NOTICES
DEPARTMENT OF COMMERCE
[C-533-063]
Preliminary Results of Countervailing Duty Administrative Review: Certain
Iron-Metal Castings from India
Thursday, August 22, 1991
*41650
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: August 22, 1991.
FOR FURTHER INFORMATION CONTACT: Paulo F. Mendes, Office of Countervailing
Investigations, Import Administration, International Trade Administration, U.S.
Department of Commerce, 14th Street and Constitution Avenue, NW, 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, 1989 through December 31, 1989 and the following programs:
- Pre-Shipment Export Loans
- Post-Shipment Export Loans
- Income Tax Deduction Under Section 80HHC
- International Price Reimbursement Scheme (IPRS)
- Sale of Replenishment Licenses
- Sale of Additional Import Licenses
- Cash Compensatory Support Scheme
- Use of Advance Licenses
- Market Development Assistance Grants
- Preferential Freight Rates
- Import Duty Exemptions Available to 100 Percent Export-Oriented Units
- Benefits under the Falta Free Trade Zone or other Free Trade Zones
The weighted-average net subsidies are shown in the "Preliminary Results of 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). The Department will publish the final results of its most
recently completed administrative review for the period January 1, 1987 through
December 31, 1987 concurrently with these preliminary results.
Since the notice of initiation of this administrative review (55 FR 50739, December 10,
1990), the following events have occurred. On May 13, 1991, we presented a questionnaire
to the Government of India and the manufacturers and exporters of castings. We received
the Government's response and all the company responses between July 15, and July 17,
1991. On July 25, 1991, we presented a supplemental questionnaire to the Government of
India and to those manufacturers and exporters of castings who had responded to our first
questionnaire. We received responses to the supplemental questionnaire between August 1,
and August 6, 1991.
Scope of Review
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
*41651
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.
Analysis of Programs
We did not receive responses to our questionnaire from Govind Steel Company (Govind),
Tirupati International (Tirupati), and Raghunath Prasad Phoolchand (Raghunath).
Therefore, as the best information available, we are assigning these companies the highest
subsidy rate found for any company for each program preliminarily determined to be
countervailable.
When we calculate the country-wide rate we weight the individual company rates according
to each company's share of exports of the subject merchandise to the United States. In this
case, however we cannot include Govind, Tirupati, and Raghunath in the calculation of the
country-wide rate because we have no information on the value of their exports of the
subject merchandise to the United States. Therefore, these three companies are receiving
separate rates, which have not been included in the calculation of the country-wide rate.
Based on our analysis of the responses to our questionnaire, we preliminarily find the
following:
I. Programs Preliminarily Found to Confer Subsidies
A. 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 up to 180 days. 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.
During the review period, the interest rate on pre-shipment export loans up to 180 days was
9.5 percent during January and February, and 7.5 percent from March through December.
Because the Government of India was unable to provide an average predominant
short-term commercial rate, we used the maximum rate provided. The maximum
comparable commercial interest rate during the review period for loans to small-scale
industries was 15.5 percent as quoted by the Reserve Bank of India in its bulletins entitled
"Report on Trend and Progress of Banking in India: 1987-1988" and "Reserve Bank of India
Bulletin October 1989 (Supplement)." Since all castings manufacturers and exporters
subject to this review are characterized as small-scale industries by the Indian Government,
we have used this interest rate as a benchmark for the year. We compared this benchmark
to the interest rate charged on pre-shipment loans 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 1989,
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).
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 or exports of the subject
merchandise to the United States, depending on how the pre-shipment financing was
reported. On this basis, we preliminarily determine the net subsidy from this program to be
0.52 percent for all manufacturers and exporters in India of certain iron-metal castings,
except for those firms listed below which have significantly different aggregate benefits. The
net subsidy for these firms is as follows:
--------------------------------------------------------------
Company Net ad valorem subsidy (percent)
--------------------------------------------------------------
Carnation Enterprise ..................................... 0.65
Govind Steel Co. Ltd...................................... 0.88
Tirupati International ................................... 0.88
Raghunath Prasad Phoolchand .............................. 0.88
--------------------------------------------------------------
B. Post-Shipment Export Loans
The Reserve Bank of India, through commercial banks, provides post-shipment loans to
exporters upon presentation of export documents. Post-shipment financing also includes
bank discounting of foreign customer receivables. In general, post-shipment loans are
granted for a period of 90 to 180 days. Because only exporters are eligible for the
post-shipment loans, we determine that they are countervailable to the extent that they are
provided at preferential rates.
The rate of interest for post-shipment financing was 9.5 percent during January and
February, and 8.65 percent from March through December. For the reasons stated in the
section on pre-shipment loans, we are using 15.5 percent as our short-term interest rate
benchmark. We compared this benchmark to the interest rate charged on post-shipment
export loans 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 divided the benefit by the companies' total exports, exports of subject castings to
all markets or exports of the subject merchandise to the United States, depending on how
the post-shipment financing was reported. On this basis, we preliminarily determine the net
subsidy from this program to be 1.08 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 as follows:
--------------------------------------------------------------
Company Net ad valorem subsidy (percent)
--------------------------------------------------------------
Carnation Enterprise ..................................... 0.33
Govind Steel Co. Ltd...................................... 3.20
Tirupati International ................................... 3.20
Raghunath Prasad Phoolchand .............................. 3.20
--------------------------------------------------------------
C. Income Tax Deduction Under Section 80HHC
For tax returns filed in 1989, the Government of India allowed exporters to claim two tax
deductions related to their export sales. The first deduction was derived by taking four
percent of the net foreign exchange realized by the company. The second deduction was
equal to fifty percent of a company's
*41652
export profit minus the amount of the first
deduction.
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
total exports. (Based on the questionnaire responses, it is not clear if one company, Uma
Iron and Steel Company (Uma), benefited under this program. We intend to seek
clarification of this issue prior to the issuance of the final results in this proceeding.)
We preliminarily determine the net subsidy from this program to be 0.63 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 as follows:
--------------------------------------------------------------
Company Net ad valorem subsidy (percent)
--------------------------------------------------------------
Carnation Enterprise .................................... 14.49
Govind Steel Co. Ltd..................................... 14.49
Tirupati International .................................. 14.49
Raghunath Prasad Phoolchand ............................. 14.49
--------------------------------------------------------------
D. Sale of Additional Licenses
Additional licenses are available to companies designated as Export/Trading Houses. To be
designated as an Export/Trading House, a company must have achieved a certain level of
export performance over a three-year period. An additional license permits its holder to
import a relatively wide variety of items in an amount equal to ten percent of the "net
foreign exchange"earned in the previous year. Imports under an additional license are
subject to customs duties and there is no obligation to export the products incorporating
the imported inputs. If a recipient does not use the license, it can be sold for a premium. All
the respondent companies, except Crescent Foundry Company (Crescent), Calcutta Iron &
Engg. (Calcutta), Prudential Marketing (Prudential), and Overseas Iron Foundry (Overseas),
sold additional licenses during the review period.
Because only exporters receive additional licenses based on their status as exporters, we
have preliminarily determined that these licenses provide a countervailable subsidy, and
that the benefit is equal to the proceeds resulting from the sale of these licenses.
As noted above, the amount of the license is equal to ten percent of the net foreign
exchange earned by the exporter in the previous year. To compute the net foreign
exchange, the value of advance and replenishment licenses (described below) issued is
deducted from foreign exchange receipts. As explained elsewhere, exports of the subject
merchandise appear to be primarily linked to advance licenses. Thus, in this case,
additional licenses seem to benefit predominantly exports which are produced form
domestically sourced inputs. Therefore, the value of additional licenses may be largely,
although not entirely, attributable to exports of the non-subject merchandise.
At this point, however, we do not believe that we have adequate information in the record
to calculate the benefit exclusively attributable to the subject merchandise. Therefore, for
purposes of these preliminary results, we have calculated the benefit from the sales of these
licenses by dividing the amounts the companies received from selling the licenses by their
total exports to all markets. We intend to seek further information concerning this issue
prior to the issuance of the final results in this proceeding.
We preliminarily determine the net subsidy from this program to be 0.19 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 as follows:
--------------------------------------------------------------
Company Net ad valorem subsidy (percent)
--------------------------------------------------------------
Carnation Enterprise ..................................... 0.43
Govind Steel Co. Ltd...................................... 1.18
Tirupati International ................................... 1.18
Raghunath Prasad Phoolchand .............................. 1.18
--------------------------------------------------------------
E. Sale of Replenishment Licenses
The purpose of issuing replenishment licenses is to permit the replacement of imported
inputs used in exported products. Replenishment licenses are provided to exporters after
an export sale. The types and amounts of products which can be imported under a
replenishment license are contingent upon the particular product exported. For example,
when a company exports castings it can receive a replenishment license equal to seven
percent of the export value of the castings and can use the license to import pig iron and
other products. A company cannot, however, according to the questionnaire responses,
receive a replenishment license on an exported product produced with inputs imported
under an advance license until the export obligation of the advance license is satisfied.
Replenishment licenses are different from advance licenses in three important respects: (1)
They are transferable and can be sold at a premium; (2) imports made under a
replenishment license do not enter the country duty- free; and (3) there is no export
obligation.
According to the questionnaire responses many of the companies sold replenishment
licenses during the review period. Because only exporters can receive replenishment
licenses based on their status as exporters, we consider the proceeds resulting from sales of
these licenses to be a countervailable subsidy. One company, Crescent, stated in this
questionnaire response that it sold a replenishment license during the review period which
was earned, in part, on exports of the subject castings to all markets. In its response,
Crescent also provided the percentage of the license value which was earned on the exports
of subject castings to all markets. To calculate the benefit attributable to the sale of this
license, we multiplied the percentage of the value of the license earned on the basis of
exports of the subject castings to all markets by the value of the proceeds received on the
sale of the license. We then divided the resulting figure by Crescent's exports of subject
castings to all markets.
Most of the other respondent companies stated that all the replenishment licenses they sold
during the review period were earned on exports of non- subject merchandise. Two of the
companies, Carnation Enterprise (Carnation) and Kejriwal Iron & Steel works (Kejriwal), did
not indicate the basis upon which they earned the replenishment licenses they sold during
the review period. However, we did not request these companies to provide this
information, and, therefore, are not willing to assume that the replenishment licenses sold
during the review period by these companies were earned on the exportation of the subject
merchandise. We intend to seek clarification of this issue prior to the issuance of the final
results in this proceeding. Therefore, we preliminarily determine that only Crescent
benefited from this program during the review period.
Based on the above analysis, we preliminarily determine the net subsidy from this program
to be 0.01 percent ad valorem for all manufacturers and exporters in India of castings,
except for those firms listed below which have significantly different aggregate
*41653
benefits. The net subsidy for these firms is as follows:
--------------------------------------------------------------
Company Net ad valorem subsidy (percent)
--------------------------------------------------------------
Carnation Enterprise ..................................... 0.00
Govind Steel Co. Ltd...................................... 0.10
Tirupati International ................................... 0.10
Raghunath Prasad Phoolchand .............................. 0.10
--------------------------------------------------------------
F. 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 was 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 was 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, processed the claims for and disbursed the IPRS
rebate. The IPRS rebate was based on the differential between domestic and international
prices of pig iron, using a standard pig iron consumption factor of 110 percent of the
finished castings, which includes a ten percent allowance for waste.
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 preliminary determine the IPRS
program to confer a countervailable export subsidy. We consider the benefit to be the
entire IPRS rebate.
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. One respondent, R.B. Agarwalla & Co. (Agarwalla), received one IPRS rebate during
the review period. We calculated the benefit for Agarwalla by dividing the amount of the
IPRS rebate received by the company's total castings exports to the U.S. during the review
period.
We preliminarily determine the net subsidy from this program to be 0.16 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 as follows:
--------------------------------------------------------------
Company Net ad valorem subsidy (percent)
--------------------------------------------------------------
Carnation Enterprise ..................................... 0.00
Govind Steel Co. Ltd...................................... 1.06
Tirupati International ................................... 1.06
Raghunath Prasad Phoolchand .............................. 1.06
--------------------------------------------------------------
We previously verified that this program was terminated for exports of subject castings to
the United States effective July 1, 1987. (Although Agarwalla received an IPRS rebate after
the program was terminated, we verified in the 1987 administrative review that this late
payment was due to shipping and handling difficulties that led to a disputed claim which was
eventually granted.) As a result, for purposes of the cash deposit of estimated
countervailing duties, we preliminarily determine the benefit from this program to be
zero.
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. 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. 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. (See, Preliminary Affirmative Countervailing Duty
Determination: Textile Mill Products and Apparel from Indonesia, 49 FR 49672, December
21, 1984.)
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 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 established that the rebates under this program continue to
reflect reasonably 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.
It should be added that the Government of India suspended the entire CCS program,
effective July 3, 1991.
B. Use of Advance Licenses
Generally, a company can receive an advance license if it has received a foreign purchase
order or if it has an established history of exporting. Products imported under an advance
license enter the country duty-free and the company importing under an advance license is
obligated under the terms of the license to export the products produced with the duty-free
imports. A product imported under an advance license does not necessarily have to be
physically incorporated into the exported product. The amount of imports allowed under
an advance license is closely linked to the amount of exports to be produced. Unlike
additional licenses and replenishment licenses (described above), an advance license is not
transferable.
During the period of review all the castings producers, except Super Castings (India)
(Super Castings) and Carnation, received advance licenses. The companies used these
licenses to import pig iron, an input which is physically incorporated in the production of
castings. According to the questionnaire responses, some of the companies used all their
castings exports to the United States to satisfy the export obligation of their advance
licenses.
We consider the use of the advance licenses in this case to be the equivalent of a duty
drawback program: customs duties are not paid on a physically incorporated, imported
product (i.e., pig
*41654
iron) used in the production of exports. Therefore, we
preliminarily determine that the advance licenses are not countervailable.
III. Programs Preliminarily Determined Not To Be Used
A. Market Development Assistance Grants
B. Preferential Freight Rates
C. Import Duty Exemptions Available to 100 Percent Export-Oriented Units
D. Benefits under the Falta Free Trade Zone or other Free Trade Zones
Preliminary Results of Review
In accordance with section 355.22(d), we preliminarily determine that the following net
subsidies exist for the period January 1, 1989 through December 31, 1989:
-----------------------------------------------------------------------
Manufacturer/Exporter Net ad valorem subsidy (percent)
-----------------------------------------------------------------------
Carnation Enterprise ............................................. 15.91
Govind Steel Co. Ltd ............................................. 20.91
Tirupati International ........................................... 20.91
Raghunath Prasad Phoolchand ...................................... 20.91
All other manufacturers or exporters .............................. 2.59
-----------------------------------------------------------------------
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 cash deposits of 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 in the following amounts:
-----------------------------------------------------------------------
Manufacturer/Exporter Net ad valorem subsidy (percent)
-----------------------------------------------------------------------
Carnation Enterprise ............................................. 15.91
Govind Steel Co. Ltd ............................................. 19.85
Tirupati International ........................................... 19.85
Raghunath Prasad Phoolchand ...................................... 19.85
All other manufacturers or exporters .............................. 2.43
-----------------------------------------------------------------------
Public comment
In accordance with 19 CFR 355.38, we plan to hold a public hearing, if requested, on
September 26, 1991, at 10:15 a.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 September 17, 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 September 24, 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 19
CFR 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: August 15, 1991.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 91-20158 Filed 8-21-91; 8:45 am]
BILLING CODE 3510-DS-M