly different aggregate benefits. The net subsidy for these
firms is the following:
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Company Net ad valorem subsidy (percent)
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1. R. B. Agarwalla & Company .................................. 0.59
2. Crescent Foundry Co. Pvt. Ltd .............................. 0.00
3. Govind Steel Co. Ltd........................................ 2.93
4. Kejriwal Iron & Steel Works ................................ 0.19
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D. Income Tax Reductions
Under section 80HHC of the Finance Act of 1983, the Government of India allows
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 of the Finance Act of 1983
limits the tax deduction to 70 percent of net income. Because the tax deduction allowable
under section 80HHC is contingent upon export performance and available only to
exporters, we preliminarily determine that it is countervailable.
To calculate the benefit, we multiplied the income tax deductions each company claimed by
the corporate income tax rate and divided the result by its total exports. For those
companies that did not provide their tax rate, we used the corporate tax rate reported by
the Government of India. One company's allowable deductions exceeded 70 percent of net
income. However, the Government of India, pursuant to section 80VVA of the Finance
Act, allows only those deductions up to 70 percent of net income. Therefore, for this
company, we calculated the benefit to be 70 percent of the total deduction taken under
section 80HHC.
We preliminarily determine the net subsidy from this program to be 0.73 percent ad
valorem for all manufacturers and exporters in India of certain iron-metal castings except
for those firms listed below which have significantly different aggregate benefits. The net
subsidy for these firms is the following:
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Company Net ad valorem subsidy (percent)
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1. R. B. Agarwalla & Company .................................. 0.40
2. Crescent Foundry Co. Pvt. Ltd .............................. 3.26
3. Govind Steel Co. Ltd........................................ 0.12
4. Kejriwal Iron & Steel Works ................................ 0.15
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E. Market Development Assistance (MDA) Grants
The Federation of Indian Export Organization administers, and the Ministry of Commerce,
approves all MDA grants. 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 are countervailable.
Of the 11 known exporters, only Kejriwal Iron and Steel Works received MDA grants related
to exports of the subject merchandise to the United States during the review period.
Because the grant represented less than 0.5 percent of export sales during the review
period, we allocated the value of the grant to the firm's total exports to the United States in
1986. To calculate the benefit, we divided the value of the grant received by the value of
Kejriwal's total export sales to the United States in 1986.
We preliminarily determine the net subsidy from this program to be 0.00 percent ad
valorem for all manufacturers and exporters in India of certain iron-metal castings except
for those firms listed below which have significantly different aggregate benefits. The net
subsidy for these firms is the following:
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Company Net ad valorem subsidy (percent)
-------------------------------------------------------------------
1. R. B. Agarwalla & Company .................................. 0.00
2. Crescent Foundry Co. Pvt. Ltd .............................. 0.00
3. Govind Steel Co. Ltd........................................ 0.00
4. Kejriwal Iron & Steel Works ................................ 0.09
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II. Programs Preliminarily Determined to be Not Used
We examined the following programs and preliminarily determine that manufacturers or
exporters of certain iron-metal castings did not use the following programs during the
review period:
A. Sales of Import Replenishment Licenses
B. Extension of the Free Trade Zones
C. Preferential Freight Rates
D. Import Duty Exemptions Available to 100 Percent Export-Oriented Units
E. Post-Shipment Financing
Preliminary Results of Review
In accordance with section 355.22(d), we preliminarily determine that the following net
subsidies exist for the period January 1, 1986 through December 31, 1986:
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Manufacturer/exporter Net ad valorem subsidy (percent)
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R. B. Agarwalla and Company ...................................... 17.34
Crescent Foundry Co. Pvt. Ltd..................................... 18.07
Govind Steel Co. Ltd............................................. 226.45
Kejriwal Iron and Steel Works .................................... 44.85
All Other Manufacturers or Exporters ............................. 23.51
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Upon completion of this administrative review, the Department will issue appraisement
instructions to the U.S. Customs Service. The Department also intends to instruct the U.S
Customs Service to collect the following cash deposit of estimated countervailing duties
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:
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Manufacturer/exporter Net ad valorem subsidy (percent)
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Carnation Enterprise Pvt. Ltd...................................... 0.00
Kejriwal Iron and Steel Works ..................................... 0.00
All Other Manufacturers or Exporters .............................. 2.33
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Public Comment
In accordance with 19 CFR 355.38 of the Commerce Department's regulations, we will hold
a public hearing, if
*46703
requested, on December 12, 1990, at 2:00 p.m. in room 3708,
to afford interested parties the opportunity to comment on this preliminary determination.
Interested parties who wish to request or to participate in the hearing must submit a
request within ten days of the publication of this notice in the Federal Register to the
Assistant Secretary for Import Administration, U.S. Department of Commerce, Room
B-099, 14th Street and Constitution Avenue, NW., Washington, DC 20230. Requests should
contain: (1) The party's name, address, and telephone number; (2) the number of
participants; (3) the reason for attending; and (4) a list of the issues to be discussed.
In addition, ten copies of the business proprietary version and five copies of the
nonproprietary version of case briefs must be submitted to the Assistant Secretary no later
than November 26, 1990. Ten copies of the business proprietary version and five copies of
the nonproprietary version of rebuttal briefs must be submitted to the Assistant Secretary
no later than December 5, 1990. An interested party may make an affirmative presentation
only on arguments included in that party's case or rebuttal brief. If no hearing is requested,
interested parties still may comment on these preliminary results in the form of case and
rebuttal briefs. Written argument should be submitted in accordance with § 355.38 of the
Commerce Department's regulations and will be considered if received within the time
limits specified in this notice.
This administrative review and notice are published in accordance with section 751(a)(1) of
the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR 355.22.
Dated: October 31, 1990.
Francis J. Sailer,
Acting Assistant Secretary for Import Administration.
[FR Doc. 90-26184 Filed 11-5-90; 8:45 am]
BILLING CODE 3510-DS-M