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[C-533-063] 

Certain Iron-Metal Castings From India: Preliminary Results 
of Countervailing Duty Administrative Review 

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.

ACTION: Notice of preliminary results of countervailing duty 
administrative review.



SUMMARY: The Department of Commerce (the Department) is conducting 
an administrative review of the countervailing duty order on 
certain iron-metal castings from India for the period January 
1, 1992 through December 31, 1992. We preliminarily determine 
the net subsidy to be 12.93 percent ad valorem for Kajaria Iron 
Castings (Kajaria); 0.00 percent ad valorem for Dinesh Brothers, 
Pvt. Ltd. (Dinesh) and 3.54 percent ad valorem for all other 
companies. Interested parties are invited to comment on these 
preliminary results. Parties who submit comments in this proceeding 
are requested to submit with their comments (1) a statement 
of the issue and (2) a brief summary of their position. 

EFFECTIVE DATE: August 29, 1995.

FOR FURTHER INFORMATION CONTACT: Elizabeth Graham or Kristin 
Mowry, Office of Countervailing Investigations, International 
Trade Administration, U.S. Department of Commerce, Washington, 
D.C. 20230; telephone: (202) 482-4105 and 482-3798. 

SUPPLEMENTARY INFORMATION: 


Background 

   On October 16, 1980, the Department published in the Federal 
Register (45 FR 68650) the countervailing duty order on certain 
iron-metal castings from India. On October 8, 1992, the Department 
published in the Federal Register a notice of ``Opportunity 
to Request an Administrative Review'' (57 FR 46371) of this 
countervailing duty order. On October 27, 1992, we received 
a timely request for review from the Municipal Castings Fair 
Trade Council and individually-named members (petitioners), 
all of which are interested parties. 
   We initiated the review, covering the period January 1, 1992 
through December 31, 1992, on November 17, 1993 (58 FR 60600). 
The review covers 14 companies (11 exporters and three producers 
of the subject merchandise), which account for virtually all 
exports of the subject merchandise from India, and 12 programs. 

Applicable Statute and Regulations 

   The Department is now conducting this administrative review 
in accordance with section 751(a) of the Tariff Act of 1930 
as amended (the Act). Unless otherwise indicated, all citations 
to the statute and the Department's regulations are in reference 
to the provisions as they existed on December 31, 1994. However, 
references to the Department's Countervailing Duties: Notice 
of Proposed Rulemaking and 


---- page 44840 ----


Request for Public Comments, 54 FR 23366 (May 31, 1989) (Proposed 
Regulations), are provided solely for further explanation of 
the Department's countervailing practice. Although the Department 
has withdrawn the particular rulemaking proceeding pursuant 
to which the Proposed Regulations were issued, the subject matter 
of these regulations is being considered in connection with 
an ongoing rulemaking proceeding which, among other things, 
is intended to conform the Department's regulations to the Uruguay 
Round Agreements Act. See 60 FR 80 (January 3, 1995). 

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. 

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 calculated the net subsidy 
on a country-wide basis by first calculating the 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, including all companies, even those 
with de minimis and zero rates. 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 (1994), 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). Two companies 
(Kajaria and Dinesh) 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 


I. Programs Conferring Subsidies 
 
A. 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 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 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 13 to 15 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 selects 
the predominant source of short-term financing in the country 
in question. (See section 355.44(3)(b)(i) of the Proposed Regulations). 
   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 rate published 
in a Reserve Bank of India periodical, Reserve Bank of India 
Annual Report 1992-93, that was submitted by the GOI. This publication 
provided us with the actual short-term small-scale industry 
interest rate of 15 percent. 
   During the review period, 9 of the 14 respondent companies 
made payments on Pre-Shipment Export loans for shipments of 
subject castings to the United States. 
   To calculate the benefit from the pre-shipment loans to these 
nine 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 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 0.06 percent ad valorem for all manufacturers 
and exporters in India of certain iron-metal castings, except 
for Kajaria and Dinesh which have significantly different aggregate 
benefits. The net subsidy for Kajaria is 0.30 percent ad valorem. 
The net subsidy for Dinesh is 0.00 percent ad valorem. 

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. In general, post-shipment loans 
are granted for a period of up to 180 days. The interest rate 
for post-shipment financing ranged from 12.5 to 24.75 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 


---- page 44841 ----


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 percent as our short-term 
interest rate benchmark for these loans. 
   On January 1, 1992, the GOI introduced a program entitled 
``Scheme for Post-Shipment Credit Denominated in Foreign Currency'' 
(PSCFC). The loans are denominated in dollars and provided at 
interest rates at or above the London Interbank Offering Rate 
(LIBOR). Upon presentation of the export documents, the bank 
will credit the exporter's account in rupees for the loan amount 
less interest. The interest rate charged on these loans ranged 
from 6.5 percent to 8.5 percent during the review period. 
   Our normal practice is to use a foreign currency benchmark 
where loans are denominated in foreign currency. In this case, 
however, the Indian exporter borrowing under this program receives 
rupees. The loans are generally repaid in dollars when the customer 
makes payment. However, if the customer defaults, the exporter 
must repay the loan in rupees. Therefore, as explained more 
fully below, although the loans are tied to foreign exchange, 
foreign currency benchmarks are not appropriate. 
   Under these loans, the rupee equivalent of the amount of 
principal repaid will vary according to the exchange rate. This 
occurs because the principal remains constant in dollar terms, 
but as the dollar/rupee exchange rate varies, the amount of 
rupees necessary to repay the constant dollar amount varies. 
In this situation, the preferred benchmark would be the interest 
rate on alternative dollar-indexed loans in India. However, 
we have not been able to locate such a benchmark, and must, 
therefore, use as a benchmark a rupee-denominated interest rate. 
To make dollar-denominated post-shipment export financing rates 
comparable to the benchmark, we took account of the effect of 
movements in the rupee-dollar exchange rate over the loan period. 
   On March 1, 1992, the GOI introduced the Liberalised Exchange 
Rate Management System, whereby the rupee was made partly convertible. 
Under this system, 40 percent of all foreign exchange remitted 
was required to be exchanged at the official exchange rate and 
the remaining 60 percent at a market determined rate. 
   Because Indian exporters and banks use two exchange rates, 
we have used both of those rates (in the proportions, 40 percent 
at the official rate and 60 percent at the market rate) to calculate 
the amount of interest paid in rupees, adjusting for exchange 
rate fluctuations between the day of receipt and the day of 
repayment. We then compared the interest that would be paid 
on a benchmark rupee loan to the interest paid on the dollar-
indexed loans. In this calculation, we have followed our consistent 
methodology of assuming that interest would be paid on the rupee 
loans at the time of repayment. (See section 355.48(b)(3) of 
the Proposed Regulations.) 
   During the review period, 11 of the 14 respondent companies 
made payments on post-shipment export loans for shipments of 
subject castings to the United States. One of these 11 companies, 
Serampore Industries Private Ltd. (Serampore), provided incomplete 
post-shipment loan information in its response to our questionnaire. 
We have requested Serampore provide the complete post-shipment 
loan information. Since we have not received the information 
in time for these preliminary results, in accordance with section 
776(c) of the Act, we have assigned Serampore the highest subsidy 
rate for post-shipment loans calculated for another company 
in this review. We will use the information provided by Serampore 
in our final results of this review. 
   Also during the review period, the Reserve Bank of India 
refinanced banks' rupee post-shipment export credit at a rate 
of 11 percent per annum, while credit under the PSCFC scheme 
was refinanced at 5.5 percent per annum. Such refinancing practices 
encourage lending to the export sector; thus, driving down interest 
rates for exporters while driving up interest rates for domestic 
firms. Similar practices by other central banks of foreign governments 
have been considered to have been subsidizing their export sector, 
and thus found to be countervailable. However, we were unable 
to locate a reference to use as a benchmark for such refinancing 
practices. We will continue to search for such a benchmark, 
and invite interested parties to submit relevant information. 
   To calculate the ad valorem subsidy 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 0.43 percent ad valorem 
for all manufacturers and exporters in India of certain iron-
metal castings, except for Kajaria and Dinesh which have significantly 
different aggregate benefits. The net subsidy for Kajaria is 
0.15 percent ad valorem. The net subsidy for Dinesh is 0.00 
percent ad valorem. 

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. 
   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 2.97 percent 
ad valorem for all manufacturers and exporters in India of certain 
iron-metal castings, except for Kajaria and Dinesh which have 
significantly different aggregate benefits. The net subsidy 
for Kajaria is 12.39 percent ad valorem. The net subsidy for 
Dinesh is 0.00 percent ad valorem.
   
4. Import Mechanisms 
  
   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, Replenishment 
Licenses, Exim Scrip Licenses, and Special Exim Licenses. However, 
exporters reported that the Replenishment Licenses and Exim 
Scrip Licenses they sold during the review period were for non-
subject merchandise. The GOI reported that the Replenishment 
License Program was terminated for exports made after February 
29, 1992. The Replenishment License Program was replaced by 
the Exim Scrip Program, which was itself terminated on March 
1, 1992. On April 1, 1992, the Special Exim License Program 
was created to replace the Exim Scrip Program. 
   Additional licenses permit the exporter to import a variety 
of products 

---- page 44842 ----

in an amount equal to ten percent of the ``net foreign exchange'' 
earned in the previous year. Imports under an additional license 
are subject to customs duties and there is no obligation to 
export the products incorporating the imported inputs. 
   Special Exim Licenses are issued to exporters based on their 
net foreign exchange earnings. Special Exim Licenses specify 
the products that may be imported using the license and the 
exporter is not required to incorporate the inputs into the 
products it exports. 
   Replenishment Licenses permit the replacement of imported 
inputs used in exported products. The types and amounts of products 
which can be imported under a Replenishment License are contingent 
upon the particular product exported. Exporters are required 
to pay import duties on the inputs imported under a Replenishment 
License, but the importer is not required to incorporate the 
inputs into the product it exports. Additionally, Replenishment 
Licenses may not be issued to exporters utilizing Advance Licenses 
to import inputs. 
   Exim Scrip Licenses are issued for 30 percent of the F.O.B. 
value of the exports. Import duties are payable on inputs imported 
under these licenses and like Replenishment Licenses, they may 
not be issued to exporters utilizing Advance Licenses to import 
inputs. 
   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. 
   Since companies receive Additional Licenses and Special Exim 
Licenses based on their total export earnings from the previous 
year, we calculated the subsidies by dividing the total amount 
of proceeds a company received from sales of Additional Licenses 
and Special Exim Licenses by the total value of its exports 
of all products to all markets. 
   Companies receive Replenishment Licenses and Exim Scrip Licenses 
based on individual export shipments. Since the Replenishment 
Licenses and Exim Scrip Licenses sold by exporters during the 
review period were for non-subject merchandise, we do not consider 
these sales to have benefitted exports of the subject merchandise. 
   We preliminarily determine the net subsidy from the sale 
of Additional and Special Exim Licenses to be 0.08 percent ad 
valorem for all manufacturers and exporters in India of certain 
iron-metal castings, except for Kajaria and Dinesh which have 
significantly different aggregate benefits. The net subsidy 
for Kajaria is 0.09 percent ad valorem. The net subsidy for 
Dinesh is 0.00 percent ad valorem. 
 
II. Program Preliminary Found Not To Confer Subsidies
 
 Advance Licenses 
 
   The purpose of the advance license is to allow an importer 
to import raw materials used in the production of an exported 
product without first having to pay duty. Companies importing 
under advance licenses are obligated to export the products 
made using the duty-free imports.
   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. Item (i) 
of the Illustrative List specifies that the remission or drawback 
of import duties levied on imported goods that are physically 
incorporated into an exported product is not a countervailable 
subsidy, if the remission or drawback is not excessive. We consider 
respondents' use of advance licenses to be the equivalent of 
a duty drawback scheme. That is, they used the licenses in order 
to import, net of duty, raw materials which were physically 
incorporated into the exported products. Since the amount of 
raw materials imported was not excessive vis-a-vis the products 
exported, we preliminarily determine that use of the advance 
licenses was not countervailable. 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). 
 
III. Programs Preliminarily Found Not To Be Used 

   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) Falta Free Trade Zones and Other Free Trade Zones Program; 
(4) Preferential Freight Rates; 
(5) Preferential Diesel Fuel Program; and 
(6) 100 Percent Export-Oriented Units Program. 

IV. Program Preliminarily Found To Be Terminated 

   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) dated 
December 13, 1993, located in the Central Records Unit, room 
B-099, Department of Commerce). However, exporters have two 
years in which to file applications for CCS rebates for exports 
made prior to July 3, 1991. We have found no evidence of any 
residual benefits during this review period. Therefore, we preliminarily 
determine that exporters of certain iron-metal castings did 
not apply for or receive benefits under this program with respect 
to exports of the subject merchandise to the United States during 
the review period. 

Preliminary Results of Review 

   For the period January 1, 1992 through December 31, 1992, 
we preliminarily determine the net subsidy to be 12.93 ad valorem 
for Kajaria; 0.00 percent for Dinesh; and 3.54 percent ad valorem 
for all other companies. If the final results of this review 
remain the same as these preliminary results, the Department 
intends to instruct the U.S. Customs Service to assess the following 
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, 1992, and on or before December 31, 1992. 
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. 
   Parties to the proceeding may request disclosure of the calculation 
methodology and interested parties may request a hearing not 
later than 10 days after the date of publication of this notice. 
Interested parties may submit written arguments in case briefs 
on these preliminary results within 30 days of the day 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). 


---- page 44843 ----


   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 client 
or employer becomes a party to the proceeding, but in no event 
later than the date the case briefs, under section 355.38(c)of 
the Department's regulations, are due. 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 
brief or at a hearing. 
   This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. § 1675(a)(1)) and 19 
CFR § 355.22. 

   Dated: August 18, 1995. 

Susan G. Esserman, 
Assistant Secretary for Import Administration. 

[FR Doc. 95-21433 Filed 8-28-95; 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, 44839