[Federal Register Volume 60, Number 15 (Tuesday, January 24, 1995)]
[Notices]
[Pages 4592-4596]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1761]



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DEPARTMENT OF COMMERCE
[C-533-063]


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

AGENCY: International Trade Administration/Import Administration, 
Commerce.

ACTION: Notice of Preliminary Results of Countervailing Duty 
Administrative Review.

-----------------------------------------------------------------------

SUMMARY: The Department of Commerce is conducting an administrative 
review of the countervailing duty order on certain iron-metal castings 
from India for the period January 1, 1990 through December 31, 1990. We 
preliminarily determine the net subsidy to be 10.16 percent ad valorem 
for all manufacturers and exporters in India of certain iron-metal 
castings, except for certain firms which have significantly different 
aggregate benefits. A complete listing of the net subsidies for these 
firms can be found in the ``Preliminary Results of Review'' section of 
this notice. We invite interested parties to comment on these 
preliminary results.

EFFECTIVE DATE: January 24, 1995.

FOR FURTHER INFORMATION CONTACT: Robert Copyak or Lorenza Olivas, 
Office of Countervailing Compliance, International Trade 
Administration, U.S. Department of Commerce, Washington, D.C. 20230; 
telephone: (202) 482-2786.

SUPPLEMENTARY INFORMATION:

Background

    On October 2, 1991, the Department of Commerce (the Department) 
published in the Federal Register a notice of ``Opportunity to Request 
Administrative Review'' (56 FR 49878) of the countervailing duty order 
on certain iron-metal castings from India (45 FR 68650; October 16, 
1980). On October 23, 1991, the Municipal Castings Fair Trade Council 
and individually-named members, all of which are interested parties, 
requested an administrative review of the order. In addition, various 
respondent companies submitted timely requests for review. We initiated 
the review, covering the period January 1, 1990 through December 31, 
1990, on November 22, 1991 (56 FR 58878). The Department is now 
conducting this administrative review in accordance with section 751(a) 
of the Tariff Act of 1930 (the Act).

Scope of Review

    Imports covered by this review are shipments of Indian manhole 
covers and frames, clean-out covers and frames, and catch basin grates 
and frames. These articles are commonly called municipal or public 
works castings and are used for access or drainage for public utility, 
water, and sanitary systems. During the review period, such merchandise 
was classifiable under the Harmonized Tariff Schedule (HTS) item 
numbers 7325.10.0010 and 7325.10.0050. The HTS item numbers are 
provided for convenience and Customs purposes. The written description 
remains dispositive.
    The review period is January 1, 1990 through December 31, 1990. 
This review involves 14 producers/exporters and 14 programs.
    Calculation Methodology for Assessment and Deposit Purposes 
Pursuant to Ceramica Regiomontana, S.A. v. United States, 853 F. Supp. 
431 (CIT 1994), Commerce is required to calculate a country-wide CVD 
rate, i.e., the all-other rate, by ``weight averaging the benefits 
received by all companies by their proportion of exports to the United 
States, inclusive of zero rate firms and de minimis firms.'' Therefore, 
we first calculated a subsidy rate for each company subject to the 
administrative review. We then weight-averaged the rate received by 
each company using as the weight its share of total Indian exports to 
the United States of subject merchandise. We then summed the individual 
companies' weight-averaged rates to determine the subsidy rate from all 
programs benefitting exports of subject merchandise to the United 
States.
    Since the country-wide rate calculated using this methodology was 
above de minimis, as defined by 19 CFR Sec. 355.7 (1993), we proceeded 
to the next step and examined the net subsidy rate calculated for each 
company to determine whether individual company rates differed 
significantly from the weighted-average country-wide rate, pursuant to 
19 CFR Sec. 355.22(d)(3). Three companies received significantly 
different net subsidy rates during the review period pursuant to 19 CFR 
Sec. 355.22(d)(3). These companies are treated separately for 
assessment and cash deposit purposes. All other companies are assigned 
the country-wide rate.

Analysis of Programs

1. Pre-Shipment Export Financing

    The Reserve Bank of India, through commercial banks, provides pre-
shipment financing, or ``packing credit,'' to exporters. With these 
pre-shipment loans, exporters may purchase raw materials and packing 
materials based on presentation of a confirmed order or 
[[Page 4593]] letter of credit. In addition, exporters may establish 
pre-shipment credit lines under this program with limits contingent 
upon the value of exports. In prior administrative reviews of this 
order, this program was determined to be countervailable because 
receipt of the loans under this program is contingent upon export 
performance and the interest rates were preferential. (See, e.g., Final 
Results of Countervailing Duty Administrative Review: Certain Iron-
Metal Castings From India (56 FR 41658; August 22, 1991) (1987 Indian 
Castings Final Results); Final Results of Countervailing Duty 
Administrative Review: Certain Iron-Metal Castings From India (56 FR 
52515; October 21, 1991) (1988 Indian Castings Final Results); and 
Final Results of Countervailing Duty Administrative Review: Certain 
Iron-Metal Castings From India (56 FR 52521; October 21, 1991) (1989 
Indian Castings Final Results).) There has been no new information or 
evidence of changed circumstances in this review to warrant 
reconsideration of this program's countervailability.
    During the review period, there were two types of pre-shipment 
export financing arrangements. For pre-shipment loans with periods of 
180 days or less, the interest rate was 7.5 percent per annum. For 
loans with periods exceeding 180 days, the interest rate was 9.5 
percent per annum. In either case, a ``penalty'' interest rate of 15.5 
percent was charged on an unpaid balance from the end of the loan 
period forward.
    In the case of a short-term loan provided by a government, the 
Department will use as a benchmark the average interest rate for an 
alternative source of short-term financing in the country in question. 
In determining this benchmark, the Department will normally rely upon 
the predominant source of short-term financing in the country in 
question. (See Countervailing Duties; Notice of Proposed Rulemaking and 
Request for Public Comments, section 355.44(b)(3)(i) (Proposed Rules) 
(54 FR 23380; May 31, 1989).
    The Government of India classifies the manufacturers and exporters 
subject to this review as small-scale industries. Since the interest 
rates on loans to small-scale industries were set by the Reserve Bank 
of India, we used the small-scale industry short-term interest rates 
published in the Reserve Bank of India periodicals ``Report on Trend 
and Progress in India: 1989-90'' and ``Reserve Bank of India Bulletin 
October 1989 (Supplement)'' to calculate a benchmark interest rate of 
15.08 percent. Because the Reserve Bank of India devised different 
interest rates for the latter months of the review period, this 15.08 
percent benchmark is a weighted-average of the highest rate for small-
scale industry loans between 200,000 and 2,500,000 rupees for the 
period January 1 through September 21, 1990, and the rate for small-
scale industry loans over 50,000 rupees for the period September 22 
through December 31, 1990. We compared this benchmark to the interest 
rate charged on pre-shipment loans and found that the interest rate 
charged under this program was lower than the benchmark. The use of 
this benchmark rate is consistent with prior reviews of this order. 
(See 1988 and 1989 Indian Castings Final Results).
    During the review period, 12 of the 14 respondent companies made 
payments on pre-shipment export loans for shipments of subject castings 
to the United States. While all 12 of these companies provided specific 
loan information as requested in our questionnaires, the submission 
containing the pre-shipment loan information for Super Castings (India) 
Private Ltd. was untimely and therefore returned. (See the April 21, 
1994 memorandum titled Removal of Information from the Administrative 
Record for the 1990 Administrative Review of the Countervailing Duty 
Order on Certain Iron-metal Castings from India, on file in the public 
file of the Central Records Unit, Room B-099.) To calculate the benefit 
from these loans to the other 11 companies, we compared the actual 
interest each company paid during the review period with the interest 
that would have been paid on these loans using the benchmark rate of 
15.08 percent. The difference is the benefit. We divided the benefit by 
either total exports or total exports of subject merchandise to the 
United States, depending on how the pre-shipment financing was 
reported. That is, if a company was able to segregate pre-shipment 
loans applicable to subject merchandise exported to the United States, 
we divided the benefit derived from only those loans by total exports 
of subject merchandise to the United States. If a firm reported 
aggregate pre-shipment financing, we divided the benefit from all pre-
shipment loans by total exports. For Super Castings (India) Private 
Ltd., we used the highest individual company benefit rate from this 
program as best information available. On this basis, we preliminarily 
determine the net subsidy from this program to be 1.11 percent ad 
valorem for all manufacturers and exporters in India of certain iron-
metal castings, except for those firms listed below which have 
significantly different aggregate benefits. The net subsidies for those 
firms are as follows:

------------------------------------------------------------------------
                                                                  Net   
                    Manufacturer/exporter                       subsidy 
                                                               (percent)
------------------------------------------------------------------------
Nandikeshwari Iron Foundary..................................       0.00
Overseas Iron Foundry Pvt. Ltd...............................       5.27
Sitaram Madhogarhia & Sons Pvt. Ltd..........................       0.41
------------------------------------------------------------------------

2. Post-Shipment Export Financing

    The Reserve Bank of India, through commercial banks, provides post-
shipment loans to exporters upon presentation of export documents. 
Post-shipment financing also includes bank discounting of foreign 
customer receivables. As with pre-shipment financing, exporters may 
establish post-shipment credit lines with their commercial banks. In 
general, post-shipment loans are granted for a period of up to 180 
days. In prior administrative reviews of this order, this program was 
determined to be countervailable because receipt of the loans under 
this program is contingent upon export performance and the interest 
rates were preferential. (See 1988 and 1989 Indian Castings Final 
Results.) There has been no new information or evidence of changed 
circumstances in this review to warrant reconsideration of this 
program's countervailability. The interest rate for post-shipment 
financing was 8.65 percent during the review period. For reasons stated 
above for pre-shipment financing, we are using 15.08 percent as our 
short-term interest rate benchmark.
    During the review period, 12 of the 14 respondent companies made 
payments on post-shipment export loans for shipments of subject 
castings to the United States. Only 11 of those 12 companies, however, 
provided specific loan information as requested in our questionnaires. 
Super Castings (India) Private Ltd. stated in its response to our 
original questionnaire that its information about its post-shipment 
loans was forthcoming; despite another request for the information in 
our supplemental questionnaire, the company never submitted it. To 
calculate the benefit from these loans to the other 11 companies, we 
followed the same short-term loan methodology discussed above for pre-
shipment financing. We divided the benefit by either total exports or 
exports of subject merchandise to the United States, depending on 
whether the company was able to segregate the post-shipment 
[[Page 4594]] financing on the basis of destination of the exported 
good. For the company that did not submit specific loan information, we 
used the highest individual company benefit rate from this program as 
best information available. On this basis, we preliminarily determine 
the net subsidy from this program to be 1.49 percent ad valorem for all 
manufacturers and exporters in India of certain iron-metal castings, 
except for those firms listed below which have significantly different 
aggregate benefits. The net subsidies for those firms are as follows:

------------------------------------------------------------------------
                                                                  Net   
                    Manufacturer/exporter                       subsidy 
                                                               (percent)
------------------------------------------------------------------------
Nandikeshwari Iron Foundry...................................       0.00
Overseas Iron Foundry Pvt. Ltd...............................       2.83
Sitaram Madhogarhia & Sons Pvt. Ltd..........................       1.85
------------------------------------------------------------------------

3. Income Tax Deductions Under Section 80HHC

    Under section 80HHC of the Income Tax Act, the Government of India 
allows exporters to deduct from taxable income profits derived from the 
export of goods and merchandise. In prior administrative reviews of 
this order, this program has been determined to be countervailable 
because receipt of benefits under this program is contingent upon 
export performance. (See 1988 and 1989 Indian Castings Final Results.) 
There has been no new information or evidence of changed circumstances 
in this review to warrant reconsideration of this program's 
countervailability.
    To calculate the benefit to each company, we subtracted the total 
amount of income tax the company actually paid during the review period 
from the amount of tax the company would have paid during the review 
period had it not claimed any deductions under section 80HHC. We then 
divided this difference by the value of the company's total exports. On 
this basis, we preliminarily determine the net subsidy from this 
program to be 2.59 percent ad valorem for all manufacturers and 
exporters in India of certain iron-metal castings, except for those 
firms listed below which have significantly different aggregate 
benefits. The net subsidies for those firms are as follows:

------------------------------------------------------------------------
                                                                  Net   
                    Manufacturer/exporter                       subsidy 
                                                               (percent)
------------------------------------------------------------------------
Nandikeshwari Iron Foundry...................................       0.05
Overseas Iron Foundry Pvt. Ltd...............................       6.18
Sitaram Madhogarhia & Sons Pvt. Ltd..........................      15.82
------------------------------------------------------------------------

4. Cash Compensatory Support (CCS) Program

    In 1966, the Government of India established the CCS program which 
provides a cumulative tax rebate paid upon export and is calculated as 
percentage of the f.o.b. invoice price. We verified that the rebate 
rate for exports of castings was set at a maximum of five percent for 
the review period.
    As stated in Sec. 355.44(i)(4)(ii) of the Proposed Rules (54 FR 
23382), the Department will find that the entire amount of any such 
rebate is countervailable unless the following conditions are met: (1) 
The program operates for the purpose of rebating prior stage cumulative 
indirect taxes and/or import charges; (2) the government accurately 
ascertained the level of the rebate; and (3) the government reexamines 
its schedules periodically to reflect the amount of actual indirect 
taxes and/or import charges paid. In prior administrative reviews of 
this order, the Department determined that these conditions have been 
met, and, as such, the entire amount of the rebate has not been 
countervailed (see, e.g., the 1989 Indian Castings Final Results).
    However, once a rebate program meets this threshold, the Department 
must still determine in each case whether there is an overrebate; that 
is, the Department must still analyze whether the rebate for the 
subject merchandise exceeds the total amount of indirect taxes and 
import duties borne by inputs that are physically incorporated into the 
exported product. If the rebate exceeds the amount of allowable 
indirect taxes and import duties, the Department will, pursuant to 
Sec. 355.44(i)(4)(i) of the Proposed Rules, find a countervailable 
benefit equal to the difference between the rebate rate and the 
allowable rate determined by the Department (i.e., the overrebate).
    Since the last completed review of this order, the Indian 
manufacturers of castings have moved from domestic pig iron to imported 
pig iron as the basic raw material used in the production of exports 
destined for the U.S. market. In this review, the manufacturers 
presented a tax incidence calculation based on the Indian government's 
rebate system on castings. The companies also provided information on 
the taxes paid. Based on our examination of the indirect tax incidence 
on inputs of castings, we preliminarily determine that two items listed 
as taxes, the port tax and harbor tax (incurred with respect to 
imported pig iron), were charges for services rather than indirect 
taxes. At verification, the information we examined shows that the port 
tax included in the indirect tax incidence is a wharfage charge. The 
documentation submitted at verification on the harbor tax indicates 
that this item included berthage, port dues, pilotage, and towing 
charges. (See February 25, 1994 report titled Verification of 
Information Submitted by RSI India Pvt. Ltd. for the 1990 
Administrative Review of the Countervailing Duty Order on Certain Iron-
Metal Castings from India which is on file in the Central Records Unit 
(room B099 of the Main Commerce Building).)
    Since the information we verified was at the company level, we 
afforded the Government of India the opportunity to provide information 
which demonstrates that the port and harbor collections discussed above 
were actually indirect taxes rather than charges for services and, if 
so, that they were accurately reflected in the rebate rate authorized 
for subject castings. We received a response from the Government of 
India on April 25, 1994. The information provided did not demonstrate 
that these charges, which were used in the calculation of tax 
incidence, are indirect taxes or fiscal charges. Therefore, we 
determine that the charges for wharfage, berthage, pilotage, and towage 
are service charges rather than import charges. For further discussion 
of this analysis, see the May 26, 1994 briefing paper titled Cash 
Compensatory Support (CCS) Program which is on file in the Central 
Records Unit (room B009 of the Main Commerce Building).
    Because these claimed charges on the physically incorporated items 
are service charges rather than indirect taxes or import charges, we 
have preliminarily disallowed these items in the calculation of the 
indirect tax incidence. Therefore, we recalculated the indirect tax 
incidence incurred on the items physically incorporated in the 
manufacture of castings. We then compared that recalculated tax 
incidence rate to the rebates authorized on castings exports under the 
CCS program. Based on this comparison, we preliminarily determine that 
this program provides an overrebate of indirect taxes. The amount of 
the overrebate is a countervailable benefit provided to exporters of 
the subject [[Page 4595]] castings. On this basis, we preliminarily 
determine the net subsidy from this program to be 4.24 percent ad 
valorem for all manufacturers and exporters in India of certain iron-
metal castings.
    On February 1, 1991, manufacturers and exporters of castings agreed 
to stop applying for CCS rebates on exports of the subject castings to 
the United States. We also verified that the Government of India 
terminated the program effective July 3, 1991. However, exporters have 
two years in which to file applications for CCS rebates for exports 
made prior to July 3, 1991. To ascertain whether castings exporters 
received any residual benefits from this terminated program, we 
reviewed the companies' accounting ledgers through September 1993 (the 
time of our verification). We found no evidence of any application for 
or receipt of residual benefits under this program as of that date, 
which exceeded the two year period following the termination of the 
program during which castings exporters could file CCS applications. 
Therefore, we plan not to include the subsidy conferred by this program 
in the cash deposit rate to be established in the final results of this 
review. (See section 355.50(a) of the Proposed Rules.)

5. The Sale of Import Licenses

    The GOI allows companies to transfer certain types of import 
licenses to other companies in India. During the review period, 
castings manufacturers/exporters sold additional licenses and 
replenishment licenses. Because the companies received these licenses 
based on their status as exporters, we preliminarily determine that the 
sale of these licenses is countervailable. See the 1988 and 1989 Indian 
Castings Final Results. There has been no new information or evidence 
of changed circumstances in this review to warrant reconsideration of 
this program's countervailability.
    A company receives an additional license based on its total export 
earnings from the previous year. Therefore, we calculated the subsidy 
by dividing the total amount of proceeds a company received from sales 
of additional licenses by the total value of its exports of all 
products to all markets.
    A company receives replenishment licenses based on individual 
export shipments. Therefore, we calculated the subsidy by dividing the 
amount of proceeds a company received from sales of replenishment 
licenses that was attributable to shipments of subject castings to the 
United States by the total value of the company's exports of subject 
castings to the United States.
    We preliminarily determine the net subsidy from sales of import 
licenses to be 0.45 percent ad valorem for all manufacturers and 
exporters in India of certain iron-metal castings, except for those 
firms listed below which have significantly different aggregate 
benefits. The net subsidies for those firms are as follows:

------------------------------------------------------------------------
                                                                  Net   
                    Manufacturer/exporter                       subsidy 
                                                               (percent)
------------------------------------------------------------------------
Nandikeshwari Iron Foundry...................................       0.00
Overseas Iron Foundry Pvt. Ltd...............................       0.00
Sitaram Madhogarhia & Sons Pvt. Ltd..........................       0.00
------------------------------------------------------------------------

6. Advance Licenses

    Generally, a company can receive an advance license if it has 
received a foreign purchase order or if it has an established history 
of exporting. Products imported under an advance license enter the 
country duty-free, and companies importing under advance licenses are 
obligated to export the products made using the duty-free imports. A 
product imported under an advance license does not necessarily have to 
be physically incorporated into the exported product. The amount of 
imports allowed under an advance license is closely linked to the 
amount of exports to be produced.
    During the review period, eight of the respondent castings 
manufacturers/exporters used advance licenses to import pig iron, an 
input which is physically incorporated into the subject iron-metal 
castings exported to the United States. We consider the use of advance 
licenses in this case to be the equivalent of a duty drawback program: 
customs duties were not paid on imported products that were physically 
incorporated in the subject castings which were exported to the United 
States. See the 1988 and 1989 Indian Castings Final Results, and the 
Final Affirmative Countervailing Duty Determination: Steel Wire Rope 
from India (Steel Wire Rope), (56 FR 46293, September 11, 1991). 
Therefore, we preliminarily determine that the use of advance licenses 
for the importation of pig iron is not countervailable.

Other Programs

    We also examined the following programs and preliminarily determine 
that exporters of certain iron-metal castings did not apply for or 
receive benefits under these programs with respect to exports of the 
subject merchandise to the United States during the review period: (1) 
Market Development Assistance; (2) International Price Reimbursement 
Scheme; (3) Free Trade Zones; (4) Preferential Freight Rates; (5) 100 
Percent Export-Oriented Units Program; (6) Exim Scrip; and (7) Income 
Tax Deductions under sections 80GGA, 80HH, 80HHA, and 80I of the Income 
Tax Act. Moreover, we verified that the exporters did not purchase 
diesel fuel at a discount, and that a program designed to provide 
preferentially priced oil for running generators was never funded. This 
program was abolished on April 1, 1993, and we did not find any 
evidence of residual benefits.

Preliminary Results of Review

    We preliminarily determine that the following net subsidies exist 
for the period January 1, 1990 through December 31, 1990:

------------------------------------------------------------------------
                                                                  Net   
                    Manufacturer/exporter                       subsidy 
                                                               (percent)
------------------------------------------------------------------------
Nandikeshwari Iron Foundry...................................       4.29
Overseas Iron Foundry Pvt. Ltd...............................      18.52
Sitaram Madhogarhia & Sons Pvt. Ltd..........................      22.32
Country-wide All-other Rate..................................      10.16
------------------------------------------------------------------------

    If the final results of this review remain the same as these 
preliminary results, the Department intends to instruct the Customs 
Service to assess countervailing duties at the above percentages of the 
f.o.b. invoice price on shipments of the subject merchandise exported 
on or after January 1, 1990, and on or before December 31, 1990.
    The Department also intends, as a result of the termination of 
benefits attributable to the CCS program, to instruct the Customs 
Service to collect cash deposits of estimated countervailing duties at 
the following rates:

------------------------------------------------------------------------
                                                                  Net   
                    Manufacturer/exporter                       subsidy 
                                                               (percent)
------------------------------------------------------------------------
Nandikeshwari Iron Foundry...................................       0.05
Overseas Iron Foundry Pvt. Ltd...............................      14.28
Sitaram Madhogarhia & Sons Pvt. Ltd..........................      18.08
Country-wide All-other Cash Deposit Rate.....................       5.92
------------------------------------------------------------------------

    The country-wide all-other cash deposit rate of 5.92 percent 
applies to all but the above-listed companies on shipments of this 
merchandise entered, or withdrawn from warehouse, for consumption on or 
after the date of publication of the final results of this 
administrative review.
    Parties to the proceeding may request disclosure of the calculation 
[[Page 4596]] methodology and interested parties may request a hearing 
not later than 10 days after date of publication of this notice. In 
accordance with 19 CFR 355.38(c)(1)(ii), interested parties may submit 
written arguments in case briefs on these preliminary results within 30 
days of the date of publication. Rebuttal briefs, limited to arguments 
raised in case briefs, may be submitted seven days after the time limit 
for filing the case brief. Any hearing, if requested, will be held 
seven days after the scheduled date for submission of rebuttal briefs. 
Copies of case briefs and rebuttal briefs must be served on interested 
parties in accordance with 19 CFR 355.38(e).
    Representatives of parties to the proceeding may request disclosure 
of proprietary information under administrative protective order no 
later than 10 days after the representative's client or employer 
becomes a party to the proceeding, but in no event later than the date 
the case briefs are due under 19 CFR 355.38(c).
    The Department will publish the final results of this 
administrative review, including the results of its analysis of issues 
raised in any case or rebuttal briefs.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR 
355.22.

    Dated: January 9, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-1761 Filed 1-23-95; 8:45 am]
BILLING CODE 3510-DS-P