99-b12

NOTICES

DEPARTMENT OF COMMERCE

International Trade Administration

[C-533-063]

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

Friday, November 12, 1999

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AGENCY: Import Administration, International Trade 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. The period
covered by this administrative review is January 1, 1997 through December 31, 1997. For
information on the net countervailable subsidy rate for each reviewed company, as well as
for all non-reviewed companies, please see the Preliminary Results of Review section of this
notice. If the final results remain the same as these preliminary results of administrative
review, we will instruct the U.S. Customs Service to assess countervailing duties as
detailed in the Preliminary Results of Review section of this notice. Interested parties are
invited to comment on these preliminary results. (See Public Comment section of this
notice.)

EFFECTIVE DATE: November 12, 1999.

FOR FURTHER INFORMATION CONTACT: Kristen Johnson or Michael Grossman, Office of
CVD/AD Enforcement VI, Group II, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue,
N.W., Washington, D.C. 20230; telephone: (202) 482-2786.

SUPPLEMENTARY INFORMATION:

Background

On October 16, 1980, the Department of Commerce (the Department) published in the
Federal Register (45 FR 50739) the countervailing duty order on certain iron-metal
castings from India. On October 14, 1998, the Department notified all interested parties of
the opportunity to request an administrative review of this order. We received timely
requests for review, and we initiated a review covering the period January 1, 1997 through
December 31, 1997, on November 30, 1998 (63 FR 65748).
In accordance with 19 CFR 351.213(b), this review covers only those producers or
exporters of the subject merchandise for which a review was specifically requested. The
producers/exporters of the subject merchandise for which the review was requested are:
AGV Exports,
Agarwal Hardware,
Ambika Exports,
Bengal Export Corporation,
Bengal Iron Corporation,
Bhagyadevi Factory,
Calcutta Ferrous Ltd.,
Carnation Enterprise Pvt. Ltd.,
Carnation Industries, [FN1]

FN1 Carnation Industries was formerly Carnation Enterprise Pvt. Ltd.
Commex Corporation,
Crescent Foundry Co. Pvt. Ltd.,
Delta Enterprises,
Delta Corporation Ltd.,
Dinesh Brothers Pvt. Ltd.,
Dugar International,
Edcons Castings,
Essen International,
Ganapati Suppliers,
Global Intertrade,
Hargolal & Sons,
Hindustahn Malleables & Forgings Ltd.,
J.K. Udyog,
Kajaria Iron Castings Ltd., [FN2]

FN2 Kajaria Iron Castings Ltd. was formerly Kajaria Iron Castings Pvt. Ltd.
Kajaria Iron Castings Pvt. Ltd.,
Kauntia Exports,
Kejriwal Iron & Steel Works,
Kiswok Industries Pvt. Ltd., [FN3]

FN3 Kiswok Industries Pvt. Ltd. was formerly Kejriwal Iron & Steel Works.
Metflow Corporation Pvt. Ltd.,
Nandikeshwari Iron Foundry Pvt. Ltd.,
Orissa Metal Industries,
Overseas Iron Foundry Pvt. Ltd.,
Rangilal & Sons,
RBA Exports,
R.B. Agarwalla & Company,
R.B. Agarwalla & Company Pvt. Ltd.,
RR Enterprise,
RSI Limited,
RS Ispat Pvt. Ltd.,
Samitex Corporation,
Sammitex,
Serampore Industries Pvt. Ltd.,
Shakti Isabgel Industries,
Shree Hanuman Foundry & Engineering Co. Ltd.,
Shree Rama Enterprises,
Shree Uma Foundries Pvt. Ltd.,
Siko Exports,
Sitaram Maohogarhia & Sons Pvt. Ltd.,
Sociedad J.B. Nagar,
SSL Exports,
Super Iron Foundry,
Tara Engineering Works,
Thames Engineering,
Tirupati International Pvt. Ltd.,
Trident Industries,
Trident International,
Uma Iron & Steel, and
Victory Castings Ltd.
The following companies, for which a review was requested, certified that they either do not
produce or did not export the subject merchandise to the United States during the period of
review (POR): AGV Exports, Agarwal Hardware Works & Foundries Pvt. Ltd., Ambika
Exports, Bengal Iron Corporation, Bhagyadevi Factory, Delta Enterprises, Edcons Castings
Pvt. Ltd., Essen International, Hargolal & Sons, Hindustahn Malleables & Forgings Ltd., J.K.
Udyog, Kauntia Exports, Metflow Corporation Pvt. Ltd., Orissa Metal Industries, Overseas
Iron Foundry Pvt. Ltd., RBA Exports, R.B. Agarwalla & Company Pvt. Ltd., RR Enterprise,
RS Ispat Pvt. Ltd., Samitex Corporation, Sammitex, Shree Hanuman Foundry & Engineering
Co. Ltd., Shree Rama Enterprises, Shree Uma Foundries Pvt. Ltd., Siko Exports, Sitaram
Madhogarhia & Sons Pvt. Ltd., Tara Engineering Works, Tirupati International Pvt. Ltd., and
Tirupati Trading Company. In addition, the Government of India (GOI) certified that the
following companies either do not exist or do not export the subject merchandise to the
United States: Dugar International, Global Intertrade, Shakti Isabgel Industries, Sociedad
J.B. Nagar, and Trident Industries. Therefore, in accordance with section 351.213(d)(3) of
the Department's regulations, we are rescinding the review with respect to these companies.
On December 1, 1998, the Department issued a questionnaire to the GOI and the
producers/exporters of the subject merchandise. The Department received questionnaire
responses from the GOI and the producers/exporters of the subject merchandise on
February 1, 4, and 8, 1999. The Department issued a supplemental questionnaire on April
26, 1999. On April 28, 1999, the Department extended the preliminary results of this
administrative review until no later than November 2, 1999 (see 64 FR 23822, May 4,
1999). The Department then on June 2, 1999, corrected the deadline for issuance of this
notice of preliminary results to November 1, 1999. See Memorandum to the File: Correction
of Deadline for Notice of Results of Preliminary Results, dated June 2, 1999 (public
document on file in the Central Records Unit (Room B-099 of the Main Commerce Building)
(CRU). The Department received the respondents' supplemental questionnaire responses on
June 4, 14, 22, 28, and July 9, 1999. Additional

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supplemental questionnaires were
issued to the respondents on July 30, 1999, and August 4, 1999, and their responses were
received on August 11, 12, and 20, 1999.

Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are references to the provisions of the
Tariff Act of 1930, as amended by the Uruguay Round Agreements Act (URAA) effective
January 1, 1995 (the Act). The Department is conducting this administrative review in
accordance with section 751(a) of the Act. In addition, unless otherwise indicated, all
citations to the Department's regulations are to the regulations as codified at 19 CFR Part
351 (1998).

Scope of the Review

Imports covered by this administrative 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 of the United States (HTSUS) item
numbers 7325.10.0010 and 7325.10.0050. The HTSUS item numbers are provided for
convenience and Customs purposes. The written description remains dispositive.

Verification

As provided in section 782(i) of the Act, we verified information submitted by the GOI,
regional government of West Bengal, and certain producers/exporters of the subject
merchandise over the dates of August 19, 1999 through August 27, 1999. We followed
standard verification procedures, including meeting with government and company
officials and conducting an examination of all relevant accounting and financial records and
other original source documents. Our verification results are outlined in public versions of
the verification reports, which are on file in the Central Records Unit (Room B-099 of the
Main Commerce Building).

Use of Facts Available

The following companies, for which a review was requested, failed to respond to the
Department's questionnaires: Delta Corporation Ltd., SSL Exports, Thames Engineering, and
Trident International. Section 776(a)(2) of the Act requires the use of facts available when
an interested party withholds information that has been requested by the Department, or
when an interested party fails to provide the information requested in a timely manner and
in the form required. In such cases, the Department must use the facts otherwise available
in reaching the applicable determination. Because these companies failed to submit the
information that was specifically requested by the Department, we have based our
preliminary results for these companies on the facts available. In addition, the Department
finds that by not providing the requested information, the respondents have failed to
cooperate to the best of their abilities.
In accordance with section 776(b) of the Act, the Department may use an inference that is
adverse to the interests of that party in selecting from among the facts otherwise available
when the party has failed to cooperate by not acting to the best of its ability to comply with
a request for information. Such adverse inference may include reliance on information
derived from (1) the petition; (2) a final determination in a countervailing duty or an
antidumping investigation; (3) any previous administrative review, new shipper review,
expedited antidumping review, section 753 review, or section 762 review; or (4) any other
information placed on the record. See Section 351.308(c) of the Department's regulations.
In the absence of information from the respondents, we consider information placed on the
record by other respondent producers/exporters to be the appropriate basis for a facts
available countervailing duty rate calculation.
Therefore, to calculate the ad valorem subsidy rate for these non- respondent companies,
we summed the highest company-specific net countervailable subsidy rate for each
program under review. See Preliminary Results of Review section of the notice below for the
preliminary ad valorem rate calculated for these companies.

Analysis of Programs

I. Programs Found To Confer Countervailable Subsidies

A. Pre-Shipment Export Financing

The Reserve Bank of India (RBI), through commercial banks, provides short-term
pre-shipment financing, or "packing credits," to exporters. Upon presentation of a
confirmed export order or letter of credit, companies may receive pre- shipment loans for
working capital purposes, i.e., for the purchase of raw materials and for packing,
warehousing, and transporting of export merchandise. Exporters may also establish
pre-shipment credit lines upon which they may draw as needed. Credit line limits are
established by commercial banks, based upon a company's creditworthiness and past
export performance. Companies that have pre-shipment credit lines typically pay interest
on a quarterly basis on the outstanding balance of the account at the end of each period. In
general, packing credits are granted for a period of up to 180 days.
Commercial banks extending export credit to Indian companies must, by law, charge
interest on this credit at rates determined by the RBI. The rate of interest charged on
pre-shipment export loans up to 180 days was 13.0 percent for the period January 1, 1997
through October 21, 1997, and 12.0 percent for the period October 22, 1997 through
December 31, 1997. For pre-shipment loans not repaid within 180 days, the banks charged
interest at the following rates for the number of days the loans were overdue: 15.0 percent
for the period January 1, 1997 through October 21, 1997, and 14.0 percent for the period
October 22, 1997 through December 31, 1997. An exporter would lose the concessional
interest rate if the export loan was not repaid within 270 days. If that occurred, the banks
were able to assess interest at a non-concessional interest rate above the ceiling rate of
interest set by the RBI.
In prior administrative reviews of this order, the Department has found this program to be
an export subsidy because receipt of pre-shipment export financing is contingent upon
export performance, and the interest rates are below those which would be obtained for
comparable commercial financing. See, e.g., Final Results of Countervailing Duty
Administrative Review: Certain Iron- Metal Castings From India, 63 FR 64050 (November
18, 1998) (1996 Indian Castings Final Results). No new information or evidence of changed
circumstances has been submitted in this proceeding to warrant reconsideration of this
finding. Therefore, in accordance with sections 771(5)(D) and (E) of the Act, we continue to
find this program countervailable because it results in a financial contribution by the
government in the form of a loan and provides a benefit to the recipient in the amount of the
interest savings. Moreover, because receipt of the financing is contingent upon export
performance, we continue to find the program to be an export subsidy under section
771(5A)(B) of the Act.
To determine the benefit conferred under this program, we compared the interest rates
charged under the pre-shipment financing program to a

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benchmark interest rate.
As our benchmark, we used the cash credit rate. In the 1994 administrative review of this
order, the Department determined that, in the absence of a company-specific benchmark,
the most comparable short-term benchmark to measure the benefit under the pre-shipment
export financing scheme is the cash credit interest rate. See Final Results of
Countervailing Duty Administrative Review: Certain Iron-Metal Castings From India,
62 FR 32297, 32304 (June 13, 1997) (1994 Indian Castings Final Results). The cash credit
interest rate is for domestic working capital finance, and thus comparable to pre-and
post-shipment export finance. For the POR, we calculated a cash credit rate of 16.31 percent
based on the short-term interest rate and spread information reported by the GOI in its
February 1, 1999 questionnaire response.
We compared the cash credit benchmark rate to the interest rates charged on pre-shipment
rupee loans and found that for loans granted under this program, the interest rates charged
were lower than the benchmark rate. Therefore, in accordance with section 771(5)(E)(ii) of
the Act, this program conferred countervailable benefits during the POR because the
interest rates charged on the export loans were less than what a company otherwise would
have paid on comparable short-term commercial loans.
To calculate the benefit from the pre-shipment loans, we compared the actual interest paid
on the loans with the amount of interest that would have been paid at the benchmark
interest rate. Where the benchmark rate exceeded the program rates, the difference
between those amounts is the benefit.
If the pre-shipment financing loans were received solely to finance exports of subject
merchandise to the United States, we divided the benefit derived from those loans by
exports of subject merchandise to the United States. For all other pre-shipment financing
loans, we divided the benefit by total exports to all destinations. On this basis, we
preliminarily determine the net countervailable subsidies from this program to be as
follows:

-------------------------------------------------------------------------------
Producers/exporters which used the program during the POR Ad valorem rates
(percentages)
-------------------------------------------------------------------------------
Calcutta Ferrous Ltd ..................................................... 0.04
Commex Corporation ....................................................... 0.03
Dinesh Brothers (Pvt.) Ltd ............................................... 0.44
Ganapati Suppliers Pvt. Ltd .............................................. 0.24
Kajaria Iron Castings Ltd ................................................ 0.22
Nandikeshwari Iron Foundry Pvt. Ltd ...................................... 0.38
R.B. Agarwalla & Company ................................................. 0.17
RSI Limited .............................................................. 0.38
Serampore Industries Pvt. Ltd ............................................ 0.19
Uma Iron & Steel Company ................................................. 0.03
Victory Castings Ltd ..................................................... 0.40
-------------------------------------------------------------------------------

B. Post-Shipment Export Financing

Post-shipment export financing consists of loans in the form of trade bill discounting or
advances by commercial banks. The credit covers the period from the date of shipment of
the goods, to the date of realization of export proceeds from the overseas customer.
Post-shipment finance, therefore, is a working capital finance or sales finance against
receivables. The interest amount owed is deducted from the total amount of the bill at the
time of discounting by the bank. The exporter's account is then credited for the rupee
equivalent of the net amount.
In general, post-shipment loans are granted for a period of up to 90 days. The following
interest rates were charged on post-shipment loans up to 90 days: 13.0 percent for the
period January 1, 1997 through June 23, 1997, 12.0 percent for the period June 24, 1997
through October 21, 1997, and 11.0 percent for the period October 22, 1997 through
December 31, 1997.
For loans not repaid within the negotiated number of days (90 days maximum), banks
assessed the following rates of interest for the number of days the loans were overdue, up to
six months from the date of shipment: 15.0 percent for the period January 1, 1997 through
June 23, 1997, 14.0 percent for the period June 24, 1997 through October 21, 1997, and
13.0 percent for the period October 22, 1997 through December 31, 1997. If a
post-shipment loan was not repaid within six months of the date of shipment, an exporter
would lose the concessional interest rate on the financing, and interest would be charged at
a commercial rate determined by the banks.
In prior administrative reviews, the Department has found this program to be an export
subsidy because receipt of the post-shipment financing is contingent upon export
performance, and the interest rates are below those which would be obtained for
comparable commercial financing. See, e.g., 1996 Indian Castings Final Results at 63 FR
64051. No new information or evidence of changed circumstances has been submitted in
this proceeding to warrant reconsideration of this finding. Therefore, in accordance with
sections 771(5)(D) and (E) of the Act, we continue to find this program countervailable
because it results in a financial contribution by the government in the form of a loan and
provides a benefit to the recipient in the amount of the interest savings. Moreover, because
receipt of the financing is contingent upon export performance, we continue to find the
program to be an export subsidy under section 771(5A)(B) of the Act.
To determine the benefit conferred under this program, we compared the interest rates
charged under the post-shipment financing program to a benchmark interest rate. To
measure the benefit each company received under the post- shipment financing scheme, we
used as our benchmark interest rate the cash credit rate for 1997, as discussed above in the
pre-shipment export financing section. Because the loans under this program are
discounted, and the effective interest rates paid by the exporters on the loans are
discounted rates, we derived a discounted benchmark rate from the cash credit rate of
14.02 percent to measure the benefits conferred by this program.
We compared the discounted cash credit benchmark rate to the interest rates charged on
post-shipment loans. We found that for loans granted under this program, the interest rates
charged were lower than the benchmark rate. Therefore, in accordance with section
771(5)(E)(ii) of the Act, this program conferred countervailable benefits during the POR
where the interest rates charged on the loans were less than what a company otherwise
would have paid on comparable short-term commercial loans.
To calculate the benefit from these loans, we followed the same short-term loan
methodology discussed above for pre-shipment financing. We divided the benefit by either
total exports to all markets, total exports to the United States, or exports of the subject
merchandise to the United States, depending on whether the company was able to segregate
its post-shipment financing by merchandise and destination. On this basis, we preliminarily
determine the net countervailable subsidies from this program to be as follows:

-------------------------------------------------------------------------------
Producers/exporters which used the program during the POR Ad valorem rates
(percentages)
-------------------------------------------------------------------------------
Bengal Export Corporation ................................................ 0.23
Calcutta Ferrous Ltd ..................................................... 0.25
Calcutta Iron Foundry .................................................... 0.37
Carnation Industries Ltd ................................................. 0.25
Commex Corporation ....................................................... 0.19
Crescent Foundry Co. Pvt. Ltd ............................................ 0.11
Dinesh Brothers (Pvt.) Ltd ............................................... 0.31
Ganapati Suppliers Pvt. Ltd .............................................. 0.40
Kajaria Iron Castings Ltd ................................................ 0.35
Nandikeshwari Iron Foundry Pvt. Ltd ...................................... 0.20
R.B. Agarwalla & Company ................................................. 0.22
RSI Limited .............................................................. 0.29
Serampore Industries Pvt. Ltd ............................................ 0.24
Uma Iron & Steel Company ................................................. 0.20
Victory Castings Ltd.0.23% ............................................... 0.30
-------------------------------------------------------------------------------

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C. Exemption of Export Credit From Interest Taxes

Indian commercial banks are required to pay a tax on all interest accrued from borrowers.
The banks pass along this interest tax to borrowers in its entirety. As of April 1, 1993, the
GOI exempted from the interest tax all interest accruing to a commercial bank on
export-related loans. In the 1993 administrative review, we determined that this tax
exemption is an export subsidy, and thus countervailable, because only interest accruing
on loans and advances made to exporters in the form of export credit is exempt from the
interest tax. See Final Results of Countervailing Duty Administrative Review: Certain
Iron-Metal Castings From India, 61 FR 64676, 64686 (December 6, 1996) (1993 Indian
Castings Final Results). No new information or evidence of changed circumstances has been
submitted in this proceeding to warrant reconsideration of this finding. Therefore, in
accordance with sections 771(5)(D) and (E) of the Act, we continue to find this program
countervailable because it results in a financial contribution by the government in the form
of revenue forgone and provides a benefit to the recipient in the amount of the interest tax
savings. Moreover, because receipt of the interest tax exemption is contingent upon export
performance, we continue to find the program to be an export subsidy under section
771(5A)(B) of the Act.
During the POR, fifteen of the respondent companies made interest payments on
export-related loans, through either or both, the pre- and post-shipment financing
schemes, and thus, were exempt from paying the interest tax under this program. To
calculate the benefit for each company, we first determined the total amount of interest
paid by each exporter during the POR by adding the interest payments made on all pre- and
post-shipment export loans. We then multiplied this amount by the tax rate which the
interest amount would have been subject to, if not for the exemption during the POR.
During the POR, exporters were exempt from paying a three (3.0) percent interest tax for
the period January 1, 1997 through March 31, 1997, and a two (2.0) percent interest tax for
the period April 1, 1997 through December 31, 1997.
Next, we divided the benefit by the f.o.b. value of each company's total exports to all
markets, total exports to the United States, or exports of subject merchandise to the United
States, depending on whether the export financing was tied to total exports or only exports
of subject castings to the United States. On this basis, we preliminarily determine the net
countervailable subsidies from this program to be as follows:

-------------------------------------------------------------------------------
Producers/exporters which used the program during the POR Ad valorem rates
(percentages)
-------------------------------------------------------------------------------
Bengal Export Corporation ................................................ 0.05
Calcutta Ferrous Ltd ..................................................... 0.06
Calcutta Iron Foundry .................................................... 0.05
Carnation Industries Ltd ................................................. 0.14
Commex Corporation ....................................................... 0.04
Crescent Foundry Co. Pvt. Ltd ............................................ 0.02
Dinesh Brothers (Pvt.) Ltd ............................................... 0.11
Ganapati Suppliers Pvt. Ltd .............................................. 0.13
Kajaria Iron Castings Ltd ................................................ 0.16
Nandikeshwari Iron Foundry Pvt. Ltd ...................................... 0.09
R.B. Agarwalla & Company ................................................. 0.07
RSI Limited .............................................................. 0.13
Serampore Industries Pvt. Ltd ............................................ 0.07
Uma Iron & Steel Company ................................................. 0.06
Victory Castings Ltd ..................................................... 0.12
-------------------------------------------------------------------------------

D. 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 merchandise from taxable income. In prior administrative
reviews of this order, the Department has found this program to be an export subsidy, and
thus countervailable, because receipt of the benefit is contingent upon export performance.
See, e.g., 1994 and 1996 Indian Castings Final Results at 62 FR 32298 and 63 FR 64051,
respectively. No new information or evidence of changed circumstances has been
submitted in this proceeding to warrant reconsideration of this finding. Therefore, in
accordance with sections 771(5)(D) and (E) of the Act, we continue to find this program
countervailable because it results in a financial contribution by the government in the form
of tax revenue not collected which also constitutes the benefit. Moreover, because receipt
of the tax deduction is contingent upon export performance, we continue to find the
program to be an export subsidy under section 771(5A)(B) of the Act.
In its questionnaire responses, Kiswok Industries (P) Ltd (Kiswok Industries) stated that its
profit rate on export sales of subject castings is lower than the profit rate the company
realizes on the export sales of other castings. The company submitted audited derivations
of its profit rate for exports of subject castings in 1997, and its profit rate for exports of
other castings for the same year. The company then calculated that portion of the 80HHC
tax deduction which was applicable to export profit earned on subject castings.
In prior reviews of this order, the Department has found the section 80HHC tax deduction
program to be an "untied" export subsidy program. The benefits provided under this
program are not tied to the production or sale of a particular product or products. It is the
Department's consistent and long- standing practice to attribute a benefit from an export
subsidy that is not tied to a particular product or market to all products exported by the
company. See, e.g., Final Affirmative Countervailing Duty Determination: Certain Pasta
from Turkey, 61 FR 30366, 30370, (June 14, 1996). Therefore, to calculate the benefit
Kiswok Industries received under the section 80HHC program, we have not made any
adjustments to our standard allocation methodology.
To calculate the benefit each company received under section 80HHC, we subtracted the
total amount of income tax the company actually paid during the review period from the
amount of tax the company otherwise would have paid had it not claimed a deduction
under section 80HHC. We then divided this difference by the f.o.b. value of the company's
total exports.
For those companies which used section 80HHC during the POR, we preliminarily
determine the net countervailable subsidies from this program to be as follows:

-------------------------------------------------------------------------------
Producers/exporters which used the program during the POR Ad valorem rates
(percentages)
-------------------------------------------------------------------------------
Bengal Export Corporation ................................................ 8.07
Calcutta Ferrous Ltd ..................................................... 1.66
Carnation Industries Ltd ................................................. 0.33
Commex Corporation ....................................................... 2.45
Crescent Foundry Co. Pvt. Ltd ............................................ 0.71
Dinesh Brothers (Pvt.) Ltd ............................................... 0.74
Ganapati Suppliers Pvt. Ltd .............................................. 4.40
Kajaria Iron Castings Ltd ................................................ 0.70
Kiswok Industries Pvt. Ltd .............................................. 14.90
Nandikeshwari Iron Foundry Pvt. Ltd ...................................... 1.77
R.B. Agarwalla & Company ................................................. 3.10
RSI Limited .............................................................. 0.10
Serampore Industries Pvt. Ltd ............................................ 0.54
Super Iron Foundry ....................................................... 1.08
Uma Iron & Steel Company ................................................. 1.81
-------------------------------------------------------------------------------

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E. Import Mechanism (Sale of Licenses)

The GOI allows companies to transfer certain types of import licenses to other companies in
India. In prior administrative reviews of this order, the Department has found the sale of
these licenses to be an export subsidy, and thus countervailable, because companies
receive these licenses based on their status as exporters. See, e.g., 1996 Indian Castings
Final Results at 64051. No new information or evidence of changed circumstances has been
submitted in this proceeding to warrant reconsideration of this finding. Therefore, in
accordance with sections 771(5)(D) and (E) of the Act, we continue to find this program
countervailable because it results in a financial contribution by the government and
provides a benefit in the amount of revenue received on the sale of the license. Moreover,
because receipt of the license is contingent upon export performance, we continue to find
the program to be an export subsidy under section 771(5A)(B) of the Act.
During the POR, two of the respondent companies sold Special Import Licenses. Special
Import Licenses are issued to exporters classified as export houses, trading houses, and
star trading houses by the Ministry of Commerce. Special Import Licenses are effective for a
period of 12 months and are issued at a certain percentage of f.o.b. value of exports.
Because the sale of the Special Import Licenses were not tied to specific shipments, we
calculated the net subsidy rates by dividing the total amount of proceeds each company
received from the sale of the licenses by the total f.o.b. value of its exports of all products to
all markets. We preliminarily determine the net countervailable subsidies from the sale of
the Special Import Licenses to be as follows:

-------------------------------------------------------------------------------
Producers/exporters which used the program during the Ad valorem rates
POR (percentages)
-------------------------------------------------------------------------------
Kajara Iron Castings Ltd ................................................. 0.16
Serampore Industries Pvt. Ltd ............................................ 0.47
-------------------------------------------------------------------------------

F. Passbook Scheme

On April 1, 1996, the GOI introduced the Passbook Scheme which provided exporters with
credits that could be used to pay the countervailing and custom duties levied on imported
products. The Passbook Scheme was available to certain categories of exporters, i.e., those
manufacturer and merchant exporters which were granted the status of export house,
trading house, star trading house, or super star trading house. Upon the export of finished
goods, which were produced with indigenous raw materials, and not imported materials,
the exporter was eligible to claim credits which could be used to pay customs duties on
subsequent imports. The passbook scheme was only applicable for those exported products
for which standard input/output norms had been fixed. The standard input/output norms
set out quantities of imported raw materials needed to produce one unit of finished output.
The credit in the passbook scheme was calculated on the basis of input/output norms for
the deemed input content of the exported product. The Indian Customs Authority (ICA)
determined the basic customs duty payable against the input as if it had been imported and
not sourced from the domestic market. A company's passbook account was then credited
for the amount equivalent to the basic customs duty payable on such deemed imports. The
company could then utilize the credits in its passbook account to pay the countervailing
and customs duty levied on imported goods. Any good which was not included in the
Negative List of Imports could be imported under the Passbook Scheme. Payment of the
duties was made through a debit entry in the company's passbook account by the ICA.
The GOI reported, and we verified, that it was not mandatory for the passbook holder to
consume the goods, imported with passbook credits, in the production of exported
products. There was no relation between the imported goods and the production of the
exporter and no relation between the standard input/output norms of the export product
and the goods being imported with passbook credits. The norms were simply used to
calculate the credits. A company could not transfer or sell passbook credits received, but
the goods imported with passbook credits could be transferred or sold in the domestic
market. See Memorandum to David Mueller: Verification of the Questionnaire Responses
Submitted by the Government of India, (September 9, 1999), at page 3- 4, (public
document on file in CRU) (GOI Verification Report).
The Passbook Scheme was terminated effective April 1, 1997, with the introduction of the
Duty Entitlement Passbook Scheme (see "Duty Entitlement Passbook Scheme" section
below) . Exports made on or before March 31, 1997, were eligible for passbook credits. The
last day a company could apply for passbook credits was December 31, 1997. A company
had until June 30, 1999, to use the passbook credits to pay import duties.
The Illustrative List of Export Subsidies, incorporated as Annex I of the Subsidies
Agreement, under item (i) specifies that the remission or drawback of import charges in
excess of those levied on imported inputs that are consumed in the production of the
exported product constitutes an export subsidy. The SAA states that, though the
Illustrative List has no direct application to the CVD portion of the Subsidies Agreement,
the Department will adhere to the List, except where it is inconsistent with the principles set
forth in the Act. See SAA at 928. Therefore, to determine whether inputs are consumed in
the production process, the Department establishes whether the government of the
exporting country has in place a system to confirm which inputs are consumed in the
production process of the exported product. With respect to the Passbook Scheme, no such
system existed. The credits granted to passbook holders were calculated on the basis of
standard input/output norms independently of whether the inputs were imported, whether
duty was paid on them, or whether the inputs were actually used for export production.
Moreover, the passbook holder was under no obligation to either import the inputs used to
produce the exported product against which the credits were received or consume the
imported goods in the production of exported goods. Under the Passbook Scheme, upon the
export of a finished product, a exporter was simply granted an amount of credit based on
the amount of customs duty which would have been paid on the input materials had they
been imported.
Based on these facts, in accordance with sections 771 (5)(D), (E), and (5A)(B) of the Act, we
preliminarily determine that the Passbook Scheme is a countervailable export subsidy.
Within the meaning of section 771(5)(D) of the Act, a financial contribution was provided
by the government in the form of customs duty revenue forgone. The amount of customs
duty which should have been paid by the company to

*61597

import the goods constitutes
the benefit under section 771(5)(E) of the Act. Because receipt of the passbook credits was
contingent upon export performance, we preliminarily find the program to be an export
subsidy under section 771(5A)(B) of the Act. During the POR, Calcutta Ferrous Ltd., Kajaria
Iron Castings Ltd. (Kajaria Iron Castings), and Nandikeshwari Iron Foundry Pvt. Ltd. used
passbook credits to import goods duty free.
To calculate the benefit conferred by this program, we summed the amount of passbook
credits each respondent company used during the POR to pay the customs duty on goods
imported. We then divided the benefit by each company's f.o.b. value of total exports for
1997. On this basis, we preliminarily determine the net countervailable subsidies from the
Passbook Scheme to be as follows:

G. Duty Entitlement Passbook Scheme

The Duty Entitlement Passbook Scheme (DEPB) was introduced on April 1, 1997, to replace
the Passbook Scheme. Like the Passbook Scheme, receipt of DEPB credits is contingent upon
export performance. The DEPB provides credits to passbook holders either on a pre-export
or post-export basis. All merchant and manufacturing export units are eligible for DEPB
credits. A company which exported during a three-year period prior to submitting an DEPB
application is eligible for pre-export credits. DEPB on a pre-export basis assists an exporter
in obtaining import materials required for the production of an exported good. DEPB on a
post-export basis is virtually identical to the Passbook Scheme. Post-export credits, which
are granted against exports already made, are allowed at a percentage of f.o.b. value of
exports which is announced by the Ministry of Commerce. The DEPB percentage rates are
determined on the basis of the standard input/output norms table, which sets forth the
average amount of inputs required for the manufacture of one unit of finished product. The
percentage of f.o.b. value at which castings exporters can claim DEPB credits is 6.0 percent.
During the POR, those castings exporters which used the program received DEPB credits on
a post-export basis. To calculate a castings exporter's DEPB credits on a post-export basis,
the GOI simply multiplies the company's total f.o.b. value of exports by 6.0 percent. The
company's passbook account is then credited in an amount equivalent to 6.0 percent of its
total f.o.b. value of exports. DEPB credits, received on a post-export basis, are valid for a
period of 12 months and can be used to pay the import duties on any good (i.e., raw
material or capital good), except those included on the Negative List of Imports. The goods
imported with DEPB credits can either be incorporated in the production of a domestic or
export good, or directly sold on the domestic market. Similarly, DEPB credits earned on a
post-export basis can be sold in the form of a license on the domestic market. During the
POR, no respondent used DEPB credits to import goods, but three castings exporters sold
DEPB licenses.
Like the Passbook Scheme, we preliminarily find that DEPB on a post- export basis is not a
permitted drawback or substitution drawback scheme. The GOI does not have in place a
system or procedure to confirm whether the imported inputs are consumed in the
production of an exported product. When a company exports goods, it is granted DEPB
credits which can be used without restriction. With DEPB credits earned on a post-export
basis, a company has the option of using the credits to: (1) import goods for domestic or
export production, (2) import goods for domestic sale, or (3) sell the credits in the form of a
license to another company.
Therefore, in accordance with sections 771(5)(D), (E), and (5A)(B) of the Act, we
preliminarily determine that DEPB on a post-export basis is a countervailable export
subsidy. Within the meaning of section 771 (5)(D) and (E) of the Act, a financial
contribution is provided and the amount of revenue received on the sale of the DEPB license
constitutes the benefit. Moreover, because receipt of the subsidy is contingent upon export
performance, we preliminarily find the program to be an export subsidy under section
771(5A)(B) of the Act. During the POR, Dinesh Brothers (Pvt.) Ltd., Nandikeshwari Iron
Foundry Pvt. Ltd., and Victory Castings sold DEPB credits on the domestic market.
To calculate the benefit conferred by this program, we summed the revenue each company
received from the sale of the DEPB post-export credits. If the DEPB credits were received on
the basis of exports of subject merchandise to the United States, then we divided the benefit
by the company's f.o.b. value of export of subject merchandise to the United States for
1997. For DEPB credits received on the basis of all exports, we divided the benefit by the
company's f.o.b. value of total exports for 1997. On this basis, we preliminarily determine
the net countervailable subsidies from DEPB on a post-export basis to be as follows:

II. Programs Preliminarily Determined Not To Be Countervailable

A. Long-Term Financing From "All-India Development Banks"

In their "Additional Subsidy Allegations" submission of November 6, 1998, petitioners
allege that the GOI is providing long-term, low-interest financing to certain Indian
producers/exporters through a number of All-India Development Banks. The All-India
Development Banks include the following financial institutions: Industrial Development
Bank of India (IDBI), Industrial Investment Bank of India (IIBI), Industrial Credit and
Investment Corporation of India, Industrial Financial Corporation of India, and Life
Insurance Corporation (LIC). In their submission, petitioners allege that these financial
institutions, which are either wholly- or majority-owned by the GOI, are "non-conventional"
and "non-commercial" in nature. They contend that financial assistance provided by the
All-India Development Banks is export- related and, therefore, specific.
In its questionnaire responses, the GOI reported and we verified that the All- India
Development Banks function as the principal financial institutions for promoting and
developing industries. These credit agencies assist and promote industrial development,
reconstruction and revival, and undertake the rehabilitation of medium-and large-sized
industrial units by providing assistance and operating schemes. Financial assistance is
provided under a number of schemes, such as: project finance, equipment finance, asset
credit, corporate loan, working capital loan, and equipment lease. With respect to the
project finance scheme, the program under which two respondent companies received
loans, the financial institutions provide long-and medium-term credits to
promoters/

*61598

entrepreneurs who want to construct new industrial units, expand
existing units, and rehabilitate sick units in India. Any company, a domestic producer or
exporting unit, in any industrial sector can receive a term loan under the project finance
scheme provided that the borrower is creditworthy and the proposed project is financially
and commercially viable. Receipt of a loan is not contingent upon exportation.
When deciding whether to grant a loan, the financial institutions examine the following
financial indicators of the company: debt-to-equity ratio, debt services coverage ratio,
gross profit, operating profit, break-even ratio, internal rate of return, and cost of capital.
In addition, the financial institutions request data regarding a borrower's sales information,
which does include export data, market opportunities (both domestic and international),
and domestic and international competition. This information is collected so the banks can
assess the commercial viability of the promoters' project and the borrowers' financial health
and thus, ability to repay the loan. See GOI Verification Report at 5.
During the POR, Kajaria Iron Castings had outstanding project finance term loans from the
IDBI, IIBI, and LIC, and Kiswok Industries had outstanding a project finance term loan from
the IDBI. At verification, we meet with IDBI, IIBI, and LIC bank officials to discuss the
number and types of companies to which the financial institutions have extended long-term
loans under the project finance scheme over the period 1993 through 1997, in particular
exporters and the basic metals sector. The officials stated that the banks do not maintain
databases which indicate the number of loans and loan amounts granted specifically to
exporters; however, their lending patterns to industrial borrowers are presented in their
annual reports.
At verification, we reviewed the banks' annual reports which discuss industry-wide term
loan assistance provided from fiscal year 1993-1994 through fiscal year 1997-1998. See GOI
Verification Report at Exhibit 2. We noted that the institutions extended loans to a wide and
diverse range of industries, including: food manufacturing, cotton textiles, paper and paper
products, rubber products, chemical and pharmaceutical, fertilizers, cement, basic metals
which includes iron, steel, and non-ferrous metals, metal products, machinery (other than
electrical), electrical machinery/equipment, transport equipment, electricity generation,
services including hotels, and others. The officials explained that the institutions lend
long-term loans to a wide range of industries because the institutions' exposure to any one
industry cannot exceed 15 percent of the total loan amount granted in a fiscal year.
We analyzed whether the financial assistance provided by the All-India Development
Banks is export-related. Based on the fact that a company, whether a domestic producer or
exporting unit, can receive a long-term loan from the All-India Development Banks and
that the financing is not contingent upon export performance, we preliminarily determine
that financing provided by the IDBI, IIBI, and LIC is not an export subsidy under section
771(5A)(B) of the Act.
We also analyzed whether the long-term financing provided by the All-India Development
Banks is specific in law (de jure specificity), or in fact (de facto specificity), within the
meaning of section 771(5A)(D)(i) and (iii) of the Act. See also SAA, H. Doc. No. 316, Vol. 1,
103d Cong. 2d Sess. 932 (1994). First, we examined the respective banking acts for the
IDBI, IIBI, and LIC. We noted that the banking act for each financial institution did not, in
any way, limit the industries or companies to which the institutions can provide financial
assistance or instruct the institutions to provide financial assistance to exporting units. We
also examined the specifications for receipt of a term loan under the project finance
scheme. We noted that any industrial concern is eligible for assistance. An industrial
concern is defined as any concern engaged, or to be engaged in, a number of areas,
including, but not limited to:
(i) The manufacture, preservation or processing of goods; (ii) shipping; (iii) mining
including development of mines; (iv) the hotel industry; (v) the transport of passengers of
goods by road or by water or air; (vi) the generation, storage, or distribution of electricity
of any other form or energy; (vii) providing medical, health, or other allied services, etc.
See The Industrial Development Bank of India Act, 1964, and the Industrial
Reconstruction Bank of India Act, 1984, for a complete description of an industrial
concern, submitted as Annexure II and Annexure III, respectively, in the GOI's June 22,
1999 response. Based on our analysis, we preliminarily determine that long-term loans
provided by the IDBI, IIBI, and LIC are not de jure specific under section 771(5A)(D)(i) of
the Act.
We then examined data on the distribution of long-term loans under the project finance
scheme by the financial institutions to determine whether the provision of the loans meet
the criteria for de facto specificity under section 771(5A)(D)(iii) of the Act. We found that
term loans provided under the project finance scheme were distributed to a large number of
companies in a wide variety of industries. The basic metals sector did not receive a
disproportionate amount of the loans provided by the financial institutions. We also found
that the GOI did not exercise any discretion over the financial institutions with respect to
their lending decisions. Based on these facts, we preliminarily determine that long-term
loans provided by the IDBI, IIBI, and LIC are not de facto specific under section
771(5A)(D)(iii) of the Act. Therefore, based on our analysis, we preliminarily determine
that long-term financial assistance provided by the All-India Development Banks is not
countervailable.

B. Long-Term Loan From the West Bengal Industrial Finance Corporation

Petitioners allege that the regional government of West Bengal is providing various
subsidies to companies located in the region through such development policies as the West
Bengal Incentive Scheme (see "West Bengal Incentive Scheme" section below) and agencies
such as the West Bengal Industrial Development Corporation and West Bengal Financial
Corporation (WBFC). With respect to this review, petitioners requested the Department to
examine the long-term loan which Victory Iron Works received from the WBFC.
In 1996, Victory Iron Works received a long-term loan from the WBFC under the equipment
refinance scheme (ERS) for upgrading machinery and for pollution and quality control
equipment. At verification, we met with officials of the WBFC to discuss the nature and
purpose of the state institution. We learned that the objective of the WBFC, like other state
corporations, is to promote the industrial development of the region, in particular by
providing financing to companies. They stated that the WBFC provides assistance to all
small- and medium-sized manufacturing units in West Bengal in the form of term loans,
working capital term loans, and consultancy, guidance, and counseling for preparation of
project reports, market surveys, etc. To receive a loan under the ERS, a company must
satisfy the following criteria: (1) The company must have been in operation for at least four
years prior to the application date.

*61599

(2) The company must have earned a profit
(declared dividends) in the two fiscal years prior to the application date. (3) The company
must not have defaulted with a financial institution during its existence. (4) The financial
assistance sought must be used for the purchase of machinery and equipment (i.e., loans
under the ERS are provided for specific purchases). (5) The company's promoters must be
able to contribute 25 percent of the total project's cost. (6) The project for which financing
is sought must be commercially and economically viable. See Memorandum to David
Mueller: Verification of the Questionnaire Responses Submitted by the Regional
Government of West Bengal, (September 9, 1999), at 5-6, (public version is on file in the
CRU) (WB Verification Report).
At verification, we also discussed the number and types of companies to which the WBFC
lends funds under the equipment refinance scheme. The officials provided data regarding
the WBFC's lending pattern under the ERS for the years 1996-97, 1997-98, and 1998-99. See
WB Verification Report at Exhibit 10. We noted that, in granting the term loans, the WBFC
did not give preference to any particular industrial sector or extend disportionate financing
to companies located in the backward regions of West Bengal. The WBFC provides financing
to a wide range of industries, including, but not limited to: chemicals, basic metals,
engineering, food processing, metal products, paper & paper products, printing and
packaging, rubber, pharmaceuticals, services, and textiles.
We analyzed whether the long-term financing provided by the WBFC is specific in law (de
jure specificity), or in fact (de facto specificity), within the meaning of section 771(5A)(D)(i)
and (iii) of the Act. See also SAA, H. Doc. No. 316, Vol. 1, 103d Cong. 2d Sess. 932 (1994).
We examined a profile of the WBFC, which was submitted as Annexure WB-III of the GOI's
June 22, 1999 response. We noted that the WBFC provides financial assistance to new and
existing industrial units in the small and medium sectors, which intend to expand,
modernize, diversify, and upgrade their activities. We also examined the specifications for
receipt of a term loan under the equipment refinance scheme. We noted that any small- or
medium-sized concern is eligible for assistance provided the unit meets the criteria outlined
above. Based on our analysis, we preliminarily determine that term loans provided by the
WBFC are not de jure specific under section 771(5A)(D)(i) of the Act.
We then examined data on the distribution of term loans under the equipment refinance
scheme to determine whether the provision of the loans meet the criteria for de facto
specificity under section 771(5A)(D)(iii) of the Act. We found that term loans provided
under the scheme were distributed to a large number of companies in a wide variety of
industries located across West Bengal. The basic metals sector did not receive a
disproportionate amount of the loans provided by the institution. We also found that
neither the regional government of West Bengal nor the GOI exercised any discretion over
the WBFC with respect to its lending decisions. Based on these facts, we preliminarily
determine that term loans provided by the WBFC are not de facto specific under section
771(5A)(D)(iii) of the Act. Therefore, we preliminarily determine that term loan assistance
provided by the WBFC is not countervailable.

C. Leasing of Land From the Regional Government of West Bengal

Petitioners allege that the regional government of West Bengal through the West Bengal
Incentive Scheme of 1993, and the West Bengal Industrial Development Corporation
(WBIDC), is providing subsidies to manufacturers and/or exporters of the subject
merchandise. In their "Additional Subsidy Allegations" submission of November 6, 1998,
petitioners noted that Kajaria Iron Castings acquired land from the government of West
Bengal for the construction of a pig iron plant and requested the Department to examine the
land purchase. In its June 4, 1999 questionnaire response, Kajaria Iron Castings reported
that the company has not purchased land under the West Bengal Incentive Scheme of 1993,
or from the WBIDC. Rather, the company is leasing industrial land in Durgapur from the
Asansol Durgapur Development Authority (ADDA), an agency of the regional government
of West Bengal.
According to section 771(5)(E)(iv) of the Act, the adequacy of remuneration with respect to
a government's provision of a good or service "shall be determined in relation to prevailing
market conditions for the good or service being provided or the goods being purchased in
the country which is subject to the investigation or review. Prevailing market conditions
include price, quality, availability, marketability, transportation, and other conditions of
purchase or sale." Particular problems can arise in applying this standard when the
government is the sole or predominant supplier of the good or service in the country or
within the area where the respondent is located. In these situations, there may be no
alternative market prices available in the country (e.g., private prices, competitively-bid
prices, import prices, or other types of market reference prices). Hence, it becomes
necessary to examine other options for determining whether the good has been provided
for less than adequate remuneration. This consideration of other options does not indicate a
departure from our preference for relying on market conditions in the relevant country,
specifically market prices, when determining whether a good or service is being provided at
a price which reflects adequate remuneration.
With respect to the leasing of land, some of the possible factors we can consider are whether
the government has covered its costs, whether it has earned a reasonable rate of return in
setting its rates, and whether it applied market principles in determining its prices. See Final
Affirmative Countervailing Duty Determination: Steel Wire Rod From Germany, 62 FR
54990, 54994 (October 22, 1997). In the instant case, we attempted to obtain information
on the market prices for leasing of industrial land in West Bengal through independent
research and a private land broker in India. However, we have found no alternative market
reference prices to use in determining whether the government is leasing the land for less
than adequate remuneration. As such, we have examined whether the government's price
was determined according to the same market factors that a private lessor would use in
determining whether to lease land to a company. During the verification of this review, we
met with officials of the ADDA to discuss the development authority's leasing of industrial
land in West Bengal. See Memorandum to David Mueller: Verification of the Questionnaire
Responses Submitted by the Asansol Durgapur Development Authority, (September 9,
1999), (public document on file in the CRU).
In December 1995, Kajaria entered into a lease agreement with the ADDA to lease 132 acres
of industrial land in Durgapur for the construction of a pig iron plant. The ADDA presently
manages 60,000 acres of land. Of the total land acreage only 600 acres are being used for
industrial purposes. The majority of the land being leased by the ADDA is residential land.
The ADDA is currently leasing industrial land to approximately 120 small-scale companies.

*61600

The lease rates for industrial land in West Bengal are established by the ADDA. The ADDA
takes into consideration the following factors to determine the price per acre of industrial
land: (1) The cost of acquiring the land; (2) the cost of constructing needed infrastructure on
the land (e.g., building roads, drainage facilities, electricity transformers); (3) the cost of
filling the land; and (4) the authority's cost of capital. Because the topography, location, and
types of infrastructure built on various tracks of land differ, the price per acre land,
classified as either "high land" or "low land" by the ADDA, may vary. However, the factors
examined by the ADDA to determine the leasing prices paid by all companies across West
Bengal are uniform. The ADDA's prices per acre of land are set prices which are
non-negotiable. The ADDA's price per acre of land does not vary with respect to the type of
industry or company leasing the land. The ADDA advertizes in national and local
newspapers the industrial land which is available for lease and the price per acre of high and
low land. With this information a prospective lessee can compare the leasing prices of the
ADDA to the price of land being sold by private land owners.
The ADDA uses a standard agreement to lease industrial land to all companies in West
Bengal. All companies which lease land from the ADDA must pay 50 percent of the total
lease amount up-front to execute the lease agreement (the amount was 30 percent in 1995).
After the lease agreement is executed a company then makes annual installment payments.
The number of payments a company must make is outlined in the lease agreement. All
companies must also make a yearly rent payment of 10 rupees per acre of land.
At verification, we found that a large number of companies are currently leasing industrial
land from the ADDA. These enterprises represent a wide variety of industries, e.g., auto
parts, ceramics, chemicals, electronic switches, engineering parts, fertilizers, glass, paints
and polishes, pig iron, and tire retreading. The ADDA does not extend special leasing
provisions or show a pricing preference to any particular industry or industries. We also
ascertained that Kajaria Iron Castings is paying a standard lease rate which the ADDA
charges all companies leasing land in West Bengal. The price per acre of industrial land is set
in reference to market factors. Therefore, based on these facts, we preliminarily determine
that Kajaria Iron Castings' lease rate is not countervailable.

III. Programs Preliminarily Found Not To Be Used

We examined the following programs and preliminarily find that the producers/exporters
of the subject merchandise did not apply for or receive benefits under these programs
during the POR:

A. West Bengal Incentive Scheme 1993

Petitioners allege in their "Additional Subsidy Allegations" submission of November 6, 1998,
that the West Bengal Incentive Scheme 1993 (Scheme 1993), a regional development policy,
provides various benefits including a waiver of electricity duty, a state capital investment
subsidy, a development subsidy, and sales tax deferments. They claim that both new and
expanding industrial projects can receive benefits under the scheme. Petitioners assert that
assistance provided under Scheme 1993 is specific insofar as it is provided in inverse
proportion to the development level of areas within West Bengal.
The regional government of West Bengal reported that Scheme 1993 was introduced by the
WBIDC on April 1, 1993. Though the program was terminated effective March 31, 1999,
assistance is still being provided under the scheme. The objective of Scheme 1993 is to
assist in the growth of medium- and large- scale industries, the tourism industry, the
expansion of existing units, and revival of sick units in the state of West Bengal through the
provision of incentives. All industrial projects which receive an industrial license,
registration certificate, and term loans from a financial institution are eligible to receive
benefits under Scheme 1993. The program offers various incentives and tax concessions to
entrepreneurs and industrial units to assist them in the construction of new units or
expansion of existing units, and the building of infrastructure in the backward areas of West
Bengal. The amount of financial assistance an industrial unit is eligible to receive is
determined by its location in West Bengal. The regional government reported that West
Bengal is divided into four groups: Group A (i.e., Calcutta) is classified as developed while
Groups B through D are categorized as less developed, with Group D deemed the most
backward. Industrial units located in the more backward areas receive greater monetary
assistance than those units located in the more developed areas. For example, financial
assistance provided in the form of a state capital investment subsidy is as follows: Eligible
units in Group B are entitled to receive a subsidy at the rate of 15 percent of the fixed capital
investment made in the approved project or Rs. 15 lakh, whichever is less. Eligible units in
Group C are entitled to receive a subsidy at the rate of 20 percent of the fixed capital
investment made in the approved project or Rs. 20 lakh, whichever is less. Eligible units in
Group D are entitled to receive a subsidy at the rate of 20 percent of the fixed capital
investment made in the approved project or Rs. 30 lakh, whichever is less.
In its responses, the regional government reported that both Carnation Industries Ltd.
(Carnation Industries) and Kajaria Iron Castings received state capital investment subsidies
under Scheme 1993 (see "State Capital Investment Subsidy," section below). Kajaria Iron
Castings also received a bridge loan (see "Program Preliminarily Found To Be De
Minimis--Bridge Loan" section below).
1. State Capital Investment Subsidy
The regional government reported that state capital investment subsidies are provided by
the WBIDC to industrial units as an incentive for the construction of new industries in the
backward areas of West Bengal, where infrastructure is poor and industrialization is weak.
The amount of cash payment a company is entitled to receive is based on the total capital
investment cost and location of the project (see, "West Bengal Incentive Scheme 1993"
section above). Of the total sanctioned grant amount, 85 percent may be disbursed in two
or three installments, as funds are available, before the start of commercial production. The
balance of the grant amount is disbursed after the commencement of production.
In their questionnaire responses, Carnation Industries and Kajaria Iron Castings reported
that they applied for and received state capital investment subsidies from the WBIDC. In
November 1996, Carnation Industries was approved for a grant in connection with the
construction of a new ductile iron plant in Uluberia, which is located in Group B. The
company took receipt of the first disbursement of the subsidy in November 1997. The
second disbursement of the subsidy occurred in 1998. The company reported that the
following criteria had to be satisfied for receipt of the subsidy: (1) Receipt of a registration
certificate from the Directorate of Industry of the State Government; (2) submission of
detailed feasibility and project report; and (3) approval of the project and receipt of
financial assistance from a commercial bank.

*61601

At verification, we examined Carnation Industries' application for incentives under Scheme
1993 and the corresponding eligibility certification. We confirmed that Carnation Industries
applied for and received a grant for the construction of a spheroidal graphite and malleable
cast iron castings facility (i.e., ductile iron plant). See Memorandum to David Mueller:
Verification of the Questionnaire Responses Submitted by Carnation Industries Ltd.,
(September 9, 1999), at 1-3 (public version on file in the CRU) (Carnation Verification
Report). During verification, we discussed with WBIDC officials whether, at the point of
bestowal, a state capital investment subsidy is tied to the production of a particular product
or tied to a particular production facility. We learned that a state capital investment subsidy
is tied to the production of that product/facility for which the company applied for an
eligibility certificate. See WB Verification Report at 4.
In regard to Carnation Industries, the company applied for incentives under Scheme 1993
specifically for the manufacture of spheroidal graphite CI castings and malleable cast iron at
its Uluberia facility. All assistance Carnation receives under the scheme is for the
manufacture of spheroidal graphite CI castings and malleable cast iron at its Uluberia
facility. The WBIDC officials stated, at verification, that each company which receives
assistance must submit a progress report on their facility which describes the types of
products being produced. See Id.
The scope of this order covers gray iron castings and not ductile iron castings, the goods
produced at the Uluberia facility. At the point of bestowal, the grant was connected to the
production of ductile iron castings, which is non-subject merchandise. Based on these facts,
we preliminarily determine that the state capital investment subsidy which Carnation
Industries received provides no benefits to the production and exportation of the subject
merchandise, and therefore, the program was not used.
With respect to Kajaria Iron Castings, the company was approved for a state capital
investment subsidy in December 1995, for the construction of a pig iron plant in Durgapur
(Group C). The first disbursement of the subsidy was received in 1998, which is outside the
period of this review.

B. Market Development Assistance (MDA)
C. Rediscounting of Export Bills Abroad (EBR)
D. International Price Reimbursement Scheme (IPRS)
E. Cash Compensatory Support Program (CCS)
F. Programs Operated by the Small Industries Development Bank of India (SIDBI)
G. Export Promotion Replenishment Scheme (EPRS) (IPRS Replacement)
H. Export Promotion Capital Goods Scheme
I. Benefits for Export Oriented Units and Export Processing Zones
J. Special Imprest Licenses
K. Special Benefits
L. Duty Drawback on Excise Taxes
M. Payment of Premium Against Advance Licenses
N. Pre-Shipment Export Financing in Foreign Currency (PCFC)
O. Subsidies Provided by the State of Orissa
P. Advance Licenses

IV. Program Preliminarily Found To Be De Minimis

Bridge Loan

The WBIDC provides bridge loans to entrepreneurs who are granted state capital
investment subsidies under the West Bengal Incentive Scheme to bridge the time lag
between the approval of the grant and the disbursement of the money. If the WBIDC
anticipates a late disbursement of the grant, the agency encourages companies
encountering financial difficulties to apply for a bridge loan. Not all companies awaiting a
state capital investment subsidy are eligible to receive a bridge loan. To receive a bridge
loan, a company must be financially solvent and be promoting a commercially viable
project. A company which receives a bridge loan must use the funds for the advancement of
the project. See WB Verification Report, at 2-3.
The loans are provided against the grant receivable and are repaid when the grant is
disbursed. Only those companies which have been approved for a grant are eligible to
receive a bridge loan. At verification, we learned that the WBIDC charges a fixed interest
rate of 20.0 percent against a bridge loan. However, if a company makes timely interest
payments, then the interest rate is reduced to 16.0 percent. Typically, bridge loans are
short-term loans which are extended for a period up to the date of disbursement of the
grant. See Id.
Because receipt of the its grant was delayed, Kajaria Iron Castings applied for a short-term
bridge loan with the WBIDC in September 1997. Kajaria Iron Castings took receipt of the
loan in 1997, and made an interest payment during the POR. See Memorandum to David
Mueller: Verification of the Questionnaire Responses Submitted by Kajaria Iron Castings
Ltd., (September 9, 1999), at 4-5 (public version on file in the CRU) (Kajaria Verification
Report).
As discussed in the "Pre-Shipment Export Finance" section above, the short- term
benchmark interest rate for the POR is 16.31 percent. To determine the benefit provided by
the loan, we compared the cash credit benchmark rate to the interest rate charged on the
bridge loan. We found that the interest paid on the bridge loan was less than the interest the
company would have paid on a comparable short-term commercial loan. We calculated that
the bridge loan provided a benefit of less than 0.005 percent ad valorem during the POR.
Because the benefit provided by the bridge loan is less than 0.005 percent ad valorem and
has no affect on the net countervailable subsidy rate for Kajaria Iron Castings, we
preliminarily determine that it is not necessary, at this time, to analyze whether bridge
loans provided under the West Bengal Incentive Scheme are specific. See Final Results of
Countervailing Duty Administrative Review: Certain Hot-Rolled Lead and Bismuth
Carbon Steel Products From the United Kingdom, 63 FR 18367, 18370 (April 15, 1998).

V. Programs Preliminarily Found Not To Exist

A. State Value-Added Tax "Set-Off" Program

The GOI reported in its February 1, 1999 questionnaire response that a state value-added
tax "set-off" program does not yet exist. They reported that the state value-added tax
scheme is only a concept at this time and has not yet been implemented.

B. Interest Rate Surcharge Exemption

In its February 1, 1999 questionnaire response, the GOI stated that the RBI introduced an
interest rate surcharge on import finance in October 1995. The surcharge was 15.0 percent
over the cash credit rate and was exempt on packing credit provided for exports. The GOI
further reported that the interest rate surcharge was withdrawn effective July 24, 1996. In
its July 14, 1999 response, the GOI submitted official documentation of the RBI, which
announced the termination of the interest rate surcharge.

Preliminary Results of Review

In accordance with section 777A(e)(1) of the Act, we calculated an individual ad valorem
subsidy rate for each producer/exporter subject to this administrative review. For the
period January 1, 1997 through December 31, 1997, we preliminarily determine the

*61602

net countervailable subsidy rates for the reviewed companies to be as follows:

------------------------------------------------------------------------
Producers/exporters Ad valorem rates (percentages)
------------------------------------------------------------------------
Bengal Export Corporation ......................................... 8.35
Calcutta Ferrous Ltd............................................... 9.28
Calcutta Iron Foundry ............................................. 0.42
Carnation Industries Ltd........................................... 0.72
Commex Corporation ................................................ 2.71
Crescent Foundry Co. Pvt. Ltd...................................... 0.84
Delta Corporation Ltd............................................. 27.65
Dinesh Brothers (Pvt.) Ltd......................................... 1.71
Ganapati Suppliers Pvt. Ltd........................................ 5.17
Kajaria Iron Castings Ltd.......................................... 5.19
Kiswok Industries Pvt. Ltd........................................ 14.90
Nandikeshwari Iron Foundry Pvt. Ltd............................... 13.72
Rangilal & Sons ................................................... 0.00
R.B. Agarwalla & Company .......................................... 3.56
RSI Limited ....................................................... 0.90
Seramapore Industries Pvt. Ltd..................................... 1.51
SSL Exports ...................................................... 27.65
Super Iron Foundry ................................................ 1.08
Thames Engineering ............................................... 27.65
Trident International ............................................ 27.65
Uma Iron & Steel Company .......................................... 2.10
Victory Castings Ltd............................................... 1.88
------------------------------------------------------------------------

If the final results of this review remain the same as these preliminary results, the
Department intends to instruct the U.S. Customs Service (Customs) to assess
countervailing duties as indicated above. The Department also intends to instruct
Customs to collect cash deposits of estimated countervailing duties as indicated above
of the f.o.b. invoice price on all shipments of the subject merchandise from reviewed
companies, entered, or withdrawn from warehouse, for consumption on or after the date of
publication of the final results of this review.
Because the URAA replaced the general rule in favor of a country-wide rate with a general
rule in favor of individual rates for investigated and reviewed companies, the procedures
for establishing countervailing duty rates, including those for non-reviewed companies,
are now essentially the same as those in antidumping cases, except as provided for in
section 777A(e)(2)(B) of the Act. The requested review will normally cover only those
companies specifically named. See 19 CFR 351.213(b). Pursuant to 19 CFR 351.212(c), for
all companies for which a review was not requested, duties must be assessed at the cash
deposit rate, and cash deposits must continue to be collected, at the rate previously
ordered. As such, the countervailing duty cash deposit rate applicable to a company can
no longer change, except pursuant to a request for a review of that company. See
Federal-Mogul Corporation and the Torrington Company v. United States, 822 F.Supp. 782
(CIT 1993) and Floral Trade Council v. United States, 822 F.Supp. 766 (CIT 1993)
(interpreting 19 CFR 353.22(e) (now 19 CFR 351.212(c)), the antidumping regulation on
automatic assessment, which is identical to 19 CFR section 355.22(g)). Therefore, the cash
deposit rates for all companies, except those covered by this review, will be unchanged by
the results of this review.
We will instruct Customs to continue to collect cash deposits for non-reviewed companies
at the most recent company-specific or country-wide rate applicable to the company.
Accordingly, the cash deposit rates that will be applied to non-reviewed companies covered
by this order will be the rate for that company established in the most recently completed
administrative proceeding conducted under the URAA. See 1996 Indian Castings Final
Results. If such a review has not been conducted, the rate established in the most recently
completed administrative proceeding pursuant to the statutory provisions that were in
effect prior to the URAA amendments is applicable. See 1993 Indian Castings Final Results.
These rates shall apply to all non-reviewed companies until a review of a company assigned
these rates is requested. In addition, for the period January 1, 1997 through December 31,
1997, the assessment rates applicable to all non-reviewed companies covered by this order
are the cash deposit rates in effect at the time of entry.

Public Comment

Pursuant to 19 CFR 351.224(b), the Department will disclose to the parties of this
proceeding within five days after the date of publication of this notice, the calculations
performed in this review. Interested parties may request a hearing not later than 30 days
after the date of publication of this notice. Pursuant to 19 CFR 309, 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 five days after the time limit for filing the case brief. Parties who submit argument
in this proceeding are requested to submit with the argument (1) A statement of the issue
and (2) a brief summary of the argument. Any hearing, if requested, will be held two 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 351.303(f).
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, under 19 CFR 351.309(c)(ii), 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 issued and published in accordance with section
751(a)(1) of the Act (19 U.S.C. 1675(a)(1)), 19 CFR 351.213.
Dated: November 1, 1999.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 99-29204 Filed 11-10-99; 8:45 am]

BILLING CODE 3510-DS-P