NOTICES
DEPARTMENT OF COMMERCE
[C-533-063]
Final Results of Countervailing Duty Administrative Review: Certain Iron-Metal
Castings From India
Thursday, August 22, 1991
*41658
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, Washington, DC 20230 at (202) 377-5050.
Final Results
We 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 January 1, 1987 through
December 31, 1987 and the following programs:
- International Price Reimbursement Scheme (IPRS).
- Pre-Shipment Export Loans.
- Post-Shipment Export Loans.
- Income Tax Deductions 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 "Final Results of Administrative
Review" section of this notice.
Case History
On October 16, 1980, the Department published a 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 preliminary results of review in this case (56 FR 29626, June 28 1991) the
following events have occurred. On July 10, 1991, the Department requested further
information from some of the Indian exporters regarding IPRS benefits received during the
review period. A response was received on July 18, 1991. Case briefs and rebuttal briefs
were filed on July 23 and July 30, 1991, respectively.
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 are used for access 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 Comments Received
We afforded interested parties an opportunity to comment on the preliminary results. We
received comments from the Indian exporters, two separate groups of U.S. importers and
the petitioners.
The majority of the issues raised by the parties with respect to the IPRS program in the case
and rebuttal briefs were in essence identical to those raised by the parties in their briefs for
the 1986 review. The information on the record and the Department's position with respect
to these comments have not changed. Therefore, we have generally restated here those
comments and "Department Positions" that were in the 1986 review that pertain to the
instant review. (See, Final Results of Countervailing Duty Administrative Review:
Certain Iron-Metal Castings from India (56 FR 1976, January 18, 1991).) Where new
arguments have been raised regarding IPRS we have addressed them separately.
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. The program 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, 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) (Korea Nails), 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) (Taiwanese OCTG), 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.
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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) (Cotton Yarn), 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 the 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, 672 F. Supp. 1465 (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, 876 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, petitioners argue that the exception to an item (d) subsidy is inapplicable in
this administrative review because the Government of India did not provide pig iron for
use in the production of exported castings at the world market price.
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: 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.
countervailing 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-priced pig iron on a specific group of downstream users.
The circumstances in 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 and 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 based principally 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.
Similarly, 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 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
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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
case 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
1303 * * *, and includes, but is not limited to, the following: (i) 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 into the statute, it
did not limit the definition of export subsidy to the practices outlined in the List. The
legislative history of the Trade Agreements Act of 1979 (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 Agreement
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.
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. Thus, 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 consistute 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 importers argue that the Department recognized the principle of item (d) in
the 1984 administrative review of this case. Further, the importers state that the
Department has not identified any valid distinction between the IPRS program and other
import substitution programs that have previously been found to be not countervailable. In
particular, the importers argue that the Department only distinguished the IPRS from the
programs in Korean Nails and Taiwanese OCTG on the basis that the IPRS results in a price
rebate while the other programs result in a price reduction.
Department's Position: The importers mischaracterize the Department's decision in the
1984 administrative review of this case. In the 1984 review the Department was unable to
confirm that the amount of the IPRS rebate was purely a function of the difference between
the domestic and international price of pig iron. Therefore, the Department never reached
the question of the applicability of the item (d).
The Department did not distinguish the programs in Korean Nails and Taiwanese OCTG
simply on the basis that they offered price reductions rather than price rebates as provided
under IPRS. As we stated in the 1985 administrative review and repeated above in our
response to the previous comment, we found that the dual pricing schemes examined in
Korean Nails and Taiwanese OCTG were strictly commercial responses to segmented
markets and not the product of a government desire to subsidize exports while continuing
to offer input suppliers the full benefits of tariff protection.
Comment 3: The importers argue that although the Department has the authority to expand
or supplement the Illustrative List it must strictly adhere to the precise standards of the
Illustrative List in identifying export subsidies. Specifically, the importers state that the
Department does not have the authority to interpret the Illustrative List so as to negate the
world market price exception in item (d).
Department's Position: It is very clear from the legislative history of the Trade Agreements
Act of 1979 that Congress intended to define subsidy very broadly. See response to
Comment 1. This was made clear in the course of the Congressional debate of the 1979 Act.
For example, Senator Heinz stated that: "The point * * * is to define subsidy broadly so as to
catch within the scope of our law as many unfair trading practices as we can * * * Better to
define the term broadly as it ought to be defined, and then use the injury test as it is
intended to be used." 125 Cong. Rec. 20167 (July 23, 1979) (emphasis added). No where in
the statute is an exhaustive list of subsidy practices and their definitions provided. Rather,
Congress merely set out certain descriptive examples of unfair trading practices. Therefore,
it is beyond dispute that the Department was given wide discretion to determine what
constitutes a subsidy within the meaning of section 771(5) of the Act.
We believe that we have the authority to countervail export subsidy practices which cause
injury to a domestic industry, and that it is not limited by the adoption of the Illustrative
List into U.S. law. It is clear from the legislative history that the incorporation of the
Illustrative List was merely intended to provide examples of potential subsidy practices. It
is unquestionable that, with respect to the administration of the countervailing duty law
up until 1979, Congress was not concerned that an excessive number of foreign government
practices were being found countervailable. Instead, Congress was troubled by the number
of foreign government practices which were not being countervailed. Therefore, we do not
believe that Congress intendedthe
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Department's authority to countervail injurious
export subsidy practices to be restricted by a mechanical interpretation of the language
used to describe an example of one type of subsidy practice. To Congress, the Illustrative
List was just that--illustrative. The incorporation of the Illustrative List of U.S. law has no
relevance to the Department's determination that the IPRS program was a subsidy within
the meaning of 771(5) of the Act because we are properly concerned with the fact that the
Indian government made cash payments to castings producers, the receipt of which was
contingent upon export performance. We believe that we have the authority to countervail
these payments; we believe it to be inconceivable that the Congress would have us do
otherwise.
Comment 4: The importers argue that the Department has not taken into account a past
Treasury Department decision involving Uruguayan leather apparel (see, Final
Countervailing Duty Determination; Leather Wearing Apparel from Uruguay (43 FR
3974; January 30, 1978), where a world market price exception similar to the one noted in
item (d) was relied on. Moreover, in its final results of the 1985 administrative review of this
case the Department misread the finding in Uruguay Leather Apparel when distinguishing it
from the IPRS
Department's Position: We have explained our rational for countervailing the IPRS in the
previous comments. While this rationale may appear to be inconsistent with previous
Treasury determinations, we do not believe we are necessarily bound by previous Treasury
decisions regarding practices which were not defined as subsidies. As explained above, our
determination with respect to the IPRS is based upon our interpretation of the 1979 statute
and its legislative history. To the extent that we have refined our analysis, we believe that
we have articulated a rational basis for doing so.
Comment 5: Petitioners maintain that the Department should not have issued after
verification its July 10, 1991 letter requesting information from some of the companies on
the amount of IPRS benefits received in 1987. The information obtained in response to this
request, petitioners argue, should not be used in the Department's final determination
because it cannot be verified and the certifications of respondents cannot be relied upon.
Petitioners contend that respondents had ample opportunity, and numerous extensions, in
which to provide the information which was requested in unambiguous terms in the
Department's questionnaires. In addition, petitioners request that the Department use in it
calculation of Serampore's IPRS benefit amount the total amount of IPRS payments it
received, according to its questionnaire response, rather than an approximate amount
based upon other respondent's data.
The respondents state that three exporters have responded to the Department's letter of
July 10, 1991. Respondents request that the Department recalculate the IPRS benefit for
these three firms using the information provided. The exporters further state that the IPRS
figure used in the preliminary determination for Serampore relates to IPRS received on all
exports, not just subject castings to the United States. Therefore, the exporters suggest that
the Department use the data provided in Serampore's supplemental response of July 18,
1991.
Department's Position: Our November 16, 1990 questionnaire to the exporters did not
clearly specify that all IPRS payments received in 1987, including those associated with
1986 shipments, should be reported. Therefore, we issued a letter on July 10, 1991,
specifically requesting the correct information. We have used all the information provided
in the responses to our letter, including the information received from Serampore, for
purposes of these final results. Although we were not able to verify this information, we did
closely examine the information submitted. Based on our analysis of the submitted
information, we have no reason to believe that it is inaccurate. Furthermore, we note that
we are not required by the statute or our regulations to verify all the information used in
our final results.
Comment 6: 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 petitioners argue 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: It has been our general practice to compute benefits received by a
firm during the review period (in this case the 1987 calendar year), and apply them to the
relevant value of exports for the same period. This is because the company's cash flow is not
affected until the payment is received. 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)). In the case of IPRS benefits, however, the exact
amount of the benefit is not know at the time of export because there is always a lag between
the time an export is made and the time the EEPC announces the international price it will
use in its calculation of the IPRS payment. Even if we were to consider the IRPS 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 IRPS program by allocating receipts over exports. 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 1986 but received in 1987 would not be
captured by any review).
Comment 7: 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, petitioners argue 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: 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.
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Payment of the levies is not in the nature of an IPRS application fee.
Therefore, they do not constitute offsets, as defined in the statute, to the IPRS benefit.
Comment 8: The exporters claim that in the preliminary results of this review the
Department countervailed IPRS claims made by RSI India Pvt. Ltd. (RSI) in 1986 but
received in 1987 even though the 1986 claims were countervailed in the 1986
administrative review.
Department's Position: In the 1986 administrative review, RSI was requested to provide
information on the amount of IPRS benefits received in 1986. Instead of providing this
information, which was provided by every other exporter, RSI only provided data
regarding IPRS rebates claimed in 1986. Because RSI failed to provide the requested
information, we considered as the best information available, the IPRS rebates claimed in
1986 as a surrogate for the IPRS rebates received in 1986. In this review we countervailed
the amount of IPRS benefits received by RSI in 1987, which, as described above, is
consistent with our past practice.
Comment 9: The petitioners argue 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 exporter's renunciation of IPRS payments
on exports of the subject merchandise to the United States does not constitute 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 state that the Department determined that the EEPC stopped accepting IPRS
claims filed on shipments exported to the United States after June 30, 1987. Moreover,
because the Department verified that this program-wide change was implemented prior to
the issuance of the preliminary determination in this administrative review, the Department
should exclude IPRS payments from the estimated countervailing duty assessment rate.
Such a determination is consistent with the final results of the 1985 and 1986 administrative
reviews.
Department's Position: We verified in the 1985 and 1987 reviews, that in April 1987 the
EEPC directed the castings procedures not to make IPRS claims on exports of the subject
merchandise. More importantly, however, we verified in the 1987 review that the
Government of India officially terminated the IPRS program with respect to exports of the
subject merchandise. We verified this fact by examining a Ministry of Commerce circular
which stated that IPRS claims are not to be made on exports of the subject merchandise to
the United States. Therefore, we have determined that the termination of the IPRS program
with respect to exports of the subject merchandise to the United States meets the
Department's program-wide change criteria.
Comment 10: The exporters allege that the Department calculated the benefit for Uma Iron
& Steel Co. (Uma) related to the IPRS by dividing the total IPRS received by Uma's exports
to the United States. The exporters request that the Department correct this calculation.
Conversely, petitioners argue that because Uma failed to clearly identify the IPRS payments
associated with exports of subject castings, the Department had no choice but to calculate
Uma's IPRS benefits based on the information Uma had itself provided.
Department's Position: In the exhibits to its questionnaire response, Uma reported a
monthly breakdown of the total amount of IPRS payments received, rather than reporting,
as requested, only the IPRS payments received on exports of the subject merchandise.
However, Uma did report elsewhere in its response the lump sum amount it received on
exports of the subject merchandise. Consequently, we have used in our final calculations
the reported amount of IPRS payments received on the subject merchandise.
Comment 11: Respondents argue that the calculation of the benefit from pre-shipment
financing is incorrect in that the Department failed to take into account premium payments
made to the Export Credit Guarantee Corporation ("ECGC") in order to obtain such
financing. Respondents claim that in order to obtain such financing, exporters are required
to purchase insurance coverage from the ECGC, even for U.S. sales. Respondents request
that the final results be corrected to properly account for these premiums.
Department's Positon: We verified that exporters are not required to purchase insurance
coverage from the ECGC in order to receive pre-shipment financing. Therefore, the cost of
export credit insurance is not an offset to a benefit as defined by section 771(6)(A) of the
Act.
Comment 12: Petitioners argue that in accordance with 19 CFR 355.31(i), the Department
should enforce its certification requirement by sanctioning respondents for certification of
inaccurate submissions and the failure to report the receipt of countervailable subsidies.
Petitioners assert that respondents' inaccurate representation has violated the statutory
certification requirement and threatens the integrity of Departmental procedures.
Petitioners state that while they agree with the Department's determination that some form
of sanction was appropriate, the proposed sanction is disproportionately weak to the
seriousness of the violation. Citing this proceeding (56 FR 29627, June 28, 1991), and the
Final Affirmative Countervailing Duty Determination and Countervailing Duty
Order: Certain Welded Carbon Steel Pipe and Tube Products From Argentina (53 FR 37619,
37620, September 27, 1988), petitioners suggest that in calculating the net subsidy for
post-shipment financing programs, the Department should apply the highest rate found for
the individual verified companies, rather than a weighted- average of their rates.
Department's Position: We verified the amount of post-shipment financing received by the
three companies which were subject to on-site verification. For each of these companies we
calculated a benefit in accordance with the verified information. Normally, we resort to the
best information available, which includes the use of adverse inferences, when a company
fails to respond accurately to the Department's questionnaire. However, because we had
complete, accurate and verified information, with respect to the relevant program we
deemed it unnecessary to draw adverse inferences in this case. Because we did not penalize
the verified companies it is not appropriate to penalize the companies we did not verify.
Therefore, as the best information available we assigned the non-verified companies the
weighted-average benefit of the three verified companies.
Comment 13: Petitioners suggest that, as the Department under 19 CFR 355.22(f)(6) "will
refuse" to accept other requests for review from any other individual producer or exporter
if it is "unable to verify that the certifications" of the original requesting individual producer
or exporter are complete and accurate with regard to programs previously found
countervailable in the proceeding, the Department should refuse to accept any future
requests for
*41663
review from respondent companies for the duration of the order to
demonstrate the seriousness of respondents' false certifications. Citing 19 CFR part 355:
Countervailing Duties; Final Rule (53 FR 52306, December 27, 1988), petitioners state
that the Department disagreed with parties that argued that one firm's inaccurate
certification or the government's deficient certification ought not to affect the ability of
another firm to request a review by stating that "The Department cannot rely on a faulty
mechanism as a basis for action, even though this mechanism is not within the control of a
particular producer or exporter." Petitioner contends that unless the Department reacts
convincingly in this case the certification requirement will become meaningless.
Department's Position: We stated in our preliminary results that we would refer the
certification issue to the Department of Justice and the U.S. Customs Service. We have now
done so. We have also begun formulating a set of procedures for handling cases involving
certification issues. We do not believe that further action with respect to this administrative
review is necessary at this time. However, we are not precluded from taking additional
action in the future if we deem it appropriate.
Comment 14: The petitioners state 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 1671e(a) (emphasis added). Thus,
Congress created a presumption in favor of country-wide rates.
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: 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 determined that a "significant
differential" exists between companies receiving subsidies benefits. 19 U.S.C. section
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 19 CFR
355.20(d)(3), 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.
Comment 15: Petitioners request that the Department correct certain clerical errors in its
final results for RSI's and Carnation's IPRS payments, and Kejriwal's pre-shipment financing
benefits including its reported interest payments.
The exporters argue that because the loan and the interest were paid outside the review
period, the Department was correct not to countervail this loan in this review.
Department's Position: We have corrected our calculations to reflect the correct figures for
RSI's and Carnation's IPRS payments. However, we did not include in our calculation
Kejriwal's pre-shipment financing interest payment related to the loan taken out in 1987
because the interest associated with this loan was paid outside the review period.
Final Results of Review
After reviewing all of the comments received, we determine that the following net subsidies
exist for the period January 1, 1987 through December 31, 1987:
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, 1987, and on or before December 31, 1987.
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 in the amount of 3.84 percent ad valorem 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 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 14, 1991.
Eric I. Garfinkel,
Assistant Secretary for Import Administration.
[FR Doc. 91-20160 Filed 8-21-91; 8:45 am]
BILLING CODE 3510-DS-M