CITE = 60 FR 4596 (1/24/95) Filename = 95-124b.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,
Department of 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, 1991 through December
31, 1991. We preliminarily determine the net subsidy to be 5.54
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: Lorenza Olivas or Alexander
Braier, Office of Countervailing Compliance, International Trade
Administration, U.S. Department of Commerce, Washington, DC.
20230; telephone: (202) 482-2786.
SUPPLEMENTARY INFORMATION:
Background
On October 8, 1992, the Department of Commerce (the Department)
published in the Federal Register a notice of ``Opportunity
to Request Administrative Review'' (57 FR 46371) of the countervailing
duty order on certain iron-metal castings from India (45 FR
68650; October 16, 1980). On October 27, 1992, the Municipal
Castings Fair Trade Council and individually-named members,
all of which are interested parties, requested an administrative
review of the order. We initiated the review, covering the period
January 1, 1991 through December 31, 1991, on November 27, 1992
(55 FR 56318). 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 the 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, 1991 through December 31,
1991. This review involves 14 producers/exporters and 12 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
(Dinesh Brothers, Pvt. Ltd., Super Castings (India) Pvt. Ltd.,
and Kajaria Iron Castings Pvt. Ltd.) 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 letter of credit. In addition, exporters may establish pre-
shipment credit lines under this program with limits contingent
upon the value of exports. In general, the 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 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
---- page 4597 ----
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, the rate of interest charged on pre-shipment
export loans ranged from 7.50 to 17 percent, depending on the
length and date of the loan.
In the case of a short-term loan provided by a government,
the Department uses the average interest rate for an alternative
source of short-term financing in the country in question as
a benchmark. In determining this benchmark, the Department relies
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, § 355.44(b)(3)(i)
(Proposed Rules) (54 FR 23380; May 31, 1989).
The Government of India (GOI) classifies the companies under
review as small-scale industry companies. Therefore, we used
the small-scale industry short-term interest rates published
in the Reserve Bank of India periodicals Reserve Bank of India
Report on Trend and Progress of Banking in India: 1990-91 (Appendix
II) and Reserve Bank of India Annual Report 1991-92 that were
submitted by the GOI. These publications provided us with the
actual short-term small-scale industry interest rate of 14 percent
for loans through October 8, 1991. Since they provided only
minimum interest rates for October 9, 1991 through December
31, 1991, we used the International Monetary Fund publication
International Financial Statistics (IFS) for the remainder of
the year. The IFS reported that the short-term interest rate
in India for the period October 9, 1991 through December 31,
1991 was 20 percent. Therefore, we weight-averaged these two
rates based on the number of months of the year each applied,
and calculated a benchmark of 15.38 percent for this review.
During the review period, 11 of the 14 respondent companies
made payments on pre-shipment export loans for shipments of
subject castings to the United States. One of these 11 companies,
Super Castings (India) Private Ltd. (Super Castings), provided
aggregate pre-shipment loan and post-shipment loan information
in its response to our original questionnaire. We were not able
to distinguish which entries were pre-shipment loans based on
the information submitted by the company. Super Castings did
not respond to a second request for information on pre-shipment
loans in our supplemental questionnaire. Therefore, in accordance
with section 776(c) of the Act, we assumed as best information
available (BIA) that all reported loans were pre-shipment loans.
To calculate the benefit from the pre-shipment loans to these
eleven companies, we compared the actual interest paid on these
loans during the review period with the interest that would
have been paid using the benchmark interest rate of 15.38 percent.
If the benchmark rate exceeded the program rate, the difference
between those amounts is the benefit. We then divided the benefit
by either total exports or by total exports of the 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 financing 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 was unable to segregate pre-shipment financing,
we divided the benefit from all pre-shipment loans by total
exports. On this basis, we preliminarily determine the net subsidy
from this program to be one 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 subsidy for those firms is as follows:
------------------------------------------------------------------------------
Manufacturer/exporter | Net subsidy
| (percent)
------------------------------------------------------------------------------
|
Dinesh Brothers, Pvt. Ltd.................................... | 0.00
Super Castings (India) Pvt. Ltd.............................. | 23.00
Kajaria Iron Castings Pvt. Ltd............................... | 0.68
------------------------------------------------------------------------------
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. The interest rate for post-shipment
financing was 8.65 percent during the review period.
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 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. For reasons
stated above for pre-shipment financing, we are using 15.38
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. One of these 12 companies,
Super Castings, provided aggregate post-shipment loan and pre-
shipment loan information in its response to our original questionnaire.
Our treatment of Super Castings is described under our analysis
of pre-shipment financing. 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
the subject merchandise to the United States, depending on whether
the company was able to segregate the post-shipment financing
on the basis of destination of the exported good. On this basis,
we preliminarily determine the net subsidy from this program
to be 0.42 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 subsidy for those firms is as follows:
------------------------------------------------------------------------------
Manufacturer/exporter | Net subsidy
| (percent)
------------------------------------------------------------------------------
|
Dinesh Brothers, Pvt. Ltd.................................... | 0.00
Super Castings (India) Pvt. Ltd.............................. | 0.00
Kajaria Iron Castings Pvt. Ltd............................... | 0.00
------------------------------------------------------------------------------
3. Income Tax Deductions Under Section 80HHC
Under section 80HHC of the Income Tax Act, the GOI allows
exporters to deduct profits derived from the export of goods
and merchandise from taxable income. 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 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.
---- page 4598 ----
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 1.47 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 subsidy
for those firms is as follows:
------------------------------------------------------------------------------
Manufacturer/exporter | Net subsidy
| (percent)
------------------------------------------------------------------------------
|
Dinesh Brothers, Pvt. Ltd.................................... | 0.00
Super Castings (India) Pvt. Ltd.............................. | 18.75
Kajaria Iron Castings Pvt. Ltd............................... | 15.46
------------------------------------------------------------------------------
4. Cash Compensatory Support (CCS) Program
In 1966, the GOI established the CCS program which provides
a cumulative tax rebate paid upon export and is calculated as
a 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, even if a rebate program meets one of these conditions,
the Department must still determine in each case whether there
is an over-rebate; 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 over-rebate).
During this review period, the Indian manufacturers of castings
have replaced domestic pig iron with imported pig iron as the
basic raw material used in the production of exports destined
for the U.S. market. Therefore, 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. During the verification
of the 1990 administrative review, the information we examined
showed that the port tax included in the indirect tax incidence
is a wharfage charge. The documentation submitted at the 1990
verification on the harbor tax indicated 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 (public version), which is on file in the Central
Records Unit (room B099 of the Main Commerce Building).)
We afforded the GOI the opportunity to provide information
to demonstrate 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 GOI on April 26, 1994. The information provided did
not demonstrate that the port tax and the harbor tax, which
were used in the calculation of tax incidence, are indirect
taxes. Therefore, we determine that the port dues and 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 B099 of the Main Commerce Building).
Because these two 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 over-
rebate of indirect taxes. The amount of the over-rebate is a
countervailable benefit provided to exporters of the subject
castings.
We verified that on February 1, 1991, manufacturers and exporters
of castings stopped applying for CCS rebates on exports of subject
castings to the United States. Thus, to calculate the ad valorem
benefit to each company which applied for CCS rebates, we multiplied
the over-rebate rate by each company's exports of subject castings
to the United States during the month of January, 1991. We then
divided this amount by each company's total exports of subject
castings to the United States during the period of review. On
this basis, we preliminarily determine the net subsidy from
this program to be 0.41 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:
------------------------------------------------------------------------------
Manufacturer/exporter | Net subsidy
| (percent)
------------------------------------------------------------------------------
|
Dinesh Brothers, Pvt. Ltd ................................... | 0.00
Super Castings (India) Pvt. Ltd ............................. | 0.00
Kajaria Iron Castings Pvt. Ltd .............................. | 0.50
------------------------------------------------------------------------------
During the 1990 review, we verified that the GOI terminated
the CCS program effective July 3, 1991. (See the Verification
of the Government of India (GOI) Questionnaire Responses for
the 1990 Administrative Review of the Countervailing Duty Order
on Certain Iron-Metal Castings from India (public version).)
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 1990 verification)
(see verification report, Id). We found no evidence of any applications
for or receipts of residual benefits under this program as of
that date, which exceeded the two year period following the
---- page 4599 ----
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
§ 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 the sale
of all import licenses to be 0.18 percent ad valorem for all
manufactures 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:
------------------------------------------------------------------------------
Manufacturer/exporter | Net subsidy
| (percent)
------------------------------------------------------------------------------
|
Dinesh Brothers, Pvt. Ltd ................................... | 0.00
Super Castings (India) Pvt. Ltd ............................. | 0.00
Kajaria Iron Castings 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) the International Price Reimbursement Scheme;
(3) Free Trade Zones;
(4) Preferential Freight Rates;
(5) a Preferential Diesel Fuel Program; and
(6) the 100 Percent Export-Oriented Units Program.
We also determined that exporters did not apply for or receive
benefits from a seventh program, called Exim Script. This program
was introduced on July 4, 1991 to replace the replenishment
license. The Exim Scrip program was terminated on March 1, 1992.
Preliminary Results of Review
We preliminarily determine that the following net subsidies
exist for the period January 1, 1991 through December 31, 1991:
------------------------------------------------------------------------------
Manufacturer/exporter | Net subsidy
| (percent)
------------------------------------------------------------------------------
|
Dinesh Brothers, Pvt. Ltd ................................... | 0.00
Super Castings (India) Pvt. Ltd ............................. | 41.75
Kajaria Iron Castings Pvt. Ltd .............................. | 16.14
All Others .................................................. | 5.54
------------------------------------------------------------------------------
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, 1991, and
on or before December 31, 1991. Because the total net subsidy
for Dinesh Brothers Pvt., Ltd. is determined to be zero, we
intend to instruct the Customs Service not to assess countervailing
duties on shipments of the subject merchandise with respect
to that company.
The Department also intends, as a result of the termination
of benefits attributable to the CCS program, to instruct the
Customs Service to collect a cash deposit of estimated countervailing
duties of 5.13 percent for all firms except Dinesh Brothers,
Pvt. Ltd., Super Castings (India) Pvt. Ltd., and Kajaria Iron
Castings Pvt. Ltd, 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. Because Super Castings and Kajaria did not use the CCS
program, the cash deposit rates for those companies will equal
the calculated net subsidies of 41.75 percent and 16.14 percent,
respectively. Because the net subsidy for Dinesh Brothers Pvt.,
Ltd. is zero, the Department intends to instruct the Customs
Service not to collect cash deposits on shipments of this merchandise
from this company entered or withdrawn 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
methodology and interested parties may request a hearing not
later than ten 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 ten days after the representative's
---- page 4600 ----
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. 95-1762 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, 4596