[Federal Register Volume 59, Number 104 (Wednesday, June 1, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-13316]


[[Page Unknown]]

[Federal Register: June 1, 1994]


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DEPARTMENT OF COMMERCE
[C-533-812]

 

Preliminary Affirmative Countervailing Duty Determination: 
Certain Carbon Steel Butt-Weld Pipe Fittings From India

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

EFFECTIVE DATE: June 1, 1994.

FOR FURTHER INFORMATION CONTACT: Julie Anne Osgood or Annika O'Hara, 
Office of Countervailing Investigations, Import Administration, U.S. 
Department of Commerce, Room 3099, 14th Street and Constitution Avenue, 
N.W., Washington, D.C. 20230; telephone (202) 482-0167 and (202) 482-
4198, respectively.

PRELIMINARY DETERMINATION: The Department of Commerce (``the 
Department'') preliminarily determines that benefits which constitute 
subsidies within the meaning of section 701 of the Tariff Act of 1930, 
as amended (``the Act''), are being provided to manufacturers, 
producers, or exporters in India of certain carbon steel butt-weld pipe 
fittings. For information on the estimated net subsidies, please see 
the Suspension of Liquidation section of this notice.

Case History

    Since the publication of the notice of initiation in the Federal 
Register, 59 FR 14148 (March 25, 1994), the following events have 
occurred.
    On April 5, 1994, we issued a questionnaire to the Government of 
India (``GOI'') in Washington, D.C. concerning petitioner's 
allegations. On May 9, 1994, we received questionnaire responses from 
the GOI, Karmen Steels of India (``Karmen''), and Sivanandha Pipe 
Fittings Limited (``Sivanandha''). According to the GOI, Karmen, 
Sivanandha, and Tata Iron & Steel Limited (``Tata'') accounted for over 
85 percent of exports of butt-weld pipe fittings to the United States. 
Therefore, these companies are the respondents in this investigation. 
However, Tata did not respond to the Department's questionnaire.
    We issued deficiency questionnaires on May 11, 1994, to the GOI, 
Karmen, and Sivanandha. We received responses on May 18, 1994.

Scope of Investigation

    The products covered by this investigation are certain carbon steel 
butt-weld pipe fittings (``pipe fittings'') having an inside diameter 
of less than fourteen inches (355 millimeters), imported in either 
finished or unfinished condition. Pipe fittings are formed or forged 
steel products used to join pipe sections in piping systems where 
conditions require permanent welded connections, as distinguished from 
fittings based on other methods of fastening (e.g., threaded, grooved, 
or bolted fittings). Butt-weld fittings come in a variety of shapes 
which include ``elbows'', ``tees'', ``caps'', and ``reducers.'' The 
edges of finished pipe fittings are beveled, so that when a fitting is 
placed against the end of a pipe (the ends of which have also been 
beveled), a shallow channel is created to accommodate the ``bead'' of 
the weld which joins the fitting to the pipe. These pipe fittings are 
currently classifiable under subheading 7307.93.3000 of the Harmonized 
Tariff Schedule of the United States (``HTSUS'').
    Although the HTSUS subheading is provided for convenience and 
customs purposes, our written description of the scope of this 
proceeding is dispositive.

Injury Test

    Because India is a ``country under the Agreement'' within the 
meaning of section 701(b) of the Act, the U.S. International Trade 
Commission (``ITC'') is required to determine whether imports of pipe 
fittings from India materially injure, or threaten material injury to, 
a U.S. industry. On April 20, 1994, the ITC preliminarily determined 
that there is a reasonable indication that an industry in the United 
States is being materially injured or threatened with material injury 
by reason of imports from India of the subject merchandise (59 FR 
18825).

Analysis of Programs

    For purposes of this preliminary determination, the period for 
which we are measuring subsidies (the period of investigation 
(``POI'')) is the respondents' fiscal year: April 1, 1993 to March 31, 
1994.

Non-Responding Company

    Since Tata did not respond to our countervailing duty 
questionnaire, we have used best information available (``BIA'') in 
accordance with Sec. 355.37(a) of the Department's regulations. As BIA, 
we have used information provided in the petition except where we have 
calculated a rate for a given program in a previous countervailing duty 
investigation or administrative review for India which is higher than 
that provided in the petition. We did not include in the BIA subsidy 
rate for Tata programs for which we have no basis to calculate a 
benefit (i.e., programs for which rates are not calculated in the 
petition, programs not previously investigated, or programs previously 
found not used). Based on this approach, we calculated a BIA rate for 
Tata of 23.03 percent ad valorem.

Calculation of Country-Wide Rate

    In determining the benefits to the subject merchandise from the 
various programs described below, we used the following calculation 
methodology. We first calculated a country-wide rate for each program. 
This rate comprised the ad valorem benefit received by each firm 
weighted by each firm's share of exports of the subject merchandise to 
the United States. The program rates were then added together to arrive 
at the country-wide rate.
    Pursuant to 19 CFR 355.20(d) of the Department's regulations, we 
compared the total ad valorem benefit received by each firm to the 
country-wide rate for all programs. The rates for Karmen and Tata were 
significantly different from the country-wide rate. Therefore, Karmen 
and Tata received company- specific rates. Because Sivanandha was the 
only company whose total ad valorem benefit was not significantly 
different from the country-wide rate for all programs, we based the 
all-other rate only on benefits received by Sivanandha. We then 
assigned this all-other rate to all other manufacturers, producers, and 
exporters.
    Consistent with our practice in preliminary determinations, when a 
response to an allegation denies that a program exists, that producers 
of the subject merchandise receive benefits under a program, or that 
producers of the subject merchandise are eligible for a program, and 
the Department has no persuasive evidence showing that the response is 
incorrect, we accept the response for purposes of the preliminary 
determination. All such responses, however, are subject to 
verification. If the response cannot be supported at verification, and 
the program is otherwise countervailable, the program will be 
considered a subsidy in the final determination.

Karmen's Exports of Refurbished Pipe Fittings

    Karmen reported in its responses that in addition to its production 
of new pipe fittings, the company imports rusty, unused pipe fittings 
from a Singaporean company which it refurbishes and subsequently re-
exports to a customer of the Singaporean company in the United States. 
For purposes of this preliminary determination, we have considered this 
refurbished merchandise to be covered by this proceeding. For the final 
determination, we will seek additional information concerning the 
following: (1) the nature and extent of the processing operation, and 
(2) the extent to which the refurbished pipe fittings are being 
subsidized.
    In its responses, Karmen reported only the value added in the 
refurbishing process for these sales. The U.S. Customs Service, 
however, collects duties based on the full value of the subject 
merchandise exported, i.e., the value of the pipe fittings and any 
value-added through the refurbishing process. Therefore, to avoid an 
over-assessment of the duty, we have adjusted Karmen's sales value used 
as the denominator in our subsidy rate calculation. For purposes of 
this preliminary determination, we have valued Karmen's exports of 
refurbished pipe fittings using the price per metric ton of new pipe 
fittings because we do not have an actual export value of refurbished 
pipe fittings.
    Based upon our analysis of the petition and the responses to our 
questionnaires, we preliminarily determine the following:

A. Programs Preliminarily Determined to be Countervailable

1. Preferential Pre-Shipment Financing
    Pre-shipment financing is extended to exporters prior to shipment 
as working capital for purchasing raw materials, processing, packing, 
warehousing, transporting and shipping. Any exporter showing a 
confirmed export order or a letter of credit is eligible for this 
program. Generally, the loans are extended for 180 days. According to 
the responses, both Karmen and Sivanandha used pre-shipment financing 
during the POI.
    Because only exporters are eligible for loans under this program, 
we preliminarily determine that they are countervailable to the extent 
they are provided at a preferential interest rate. We have used the 
average annual commercial interest rate on short-term financing in the 
POI as the benchmark interest rate. The GOI reported a short-term 
financing rate of 16.5 percent. We compared this benchmark rate to the 
interest rate charged on pre-shipment loans and found that the interest 
rate charged was lower than the benchmark rate. Therefore, we determine 
that loans provided under this program are countervailable.
    To calculate the benefit, we followed the short-term loan 
methodology which has been applied consistently in our past 
determinations and is described in more detail in the Subsidies 
Appendix accompanying Cold-Rolled Carbon Steel Flat-Rolled Products 
from Argentina: Final Affirmative Countervailing Duty Determination and 
Countervailing Duty Order, 49 FR 18006 (April 26, 1984); see also, 
Alhambra Foundry v. United States, 626 F. Supp. 402 (CIT 1985).
    We compared the amount of interest paid during the POI to the 
amount of interest that would have been paid at the benchmark rate. The 
difference between these two amounts is the benefit. We then divided 
the benefit by total exports. On this basis, we preliminarily determine 
the estimated net subsidy from this program to be 0.23 percent ad 
valorem for Karmen and 0.84 ad valorem for all other manufacturers, 
producers, and exporters of pipe fittings in India.
2. Income Tax Deductions Under Section 80HHC
    Income tax benefits are available to exporters in India under 
Section 80HHC of the Income Tax Act of 1961. This program allows 
exporters to reduce their taxable income by the profits earned on 
exports. Both Karmen and Sivanandha claimed deductions under this 
program on their income tax returns filed in the POI.
    Since tax deductions under Section 80HHC are available only to 
exporters, we preliminarily determine that this program is 
countervailable. To calculate the benefit, we multiplied the amount of 
the deduction claimed by each company by the corporate income tax rate 
and divided the result by total exports. On this basis, we 
preliminarily determine the estimated net subsidy from this program to 
be 1.07 percent ad valorem for Karmen and 2.69 ad valorem for all other 
manufacturers, producers, and exporters of pipe fittings in India.

B. Programs Preliminarily Determined not to Provide Benefits During the 
POI

1. Advance Licenses and Advance Customs Clearance Permits (``ACCP's'')
    Under the GOI's Duty Exemption Scheme, inputs used in the 
production of exports may enter the country duty-free. Two mechanisms 
under the Duty Exemption Scheme are Advanced Licenses and Advanced 
Custom Clearance Permits (``ACCP's''). Sivanandha used Advanced 
Licenses to import seamless carbon steel pipes in the POI. Karmen used 
ACCP's to import rusty unused butt-weld pipe fittings in the POI.
    Both Advance Licenses and ACCP's permit the importation of goods 
duty free provided the imports are used in the production of goods 
which are subsequently re-exported. We consider the use of Advance 
Licenses and ACCP's to be the equivalent of a duty-drawback program 
(see Final Affirmative Countervailing Duty Determination: Steel Wire 
Rope from India, 56 FR 46292 (September 11, 1991).
    Under Sec. 355.44(i)(4)(1) of the Department's proposed regulations 
(see Countervailing Duties; Notice of Proposed Rulemaking and Request 
for Public Comments, 54 FR 23366 (May 31, 1989), the non-excessive 
drawback of import duties is not countervailable if the imported inputs 
are subsequently physically incorporated into exported products. 
According to the questionnaire responses, inputs imported under Advance 
Licenses and ACCP's were physically incorporated into pipe fittings 
which were subsequently re-exported. Therefore, we preliminarily 
determine that Advance Licenses and ACCP's did not provide a 
countervailable benefit in the POI.
    2. International Price Reimbursement Scheme
    The International Price Reimbursement Scheme (``IPRS'') was 
established to compensate Indian exporters for the difference between 
the world market price and the domestic price of inputs. According to 
the responses, as of April 1, 1993, the input product used in the 
production of pipe fittings, i.e., seamless carbon steel pipe, was no 
longer eligible for IPRS benefits. However, residual benefits could be 
received after that date and, in fact, Karmen indicated in its response 
that it received residual benefits under this program during the POI 
for exports of pipe fittings shipped prior to the POI.
    Respondents maintain that the IPRS program is permissible within 
the framework of Item (d) of the Illustrative List of Export Subsidies 
annexed to the Agreement on the Interpretation and Application of 
Article VI, XVI and XXIII of the General Agreement of Tariff and Trade 
(1979). Pursuant to the Court of International Trade's decision in 
Creswell Trading Co. v. United States, 783 F. Supp. 1418 (CIT 1992), 
the IPRS program must be examined in light of Item (d). Accordingly, if 
the IPRS program does not provide a reimbursement which exceeds the 
difference between the international price and the domestic price, the 
program does not provide a countervailable benefit.
    As discussed above, since the IPRS program was designed to 
compensate exporters for the difference between the world market price 
and the domestic price of inputs and since information provided in 
Karmen's response demonstrates that it was reimbursed in an amount 
equal to the difference between the domestic price and the 
international price, we preliminarily determine that the IPRS program 
is not countervailable with respect to inputs used in the production of 
pipe fittings.

C. Programs Preliminarily Determined to be not Used

    The Department preliminarily determines that the following programs 
were not used during the POI.

A. Preferential Post-Shipment Financing
B. Additional and Replenishment Licenses
C. Market Development Assistance
D. Export Promotion, Capital Goods Scheme
E. Benefits for 100 Percent Export-Oriented Units
F. Benefits Provided to Export Processing Zones Verification

    In accordance with section 776(b) of the Act, we will verify the 
accuracy of the information used in making our final determination.

Suspension of Liquidation

    In accordance with section 703(d) of the Act, we are directing the 
U.S. Customs Service to suspend liquidation of all entries of pipe 
fittings from India, which are entered or withdrawn from warehouse, for 
consumption on or after the date of the publication of this notice in 
the Federal Register, and to require a cash deposit or bond for such 
entries of the merchandise in the amounts indicated below. This 
suspension will remain in effect until further notice. 

------------------------------------------------------------------------
                                                              Percent ad
                       Pipe fittings                           valorem  
------------------------------------------------------------------------
Karmen Steels of India.....................................         1.30
Tata Iron & Steel Limited..................................        23.03
All-Others.................................................         3.53
------------------------------------------------------------------------

ITC Notification

    In accordance with section 703(f) of the Act, we will notify the 
ITC of our determination. In addition, we are making available to the 
ITC all nonprivileged and nonproprietary information relating to this 
investigation. We will allow the ITC access to all privileged and 
business proprietary information in our files, provided the ITC 
confirms that it will not disclose such information, either publicly or 
under administrative protective order, without written consent of the 
Deputy Assistant Secretary for Investigations, Import Administration.
    If our final determination is affirmative, the ITC will make its 
final determination within 45 days after the Department makes its final 
determination.

Public Comment

    In accordance with 19 CFR 355.38, we will hold a public hearing, if 
requested, to afford interested parties an opportunity to comment on 
this preliminary determination on Wednesday, July 27, 1994, at 10 a.m. 
at the U.S. Department of Commerce, Room 3708, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230. Individuals who wish to 
request a hearing must submit such a request within ten business days 
of the publication of this notice in the Federal Register to the 
Assistant Secretary for Import Administration, U.S. Department of 
Commerce, room B099, 14th Street and Constitution Avenue, NW., 
Washington, DC 20230. Parties should confirm by telephone the time, 
date, and place of the hearing 48 hours before the scheduled time.
    Requests should contain: (1) The party's name, address, and 
telephone number; (2) the number of participants; (3) the reason for 
attending; and (4) a list of the issues to be discussed. In addition, 
case briefs must be submitted to the Assistant Secretary no later than 
July 18, 1994. Rebuttal briefs must be submitted to the Assistant 
Secretary no later than July 25, 1994. An interested party may make an 
affirmative presentation only on arguments included in that party's 
case or rebuttal briefs. Written arguments should be submitted in 
accordance with section 355.38 of the Department's regulations and will 
be considered if received within the time limits specified above.
    This determination is published pursuant to section 703(f) of the 
Act (19 U.S.C. 1671b(f)).

Susan G. Esserman,
Assistant Secretary for Import Administration.
    Dated: May 24, 1994.
[FR Doc. 94-13316 Filed 5-31-94; 8:45 am]
BILLING CODE 3510-DS-P