[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.
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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