90-c10

NOTICES

DEPARTMENT OF COMMERCE

[C-533-063]

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

Monday, December 10, 1990

AGENCY: International Trade Administration/Import Administration Commerce.

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

SUMMARY: On April 5, 1990, the Department of Commerce published the preliminary
results of its administrative review of the countervailing duty order on certain
iron-metal castings from India. We have now completed that review and determine the net
subsidy to be 9.81 percent ad valorem for R.B. Agarwalla, 19.32 percent ad valorem for
Carnation, 36.40 percent ad valorem for Crescent, 78.86 percent ad valorem for Govind,
44.84 percent ad valorem for Kajaria, 9.06 percent ad valorem for RSI, 41.87 percent ad
valorem for Serampore and 27.37 percent ad valorem for all other firms during the period
January 1, 1985 through December 31, 1985.

EFFECTIVE DATE: December 10, 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 April 5, 1990, the Department of Commerce (the Department) published in the Federal
Register (55 FR 12702) the preliminary results of its administrative review of the
countervailing duty order on certain iron-metal castings from India (October 16, 1980;
46 FR 16921). The Department has now completed that administrative review in
accordance 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. 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 (TSUSA) item
numbers 657.0950 and 657.0990. These products are currently classifiable under item
numbers 7325.10.0010 and 7325.10.0050 of the Harmonized Tariff Schedule (HTS). The
TSUSA and 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: (1) International Price Reimbursement Scheme (IPRS), (2) Cash Compensatory
Support program (CCS), (3) pre-shipment export loans, (4) post- shipment financing, (5)
income tax reductions, (6) Market Development Assistance (MDA) grants, (7) sale of import
replenishment licenses, (8) extension of free trade zones, (9) preferential freight rates, and
(10) import duty exemptions available to 100 percent export-oriented units.

Analysis of Comments Received

We gave interested parties an opportunity to comment on the preliminary results. We
received comments from the Indian exporters, U.S. importers and the petitioner, Pinkerton
Foundry.

Comment 1: The exporters and importers argue that IPRS payments are not countervailable
subsidies. In intent and practice, the IPRS refunds to exporters of castings the difference
between the price they must pay for certain raw materials purchased from
government-owned Indian producers and the price they would otherwise pay on the world
market. It was operated in a manner consistent with item (d) of the Illustrative List of
Export Subsidies annexed to the Agreement on Interpretation and Application of Articles
VI, XVI, and XXIII of the General Agreement on Tariffs and Trade (the List) which states:
The delivery by governments or their agencies of imported or domestic products or
services for use in the production of exported goods, on terms or conditions more
favorable than for delivery of like or directly competitive products or services for use in the
production of goods for domestic consumption, if (in the case of products) such terms or
conditions are more favorable than those commercially available on world markets to their
exporters (emphasis added).
Item (d) of the List is thus explicit that the provision of raw materials at world market prices
to exporters is not a subsidy. The Department recognized this in previous countervailing
duty cases, namely in Final Negative Countervailing Duty Determination; Certain Steel
Wire Nails from the Republic of Korea (47 FR 39549; September 8, 1982), the Department
held that "price preferences for inputs to be used in the production of export goods
constitute a subsidy only if the preference lowers the price of that input below that which
the input purchaser would pay on world markets." Similarly, in Final Negative
Countervailing Duty Determination; Oil Country Tubular Goods from Taiwan (51 FR
19583; May 30, 1986), the Department stated that:
Based on an examination of China Steel's second-tier prices for hot-rolled coil used in the
production of OCTG, and of the world market prices for such coil, we found that China Steel's
prices were at world market levels; therefore, we determine that China Steel's two-tiered
pricing policy does not confer a countervailable benefit within the meaning of the
countervailing duty law.
Furthermore, the exporters state that there is no evidence in the statutes or in the
legislative history to support a theory that Congress intended to reject the principle
embodied in item (d) of the List when it enacted the Trade Agreements Act of 1979 (the
TAA). In fact, the importers claim that this issue was examined by the U.S. Treasury
Department in a countervailing duty investigation that predates the 1979 statute (see,
Final Countervailing Duty Determination; Leather Wearing Apparel from Uruguay (43
FR 3974; January 30, 1978). According to the importers, Treasury determined that direct
payments to exporters of apparel that lowered the price of their primary

*50748

input,
hides, to the "readily available price of hides in other markets" was not a subsidy.
The exporters also argue that the IPRS benefits not the exporter of castings, but rather the
Indian pig iron producers. Castings exporters can import pig iron or purchase domestic pig
iron at the relatively high price that is set by the Indian government and receive IPRS
rebates. The net effects of these two alternatives are the same.
In addition, importers argue that the Department is attempting to use an unauthorized
interpretation of U.S. law to find the Indian IPRS program countervailable. In Certain
Cotton Yarn Products from Brazil; Final Results of Countervailing Duty Administrative
Review (55 FR 3442; February 1, 1990), the Department determined as countervailable a
similar Brazilian dual pricing scheme, the Price Equalization Program (PEP). In Cotton Yarn,
the Department advanced the theory that the List is not controlling on the identification of
subsidies: "It is irrelevant whether the PEP is consistent with item (d) or whether cotton
yarn exporters could have imported raw cotton at world market prices. We are concerned
with the alternative price commercially available in the domestic market" (55 FR 3446).
Importers argue that such a theory is untenable because Congress incorporated the List
into U.S. countervailing duty law and the Department has no authority to claim item (d)
as "irrelevant." The Court of International Trade (CIT) has acknowledged this adoption of the
List in U.S. law in its decision in Fabricas El Carmen, S.A. de C.V., et al. v. United States, Slip
Op. 87-113 (CIT October 7, 1987), as did the U.S. Court of Appeals in its decision of the 1984
review of this countervailing duty order (see RSI (India) Pvt., Ltd. v. United States,
687 F.2d 1571 (Fed. Cir. 1989)). The legislative history confirms that the sole reservation
expressed by Congress in adopting the List was that it not be regarded as a permanent,
exhaustive listing of all export subsidies countervailable under U.S. law. The Department is
empowered only to supplement or expand the existing List, not alter or ignore established
principles of the List. Consequently, in the case of item (d), U.S. law specifically excludes
from countervailability any such programs which do not result in the provision of inputs on
terms more favorable than those obtainable on world markets. Furthermore, the
Department's failure to observe the principle of the statutory language and item (d) also
directly conflicts with its efforts to codify item (d) in its own regulations. Commerce's
proposed Regulation 355.44(h) in 19 CFR part 355 Countervailing Duties; Notice of
Proposed Rulemaking and Request for Public Comments (54 FR 23366; May 31, 1989)
clearly states that price preferences for inputs used in the production of goods for export
are subsidies only if they are provided on terms or conditions that "are more favorable than
those commercially available on world markets to their exporters."
Conversely, petitioner argues that the IPRS is a countervailable subsidy because the
exception in item (d) applies only to the preferential pricing of inputs and not to payments
contingent upon the exportation of finished goods. Petitioner maintains that the
Department's interpretation of item (d) has always been a narrow one, i.e., the exception in
item (d) applies only to inputs, not monetary payments. Such an interpretation of item (d) is
consistent with a panel report of the GATT Committee on Subsidies and Countervailing
Measures that examined item (d) in conjunction with an investigation of European
Community pasta export payments. See GATT Panel Report on EEC Subsidies on Export
Pasta Products, SCM/433 (May 19, 1983). The Department's determination in Cotton Yarn,
that the Brazilian PEP program is countervailable, is consistent with past Department
determinations that reflect a narrow interpretation of the exception in item (d). The
Department's preliminary determination that IPRS payments are countervailable implicitly
recognizes that the exception in item (d) does not apply because item (d) clearly
encompasses the IPRS within its definition of an export subsidy.

Department's position: We disagree with the importers and exporters. The Indian
government's decision to insulate its pig iron producers from foreign competition placed
users of domestic pig iron at a disadvantage vis-a- vis competitors abroad by raising the
price of domestic pig iron. During the review period, Indian castings exporters could have
overcome this competitive disadvantage in two ways: Duty drawback and the IPRS.
Imported pig iron in India is subject to normal customs duties. Had Indian castings
exporters imported foreign pig iron for use as an input and processed it into castings for
export, they could have been exempted from the normal customs duties on pig iron by
using duty drawback, a practice acceptable under U.S. contervailing duty law and the GATT.
Alternatively, under the IPRS, the Indian government created a benchmark price for pig
iron and made cash payments to exporters based on the difference between the benchmark
price and the domestic price. These cash payments were made exclusively to castings
exporters, with the net effect being a reduction in the price of pig iron to a level well below
the price commercially available in the domestic market. The IPRS was an instrument used
by the Indian government to ameliorate the deleterious effects of high-price pig iron on a
specific group of downstream users.
The circumstances is both Korean Nails and Taiwanese OCTG differ from those in this case.
In Korean Nails, the Korean producers of nails for export had access to wire rod from
foreign as well as domestic sources at comparable prices. Although afforded the
opportunity through tariff protection to charge high prices for wire rod used in the
manufacture of products sold domestically, POSCO (an integrated steel producer which is
largely government-owned) and other Korean producers of wire rod chose to lower their
prices to exporters of nails and compete with foreign-sourced wire rod purchased under
duty drawback. We concluded that "the different prices for purchasers do not arise from a
scheme to subsidize exports, but rather are a commercial response to a segmented market,
one segment being protected and the other fully open to foreign competition." We further
stated that "this dual pricing system reflects strictly economic motivations (of the wire rod
producers) rather than a desire of the Government of Korea (the owners of POSCO) to
subsidize nail exports" (47 FR 39552).
We noted in addition that our conclusion regarding the dual pricing system was consistent
with the principle contained in item (d). However, our decision not to countervail the
Korean pricing scheme was not made solely on the basis of item (d). Rather, our decision
was based in large part on a determination that POSCO was acting in a commercially
reasonable fashion by instituting a dual- pricing system. As support for this, we stated that
two privately-owned Korean wire rod producers also had dual-pricing systems in place.
These facts led us to conclude that the Korean government was not acting to subsidize
exports.
Similary, in Taiwanese OCTG, we found that China Steel, a state-owned corporation and a
supplier of pipe and tube inputs, maintained a two-tiered pricing policy. Accordingly, in
determining whether China Steel's

*50749

prices were preferential, we compared not only
the actual prices FEMCO (an OCTG producer) paid China Steel to the actual prices FEMCO
paid for imported coil, but we also compared the prices FEMCO paid China Steel to generally
available world market prices for coil. In doing so, we found that China Steel's prices were at
world market levels. Once again, our decision was based on a determination that China Steel
was acting in a commercially reasonable manner.
In this case, the fact pattern is different. The Steel Authority of India, Ltd. (SAIL), an
Indian government entity that supplied all of the pig iron used by the castings exporters,
did not institute a dual-pricing scheme for pig iron. Instead, the Indian government
intervened to ensure that Indian castings exporters could continue to use
domestically-sourced pig iron while pig iron producers continued to enjoy the full benefits
of tariff protection. Thus, the Indian government's decision to establish the IPRS and make
cash payments to castings producers made possible exports that otherwise would not have
occurred. Without this direct government action, castings exporters would have had to pay
the high domestic price for Indian pig iron.
The fact that the Illustrative List is incorporated into U.S. law has no bearing on our
decision. In determining whether item (d) is applicable to the identification and
measurement of an export subsidy from this type of program, we have examined the law
and its legislative history. Section 771(5) of the Tariff Act states, in relevant part: "the term
'subsidy' has the same meaning as the term 'bounty or grant' as that term is used in section
303, and includes, but is not limited to, the following: (A) Any export subsidy described in
Annex A to the Agreement (relating to the illustrative list of export subsidies) * * *"
(emphasis added). While Congress incorporated the Illustrative List in the statute, it did not
limit the definition of export subsidy to the practices outlined in the List. The legislative
history of the TAA explains, "The reference to specific subsidies in the definition is not all
inclusive, but rather is illustrative of practices which are subsidies within the meaning of the
word as used in the bill. The administering authority may expand upon the list of specified
subsidies consistent with the basic definition." S. Rep. No. 96-249, 96th Cong., 1st Sess. 85
(1979). See also Trade Agreements Act of 1979: Statements of Administrative Action, H.R.
Doc. No. 96-153, Pt. II, 96th Cong., 1st Sess. 432 (1979). The Illustrative List is not,
therefore, controlling of the identification and measurement of export subsidies, but must
be considered along with other provisions of the statute and its legislative history,
administrative practice and judicial precedent. In light of the foregoing reasons, the
inclusion of proposed regulation 355.44(h), which corresponds to item (d) on the List, in no
way supports the importers' position. Finally, contrary to the exporter's claim regarding
administrative practice prior to 1979, Uruguayan Leather Apparel is not relevant to the
exception in item (d). There was no provision of hides to apparel manufacturers by the
Uruguayan government, nor did the Uruguayan government intervene to manipulate the
domestic price of hides. Uruguayan leather tanners were provided payments upon the
export of finished leather wearing apparel, and Treasury offset the amount of the payment
to the extent that it considered of a rebate of value-added and other indirect taxes.
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. It is irrelevant whether the IPRS is consistent
with item (d) because we are not concerned with world market prices but with the
alternative price of pig iron commercially available in the domestic market. This, we
determine the IPRS program to be countervailable.
An analogy to the IPRS program is the case of export loans. In this case, as in many others,
we have determined that export loans at preferential interest rates constitute a subsidy. In
measuring the subsidy, we do not concern ourselves with whether firms could have
borrowed money at commercial rates in international credit markets. The fact that, as a
result of a government program, they borrowed from domestic sources at rates below those
commercially available in the domestic market leads us to determine that a subsidy is
bestowed.

Comment 2: The exporters argue that the benefit from the IPRS program is overstated,
claiming that it should be offset by the Engineering Goods Export Assistance Fund (EGEAF)
and Freight Equalization Fee (FEF) levies which are included in the price of pig iron.
Because IPRS payments include the refund of both the EGEAF and the FEF, the amounts
paid for these two levies should be deducted from IPRS receipts to determine the net
subsidy from this program.
Conversely, petitioner argues that the EGEAF and the FEF levies are not allowable offsets
under section 771(6) of the Tariff Act. These levies are included in the price of pig iron and
are paid regardless of whether the castings produced from the purchased pig iron is sold
domestically or exported.

Department's position: We agree with petitioner. Section 771(6)(A) of the Tariff Act states
that to determine the net subsidy the Department may subtract from the gross subsidy the
amount of "any application fee, deposit, or similar payment paid in order to qualify for, or
to receive, the benefit of the subsidy * * *." Both levies are paid by all consumers of Indian
pig iron, not just exporters. Therefore, they do not constitute offsets to the IPRS benefits as
defined in the statute.

Comment 3: The exporters argue that the Department overstated the IPRS benefit received
by Uma, because the questionnaire response shows a refund of "excess claims" that the
Department failed to deduct from the amount of the IPRS payment.

Department's position: Despite repeated attempts by the Department to remedy deficiencies
in initial and supplemental questionnaire responses, the existence of Uma's refund is not
substantiated. Therefore, we have not deducted any amount from Uma's reported receipts
of IPRS payments.

Comment 4: The exporters argue that the Department overstated the IPRS benefit received
by Carnation because Carnation reported IPRS payments received on all exports to all
markets and the Department allocated the IPRS payments over the value of subject exports
to the United States.

Department's position: We agree and have corrected our calculation accordingly.

Comment 5: The exporters claim that the Department overstated the amount of IPRS
payments received by Serampore because of an inadvertent transposition of two numbers.

Department's position: We agree and have corrected our calculation accordingly.

Comment 6: The petitioner claims that the Department understated the IPRS benefit to RSI
by allocating the IPRS payments over a value of exports that included RSI's exports of
furniture.

Department's position: We agree and have corrected our calculation accordingly.

Comment 7: The petitioner claims that the Department understated the amount of IPRS
payments received by Super Castings because of a transposition of two numbers.

*50750

Department's position: We agree and have corrected our calculation accordingly.

Comment 8: The petitioner argues that a single country-wide rate should be applied to all
exporters. Section 706(a) of the Tariff Act states, in part, that "the order may provide for
differing countervailing duties," 19 U.S.C. section 1671(a) (emphasis added). Thus,
Congress created a presumption in favor of country-wide rates. The exporters add that the
Department's discretion to apply separate company-specific rates should not be exercised
because all the companies benefit from the IPRS program to the same degree. The varying
rates of subsidy attributable to the IPRS program led to the application of individual
company rates not because the companies received differing rates of benefits under the
IPRS program, but rather because the Department used IPRS payments received in 1985,
rather than the amounts claimed on 1985 exports. Therefore, it is inappropriate to assign
individual company rates solely because some companies, as a result of happenstance,
received IPRS payments during the review period that were substantially different from the
amounts claimed for exports made during the review period.
Conversely, the importers argue that the Department correctly assigned company-specific
rates, rather than a single country-wide rate. The Department is required by its regulations
to issue company-specific rates if significant differentials exist between the
weighted-average country-wide rate and individual company rates.

Department's position: We disagree with the petitioner and the exporters. Section 607 of
the Tariff and Trade Act of 1984 establishes a statutory presumption in favor of
country-wide countervailing duty rates, with the possibility of company-specific rates if
the Department determines that a "significant differential" exists between companies
receiving subsidies benefits. 19 U.S.C. 1671e(a)(2). Pursuant to that section, the Department
promulgated regulations to use a single weighted-average country-wide rate unless there is
a significant differential between an individual company rate and the weighted-average
country-wide rate. Under � 355.20(d)(3) of our regulations, a significant differential is a
"difference of the greater of at least five percentage points or 25 percent, from the
weighted-average net subsidy calculated on a country-wide basis." In this review, seven
companies met the standard in the regulations for being significantly different; therefore,
we assigned them company-specific rates.
Regarding the exporters' argument that it is inappropriate to assign company-specific rates
solely because lagged receipts of IPRS payments resulted in varying subsidies for individual
companies, the Department has consistently used receipts and not claims filed during the
review period to measure the subsidy from the IPRS program. We use receipts because they
represent a tangible measure of benefits received. Claims, on the other hand, are tenuous in
nature and have the potential to be rejected.
As a result of the changes in our calculations discussed in Comments 4 through 7, we
determine the net subsidy from the IPRS program to be 9.11 percent ad valorem for R.B.
Agarwalla, 18.14 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, 8.00 percent
ad valorem for RSI, 41.08 percent ad valorem for Serampore and 25.33 percent ad valorem
for all other firms.

Comment 9: The exporters argue that it is inappropriate to calculate IPRS benefits based on
when benefits are received because, even though payment is not received for months after
shipment, the program provides known payments on a sale-by-sale basis. The Department
should calculate the benefit from the IPRS using payments claimed during the review
period, rather than payments received during the review period.
Conversely, the petitioner argues that the Department should be consistent from one
review to the next and continue to use the total amount of IPRS payments received during
the review period in calculating the benefit from this program.

Department's position: We agree with petitioner. It has been our general practice to
compute benefits received by a firm during the review period (in this case the 1985
calendar year), and apply them to the total value of exports for the same period. There are a
few exceptions to this practice, such as when a benefit is earned on a shipment-by-shipment
basis and the exact amount of the benefit is known at the time of export (see e.g., Final
Affirmative Countervailing Duty Determination and Countervailing Duty Order;
Certain Steel Wire Nails from New Zealand (52 FR 37196; October 5, 1987)). Even if we were
to consider the IPRS such an exception, the exporters did not make such a claim when we
first determined in the 1984 review of this order that the IPRS provided a countervailable
subsidy. In that review, we calculated the subsidy from the IPRS program by allocating
receipts over exports. The use of the lag in payments from this new program resulted in
lower benefits than would have been the case if we had measured the subsidy based on IPRS
claims during the 1984 review period. Furthermore, a shift in methodology at this time
would result in a substantial gap in the measurement of subsidies from this program (i.e.,
IPRS payments claimed in 1984 but received in 1985 would be excluded from not only 1984
but 1985 as well).

Comment 10: The petitioner argues that the Department incorrectly determined that the
benefit from the IPRS program is zero for purposes of the cash deposit of estimated
countervailing duties. While it is the Department's policy to adjust the deposit rate if a
program-wide change has taken place since the review period but prior to publication of the
preliminary results of administrative review, the exporters' renunciation of IPRS payments
on exports of the subject merchandise to the United States does not constitute a program-
wide change because it was not effectuated by an official act, statute, regulation or decree,
and the exporters could resume receiving IPRS payments if they chose.
The exporters respond that the Department verified that no exporter was permitted to
receive IPRS payments on sales to the United States of the subject merchandise and that
this change applied to all exporters without exception. The Engineering Export Promotion
Council (EEPC) issued a decree, verified by the Department, terminating IPRS payments for
exports of subject castings to the United States. The EEPC is an official body legally
sanctioned by the Indian Ministry of Commerce. A change that affects the entire program
and affects equally all exporters under that program is a program-wide change.
Accordingly, the exporters argue that the Department correctly determined that this
program-wide change meets the Department's requirements for setting a deposit rate
different from the net subsidy determined for the review period.

Department's position: We agree with the exporters. 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. The Ministry of Commerce has
subsequently enforced the renunciation. Allowing for the normal lag of a few months
between the filing of IPRS

*50751

claims and the receipt of payment, there is no evidence
or reason to believe that IPRS payments will be received by any exporters after publication
of the preliminary results. Therefore, for purposes of the cash deposit of estimated
countervailing duties, we determine the benefit from this program to be zero.

Comment 11: The exporters claim that Crescent inadvertently failed to include in the
questionnaire response a revision to the amount of income tax benefit it received under
section 80HHC and, with the submission of the revised information, argue that the
Department should recalculate its benefit accordingly.

Department's position: We disagree. Section 355.31(b) of the Department's regulations does
not allow for submission of factual information after the date of publication of the
preliminary results. Crescent's submission was untimely.

Comment 12: The exporters argue that the Department overstated Carnation's benefit from
the Income Tax Deduction under section 80HHC by incorrectly applying a 68.25 percent
tax rate, instead of the 63 percent rate applicable to Carnation. Although the exporters
acknowledge that the verification report and the questionnaire response show that
Carnation's tax rate is 68.25 percent, they claim this information is incorrect.

Department's position: We disagree. The exporters' assertion that this information is
incorrect was untimely and unsubstantiated.

Comment 13: The exporters argue that the Department overstated Uma's, Agarwalla's and
Kejriwal's benefits from the Income Tax Deduction under section 80HHC by incorrectly
applying a 63 percent tax rate, instead of the rates applicable to partnerships.

Department's position: We agree and have corrected our calculations by applying an 18
percent tax rate to Uma and a 21 percent tax rate to Agarwalla and Kejriwal. These are the
rates that the partnerships actually paid during the review period. Accordingly, we
determine the net subsidy from this program to be 0.21 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 0.62 percent ad valorem for all other firms.

Comment 14: The exporters argue that a separate and greater deposit rate for Govind is
inappropriate. Govind received benefits under the section 80HHC income tax provision
during the 1985 assessment year. Because the income tax provision changed substantially
between 1985 and 1986, the Department has no basis to set a greater deposit rate based on
prior findings. Furthermore, the benefit of a tax program will always vary depending upon
profits, and profits vary from year to year. Therefore, all companies should be considered
as benefitting equally from a tax reduction program until the actual company- specific
profit/loss data demonstrate otherwise.

Department's position: We disagree. We calculate deposit rates based upon the amount of
benefits each company received during the review period, except where program-wide
changes have been demonstrated prior to the notice of preliminary results of review.
Because we have no basis for assuming what the future benefit will be in any given program,
we have consistently determined the deposit rate based upon prior benefit levels. We have
determined the deposit rates for all companies based upon their respective net subsidies in
1985. It would be inappropriate to treat Govind differently from the rest.

Comment 15: The exporters argue that the Department overstated the benefit to Govind,
RSI, Uma and Serampore from packing credit loans by incorrectly allocating the benefits
over castings exports rather than all exports. The companies reported packing credit loans
used to finance all exports not castings exports alone, and the Department should have
divided by each company's exports of all products.

Department's position: We agree and have corrected our calculations accordingly. We
determine the benefit from packing credit loans to be 0.49 percent ad valorem for R.B.
Agarwalla, zero for Carnation, zero for Crescent, 1.22 percent ad valorem for Govind, 4.84
percent ad valorem for Kajaria, 1.06 percent ad valorem for RSI, 0.22 percent ad valorem
for Serampore and 0.44 percent ad valorem for all other firms.

Comment 16: The petitioner claims that the Department incorrectly allocated Serampore's
benefit from post-shipment preferential financing over castings exports to all markets.
Because Serampore reported post-shipment financing only on sales to the United States, the
benefit should be allocated over castings exports to the United States.

Department's position: We disagree. Serampore exported castings only to the United States.
Therefore, castings exports to all markets and castings exports to the United States are the
same.

Comment 17: The exporters argue that Govind had commercial borrowings during the
review period at a 15 percent annual rate of interest. Therefore, the Department should
revise its calculation of the benefits from export packing and pre-shipment financing.

Department's position: We disagree. Information in the record shows the Govind's
commercial borrowing rate was 16.5 percent during the review period. Nevertheless, the
Department does not use company specific-benchmarks, rather we use one benchmark for
all companies based on the average interest rate commercially available for short-term
borrowings in the country during the review period (see Final Results of Countervailing
Duty Administrative Review; Ceramic Tile from Mexico (53 FR 15091; April 27, 1988)).

Comment 18: The petitioner claims that the Department inadvertently understated Super
Castings' benefit from post-shipment financing because of a transposition of numbers.

Department's position: We agree and have corrected our calculation accordingly. We
determine the benefit from this program to be 0.45 percent ad valorem for Serampore, zero
for R.B. Agarwalla, Carnation, Crescent, Govind, Kajaria, and RSI, and 0.98 percent ad
valorem for all other firms.

Comment 19: The exporters claim that castings exporters paid an insurance premium to the
Export Credit Guarantee Corp. (ECGC) in order to utilize the preferential packing credit.
Since castings exporters can borrow commercially without paying such a premium, the
Department should deduct the cost of the premium paid from the benefit received under
packing credit financing.

Department's position: We disagree. The cost of export credit insurance is not an offset to a
benefit as defined by section 771(6)(A) of the Tariff Act (see the Department's position in
response to Comment 2). Credit insurance is part of the cost of obtaining pre-shipment
financing and, as such, is part of the calculation of the effective interest on these loans.
However, we lack sufficient information to derive an effective interest rate benchmark.
Therefore, we can only compare a nominal interest rate benchmark to a nominal
preferential interest rate.

Comment 20: The exporters claim that the Department used an incorrect Indian rupee/U.S.
dollar exchange rate to convert Crescent's reported sales values from dollars to rupees.

Department's position: We disagree. We used an average annual exchange

*50752

rate
based on verified information obtained from the Central Bank of India. The exporters
presented no evidence that this information is incorrect.

Comment 21: The petitioner argues that the Department should not accept Kejriwal's
allocation of its MDA grant when calculating the benefit from the grant. Kejriwal's
representatives used MDA grant money to attend trade fairs in both Atlanta and Toronto.
However, because Kejriwal provided neither information detailing the duration of its
representatives' stay in each city nor a list of contacts made in each city, the Department
should not accept the allocation offered by Kejriwal. Instead, the Department should
allocate the total amount of the grant based solely on Kejriwal's sales of castings to the
United States.
The exporters respond that the Department verified that the MDA grant was used for
meetings both within and outside of the United States, and argue that it is appropriate to
allocate half of the grant over exports to the United States.

Department's position: We agree with the exporters. We verified that Kejriwal applied for
the MDA grant for meetings in Atlanta and Toronto. We also verified that the
representatives did, in fact, attend meetings in the two cities. Allocating the grant equally
between the two cities is reasonable.

Comment 22: The petitioner argues that the responding companies failed to provide specific
information detailing their transactions in which the central sales tax (CST) and the West
Bengal sales tax (WBST) apply to purchases of pig iron. In the absence of such information,
the Department should assume that the CST and WBST do not apply to purchases of pig iron
when calculating the benefit attributable to the Cash Compensatory Scheme (CCS).

Department's position: We disagree. The official record demonstrates a reasonable and
documented calculation of the indirect tax incidence on exported castings. Where we had
no evidence that pig iron was purchased from dealers in the West Bengal state, we did not
include the WBST in the amount of taxes paid and rebated on pig iron.

Comment 23: The petitioner claims the Department inadvertently understated the average
f.o.b. value per metric ton of pig iron in its calculation of Kejriwal's tax rebate through the
CCS program.

Department's position: We agree and have corrected our calculation accordingly. We still
find no overrebate of indirect taxes to Kejriwal from the CCS program.

Comment 24: The petitioner argues that the Department failed to measure the indirect tax
incidence and compare it to the rebate provided under the CCS program for Super Castings
and Kajaria.

Department's position: We agree and have measured the indirect tax incidence and rebate
from the CCS program for Super Castings and Kajaria. We determine the benefit from the CCS
program to be zero for both companies.

Final Results of Review

After reviewing all of the comments received, we 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 .......................... 9.81
Carnation .............................. 19.32
Crescent ............................... 36.40
Govind ................................. 78.86
Kajaria ................................ 44.84
RSI ..................................... 9.06
Serampore .............................. 41.87
All other firms ........................ 27.37
---------------------------------------------

The Department will 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.
As a result of the termination of benefits attributable to the IPRS program, the Department
will also instruct the Customs Service to collect a cash deposit of estimated
countervailing duties of 13.03 percent of the f.o.b. invoice price for Govind and 2.21
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 these final results of
administrative review.
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: November 30, 1990.

Marjorie A. Chorlins,

Acting Assistant Secretary for Import Administration.

[FR Doc. 90-28894 Filed 12-7-90; 8:45 am]

BILLING CODE 3510-DS-M