NOTICES
DEPARTMENT OF COMMERCE
International Trade Administration
[C-533-802]
Preliminary Affirmative Countervailing Duty Determination: Steel Wire Rope
from India
Monday, February 4, 1991
AGENCY: Import Administration, International Trade Administration, Department
of Commerce.
ACTION: Notice.
SUMMARY: We preliminarily determine that benefits which constitute subsidies within the
meaning of the countervailing duty law are being provided to manufacturers,
producers, or exporters in India of steel wire rope ("wire rope"), as described in the "Scope
of Investigation" section of this notice. The estimated net subsidy is 31.80 percent ad
valorem for all manufacturers, producers, or exporters in India of wire rope.
We are directing the U.S. Customs Service to suspend liquidation of all entries of wire rope
from India that are entered, or withdrawn from warehouse, for consumption on or after
the date of publication of this notice and to require a cash deposit or bond on entries of this
product in an amount equal to the estimated net subsidy.
If this investigation proceeds as expected, we will make a final determination on or before
April 15, 1991.
EFFECTIVE DATE: February 4, 1991.
FOR FURTHER INFORMATION CONTACT:Roy A. Malmrose or Paulo Mendes, Office of
Countervailing Investigations, Import Administration, International Trade
Administration, U.S. Department of Commerce, Washington, DC 20230 at (202) 377-
5414 or (202) 377-5050, respectively
SUPPLEMENTARY INFORMATION:
Preliminary Determination
Based on our investigation, we preliminarily determine that there is reason to believe or
suspect that benefits which constitute subsidies within the meaning of section 701 of the
Tariff Act of 1930, as amended (the Act), are being provided to manufacturers, producers,
or exporters in India of wire rope. We preliminarily determine that the following programs
confer subsidies:
- International Price Reimbursement Scheme (IPRS)
- Pre-Shipment Export Loans (Export Packing Credit)
- Post-Shipment Financing
- Import Duty Exemptions Available through Advance Licenses
- Sale of an Additional License
We preliminarily determine the estimated net subsidy to be 31.80 percent ad valorem for
all manufacturers, producers, or exporters in India of wire rope.
Case History
Since the publication of the Notice of Initiation in the Federal Register (55 FR 50731,
December 10, 1990), the following events have occurred. On December 7, 1990, we
presented a questionnaire to the Government India in Washington, DC, concerning
petitioners' allegations. In response to requests from the responding companies and the
Government of India, on December 24, and 28, 1990, respectively, the due date for the
questionnaire responses was extended until January 15, 1991. On December 27, 1990, the
responding companies filed a letter requesting an extension of the preliminary
determination on the grounds that the case is extraordinarily complicated. On January 2,
1991, we notified respondents that pursuant to section 703(c)(1)(B) of the Act, the
Department did not find sufficient reason to postpone the preliminary determination in this
investigation. On January 3, 1991, the U.S. International Trade Commission preliminarily
found that imports of wire rope from India materially injure, or threaten material injury
to, a U.S. industry (56 FR 286). On January 15, 1991, we received responses from the
Engineering Export Promotion Council (EEPC), on behalf of the Government of India, and
two manufacturers: Usha Martin Industries Limited (UMIL) and Bombay Wire Ropes (BWR)
Ltd. The responses indicated that exports had been made to the United States through
certain trading companies. However, responses were received from only the two
above-mentioned manufacturers. While the responses indicate that these two
manufacturers account for well over a majority of total exports by volume to the United
States, their combined export volumes do not account for 100 percent of exports to the
United States. The Department intends to solicit additional information, prior to
verification, from those companies which account for the remaining portion of wire rope
exports to the United States.
Scope of Investigation
The product covered by this investigation is steel wire rope. Steel wire rope encompasses
ropes, cables, and cordage of iron or steel, other than stranded wire, not fitted with fittings
or made up into articles, and not made up of brass plated wire. Steel wire rope is currently
provided for in subheadings 7312.10.60, 7312.10.9030, 7312.10.9060, and
7312.10.9090, of the Harmonized Tariff Schedule (HTS). The HTS subheadings are provided
for convenience and customs purposes. The written description remains dispositive.
Analysis of Programs
For purposes of this preliminary determination, the period for which we are measuring
subsidies ("the review period") is April 1, 1989, through March 31, 1990, which corresponds
to the most recently completed fiscal year of the respondent companies.
Consistent with our practice in preliminary determinations, when a response to an
allegation denies the existence of a program, receipt of benefits under a program, or
eligibility of a company or industry under a program, and the Department has no
persuasive evidence showing that the response in incorrect, we accept the response for
purposes of the preliminary determination. All such responses, however, are subject to
verification. If the response cannot be supported at verification, and the program is
otherwise countervailable, the program will be considered a subsidy in the final
determination.
Based on our analysis of the responses to our questionnaire, we preliminarily determine the
following:
I. Programs Preliminarily Found to Confer Subsidies
We preliminarily determine that subsidies are being provided to manufacturers, producers,
or exporters in India of wire rope under the following programs:
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 January 10, 1985, and June 2, 1988, the Government of
India extended the IPRS to include stainless wire rod and high carbon steel wire rod,
respectively. Wire rod is the primary input into wire rope. According to the questionnaire
responses, the price of wire rod in India is not controlled. Eligibility for IPRS rebates is
restricted to wire rope inputs purchased domestically.
The 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 (1) the
differential between the domestic and international prices of steel wire rod and (2) the
actual wire rod consumption,
*4260
inclusive of a maximum ten percent allowance for
waste. The domestic price of wire rod is based on a calculated average of domestic
producers' prices. The international price of wire rod is derived from international prices of
an upstream steel product. During the review period both wire rope manufacturers covered
by this investigation received IPRS rebates on exports of wire rope to the United States.
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. Therefore, we preliminarily determine the IPRS
program to confer a countervailable export subsidy. We consider the benefit to be the
entire IPRS rebate with an adjustment for administrative costs in the form of banking
charges.
Respondents reported IPRS rebates received during the review period on exports of the
subject merchandise to the United States. To calculate the benefit for each company, we
divided the amount of rebates received by the value of respondents' exports of the subject
merchandise to the United States. We then weighted each company's benefit by its share of
exports of the subject merchandise to the United States. On this basis, we preliminarily
determine the net subside from this program to be 29.17 percent ad valorem for all
manufacturers and exporters in India of wire rope.
B. Pre-Shipment Export Loans (Export Packing Credit)
The Reserve Bank of India, through commercial banks, provides pre-shipment or "packing"
credits to exporters under the Pre-Shipment and Post-Shipment Credit Scheme.
Pre-shipment financing provides working capital to manufacturers/exporters for the
purchase of raw materials and packing materials based on presentation of a confirmed order
or letter of credit. Typically, 90 percent of the value of the purchase order is eligible for
pre-shipment financing, although no provision exists restricting such financing for the
remaining 10 percent of the order value.
In general, pre-shipment loans are granted for a period of 180 days. During the review
period, the interest rate under this program was 7.5 percent for goods shipped within the
first 180 days. A manufacturer/exporter can apply for an extension of up to 90 days. If
approved, the manufacturer/exporter is charged 9.5 percent interest during the 90 day
extension period. In the even that a manufacturer/exporter does not ship until after the
270th day, it will be charged 7.5 percent for the first 180 days, 9.5 percent for the next 90
days, and its "regular" interest rate for the remainder of the loan. Interest on these loans is
paid quarterly or at the date of repayment. 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.
According to the responses, the benchmark interest rate at which short-term commercial
loans were available in India during the review period was 16.0 percent. Comparing the
benchmark interest rate to the rate charged under this program, we find that the rate on the
pre-shipment loans is preferential. Therefore, we determine this program to be
countervailable.
To calculate the benefit, 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 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 interst paid on those loans related to sales of wire
rope to the United States during the review period to the amount that would have been paid
at the benchmark rate. For each company, we divided the difference by its total exports of
the subject merchandise to the United States. We then weighted each company's benefit by
its share of exports of the subject merchandise to the United States. On this basis, we
preliminarly determine the net subsidy from this program to be 1.78 precent for all
manufacturers and exporters in India of wire rope.
C. Post-Shipment Financing
The Reserve Bank of India, through commercial banks, provides post-shipment financing
under the Pre-Shipment and Post-Shipment Credit Scheme. Post- shipment financing
provides working capital to manufacturers/exporters for the interim period between
shipment of goods and receipt of payment. Post-shipment financing is available to
manufacturers/exporters upon presentation of a confirmed order or letter of credit
subsequent to shipment of the goods. The terms of post-shipment financing with respect to
the due date are those stated in the purchase order/contract. The due date may in no case
exceed 180 days. During the review period, the interest rate under this program was 8.65
percent. Interest on these loans is mainly paid up front at the time of the discount. Because
only exporters are eligible for these post-shipment loans, we determine that they are
countervailable to the extent that they are provided at preferential rates.
According to the responses, the benchmark interest rate at which short-term commercial
loans were available in India during the reveiw period was 16.0 percent. Comparing the
benchmark interest rate to the rate charged under this program, we find that the rate on the
post-shipment loans is preferential. Therefore, we determine this program to be
countervailable.
To calculate the benefit, 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 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 paid on those loans related to sales of
wire rope to the United States during the review period to the amount that would have been
paid at the benchmark rate. For each company, we divided the difference by its total
exports of the subject merchandise to the United States. We then weighted each company's
benefit by its share of exports of the subject merchandise to the United States. On this basis,
we preliminarily determine the net subsidy from this program to be 0.71 percent for all
manufacturers and exporters in India of wire rope.
D. Import Duty Exemptions Available Through Advance Licenses
Advance licenses are only available to exporters and provide an import duty exemption on
inputs of raw materials used in the production of exports. In its response, UMIL stated that
it has used four advance licenses to import raw materials used in the production of wire
rope and ther non-subject merchandise. Because this program is limited to exporters, any
import duty exemption provided on imported products not physically incorporated into an
exported product constitutes a countervailable export subsidy. According to the response,
the only material imported by
*4261
UMIL under an advance license which was not
physically incorporated into an exported product was soap. Therefore, we consider the
duty-savings attributable to imports of soap a countervailable export subsidy.
To calculate the benefit, we divided the total duty-savings by UMIL's total exports to all
markets. We then weighted this rate by UMIL's share of exports of the subject merchandise
to the United States. On this basis, we preliminarily determine the net subsidy from the use
of this license to be 0.13 percent of all manufacturers and exporters in India of wire rope.
E. Sale of an Additional License
Additional Licenses are transferable licenses available to Export/Trading Houses based on a
percentage of the annual FOB value of exports. Imports under these licenses are subject to
customs duties and need not necessarily be used in the production of goods for export. In
its response, UMIL indicated that that it sold one Additional License during the review
period.
Because exporters receive these licenses based on their status as an exporter, we consider
the proceeds resulting from sales of these licenses a countervailable export subsidy. To
calculate the benefit, we divided the amount UMIL received on selling the license by its
total exports to all markets. We then weighted this rate by UMIL's share of exports of the
subject merchandise to the United States. On this basis, we preliminary determine the net
subsidy from the sale of this license to be 0.01 percent for all manufacturers and exporters
in India of wire rope.
II. Program Preliminarily Found Not to Confer Subsidies
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 rebate for exports of wire rope was set
at a maximum of 10 percent for the review period, and is paid as a percentage of the FOB
invoice price. This rate was based on the results of a 1989 audited survey of domestic wire
rope manufacturers administered by the Mininstry of Commerce (MOC) and the EEPC. This
survey, which is updated every three years, covered wire rope manufacturers whose
cumulative production levels approximate 80 percent of total exports.
To determine whether an indirect tax rebate system confers a subsidy, we must apply the
following analysis. (See, Preliminary Affirmative Countervailing Duty Determination:
Textile Mill Products and Apparel from Indonesia, 49 FR 49672, December 21, 1984). First,
we examine whether the system is intended to operate as a rebate of both indirect taxes and
import duties. Next, we analyze whether the government properly ascertained the level of
the rebate. This includes a review of the sample used in the study, including the
documentation and the accuracy of the information gathered from the sample on input
coefficients, import prices and rates of duty on imported inputs, the ratio of imported
inputs to domestically produced inputs (when, for a given imported input, there is also
domestic production of the input), and the exchange rates used to convert import prices
denominated in a foreign currency to the local currency. Finally, we review whether the
rebate schedules are revised periodically in order to determine if the rebate amount reflects
the amount of duty and indirect taxes paid.
When the study upon which the indirect tax and import duty rebate system is based meets
these conditions, the Department will consider that the system does not confer a subsidy if
the amount rebated for duties and indirect taxes on physically incorporated inputs does not
exceed the fixed amount set forth in the rebate schedule for the exported product. Based on
the information provided in the responses and the Department's previous examination of
the CCS program (See, for example, Certain Iron Metal Castings From India: Final Results
of Countervailing Duty Administrative Review 55 FR 1976, January 18, 1991), we
preliminarily determine that the CCS rebate meets all the above- mentioned criteria. In the
present investigation, we will verify whether rebates under this program continue to
reasonably reflect the incidence of indirect taxes on inputs.
We preliminarily consider wire rod, zinc, lead, fiber cores, lubricants, and packing materials
to be raw material inputs that are physically incorporated into the subject merchandise. In
determining the extent to which the rebate exceeded the tax incidence on the items
physically incorporated into the exported product for each company, we compared the
rebate rate provided in the response to the indirect taxes on items physically incorporated
as a percentage of the total FOB value of exports of the subject merchandise. The calculation
for both companies yields tax incidence rates greater than 10 percent. On this basis, we
preliminarily determine that the CCS program provides no overrebate and, therefore, is not
countervailable.
III. Programs Preliminarily Determined To Be Not Used
We preliminarily determine that the following programs were not used by manufacturers,
producers, or exporters in India of wire rope during the review period:
A. Use or Sale of Import Replenishment Licenses
Import Replenishment Licenses permitting the import of merchandise are issued to
exporters based on a ratio of the FOB prices of previous export sales. Imports under these
licenses are subject to value limits and customs duties, but need not necessarily be used in
production for export.
B. Income Tax Deductions Available Under 8 OHHC
Section 8 OHHC of the Finance Act of 1930 provides exporters with an income tax
deduction calculated by multiplying the exporters' profits from the sale of goods by the
ratio of export sales to total sales.
C. Development Assistance (MDA)
The Federation of Indian Export Organizations 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.
IV. Programs for Which Additional Information is Needed
Based on our analysis of the questionnaire responses, we have determined that additional
information is required for the following programs before a determination can be made with
respect to whether or not they confer subsidies.
A. Import Duty Exemptions Available to 100 Percent Export-Oriented Units (EOU)
Designated status as an EOU permits an exporter to import raw materials as well as
machinery and equipment duty-free. These imported materials must be entirely
incorporated into the exported product. The responses indicate that UMIL may have
benefited from its status as an EOU through (1) the domestic sale of final products for which
inputs were imported duty-free, (2) the
*4262
duty-free importation of certain inputs that
were not physically incorporated into exported merchandise, or (3) the duty-free
importation of machinery and equipment during the review period. We have preliminarily
determined that additional information on this program is needed.
B. Sick Industrial Companies Act
The responses describe assistance available under the Sick Industrial Companies Act,
enacted in January 1986. Although this program was not included in the petition or our
initiation, the responses explain that it can provide a rehabilitation package to companies
designated as "sick or potentially sick" by the Board for Industrial and Financial
Reconstruction. The EEPC response states BWR was designated a sick company in July 1988
and provides a copy of the rehabilitation package created for it. Although the narrative
portion of the questionnaire response states that this program is not specific within the
meaning of section 771(5)(A) of the Act, the law establishing the program states that
assistance is limited to "scheduled" industries. Therefore, we will solicit further information
concerning the specificity of assistance provided under the Sick Industrial Companies Act.
C. Use of An Additional License
In its response, UMIL indicated that it used one Additional License during the review
period for imports used in the manufacture of subject and non-subject merchandise sold in
the domestic and export markets. The details regarding these licenses and identical to those
described in the "Sale of An Additional License" section of this notice. Because we lack
specific information regarding the administration and value of these licenses, we have
preliminarily determined that additional information on this license is needed.
Verification
In accordance with section 776(b) of the Act, we will verify the information used in making
our final determination.
Suspension of Liquidation
In accordance with section 703(d) of the Act, we are directing the U.S. Customs Service to
suspend liquidation on all entries of wire rope from India which are entered, or withdrawn
from warehouse, for consumption on or after the date of publication of this notice in the
Federal Register and to require a cash deposit or bond for each such entry of this
merchandise equal to 31.80 percent ad valorem. This suspension will remain in effect until
further notice.
ITC Notification
In accordance with section 703(f) of the Act, we will notify the ITC of our determination. In
addition, we are making available to the ITC all nonprivileged and nonproprietary
information relating to this investigation. We will allow the ITC access to all privileged and
business proprietary information in our files provided the ITC confirms that it will not
disclose such information, either publicly or under an administrative protective order,
without the written consent of the Deputy Assistant Secretary for Investigations, Import
Administration.
If our final determination is affirmative, the ITC will make its final determination within 45
days after the Department makes its final determination.
Public Comment
In accordance with 19 CFR 355.38 of the Commerce Department's regulations, we will hold
a public hearing, if requested, to afford interested parties an opportunity to comment on
this preliminary determination. Such a hearing will be held at 10 a.m. on Thursday, April 4,
1991, at the U.S. Department of Commerce, room 3708, 14th Street and Constitution
Avenue, NW., Washington, DC 20230. Individuals who wish 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 the case briefs must be submitted to the Assistant Secretary no
later than March 25, 1991. Ten copies of the business proprietary version and five copies of
the nonproprietary version of the rebuttal briefs must be submitted to the Assistant
Secretary no later than March 29, 1991. An interested party may make an affirmative
presentation only on arguments included in that party's case brief and may make a rebuttal
presentation only on arguments included in that party's rebuttal brief. Written comments
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.
Authority: This determination is published pursuant to sec. 703(f) of the Act (19 U.S.C.
1671b(f)).
Dated: January 29, 1991.
Eric I. Garfinkel,
Assistant Secretary for Import Administration.
[FR Doc. 91-2556 Filed 2-1-91; 8:45 am]
BILLING CODE 3510-DS-M