NOTICES
DEPARTMENT OF COMMERCE
(C-533-812)
Preliminary Affirmative Countervailing Duty Determination: Certain Carbon Steel
Butt-Weld Pipe Fittings From India
Wednesday, June 1, 1994
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AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: June 1, 1994.
FOR FURTHER INFORMATION CONTACT: Julie Anne Osgood or Annika O'Hara, Office of
Countervailing Investigations, Import Administration, U.S. Department of Commerce,
Room 3099, 14th Street and Constitution Avenue, N.W., Washington, D.C. 20230;
telephone (202) 482-0167 and (202) 482-4198, respectively.
PRELIMINARY DETERMINATION: The Department of Commerce ("the Department")
preliminarily determines that benefits which constitute subsidies within the meaning of
section 701 of the Tariff Act of 1930, as amended ("the Act"), are being provided to
manufacturers, producers, or exporters in India of certain carbon steel butt-weld pipe
fittings. For information on the estimated net subsidies, please see the Suspension of
Liquidation section of this notice.
Case History
Since the publication of the notice of initiation in the Federal Register, 59 FR 14148 (March
25, 1994), the following events have occurred.
On April 5, 1994, we issued a questionnaire to the Government of India ("GOI") in
Washington, D.C. concerning petitioner's allegations. On May 9, 1994, we received
questionnaire responses from the GOI, Karmen Steels of India ("Karmen"), and Sivanandha
Pipe Fittings Limited ("Sivanandha"). According to the GOI, Karmen, Sivanandha, and Tata
Iron & Steel Limited ("Tata") accounted for over 85 percent of exports of butt-weld pipe
fittings to the United States. Therefore, these companies are the respondents in this
investigation. However, Tata did not respond to the Department's questionnaire.
We issued deficiency questionnaires on May 11, 1994, to the GOI, Karmen, and Sivanandha.
We received responses on May 18, 1994.
Scope of Investigation
The products covered by this investigation are certain carbon steel butt-weld pipe fittings
("pipe fittings") having an inside diameter of less than fourteen inches (355 millimeters),
imported in either finished or unfinished condition. Pipe fittings are formed or forged steel
products used to join pipe sections in piping systems where conditions require permanent
welded connections, as distinguished from fittings based on other methods of fastening
(e.g., threaded, grooved, or bolted fittings). Butt-weld fittings come in a variety of shapes
which include "elbows", "tees", "caps", and "reducers." The edges of finished pipe fittings are
beveled, so that when a fitting is placed against the end of a pipe (the ends of which have
also been beveled), a shallow channel is created to accommodate the "bead" of the weld
which joins the fitting to the pipe. These pipe fittings are currently classifiable under
subheading 7307.93.3000 of the Harmonized Tariff Schedule of the United States
("HTSUS").
Although the HTSUS subheading is provided for convenience and customs
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purposes, our written description of the scope of this proceeding is dispositive.
Injury Test
Because India is a "country under the Agreement" within the meaning of section 701(b) of
the Act, the U.S. International Trade Commission ("ITC") is required to determine whether
imports of pipe fittings from India materially injure, or threaten material injury to, a U.S.
industry. On April 20, 1994, the ITC preliminarily determined that there is a reasonable
indication that an industry in the United States is being materially injured or threatened
with material injury by reason of imports from India of the subject merchandise (59 FR
18825).
Analysis of Programs
For purposes of this preliminary determination, the period for which we are measuring
subsidies (the period of investigation ("POI")) is the respondents' fiscal year: April 1, 1993 to
March 31, 1994.
Non-Responding Company
Since Tata did not respond to our countervailing duty questionnaire, we have used best
information available ("BIA") in accordance with §355.37(a) of the Department's
regulations. As BIA, we have used information provided in the petition except where we
have calculated a rate for a given program in a previous countervailing duty
investigation or administrative review for India which is higher than that provided in the
petition. We did not include in the BIA subsidy rate for Tata programs for which we have no
basis to calculate a benefit (i.e., programs for which rates are not calculated in the petition,
programs not previously investigated, or programs previously found not used). Based on
this approach, we calculated a BIA rate for Tata of 23.03 percent ad valorem.
Calculation of Country-Wide Rate
In determining the benefits to the subject merchandise from the various programs
described below, we used the following calculation methodology. We first calculated a
country-wide rate for each program. This rate comprised the ad valorem benefit received
by each firm weighted by each firm's share of exports of the subject merchandise to the
United States. The program rates were then added together to arrive at the country-wide
rate.
Pursuant to 19 CFR 355.20(d) of the Department's regulations, we compared the total ad
valorem benefit received by each firm to the country-wide rate for all programs. The rates
for Karmen and Tata were significantly different from the country-wide rate. Therefore,
Karmen and Tata received company- specific rates. Because Sivanandha was the only
company whose total ad valorem benefit was not significantly different from the
country-wide rate for all programs, we based the all-other rate only on benefits received by
Sivanandha. We then assigned this all-other rate to all other manufacturers, producers, and
exporters.
Consistent with our practice in preliminary determinations, when a response to an
allegation denies that a program exists, that producers of the subject merchandise receive
benefits under a program, or that producers of the subject merchandise are eligible for a
program, and the Department has no persuasive evidence showing that the response is
incorrect, we accept the response for purposes of the preliminary determination. All such
responses, however, are subject to verification. If the response cannot be supported at
verification, and the program is otherwise countervailable, the program will be considered
a subsidy in the final determination.
Karmen's Exports of Refurbished Pipe Fittings
Karmen reported in its responses that in addition to its production of new pipe fittings, the
company imports rusty, unused pipe fittings from a Singaporean company which it
refurbishes and subsequently re-exports to a customer of the Singaporean company in the
United States. For purposes of this preliminary determination, we have considered this
refurbished merchandise to be covered by this proceeding. For the final determination, we
will seek additional information concerning the following: (1) the nature and extent of the
processing operation, and (2) the extent to which the refurbished pipe fittings are being
subsidized.
In its responses, Karmen reported only the value added in the refurbishing process for
these sales. The U.S. Customs Service, however, collects duties based on the full value of the
subject merchandise exported, i.e., the value of the pipe fittings and any value-added
through the refurbishing process. Therefore, to avoid an over-assessment of the duty, we
have adjusted Karmen's sales value used as the denominator in our subsidy rate calculation.
For purposes of this preliminary determination, we have valued Karmen's exports of
refurbished pipe fittings using the price per metric ton of new pipe fittings because we do
not have an actual export value of refurbished pipe fittings.
Based upon our analysis of the petition and the responses to our questionnaires, we
preliminarily determine the following:
A. Programs Preliminarily Determined to be Countervailable
1. Preferential Pre-Shipment Financing
Pre-shipment financing is extended to exporters prior to shipment as working capital for
purchasing raw materials, processing, packing, warehousing, transporting and shipping.
Any exporter showing a confirmed export order or a letter of credit is eligible for this
program. Generally, the loans are extended for 180 days. According to the responses, both
Karmen and Sivanandha used pre-shipment financing during the POI.
Because only exporters are eligible for loans under this program, we preliminarily
determine that they are countervailable to the extent they are provided at a preferential
interest rate. We have used the average annual commercial interest rate on short-term
financing in the POI as the benchmark interest rate. The GOI reported a short-term
financing rate of 16.5 percent. We compared this benchmark rate to the interest rate
charged on pre-shipment loans and found that the interest rate charged was lower than the
benchmark rate. Therefore, we determine that loans provided under this program are
countervailable.
To calculate the benefit, we followed the short-term loan methodology which has been
applied consistently in our past determinations and is described in more detail in the
Subsidies Appendix accompanying 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 paid during the POI to the amount of interest that
would have been paid at the benchmark rate. The difference between these two amounts is
the benefit. We then divided the benefit by total exports. On this basis, we preliminarily
determine the estimated net subsidy from this program to be 0.23 percent ad valorem for
Karmen and 0.84 ad valorem for all other manufacturers, producers, and exporters of pipe
fittings in India.
2. Income Tax Deductions Under Section 80HHC
Income tax benefits are available to exporters in India under Section 80HHC
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of
the Income Tax Act of 1961. This program allows exporters to reduce their taxable income
by the profits earned on exports. Both Karmen and Sivanandha claimed deductions under
this program on their income tax returns filed in the POI.
Since tax deductions under Section 80HHC are available only to exporters, we preliminarily
determine that this program is countervailable. To calculate the benefit, we multiplied the
amount of the deduction claimed by each company by the corporate income tax rate and
divided the result by total exports. On this basis, we preliminarily determine the estimated
net subsidy from this program to be 1.07 percent ad valorem for Karmen and 2.69 ad
valorem for all other manufacturers, producers, and exporters of pipe fittings in India.
B. Programs Preliminarily Determined not to Provide Benefits During the POI
1. Advance Licenses and Advance Customs Clearance Permits ("ACCP's")
Under the GOI's Duty Exemption Scheme, inputs used in the production of exports may
enter the country duty-free. Two mechanisms under the Duty Exemption Scheme are
Advanced Licenses and Advanced Custom Clearance Permits ("ACCP's"). Sivanandha used
Advanced Licenses to import seamless carbon steel pipes in the POI. Karmen used ACCP's to
import rusty unused butt-weld pipe fittings in the POI.
Both Advance Licenses and ACCP's permit the importation of goods duty free provided the
imports are used in the production of goods which are subsequently re-exported. We
consider the use of Advance Licenses and ACCP's to be the equivalent of a duty-drawback
program (see Final Affirmative Countervailing Duty Determination: Steel Wire Rope
from India, 56 FR 46292 (September 11, 1991).
Under §355.44(i)(4)(1) of the Department's proposed regulations (see Countervailing
Duties; Notice of Proposed Rulemaking and Request for Public Comments, 54 FR 23366
(May 31, 1989), the non-excessive drawback of import duties is not countervailable if the
imported inputs are subsequently physically incorporated into exported products.
According to the questionnaire responses, inputs imported under Advance Licenses and
ACCP's were physically incorporated into pipe fittings which were subsequently
re-exported. Therefore, we preliminarily determine that Advance Licenses and ACCP's did
not provide a countervailable benefit in the POI.
2. International Price Reimbursement Scheme
The International Price Reimbursement Scheme ("IPRS") was established to compensate
Indian exporters for the difference between the world market price and the domestic price
of inputs. According to the responses, as of April 1, 1993, the input product used in the
production of pipe fittings, i.e., seamless carbon steel pipe, was no longer eligible for IPRS
benefits. However, residual benefits could be received after that date and, in fact, Karmen
indicated in its response that it received residual benefits under this program during the
POI for exports of pipe fittings shipped prior to the POI.
Respondents maintain that the IPRS program is permissible within the framework of Item
(d) of the Illustrative List of Export Subsidies annexed to the Agreement on the
Interpretation and Application of Article VI, XVI and XXIII of the General Agreement of
Tariff and Trade (1979). Pursuant to the Court of International Trade's decision in Creswell
Trading Co. v. United States, 783 F. Supp. 1418 (CIT 1992), the IPRS program must be
examined in light of Item (d). Accordingly, if the IPRS program does not provide a
reimbursement which exceeds the difference between the international price and the
domestic price, the program does not provide a countervailable benefit.
As discussed above, since the IPRS program was designed to compensate exporters for the
difference between the world market price and the domestic price of inputs and since
information provided in Karmen's response demonstrates that it was reimbursed in an
amount equal to the difference between the domestic price and the international price, we
preliminarily determine that the IPRS program is not countervailable with respect to inputs
used in the production of pipe fittings.
C. Programs Preliminarily Determined to be not Used
The Department preliminarily determines that the following programs were not used during
the POI.
A. Preferential Post-Shipment Financing
B. Additional and Replenishment Licenses
C. Market Development Assistance
D. Export Promotion, Capital Goods Scheme
E. Benefits for 100 Percent Export-Oriented Units
F. Benefits Provided to Export Processing Zones Verification
In accordance with section 776(b) of the Act, we will verify the accuracy of the information
used in making our final determination.
Suspension of Liquidation
In accordance with section 703(d) of the Act, we are directing the U.S. Customs Service to
suspend liquidation of all entries of pipe fittings from India, which are entered or
withdrawn from warehouse, for consumption on or after the date of the publication of this
notice in the Federal Register, and to require a cash deposit or bond for such entries of the
merchandise in the amounts indicated below. This suspension will remain in effect until
further notice.
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Pipe fittings Percent ad valorem
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Karmen Steels of India ................... 1.30
Tata Iron & Steel Limited ............... 23.03
All-Others ............................... 3.53
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ITC Notification
In accordance with section 703(f) of the Act, we will notify the ITC of our determination. In
addition, we are making available to the ITC all nonprivileged and nonproprietary
information relating to this investigation. We will allow the ITC access to all privileged and
business proprietary information in our files, provided the ITC confirms that it will not
disclose such information, either publicly or under administrative protective order,
without written consent of the Deputy Assistant Secretary for Investigations, Import
Administration.
If our final determination is affirmative, the ITC will make its final determination within 45
days after the Department makes its final determination.
Public Comment
In accordance with 19 CFR 355.38, we will hold a public hearing, if requested, to afford
interested parties an opportunity to comment on this preliminary determination on
Wednesday, July 27, 1994, at 10 a.m. at the U.S. Department of Commerce, Room 3708,
14th Street and Constitution Avenue, NW., Washington, DC 20230. Individuals who wish to
request a hearing must submit such a request within ten business days of the publication of
this notice in the Federal Register to the Assistant Secretary for Import Administration,
U.S. Department of Commerce, room B099, 14th Street and Constitution Avenue, NW.,
Washington, DC 20230. Parties should confirm by telephone the time, date, and place of the
hearing 48 hours before the scheduled time.
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Requests should contain: (1) The party's name, address, and telephone number; (2)
the number of participants; (3) the reason for attending; and (4) a list of the issues to be
discussed. In addition, case briefs must be submitted to the Assistant Secretary no later
than July 18, 1994. Rebuttal briefs must be submitted to the Assistant Secretary no later
than July 25, 1994. An interested party may make an affirmative presentation only on
arguments included in that party's case or rebuttal briefs. Written arguments should be
submitted in accordance with section 355.38 of the Department's regulations and will be
considered if received within the time limits specified above.
This determination is published pursuant to section 703(f) of the Act (19 U.S.C. 1671b(f)).
Susan G. Esserman,
Assistant Secretary for Import Administration.
Dated: May 24, 1994.
(FR Doc. 94-13316 Filed 5-31-94; 8:45 am)
BILLING CODE 3510-DS-P