NOTICES
DEPARTMENT OF COMMERCE
[C-533-063]
Final Results of Countervailing Duty Administrative Review: Certain Iron-Metal
Castings from India
Monday, October 21, 1991
*52515
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: October 20, 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.
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 (referred to in this notice as "subject castings" or
"subject merchandise"). This review covers the period January 1, 1988 through December
31, 1988 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 Licenses
- Cash Compensatory Support Scheme (CCS)
- 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 "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 August 22, 1991, the Department published the final results
of its most recently completed review for the period January 1, 1987 through December 31,
1987 (56 FR 41658).
Since the preliminary results of the review in this case (56 FR 41654; August 22, 1991) the
following events have occurred. On September 11, 1991, the Department requested further
information from certain Indian exporters regarding the sale of additional licenses and
replenishment licenses. A response was received on September 20, 1991. Unsolicited
submissions containing factual information also were received, but subsequently were
returned to the respective parties. This issue is discussed in more detail in the comments
below. Case briefs and rebuttal briefs were filed on September 23 and September 27, 1991,
respectively. A public hearing was held on October 4, 1991.
Scope of the 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 comment from the Indian exporters, Govind Steel Co., Ltd. (Govind) and Tirupati
International (P) Ltd. (Tirupati), two groups of U.S. importers, and the petitioners.
The issues raised by the parties with respect to the IPRS program in the case and rebuttal
briefs were basically identical to those raised by the parties in their briefs for the 1987
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 the comments and "Department Postions" from
the 1987 review. (See, Final Results of Countervailing Duty Administrative Review:
Certain Iron-Metal Castings From India (56 FR 41658; August 22, 1991).)
Comment 1: The two groups of U.S. importers state that the Department should only
countervail proceeds from sales of additional and replenishment licenses that were tied to
the export of subject merchandise to the United States. Where the Department cannot
determine whether the proceeds are tied to exports of subject or non-subject merchandise,
the Department should continue the methodology used in its preliminary determination,
i.e., dividing the proceeds by all exports.
The petitioners argue that to the extent that the Department is unable to tie license
proceeds to specific merchandise, it should allocate the proceeds over exports of the
subject merchandise to the United States.
Department's Position: When respondents have clearly indicated the portion of the license
attributable to exports of the subject merchandise to the United States, we have
countervailed only the sales proceeds related to that portion of the license and allocated
the benefits to sales of the subject merchandise to the United States. Where the response
was not clear in stating whether the benefits were attributable to exports of the subject
merchandise to the United States, we have used exports of the subject merchandise to the
United States as the denominator because this was the specific information requested in the
September 11, 1991 supplemental questionnaire.
Comment 2: Govind and Tirupati request that the Department reconsider its September 17,
1991 decision to return their questionnaire responses and also that the Department request
the Government of India to resubmit the questionnaire responses so that Govind's and
Tirupati's company-specific information can be considered for purposes of the final
determination. Govind and Tirupati allege that the prohibition against accepting
questionnaire responses after the date of the preliminary determination is limited to
unsolicited questionnaire responses. Their questionnaire responses, while untimely, were
submitted in response to the Department's initial questionnaire.
Govind and Tirupati explain that they did not respond in time because the companies were
affected by a strike that lasted from March 9, 1991 to August 12, 1991. The striking workers
obstructed movement to the factories where the companies' records for the review period
were stored. Govind claims that it obtained a court order to gain access to its factory, but
could not enter the premises because the police were unable to enforce the court order.
*52516
Hence, Govind and Tirupati contend that the delay in the companies' responses was
due to circumstances beyond their control.
Petitioners argue that the Department correctly rejected factual information submitted by
respondents after the Department's deadline. The petitioners refer to several past decisions
by the Department and the Court of International Trade (CIT) which show that it is the
Department's policy not to accept new information after the preliminary determination.
Department's Position: Govind and Tirupati attempted to submit their questionnaire
responses only after the preliminary determination had been published. The companies
made no effort to notify the Department of the problems created by the labor strike before
the publication of the preliminary determination. Nor did the companies request an
extension prior to the publication of the preliminary results. Had Govind and Tirupati
explained the problems caused by the strike, the Department might have been able to take
such arguments into account and been able to grant the companies an extension.
Under § 355.31(b)(2) of the Department's regulations, "* * * in no event will the Secretary
consider unsolicited questionnaire responses submitted after the date of publication of the
Secretary's preliminary determination." Once the preliminary determination had passed,
Govind's and Tirupati's questionnaire responses essentially became unsolicited
questionnaire responses. Accordingly, the Department did not accept Govind's and
Tirupati's responses.
Comment 3: Govind and Tirupati request that if the Department uses best information
available (BIA) in the final results, that it use the country-wide rate as best information
available, rather than the highest net subsidy rate found for each program. In addition,
Govind and Tirupati argue that even though the responses were submitted outside the time
period established by the Department, the failure to submit timely responses was due to the
labor strikes mentioned above and not a deliberate attempt to control the outcome of the
proceedings through partial and selective submission of information.
The petitioners contend that when a respondent refuses to provide information requested
by the Secretary or otherwise impedes the review, it is the Department's responsibility, and
not respondent's, to determine what is the best information available. Petitioners indicate
that the Department was reasonable in its use of the sum of the highest subsidy rates due to
the companies' failure to respond to the questionnaire in a timely manner. Petitioners also
cite to past determinations where the Department applied the highest BIA rates to
companies not responding to the Department's request for information.
Department's Position: We agree with the petitioners. With respect to Govind, we have
continued to apply the highest rate found for each subsidy program in this review. We
believe that this application of adverse BIA is warranted because, as discussed above,
Govind made no attempt to notify the Department prior to our preliminary determination
that it was unable to provide the requested information. Especially since Govind has
participated in prior reviews, the company should have been aware that the Department
has the authority to draw adverse inferences where a respondent withholds information,
particularly when the information is withheld until after publication of an unfavorable
preliminary determination. (See, "Department's Position" on Comment 7 for a discussion of
our treatment of Tirupati.)
Comment 4: The exporters contend that the Department should apply a non- punitive BIA
rate to Uma and Select Steels Ltd. (Select) for the benefits received under the 80HHC
income tax deduction program. The exporters argue that application of the highest subsidy
rate attributable to the 80HHC program for any other company is unduly punitive because
both Uma and Select responded to the Department's May 13, 1991 questionnaire. The
exporters state that the companies' only deficiency was their failure to submit the tax
return filed in 1988. Therefore, they argue that the Department should use as the BIA rate
the weighted average of the benefits received under the 80HHC program for all companies.
The petitioners contend that the Department should continue to apply the highest
calculated benefit attributable to the 80HHC program as the BIA rate for Uma and Select.
Department's Position: In our May 13, 1991 questionnaire, we specifically asked the
exporters to submit the income tax returns they filed in 1988. In its July 17, 1991 response,
Uma submitted a tax return for the period January 1, 1988 through March 31, 1989.
Because this tax return covered part of 1989, it could not have been filed in 1988.
Consequently, in our July 25, 1991 supplementary questionnaire, we again requested Uma
to submit the tax return filed in 1988. Uma, however, never submitted its 1988 tax return.
Similarly, Select never submitted its 1988 tax return.
First, although Select indicated that its tax return was enclosed with its response to our
questionnaire, no tax return was included in the response. Second, the company responded
to our May 13, 1991 questionnaire on August 8, 1991, three and a half weeks after the
deadline for responses. Consequently, there was no time for the Department to send a
supplementary questionnaire to Select.
Because both companies failed to provide us with their tax returns or information that
would permit us to calculate the benefits received under the 80HHC program, we believe it
is reasonable to apply adverse BIA. Therefore, we have continued to apply to each the
highest subsidy rate found for the 80HHC tax program.
Comment 5: The exporters and a group of importers 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.
The petitioners indicate that because the Department previously has verified that ECGC
insurance is not required in order for a company to borrow under the pre-shipment
financing program, the Department has correctly disallowed the offset adjustment for the
cost of the insurance.
Department's Position: In the 1987 Administrative Review, (see, Final Results of
Countervailing Duty Administrative Review: Certain Iron-Metal Castings from India,
(56 FR 41658, August 22, 1991)) we verified that exporters are not required to purchase
insurance coverage from the ECGC in order to receive pre- shipment financing. No
information has been placed on the record to the contrary or demonstrating a different
interpretation. Therefore, we continue to determine that the cost of export credit insurance
is not a permissible offset as defined by section 771(6)(A) of the Act.
Comment 6: With respect to Select, the petitioners request that the Department apply the
highest subsidy rate found for any company for each program determined to be
counteravailable as the BIA rate. The petitioners argue that the highest BIA rate is
warranted because Select submitted its August 8, 1991
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questionnaire response
three and a half weeks after the deadline. In addition, the petitioners point out that Select
failed to obtain the Department's approval to file its response beyond the due date.
Therefore, the petitioners state that the Department should regard the response submitted
as untimely.
Conversely, the exporters argue that it would be inappropriate for the Department to reject
Select's response since Select's data has already been included in the preliminary
determination. The exporters also maintain that if the Department rejects Select's response
and assigns a high countervailing duty to this company, this would not penalize Select,
which no longer produces or exports castings to the United States, but would only harm
U.S. importers.
Department's Position: On a case-by-case basis, the Department may use its discretion to
accept questionnaire responses and other factual information after the due date for
submitting such information if it is submitted before the preliminary determination and if
the Department is given adequate time to analyze the submitted data for the purpose of the
preliminary determination. Select's August 8, 1991 response was submitted a week before
the due date of the preliminary determination. Select used very few subsidy programs and
stopped manufacturing the subject merchandise during the review period. Therefore, in this
instance, the Department had sufficient time to analyze the data for purposes of the
preliminary results. Furthermore, the petitioners were not prejudiced by the lateness of the
submission as they had full opportunity to review and comment on Select's response. For
these reasons, the Department has not rejected Select's response for the present review.
Comment 7: The petitioners allege that another Indian exporter, Tirupati, should have been
included in the present review and should have been assigned the same BIA rate as Govind
at the preliminary determination. Petitioners base their allegation on a submission dated
September 13, 1991, in which Tirupati acknowledged that it had not filed a timely response
to the Department's May 13, 1991 questionnaire for the 1988 review. The petitioners claim
that Tirupati's acknowledgement is properly part of the record of the present review and
request that the Department use the highest rate found for any company for each program
determined to be countervailable as the BIA rate for Tirupati.
The exporters agree with petitioners that Tirupati should be included in the 1988 review,
but argue that the Department should use the all other rate as the BIA rate for this company
due to the extenuating circumstances surrounding Tirupati's failure to submit a
questionnaire response.
Department's Position: According to the information in the record for this review, Tirupati
did not export subject castings in 1988. In its July 15, 1991 response to our May 13, 1991
questionnaire, the Engineering Export Promotion Council of India (EEPC) provided a list of
Indian companies which exported castings to the United States during 1988. Tirupati was
not on this list. Although new information regarding Tirupati's status as an exporter in 1988
might have been included in the submission referred to by the petitioners, that unsolicited
information was rejected by the Department pursuant to 19 CFR 355.31(b)(2) since the
submission was received after the publication of the preliminary determination. Therefore,
the September 13, 1991 response does not constitute part of the 1988 record. As a result,
Tirupati was not reviewed and, as such, has not been included in the calculation of the rate.
Comment 8: The petitioners argue that the Department should use in its calculation of
Serampore's subsidy rate for the sales of additional licenses, the ratio of historical export
shipments of subject and non-subject merchandise. The petitioners argue that Serampore's
September 20, 1991 response regarding the value associated with the additional licenses
sold is not consistent with Serampore's historical ratio of export shipments of subject and
non-subject merchandise, implying that the additional licenses sold should have been
primarily tied to the exports of subject merchandise to the United States, given that
Serampore has historically exported a higher volume of subject merchandise.
Conversely, the exporter argue that the Department should use the information on the sale
of additional licenses provided by Serampore because there is no indication that
Serampore's response is incorrect. In addition, the exporters state that using information
from prior reviews to calculate the benefit associated with the sale of the licenses would be
inappropriate and a departure from the Department's practices.
Department's Position: We disagree with petitioners. We have no reason to believe that the
additional information submitted by Serampore on September 20, 1991 is inaccurate.
Additional licenses are issued based on 10 percent of the net foreign exchange (NFE). The
NFE is calculated by subtracting from the f.o.b. value of exports, the c.i.f. value of import
licenses (i.e., advance licenses and replenishment licenses). Serampore indicated in its
questionnaire response that the receipt of its advance license was linked to exports of
subject merchandise to the United States. Consequently, because the value of the advance
license was deducted in computing the amount of the additional licenses, only that portion
of the additional licenses corresponding to the value added to the subject merchandise is
countervailable. Given the way the value of additional licenses is calculated, there is no
reason to assume any relationship between the ratio of export shipments of subject
merchandise to the United States and non-subject merchandise and the portion of the value
of an additional license that is linked to the exports of subject merchandise to the United
States. To do so would be to assume that all export shipments rely equally on inputs under
advance and replenishment licenses, and we have no reason to make this assumption.
Furthermore, historic ratios of export shipments of subject and non-subject merchandise
would be even more irrelevent.
Comment 9: The petitioners argue that the Department should countervail the proceeds
received by RSI from the sales of both the additional licenses the company sold in 1988. The
petitioners state that in its September 20, 1991 response, RSI claimed that one of these two
licenses is not countervailable because the license was obtained based on non-subject
merchandise. In its response, RSI also explained that the other license the company sold is
countervailable since part of it was obtained based on the exports of subject castings to the
United States. The petitioners allege that RSI failed to demonstrate that the first license was
not linked to the exports of subject castings to the United States and, further, that the
company did not provide an explanation as to how it could link the receipt of its additional
licenses with specific export transactions.
Conversely, the exporters contend that RSI clearly explained that the additional license was
granted based on the exports of non-subject merchandise and that RSI did not apply for any
additional licenses based on the exports
*52518
of subject merchandise to the United
States.
Department's Position: The Department has no reason to believe that RSI's September 20,
1991 response is inaccurate. We have therefore accepted RSI's statement that one of the
additional licenses the company sold during the review period was received based on the
exports of non-subject merchandise while part of the other license was received based on
the exports of subject castings to the United States.
Comment 10: 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, and XXIII of the General Agreement on Tariffs and Trade (the List or the
Illustrative 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 or 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 fro 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.
The exporters also argue that the IPRS benefits not the exporter of castings, but rather than
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, the 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 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. The Department'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 General Agreement on Tariffs and Trade
(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. Indian castings exporters
could have overcome this competitive disadvantage in two ways: Duty drawback and the
IPRS. Imported pig iron in Indian 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
*52519
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 "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 FEMCO paid China Steel to generally
available world market prices for coil. In doing so, we found that China Steel's prices were at
world market levels. Once again, our decision was based on a determination that China Steel
was acting in a commercially reasonable manner.
In this case, the fact pattern is different. The Steel Authority of India, Ltd. (SAIL), an
Indian government entity that supplied all of the pig iron used by the castings exporters,
did not institute a dual-pricing scheme for pig iron. Instead, the Indian government
intervened to ensure that Indian castings exporters could continue to use
domestically-sourced pig iron while pig iron producers continued to enjoy the full benefits
of tariff protection. Thus, the Indian government's decision to establish the IPRS and make
cash payments to castings producers made possible exports that otherwise would not have
occurred. Without this direct government action, castings exporters would have had to pay
the high domestic price for Indian pig iron.
The fact that the Illustrative List is incorporated into U.S. law has no bearing on our
decision. In determining whether item (d) is applicable to the identification and
measurement of an export subsidy from this type of program, we have examined the law
and its legislative history. Section 771(5) of the Tariff Act states, in relevant part: "The term
'subsidy' has the same meaning as the term 'bounty or grant' as that term is used in section
303 * * *, and includes, but is not limited to, the following: (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 Agreements Act of 1979:
Statements of Administrative Action, H.R. Doc. No. 96-153, Pt. II, 96th Cong., 1st Sess. 432
(1979). The Illustrative List is not, therefore, controlling of the identification and
measurement of export subsidies, but must be considered along with other provisions of
the statute and its legislative history, administrative practice and judicial precedent. In
light of the foregoing reasons, the inclusion of proposed regulation 355.44(h), which
corresponds to item (d) on the List, in no way supports the importers' position.
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 the export loans. In this case, as in many
others, we have determined that export loans at preferential interest rates constitute a
subsidy. In measuring the subsidy, we do not concern ourselves with whether firms could
have borrowed money at commercial rates in international credit markets. The fact that, as
a result of a government program, they borrowed from domestic sources at rates below
those commercially available in the domestic market leads us to determine that a subsidy is
bestowed.
Comment 11: 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
*52520
that they offered price reductions rather than price rebates as
provided under the IPRS. As we stated in the 1985 administrative review, 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 12: 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. 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). Nowhere 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 intended the 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 into 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 13: 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 Uruguayan Leather Apparel when distinguishing
it from the IPRS.
Department's Position: We have explained our rationale 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 rationale basis for doing so.
Comment 14: 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 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 known 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 are to consider the IPRS such an exception, the exporters did
not make such a claim when we first determined in the 1984 review of this order that the
IPRS provided a countervailable subsidy. In that review, we calculated the subsidy from the
IPRS program by allocating receipts over exports. A shift in methodology at this time would
result in a substantial gap in the measurement of subsidies from this program.
Comment 15: 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
*52521
benefit of the subsidy * * *." Both levies are paid by all consumers of Indian pig
iron, not just exporters. 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 16: 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 the 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, 1986 and 1987
administrative reviews.
Department's Position: We verified in the 1985 and 1987 reviews, that in April 1987 the
EEPC directed the castings producers 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 to the United States. 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.
Final Results of Review
After reviewing all of the comments received we determine that the following net subsidies
exist for the period January 1, 1988 through December 31, 1988:
-----------------------------------------------------------------------
Manufacturer/exporter Net ad valorem subsidy (percent)
-----------------------------------------------------------------------
Uma Iron and Steel Co ............................................ 10.03
Govind Steel Co. Ltd ............................................. 14.08
All other manufacturers or exporters .............................. 4.10
-----------------------------------------------------------------------
In calculating the benefits received during the review period, we followed the methodology
described in the preamble to 19 CFR 355.20(d) (53 FR 52325, December 27, 1988). 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, 1988, and on or before December 31, 1988.
The cash deposit rate of estimated countervailing duties on future entries of the subject
merchandise are set forth in the Notice of Final Results of this review for the period January
1, 1989 to December 31, 1989, issued contemporaneously with this notice. These deposit
requirements, when imposed, shall remain in effect until publication of the final results of
the next administrative review.
This administrative review and notice are in accordance with section 751(a)( (1) of the Act
and 19 CFR 353.22(c)(5).
Dated October 11, 1991.
Francis J. Sailer,
Acting Assistant Secretary for Import Administration.
[FR Doc. 91-25310 Filed 10-18-91; 8:45 am]
BILLING CODE 3510-DS