NOTICES
DEPARTMENT OF COMMERCE
[C-533-063]
Preliminary Results of Countervailing Duty Administrative Review: Certain
Iron-Metal Castings From India
Friday, June 28, 1991
AGENCY: Import Administration, International Trade Administration, Department
of Commerce.
EFFECTIVE DATE: June 28, 1991.
FOR FURTHER INFORMATION CONTACT: Paulo F. Mendes, Office of Countervailing
Investigations, Import Administration, International Trade Administration, U.S.
Department of Commerce, Washington, DC 20230 at (202) 377-5050.
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 (castings). This review covers the period of January
1, 1987 through December 3l, 1987 and the following programs:
- International Price Reimbursement Scheme (IPRS)
- Pre-Shipment Export Loans
- Post-Shipment Export Loans
- Income Tax Deduction Under Section 80HHC
- Market Development Assistance Grants
- Sale of Import Replenishment License
- Cash Compensatory Support Scheme
- Income Tax Deduction Under Section 80I
- Preferential Freight Rates
- Import Duty Exemptions Available to 100 Percent Export-Oriented Units
- Free Trade Zones
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 on
castings from India (45 FR 68650). On January 18, 1991, the Department published the
final results of its most recently completed administrative review for the period January 1,
1986 through December 31, 1986 (56 FR 1976).
Since the notice of initiation of this administrative review (53 FR 48951, December 5, 1988),
the following events have occurred. On November 16, 1990, we presented a questionnaire
to the Government of India and the manufacturers and exporters of castings. On February
8, 1991, we received the Government's response and all the company responses, except for
Samitex Corporation (Samitex) and Commex Corporation (Commex). Samitex later
responded on February 15, 1991. On April 3, 1991, we presented a supplemental
questionnaire to the Government of India and the manufacturers and exporters of
castings. We received responses to this supplemental questionnaire on April 22, 1991. From
April 26 through May 3, 1991, we conducted verification in India of the government
response and the company responses of Super Castings (India) (Super Castings), R.B.
Agarwalla and Company (Agarwalla), and Crescent Foundry Co. Pvt. Ltd. (Crescent)
(hereinafter collectively the verified companies). We also verified the amount of IPRS
benefits received by RSI India Pvt. Ltd. (RSI). On May 22, 1991, additional information was
submitted on behalf of the verified companies.
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 to or drainage
for public utility, water, and sanitary systems. During the review period, this merchandise
was classifiable under Tariff Schedules of the United States Annotated (TSUSA) 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.
Although the TSUSA and HTS subheadings are provided for convenience and customs
purposes, our written description of the scope of this proceeding is dispositive.
Certification of Questionnaire Responses
Section 1331 of the Omnibus Trade and Competitiveness Act of 1988 amended the Act by
requiring that:
Any person providing factual information to the administering authority or the Commission
in connection with a proceeding under this title on behalf of the petitioner or any other
interested party shall certify that such information is accurate and complete to the best of
that person's knowledge. (I9 U.S.C. 1677e(a))
Pursuant to this amendment, the Department promulgated procedural regulations which
provide that:
(i) Certifications. Any interested party which submits factual information to the Secretary
must submit with the factual information the certification in paragraph (i)(1) and, if the
party has legal counsel or another representative, the certification in paragraph (i)(2) of
this section:
(1) For the interested party's official responsible for presentation of the factual information:
"I, (name and title), currently employed by (interested party), certify that (1) I have read
the attached submission, and (2) the information contained in this submission is, to the best
of my knowledge, complete and accurate."
(2) For interested party's legal counsel or other representative: "I, (name), of (law or other
firm), counsel or representative to (interested party), certify that (1) I have read the
attached submission, and (2) based on the information made available to me by (interested
party), I have no reason to believe that this submission contains any material
misrepresentation or omission of fact." (19 CFR 355.31(i) (1) and (2))
In the present administrative review, the Department issued a questionnaire to the Indian
producers of castings. This
*29627
questionnaire specifically asked if the producers had
received certain types of post-shipment export financing. (See, page 12 of the company
questionnaire.) In their questionnaire responses, each of the companies indicated that they
had not received any post- shipment financing during the period of review. These
questionnaire responses were accompanied by certifications from the respondent
companies and their legal counsel.
During verification, we discovered that each of the three verified companies had, in fact,
clearly received post-shipment financing. No explanation was offered as to why the
statements in the certified questionnaire responses were inaccurate.
The certification of factual information is a relatively new requirement, and one the
Department intends have real meaning. To treat the requirement otherwise would violate
our obligation to administer faithfully the provisions of the Act and would irreparably
damage the integrity of Departmental procedures. Therefore, the Department intends to
take the following actions. With respect to the relevant parties involved in this
administrative review, the Department is referring the matter to the Department of Justice
and the U.S. Customs Service to determine whether any relevant statutes within their
jurisdiction have been violated and whether further action is warranted. Additionally, the
Department will begin formulating a set of procedures for handling cases involving
certification issues. In this way, we will continue to ensure that the responses the
Department receives and uses to make its determinations are thorough and accurate. We
have not, however, reached any conclusion with respect to the circumstances of this
particular case.
Analysis of Programs
As mentioned above, we did not receive a response to our questionnaire from Commex.
Therefore, as the best information available, for each program preliminarily determined to
be countervailable, we are assigning Commex the highest company subsidy rate found for
any company.
Based on verification and 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 primary input for the
production of castings.
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
composed 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 verification and 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. Therefore, we preliminary determine the IPRS program to confer a countervailable
export subsidy.
For any given review period, it has been our practice to consider the benefit from the IPRS
program to equal the total amount of IPRS benefits received during the review period, even
if some amounts received during the review period related to exports made in the previous
year. In the current review all the companies, except Crescent and Uma Iron and Steel
Works (Uma), only reported IPRS benefits associated with 1987 shipments. These
companies did not report IPRS benefits received in 1987 which were related to 1986
shipments. We verified the IPRS information Crescent submitted, and during verification
obtained the amount of IPRS benefits received in 1987 by Super Castings, Agarwalla and
RSI. (These amounts received in 1987 included IPRS rebates relating to 1987 and 1986
shipments.)
For those companies that did not report the IPRS amounts associated with 1986 shipments
which were received in 1987, we approximated these amounts as follows. We first
calculated the amount of IPRS rebates received in 1987 which were attributable to 1986
shipments for the three verified companies, RSI and Uma. Next, we divided this amount by
the total amount of all IPRS rebates received in 1987. We then used this percentage to
adjust upward the reported amount of IPRS benefits which only included benefits
associated with 1987 shipments.
We preliminarily determine the net subsidy from this program to be 31.08 percent ad
valorem for all manufacturers and exporters in India of castings, except for those firms
listed below which have significantly different aggregate benefits. The net subsidy for these
firms is the following:
-------------------------------------------------------------------
Company Net ad valorem subsidy (percent)
-------------------------------------------------------------------
1. RSI India Pvt. Ltd ......................................... 7.77
2. Select Steel Ltd .......................................... 35.71
3. Carnation Enterprise Pvt. Ltd ............................. 36.58
4. Uma Iron and Steel Works .................................. 20.81
5. Commex Corporation ........................................ 36.58
-------------------------------------------------------------------
We verified that the Government of India terminated the IPRS program with respect to
castings exported to the United States effective June 30, 1987. During verification we saw
evidence of two shipments of castings to the United States made in the first week of July
1987 for which IPRS rebates were received. However, we preliminarily determine that
these two rebates were exceptions, granted because of shipping and handling difficulties,
and that the IPRS program otherwise has been terminated for exports of castings to the
United States. Therefore, for purposes of the cash deposit of estimated countervailing
duties, we preliminarily determine the benefit from this program to be zero.
B. 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. Because only exporters are eligible for these
pre-shipment loans, we determine that they
*29628
are countervailable to the extent that
they are provided at preferential rates.
During the review period, the interest rate on pre-shipment export loans was 9.5 percent
per annum. The maximum comparable commercial interest rate during fiscal year
1986-1987 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 1986-1987, was 16.5 percent from January through
March, and 15.5 percent from April through December. 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 these two rates to calculate an interest rate benchmark for the
year. We did so by weight-averaging the two interest rates based on the amount of time the
two above rates were in effect. We used the resulting figure of 15.75 percent as our
benchmark interest rate. We compared this benchmark to the interest rate charged on
pre-shipment financing under the program and found that the interest rate charged was
lower than the benchmark. Therefore, we determine that loans provided under this
program are countervailable.
To calculate the benefit on those preferential loans for which interest was paid during 1987,
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).
During verification, we obtained information from each of the three companies concerning
the total amount of interest paid on pre-shipment financing during the review period. For
the non-verified companies, we used the reported amount of interest paid on pre-shipment
financing relating to either exports of the subject merchandise to the United States or total
exports to the United States.
We compared the amount of interest actually paid during the review period to the amount
that would have been paid at the benchmark rate. The difference between these amounts is
the benefit. We allocated the benefit to either total exports, exports of the subject
merchandise to the United States or total exports to the United States, depending on how
the amount of pre-shipment financing was reported or verified. On this basis, we
preliminarily determine the net subsidy from this program to be 0.40 percent for all
manufacturers and exporters in India of castings, except for those firms listed below which
have significantly different aggregate benefits. The net subsidy for these firms is the
following:
-------------------------------------------------------------------
Company Net ad valorem subsidy (percent)
-------------------------------------------------------------------
1. RSI India Pvt. Ltd ......................................... 1.55
2. Select Steel Ltd ........................................... 0.00
3. Carnation Enterprise Pvt. Ltd .............................. 0.00
4. Uma Iron and Steel Works ................................... 0.02
5. Commex Corporation ......................................... 1.55
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C. Post-Shipment Loans
As mentioned above, we discovered during verification that each of the three verified
companies failed to report post-shipment financing loans. The response from the
Government of India on this program only referred to the company responses. Super
Castings received post-shipment financing in the form of "post-shipment advances against
IPRS," and Agarwalla and Crescent received post-shipment financing in the form of "transit
interest." Post-shipment advances against IPRS are loans based on expected IPRS rebates.
Post-shipment financing also includes bank discounting of foreign customer receivables.
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.
We verified that the rate of interest under both types of post-shipment financing was 9.5
percent per annum. Moreover, during verification one of the companies was not able to
provide documentation to prove that certain loans were, in fact, not post-shipment loans or
non-preferential. Therefore, as the best information available, we are treating these loans as
post-shipment loans made at the preferential rate of 9.5 percent.
For the reasons stated above in the pre-shipment loans section, we are using 15.75 percent
as our short-term interest rate benchmark. We compared this benchmark to the interest
rate charged on post-shipment financing under this program and found that the interest
rate charged under this program was lower than the benchmark. Therefore, we determine
that loans provided under this program are countervailable. To calculate the benefit, we
followed the same short-term loan methodology discussed above. We then divided the
benefit by the verified companies' total export sales.
As noted above, the government response on this program referred us to the company
responses. Since we view the verification of the three companies with regard to
post-shipment financing as constituting the overall verification of that program, we have
preliminarily determined that exports of the non-verified companies also benefited from
the program. As the best information available, for this purpose, we weight-averaged the
rates of the three companies and applied the result to the non-verified companies.
On this basis, we preliminarily determine the net subsidy from this program to be 1.47
percent for all manufacturers and exporters in India of castings except for those firms
listed below which have significantly different aggregate benefits. The net subsidy for these
firms is the following:
-------------------------------------------------------------------
Company Net ad valorem subsidy (percent)
-------------------------------------------------------------------
1. RSI India Pvt. Ltd ......................................... 1.41
2. Select Steel Ltd ........................................... 1.41
3. Carnation Enterprise Pvt. Ltd .............................. 1.41
4. Uma Iron and Steel Works ................................... 1.41
5. Commex Corporation ......................................... 2.06
-------------------------------------------------------------------
D. Income Tax Deduction Under Section 80HHC
Under section 80HHC of the Finance Act of 1983, for tax returns filed in 1987, the
Government of India allowed exporters to deduct one percent of export sales and five
percent of the incremental increase in export sales over the previous fiscal year. Because
this program is only available to exporters, we preliminarily determine it to be
countervailable. To calculate the benefit, we multiplied the income tax deductions of each
company claiming the benefit by the corporate income tax rate and divided the result by its
total exports.
We preliminarily determine the net subsidy from this program to be 1.09 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:
-------------------------------------------------------------------
Company Net ad valorem subsidy (percent)
-------------------------------------------------------------------
1. RSI India Pvt. Ltd ......................................... 0.00
2. Select Steel Ltd ........................................... 4.45
3. Carnation Enterprise Pvt. Ltd .............................. 2.74
4. Uma Iron and Steel Works ................................... 0.50
5. Commex Corporation ......................................... 4.45
-------------------------------------------------------------------
*29629
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 exporters, we preliminarily determine that such grants are
countervailable.
We verified that 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 Kejriwal's export sales during the review period, we
expensed the grant in the year of receipt (1987). 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 1987.
We preliminarily determine the net subsidy from this program to be 0.01 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:
-------------------------------------------------------------------
Company Net ad valorem subsidy (percent)
-------------------------------------------------------------------
1. RSI India Pvt. Ltd ......................................... 0.00
2. Select Steel Ltd ........................................... 0.00
3. Carnation Enterprise Pvt. Ltd .............................. 0.00
4. Uma Iron and Steel Works ................................... 0.00
5. Commex Corporation ......................................... 0.05
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F. Sale of a Replenishment License
The Ministry of Commerce administers India's import licensing system. One type of license
in India is the replenishment license. These licenses are provided subsequent to export so
that companies can replace the imported components used in the production of the
exported product. Imports under these licenses are subject to customs duties and are not
necessarily used in production of exports. Because exporters receive these licenses based
on their status as an exporter, we consider the proceeds resulting from sales of these
licenses a countervailable subsidy.
During verification, we discovered that Agarwalla sold a replenishment license during the
review period. Because the proceeds from this sale represented less than 0.50 percent of
Agarwalla's export sales during the review period, we expensed the amount received to the
year of receipt, 1987. To calculate the benefit from this sale, we divided the amount
Agarwalla received on selling the license by its total exports to all markets.
We preliminarily determine the net subsidy from this program to be 0.01 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:
-------------------------------------------------------------------
Company Net ad valorem subsidy (percent)
-------------------------------------------------------------------
1. RSI India Pvt. Ltd ......................................... 0.00
2. Select Steel Ltd ........................................... 0.00
3. Carnation Enterprise Pvt. Ltd .............................. 0.00
4. Uma Iron and Steel Works ................................... 0.00
5. Commex Corporation ......................................... 0.04
-------------------------------------------------------------------
II. Programs Preliminarily Found Not To Confer Subsidies
A. Cash Compensatory Support (CCS) Program
In 1966, the Government of India established the CCS program to rebate indirect taxes on
exported merchandise. We verified that the rebate for exports of castings was set at a
maximum of five percent for the review period, and is paid as a percentage of the FOB
invoice price.
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 indirect taxes
and/or import duties. Next, we analyze whether the government properly ascertained the
level of the rebate. 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 rebate system meets these conditions, the Department will consider that the
system does not confer a subsidy if the amount rebated for duties and/or indirect taxes on
physically incorporated inputs does not exceed the fixed amount set forth in the rebate
schedule for the exported product. Based on verification, and the Department's previous
examination of the CCS program (see, e.g., 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.
Furthermore, in this review we verified that the rebates under this program continue to
reasonably reflect the incidence of indirect taxes on inputs. On this basis, we preliminarily
determine that the CCS program provides no overrebate and, therefore, is not
countervailable.
B. Income Tax Deduction Under Section 80I
Section 80I of the Indian Finance Act generally provides for a tax deduction of 25 percent
to "new industrial undertakings." We verified that this program is not limited to a specific
enterprise or industry or group of enterprises or industries on either a de jure or de facto
basis. Therefore, we preliminarily determine this program to be not countervailable.
III. Programs Preliminarily Determined To Be Not Used
A. Extension of the Free Trade Zones
B. Preferential Freight Rates
C. Import Duty Exemptions Available to 100 Percent Export-Oriented Units
Preliminary Results of Review
In accordance with § 355.22(d), we preliminarily determine that the following net subsidies
exist for the period January 1, 1987 through December 31, 1987:
-----------------------------------------------------------------------
Manufacturer/exporter Net ad valorem subsidy (percent)
-----------------------------------------------------------------------
RSI India Pvt. Ltd ............................................... 10.74
Select Steel Ltd ................................................. 41.57
Carnation Enterprise Pvt. Ltd .................................... 40.74
Uma Iron and Steel Works ......................................... 22.75
Commex Corporation ............................................... 44.73
All Other Manufacturers or Exporters ............................. 34.05
-----------------------------------------------------------------------
*29630
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 3.84 percent estimated countervailing duties
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.
Public Comment
In accordance with 19 CFR 355.38, we plan to hold a public hearing, if requested, on August
1, 1991, at 2 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. Parties should confirm by telephone the time, date, and place of the hearing 48
hours before the scheduled time.
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 July 23, 1991. 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 July 30, 1991. 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 section 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: June 20, 1991.
Eric I. Garfinkel,
Assistant Secretary for Import Administration.
[FR Doc. 91-15487 Filed 6-27-91; 8:45 am]
BILLING CODE 3510-DS-M