CITE = 60 FR 4592 (1/24/95) Filename = 95-124a.htm
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[C-533-063]
Certain Iron-Metal Castings From India Preliminary Results of
Countervailing Duty Administrative Review
AGENCY: International Trade Administration/Import Administration,
Commerce.
ACTION: Notice of Preliminary Results of Countervailing Duty
Administrative Review.
SUMMARY: The Department of Commerce is conducting an administrative
review of the countervailing duty order on certain iron-metal
castings from India for the period January 1, 1990 through December
31, 1990. We preliminarily determine the net subsidy to be 10.16
percent ad valorem for all manufacturers and exporters in India
of certain iron-metal castings, except for certain firms which
have significantly different aggregate benefits. A complete
listing of the net subsidies for these firms can be found in
the ``Preliminary Results of Review'' section of this notice.
We invite interested parties to comment on these preliminary
results.
EFFECTIVE DATE: January 24, 1995.
FOR FURTHER INFORMATION CONTACT: Robert Copyak or Lorenza Olivas,
Office of Countervailing Compliance, International Trade Administration,
U.S. Department of Commerce, Washington, D.C. 20230; telephone:
(202) 482-2786.
SUPPLEMENTARY INFORMATION:
Background
On October 2, 1991, the Department of Commerce (the Department)
published in the Federal Register a notice of ``Opportunity
to Request Administrative Review'' (56 FR 49878) of the countervailing
duty order on certain iron-metal castings from India (45 FR
68650; October 16, 1980). On October 23, 1991, the Municipal
Castings Fair Trade Council and individually-named members,
all of which are interested parties, requested an administrative
review of the order. In addition, various respondent companies
submitted timely requests for review. We initiated the review,
covering the period January 1, 1990 through December 31, 1990,
on November 22, 1991 (56 FR 58878). The Department is now conducting
this administrative review in accordance with section 751(a)
of the Tariff Act of 1930 (the Act).
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, such merchandise was classifiable under the Harmonized
Tariff Schedule (HTS) item numbers 7325.10.0010 and 7325.10.0050.
The HTS item numbers are provided for convenience and Customs
purposes. The written description remains dispositive.
The review period is January 1, 1990 through December 31,
1990. This review involves 14 producers/exporters and 14 programs.
Calculation Methodology for Assessment and Deposit Purposes
Pursuant to Ceramica Regiomontana, S.A. v. United States, 853
F. Supp. 431 (CIT 1994), Commerce is required to calculate a
country-wide CVD rate, i.e., the all-other rate, by ``weight
averaging the benefits received by all companies by their proportion
of exports to the United States, inclusive of zero rate firms
and de minimis firms.'' Therefore, we first calculated a subsidy
rate for each company subject to the administrative review.
We then weight-averaged the rate received by each company using
as the weight its share of total Indian exports to the United
States of subject merchandise. We then summed the individual
companies' weight-averaged rates to determine the subsidy rate
from all programs benefitting exports of subject merchandise
to the United States.
Since the country-wide rate calculated using this methodology
was above de minimis, as defined by 19 CFR § 355.7 (1993), we
proceeded to the next step and examined the net subsidy rate
calculated for each company to determine whether individual
company rates differed significantly from the weighted-average
country-wide rate, pursuant to 19 CFR § 355.22(d)(3). Three
companies received significantly different net subsidy rates
during the review period pursuant to 19 CFR § 355.22(d)(3).
These companies are treated separately for assessment and cash
deposit purposes. All other companies are assigned the country-
wide rate.
Analysis of Programs
1. Pre-Shipment Export Financing
The Reserve Bank of India, through commercial banks, provides
pre-shipment financing, or ``packing credit,'' to exporters.
With these pre-shipment loans, exporters may purchase raw materials
and packing materials based on presentation of a confirmed order
or
---- page 4593 ----
letter of credit. In addition, exporters may establish pre-shipment
credit lines under this program with limits contingent upon
the value of exports. In prior administrative reviews of this
order, this program was determined to be countervailable because
receipt of the loans under this program is contingent upon export
performance and the interest rates were preferential. (See,
e.g., Final Results of Countervailing Duty Administrative Review:
Certain Iron-Metal Castings From India (56 FR 41658; August
22, 1991) (1987 Indian Castings Final Results); Final Results
of Countervailing Duty Administrative Review: Certain Iron-Metal
Castings From India (56 FR 52515; October 21, 1991) (1988 Indian
Castings Final Results); and Final Results of Countervailing
Duty Administrative Review: Certain Iron-Metal Castings From
India (56 FR 52521; October 21, 1991) (1989 Indian Castings
Final Results).) There has been no new information or evidence
of changed circumstances in this review to warrant reconsideration
of this program's countervailability.
During the review period, there were two types of pre-shipment
export financing arrangements. For pre-shipment loans with periods
of 180 days or less, the interest rate was 7.5 percent per annum.
For loans with periods exceeding 180 days, the interest rate
was 9.5 percent per annum. In either case, a ``penalty'' interest
rate of 15.5 percent was charged on an unpaid balance from the
end of the loan period forward.
In the case of a short-term loan provided by a government,
the Department will use as a benchmark the average interest
rate for an alternative source of short-term financing in the
country in question. In determining this benchmark, the Department
will normally rely upon the predominant source of short-term
financing in the country in question. (See Countervailing Duties;
Notice of Proposed Rulemaking and Request for Public Comments,
section 355.44(b)(3)(i) (Proposed Rules) (54 FR 23380; May 31,
1989).
The Government of India classifies the manufacturers and
exporters subject to this review as small-scale industries.
Since the interest rates on loans to small-scale industries
were set by the Reserve Bank of India, we used the small-scale
industry short-term interest rates published in the Reserve
Bank of India periodicals ``Report on Trend and Progress in
India: 1989-90'' and ``Reserve Bank of India Bulletin October
1989 (Supplement)'' to calculate a benchmark interest rate of
15.08 percent. Because the Reserve Bank of India devised different
interest rates for the latter months of the review period, this
15.08 percent benchmark is a weighted-average of the highest
rate for small-scale industry loans between 200,000 and 2,500,000
rupees for the period January 1 through September 21, 1990,
and the rate for small-scale industry loans over 50,000 rupees
for the period September 22 through December 31, 1990. We compared
this benchmark to the interest rate charged on pre-shipment
loans and found that the interest rate charged under this program
was lower than the benchmark. The use of this benchmark rate
is consistent with prior reviews of this order. (See 1988 and
1989 Indian Castings Final Results).
During the review period, 12 of the 14 respondent companies
made payments on pre-shipment export loans for shipments of
subject castings to the United States. While all 12 of these
companies provided specific loan information as requested in
our questionnaires, the submission containing the pre-shipment
loan information for Super Castings (India) Private Ltd. was
untimely and therefore returned. (See the April 21, 1994 memorandum
titled Removal of Information from the Administrative Record
for the 1990 Administrative Review of the Countervailing Duty
Order on Certain Iron-metal Castings from India, on file in
the public file of the Central Records Unit, Room B-099.) To
calculate the benefit from these loans to the other 11 companies,
we compared the actual interest each company paid during the
review period with the interest that would have been paid on
these loans using the benchmark rate of 15.08 percent. The difference
is the benefit. We divided the benefit by either total exports
or total exports of subject merchandise to the United States,
depending on how the pre-shipment financing was reported. That
is, if a company was able to segregate pre-shipment loans applicable
to subject merchandise exported to the United States, we divided
the benefit derived from only those loans by total exports of
subject merchandise to the United States. If a firm reported
aggregate pre-shipment financing, we divided the benefit from
all pre-shipment loans by total exports. For Super Castings
(India) Private Ltd., we used the highest individual company
benefit rate from this program as best information available.
On this basis, we preliminarily determine the net subsidy from
this program to be 1.11 percent ad valorem for all manufacturers
and exporters in India of certain iron-metal castings, except
for those firms listed below which have significantly different
aggregate benefits. The net subsidies for those firms are as
follows:
------------------------------------------------------------------------------
| Net
Manufacturer/exporter | subsidy
| (percent)
------------------------------------------------------------------------------
|
Nandikeshwari Iron Foundary..................................... | 0.00
Overseas Iron Foundry Pvt. Ltd.................................. | 5.27
Sitaram Madhogarhia & Sons Pvt. Ltd............................. | 0.41
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2. Post-Shipment Export Financing
The Reserve Bank of India, through commercial banks, provides
post-shipment loans to exporters upon presentation of export
documents. Post-shipment financing also includes bank discounting
of foreign customer receivables. As with pre-shipment financing,
exporters may establish post-shipment credit lines with their
commercial banks. In general, post-shipment loans are granted
for a period of up to 180 days. In prior administrative reviews
of this order, this program was determined to be countervailable
because receipt of the loans under this program is contingent
upon export performance and the interest rates were preferential.
(See 1988 and 1989 Indian Castings Final Results.) There has
been no new information or evidence of changed circumstances
in this review to warrant reconsideration of this program's
countervailability. The interest rate for post-shipment financing
was 8.65 percent during the review period. For reasons stated
above for pre-shipment financing, we are using 15.08 percent
as our short-term interest rate benchmark.
During the review period, 12 of the 14 respondent companies
made payments on post-shipment export loans for shipments of
subject castings to the United States. Only 11 of those 12 companies,
however, provided specific loan information as requested in
our questionnaires. Super Castings (India) Private Ltd. stated
in its response to our original questionnaire that its information
about its post-shipment loans was forthcoming; despite another
request for the information in our supplemental questionnaire,
the company never submitted it. To calculate the benefit from
these loans to the other 11 companies, we followed the same
short-term loan methodology discussed above for pre-shipment
financing. We divided the benefit by either total exports or
exports of subject merchandise to the United States, depending
on whether the company was able to segregate the post-shipment
---- page 4594 ----
financing on the basis of destination of the exported good.
For the company that did not submit specific loan information,
we used the highest individual company benefit rate from this
program as best information available. On this basis, we preliminarily
determine the net subsidy from this program to be 1.49 percent
ad valorem for all manufacturers and exporters in India of certain
iron-metal castings, except for those firms listed below which
have significantly different aggregate benefits. The net subsidies
for those firms are as follows:
------------------------------------------------------------------------------
| Net
Manufacturer/exporter | subsidy
| (percent)
------------------------------------------------------------------------------
|
Nandikeshwari Iron Foundry...................................... | 0.00
Overseas Iron Foundry Pvt. Ltd.................................. | 2.83
Sitaram Madhogarhia & Sons Pvt. Ltd............................. | 1.85
------------------------------------------------------------------------------
3. Income Tax Deductions Under Section 80HHC
Under section 80HHC of the Income Tax Act, the Government
of India allows exporters to deduct from taxable income profits
derived from the export of goods and merchandise. In prior administrative
reviews of this order, this program has been determined to be
countervailable because receipt of benefits under this program
is contingent upon export performance. (See 1988 and 1989 Indian
Castings Final Results.) There has been no new information or
evidence of changed circumstances in this review to warrant
reconsideration of this program's countervailability.
To calculate the benefit to each company, we subtracted the
total amount of income tax the company actually paid during
the review period from the amount of tax the company would have
paid during the review period had it not claimed any deductions
under section 80HHC. We then divided this difference by the
value of the company's total exports. On this basis, we preliminarily
determine the net subsidy from this program to be 2.59 percent
ad valorem for all manufacturers and exporters in India of certain
iron-metal castings, except for those firms listed below which
have significantly different aggregate benefits. The net subsidies
for those firms are as follows:
------------------------------------------------------------------------------
| Net
Manufacturer/exporter | subsidy
| (percent)
------------------------------------------------------------------------------
|
Nandikeshwari Iron Foundry...................................... | 0.05
Overseas Iron Foundry Pvt. Ltd.................................. | 6.18
Sitaram Madhogarhia & Sons Pvt. Ltd............................. | 15.82
------------------------------------------------------------------------------
4. Cash Compensatory Support (CCS) Program
In 1966, the Government of India established the CCS program
which provides a cumulative tax rebate paid upon export and
is calculated as percentage of the f.o.b. invoice price. We
verified that the rebate rate for exports of castings was set
at a maximum of five percent for the review period.
As stated in § 355.44(i)(4)(ii) of the Proposed Rules (54
FR 23382), the Department will find that the entire amount of
any such rebate is countervailable unless the following conditions
are met: (1) The program operates for the purpose of rebating
prior stage cumulative indirect taxes and/or import charges;
(2) the government accurately ascertained the level of the rebate;
and (3) the government reexamines its schedules periodically
to reflect the amount of actual indirect taxes and/or import
charges paid. In prior administrative reviews of this order,
the Department determined that these conditions have been met,
and, as such, the entire amount of the rebate has not been countervailed
(see, e.g., the 1989 Indian Castings Final Results).
However, once a rebate program meets this threshold, the
Department must still determine in each case whether there is
an overrebate; that is, the Department must still analyze whether
the rebate for the subject merchandise exceeds the total amount
of indirect taxes and import duties borne by inputs that are
physically incorporated into the exported product. If the rebate
exceeds the amount of allowable indirect taxes and import duties,
the Department will, pursuant to § 355.44(i)(4)(i) of the Proposed
Rules, find a countervailable benefit equal to the difference
between the rebate rate and the allowable rate determined by
the Department (i.e., the overrebate).
Since the last completed review of this order, the Indian
manufacturers of castings have moved from domestic pig iron
to imported pig iron as the basic raw material used in the production
of exports destined for the U.S. market. In this review, the
manufacturers presented a tax incidence calculation based on
the Indian government's rebate system on castings. The companies
also provided information on the taxes paid. Based on our examination
of the indirect tax incidence on inputs of castings, we preliminarily
determine that two items listed as taxes, the port tax and harbor
tax (incurred with respect to imported pig iron), were charges
for services rather than indirect taxes. At verification, the
information we examined shows that the port tax included in
the indirect tax incidence is a wharfage charge. The documentation
submitted at verification on the harbor tax indicates that this
item included berthage, port dues, pilotage, and towing charges.
(See February 25, 1994 report titled Verification of Information
Submitted by RSI India Pvt. Ltd. for the 1990 Administrative
Review of the Countervailing Duty Order on Certain Iron-Metal
Castings from India which is on file in the Central Records
Unit (room B099 of the Main Commerce Building).)
Since the information we verified was at the company level,
we afforded the Government of India the opportunity to provide
information which demonstrates that the port and harbor collections
discussed above were actually indirect taxes rather than charges
for services and, if so, that they were accurately reflected
in the rebate rate authorized for subject castings. We received
a response from the Government of India on April 25, 1994. The
information provided did not demonstrate that these charges,
which were used in the calculation of tax incidence, are indirect
taxes or fiscal charges. Therefore, we determine that the charges
for wharfage, berthage, pilotage, and towage are service charges
rather than import charges. For further discussion of this analysis,
see the May 26, 1994 briefing paper titled Cash Compensatory
Support (CCS) Program which is on file in the Central Records
Unit (room B009 of the Main Commerce Building).
Because these claimed charges on the physically incorporated
items are service charges rather than indirect taxes or import
charges, we have preliminarily disallowed these items in the
calculation of the indirect tax incidence. Therefore, we recalculated
the indirect tax incidence incurred on the items physically
incorporated in the manufacture of castings. We then compared
that recalculated tax incidence rate to the rebates authorized
on castings exports under the CCS program. Based on this comparison,
we preliminarily determine that this program provides an overrebate
of indirect taxes. The amount of the overrebate is a countervailable
benefit provided to exporters of the subject
---- page 4595 ----
castings. On this basis, we preliminarily determine the net
subsidy from this program to be 4.24 percent ad valorem for
all manufacturers and exporters in India of certain iron-metal
castings.
On February 1, 1991, manufacturers and exporters of castings
agreed to stop applying for CCS rebates on exports of the subject
castings to the United States. We also verified that the Government
of India terminated the program effective July 3, 1991. However,
exporters have two years in which to file applications for CCS
rebates for exports made prior to July 3, 1991. To ascertain
whether castings exporters received any residual benefits from
this terminated program, we reviewed the companies' accounting
ledgers through September 1993 (the time of our verification).
We found no evidence of any application for or receipt of residual
benefits under this program as of that date, which exceeded
the two year period following the termination of the program
during which castings exporters could file CCS applications.
Therefore, we plan not to include the subsidy conferred by this
program in the cash deposit rate to be established in the final
results of this review. (See section 355.50(a) of the Proposed
Rules.)
5. The Sale of Import Licenses
The GOI allows companies to transfer certain types of import
licenses to other companies in India. During the review period,
castings manufacturers/exporters sold additional licenses and
replenishment licenses. Because the companies received these
licenses based on their status as exporters, we preliminarily
determine that the sale of these licenses is countervailable.
See the 1988 and 1989 Indian Castings Final Results. There has
been no new information or evidence of changed circumstances
in this review to warrant reconsideration of this program's
countervailability.
A company receives an additional license based on its total
export earnings from the previous year. Therefore, we calculated
the subsidy by dividing the total amount of proceeds a company
received from sales of additional licenses by the total value
of its exports of all products to all markets.
A company receives replenishment licenses based on individual
export shipments. Therefore, we calculated the subsidy by dividing
the amount of proceeds a company received from sales of replenishment
licenses that was attributable to shipments of subject castings
to the United States by the total value of the company's exports
of subject castings to the United States.
We preliminarily determine the net subsidy from sales of
import licenses to be 0.45 percent ad valorem for all manufacturers
and exporters in India of certain iron-metal castings, except
for those firms listed below which have significantly different
aggregate benefits. The net subsidies for those firms are as
follows:
------------------------------------------------------------------------------
| Net
Manufacturer/exporter | subsidy
| (percent)
------------------------------------------------------------------------------
|
Nandikeshwari Iron Foundry ..................................... | 0.00
Overseas Iron Foundry Pvt. Ltd ................................. | 0.00
Sitaram Madhogarhia & Sons Pvt. Ltd ............................ | 0.00
------------------------------------------------------------------------------
6. Advance Licenses
Generally, a company can receive an advance license if it
has received a foreign purchase order or if it has an established
history of exporting. Products imported under an advance license
enter the country duty-free, and companies importing under advance
licenses are obligated to export the products made using the
duty-free imports. A product imported under an advance license
does not necessarily have to be physically incorporated into
the exported product. The amount of imports allowed under an
advance license is closely linked to the amount of exports to
be produced.
During the review period, eight of the respondent castings
manufacturers/exporters used advance licenses to import pig
iron, an input which is physically incorporated into the subject
iron-metal castings exported to the United States. We consider
the use of advance licenses in this case to be the equivalent
of a duty drawback program: customs duties were not paid on
imported products that were physically incorporated in the subject
castings which were exported to the United States. See the 1988
and 1989 Indian Castings Final Results, and the Final Affirmative
Countervailing Duty Determination: Steel Wire Rope from India
(Steel Wire Rope), (56 FR 46293, September 11, 1991). Therefore,
we preliminarily determine that the use of advance licenses
for the importation of pig iron is not countervailable.
Other Programs
We also examined the following programs and preliminarily
determine that exporters of certain iron-metal castings did
not apply for or receive benefits under these programs with
respect to exports of the subject merchandise to the United
States during the review period:
(1) Market Development Assistance;
(2) International Price Reimbursement Scheme;
(3) Free Trade Zones;
(4) Preferential Freight Rates;
(5) 100 Percent Export-Oriented Units Program;
(6) Exim Scrip; and
(7) Income Tax Deductions under sections
80GGA, 80HH, 80HHA, and 80I of the Income Tax Act.
Moreover, we verified that the exporters did not purchase
diesel fuel at a discount, and that a program designed to provide
preferentially priced oil for running generators was never funded.
This program was abolished on April 1, 1993, and we did not
find any evidence of residual benefits.
Preliminary Results of Review
We preliminarily determine that the following net subsidies
exist for the period January 1, 1990 through December 31, 1990:
------------------------------------------------------------------------------
| Net
Manufacturer/exporter | subsidy
| (percent)
------------------------------------------------------------------------------
|
Nandikeshwari Iron Foundry ..................................... | 4.29
Overseas Iron Foundry Pvt. Ltd ................................. | 18.52
Sitaram Madhogarhia & Sons Pvt. Ltd ............................ | 22.32
Country-wide All-other Rate .................................... | 10.16
------------------------------------------------------------------------------
If the final results of this review remain the same as these
preliminary results, the Department intends to 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, 1990, and
on or before December 31, 1990.
The Department also intends, as a result of the termination
of benefits attributable to the CCS program, to instruct the
Customs Service to collect cash deposits of estimated countervailing
duties at the following rates:
------------------------------------------------------------------------------
| Net
Manufacturer/exporter | subsidy
| (percent)
------------------------------------------------------------------------------
|
Nandikeshwari Iron Foundry...................................... | 0.05
Overseas Iron Foundry Pvt. Ltd.................................. | 14.28
Sitaram Madhogarhia & Sons Pvt. Ltd............................. | 18.08
Country-wide All-other Cash Deposit Rate........................ | 5.92
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The country-wide all-other cash deposit rate of 5.92 percent
applies to all but the above-listed companies on shipments of
this merchandise entered, or withdrawn from warehouse, for consumption
on or after the date of publication of the final results of
this administrative review.
Parties to the proceeding may request disclosure of the calculation
---- page 4596 ----
methodology and interested parties may request a hearing not
later than 10 days after date of publication of this notice.
In accordance with 19 CFR 355.38(c)(1)(ii), interested parties
may submit written arguments in case briefs on these preliminary
results within 30 days of the date of publication. Rebuttal
briefs, limited to arguments raised in case briefs, may be submitted
seven days after the time limit for filing the case brief. Any
hearing, if requested, will be held seven days after the scheduled
date for submission of rebuttal briefs. Copies of case briefs
and rebuttal briefs must be served on interested parties in
accordance with 19 CFR 355.38(e).
Representatives of parties to the proceeding may request
disclosure of proprietary information under administrative protective
order no later than 10 days after the representative's client
or employer becomes a party to the proceeding, but in no event
later than the date the case briefs are due under 19 CFR 355.38(c).
The Department will publish the final results of this administrative
review, including the results of its analysis of issues raised
in any case or rebuttal briefs.
This administrative review and notice are in accordance with
section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and
19 CFR 355.22.
Dated: January 9, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-1761 Filed 1-23-95; 8:45 am]
BILLING CODE 3510-DS-P
The Contents entry for this article reads as follows:
International Trade Administration
NOTICES
Countervailing duties:
Iron-metal castings from-
India, 4592