[Federal Register Volume 60, Number 15 (Tuesday, January 24, 1995)]
[Notices]
[Pages 4596-4600]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1762]



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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, 
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 for the period January 1, 1991 through December 31, 1991. We 
preliminarily determine the net subsidy to be 5.54 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: Lorenza Olivas or Alexander Braier, 
Office of Countervailing Compliance, International Trade 
Administration, U.S. Department of Commerce, Washington, DC. 20230; 
telephone: (202) 482-2786.

SUPPLEMENTARY INFORMATION:

Background

    On October 8, 1992, the Department of Commerce (the Department) 
published in the Federal Register a notice of ``Opportunity to Request 
Administrative Review'' (57 FR 46371) of the countervailing duty order 
on certain iron-metal castings from India (45 FR 68650; October 16, 
1980). On October 27, 1992, the Municipal Castings Fair Trade Council 
and individually-named members, all of which are interested parties, 
requested an administrative review of the order. We initiated the 
review, covering the period January 1, 1991 through December 31, 1991, 
on November 27, 1992 (55 FR 56318). 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 the review are shipments of Indian manhole 
covers and frames, clean-out covers and frames, and catch basin grates 
and frames. These articles are commonly called municipal or public 
works castings and are used for access or drainage for public utility, 
water, and sanitary systems. During the review period, such merchandise 
was classifiable under the Harmonized Tariff Schedule (HTS) item 
numbers 7325.10.0010 and 7325.10.0050. The HTS item numbers are 
provided for convenience and Customs purposes. The written description 
remains dispositive.
    The review period is January 1, 1991 through December 31, 1991. 
This review involves 14 producers/exporters and 12 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 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 355.22(d)(3). Three companies (Dinesh Brothers, Pvt. Ltd., Super 
Castings (India) Pvt. Ltd., and Kajaria Iron Castings Pvt. Ltd.) 
received significantly different net subsidy rates during the review 
period pursuant to 19 CFR 355.22(d)(3). These companies are treated 
separately for assessment and cash deposit purposes. All other 
companies are assigned the country-wide rate.

Analysis of Programs

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 letter of 
credit. In addition, exporters may establish pre-shipment credit lines 
under this program with limits contingent upon the value of exports. In 
general, the loans are granted for a period of up to 180 days. In prior 
administrative reviews of this order, this program was determined to be 
countervailable because receipt of the loans under this program is 
contingent upon export performance and the interest rates were 
preferential. (See e.g., Final Results of Countervailing Duty 
Administrative Review: Certain Iron-Metal Castings From India (56 FR 
41658; (August 22, 1991) (1987 Indian Castings Final Results); Final 
Results of Countervailing Duty Administrative Review: Certain Iron-
Metal Castings From India (56 FR 52515; October 21, 1991) (1988 Indian 
Castings Final Results); and Final Results of 
[[Page 4597]] Countervailing Duty Administrative Review: Certain Iron-
Metal Castings From India (56 FR 52521; October 21, 1991) (1989 Indian 
Castings Final Results).) There has been no new information or evidence 
of changed circumstances in this review to warrant reconsideration of 
this program's countervailability. During the review period, the rate 
of interest charged on pre-shipment export loans ranged from 7.50 to 17 
percent, depending on the length and date of the loan.
    In the case of a short-term loan provided by a government, the 
Department uses the average interest rate for an alternative source of 
short-term financing in the country in question as a benchmark. In 
determining this benchmark, the Department relies 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, Sec. 355.44(b)(3)(i) (Proposed Rules) (54 FR 23380; 
May 31, 1989).
    The Government of India (GOI) classifies the companies under review 
as small-scale industry companies. Therefore, we used the small-scale 
industry short-term interest rates published in the Reserve Bank of 
India periodicals Reserve Bank of India Report on Trend and Progress of 
Banking in India: 1990-91 (Appendix II) and Reserve Bank of India 
Annual Report 1991-92 that were submitted by the GOI. These 
publications provided us with the actual short-term small-scale 
industry interest rate of 14 percent for loans through October 8, 1991. 
Since they provided only minimum interest rates for October 9, 1991 
through December 31, 1991, we used the International Monetary Fund 
publication International Financial Statistics (IFS) for the remainder 
of the year. The IFS reported that the short-term interest rate in 
India for the period October 9, 1991 through December 31, 1991 was 20 
percent. Therefore, we weight-averaged these two rates based on the 
number of months of the year each applied, and calculated a benchmark 
of 15.38 percent for this review.
    During the review period, 11 of the 14 respondent companies made 
payments on pre-shipment export loans for shipments of subject castings 
to the United States. One of these 11 companies, Super Castings (India) 
Private Ltd. (Super Castings), provided aggregate pre-shipment loan and 
post-shipment loan information in its response to our original 
questionnaire. We were not able to distinguish which entries were pre-
shipment loans based on the information submitted by the company. Super 
Castings did not respond to a second request for information on pre-
shipment loans in our supplemental questionnaire. Therefore, in 
accordance with section 776(c) of the Act, we assumed as best 
information available (BIA) that all reported loans were pre-shipment 
loans.
    To calculate the benefit from the pre-shipment loans to these 
eleven companies, we compared the actual interest paid on these loans 
during the review period with the interest that would have been paid 
using the benchmark interest rate of 15.38 percent. If the benchmark 
rate exceeded the program rate, the difference between those amounts is 
the benefit. We then divided the benefit by either total exports or by 
total exports of the subject merchandise to the United States, 
depending on how the pre-shipment financing was reported. That is, if a 
company was able to segregate pre-shipment financing applicable to 
subject merchandise exported to the United States, we divided the 
benefit derived from only those loans by total exports of subject 
merchandise to the United States. If a firm was unable to segregate 
pre-shipment financing, we divided the benefit from all pre-shipment 
loans by total exports. On this basis, we preliminarily determine the 
net subsidy from this program to be one 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 subsidy for those firms is as follows:

------------------------------------------------------------------------
                                                             Net subsidy
                   Manufacturer/exporter                      (percent) 
------------------------------------------------------------------------
Dinesh Brothers, Pvt. Ltd..................................         0.00
Super Castings (India) Pvt. Ltd............................        23.00
Kajaria Iron Castings Pvt. Ltd.............................         0.68
------------------------------------------------------------------------

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. The interest rate for post-shipment financing was 8.65 percent 
during the review period.
    In prior administrative reviews of this order, this program was 
determined to be countervailable because receipt of the loans under 
this program is contingent upon export performance and the interest 
rates were preferential. (See the 1988 and 1989 Indian Castings Final 
Results.) There has been no new information or evidence of changed 
circumstances in this review to warrant reconsideration of this 
program's countervailability. For reasons stated above for pre-shipment 
financing, we are using 15.38 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. One of these 12 companies, Super 
Castings, provided aggregate post-shipment loan and pre-shipment loan 
information in its response to our original questionnaire. Our 
treatment of Super Castings is described under our analysis of pre-
shipment financing. 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 the subject merchandise to the 
United States, depending on whether the company was able to segregate 
the post-shipment financing on the basis of destination of the exported 
good. On this basis, we preliminarily determine the net subsidy from 
this program to be 0.42 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 subsidy for those firms is as follows:

------------------------------------------------------------------------
                                                             Net subsidy
                   Manufacturer/exporter                      (percent) 
------------------------------------------------------------------------
Dinesh Brothers, Pvt. Ltd..................................         0.00
Super Castings (India) Pvt. Ltd............................         0.00
Kajaria Iron Castings Pvt. Ltd.............................         0.00
------------------------------------------------------------------------

3. Income Tax Deductions Under Section 80HHC

    Under section 80HHC of the Income Tax Act, the GOI allows exporters 
to deduct profits derived from the export of goods and merchandise from 
taxable income. In prior administrative reviews of this order, this 
program has been determined to be countervailable because receipt of 
benefits under this program is contingent upon export performance. (See 
the 1988 and 1989 Indian Castings Final Results.) There has been no new 
information or evidence of changed circumstances in this review to 
warrant reconsideration of this program's countervailability. 
[[Page 4598]] 
    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 1.47 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 subsidy for those firms is as follows:

------------------------------------------------------------------------
                                                             Net subsidy
                   Manufacturer/exporter                      (percent) 
------------------------------------------------------------------------
Dinesh Brothers, Pvt. Ltd..................................         0.00
Super Castings (India) Pvt. Ltd............................        18.75
Kajaria Iron Castings Pvt. Ltd.............................        15.46
------------------------------------------------------------------------

4. Cash Compensatory Support (CCS) Program

    In 1966, the GOI established the CCS program which provides a 
cumulative tax rebate paid upon export and is calculated as a 
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, even if a rebate program meets one of these conditions, 
the Department must still determine in each case whether there is an 
over-rebate; 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 over-
rebate).
    During this review period, the Indian manufacturers of castings 
have replaced domestic pig iron with imported pig iron as the basic raw 
material used in the production of exports destined for the U.S. 
market. Therefore, 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. During the 
verification of the 1990 administrative review, the information we 
examined showed that the port tax included in the indirect tax 
incidence is a wharfage charge. The documentation submitted at the 1990 
verification on the harbor tax indicated 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 (public version), which 
is on file in the Central Records Unit (room B099 of the Main Commerce 
Building).)
    We afforded the GOI the opportunity to provide information to 
demonstrate 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 GOI on April 26, 
1994. The information provided did not demonstrate that the port tax 
and the harbor tax, which were used in the calculation of tax 
incidence, are indirect taxes. Therefore, we determine that the port 
dues and 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 B099 of the Main Commerce Building).
    Because these two 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 over-rebate of indirect taxes. The amount of 
the over-rebate is a countervailable benefit provided to exporters of 
the subject castings.
    We verified that on February 1, 1991, manufacturers and exporters 
of castings stopped applying for CCS rebates on exports of subject 
castings to the United States. Thus, to calculate the ad valorem 
benefit to each company which applied for CCS rebates, we multiplied 
the over-rebate rate by each company's exports of subject castings to 
the United States during the month of January, 1991. We then divided 
this amount by each company's total exports of subject castings to the 
United States during the period of review. On this basis, we 
preliminarily determine the net subsidy from this program to be 0.41 
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 subsidy
                   Manufacturer/exporter                      (percent) 
------------------------------------------------------------------------
Dinesh Brothers, Pvt. Ltd..................................         0.00
Super Castings (India) Pvt. Ltd............................         0.00
Kajaria Iron Castings Pvt. Ltd.............................         0.50
------------------------------------------------------------------------

    During the 1990 review, we verified that the GOI terminated the CCS 
program effective July 3, 1991. (See the Verification of the Government 
of India (GOI) Questionnaire Responses for the 1990 Administrative 
Review of the Countervailing Duty Order on Certain Iron-Metal Castings 
from India (public version).) 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 
1990 verification) (see verification report, Id). We found no evidence 
of any applications for or receipts of residual benefits under this 
program as of that date, which exceeded the two year period following 
the [[Page 4599]] 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 
Sec. 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 the sale of all 
import licenses to be 0.18 percent ad valorem for all manufactures 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 subsidy
                   Manufacturer/exporter                      (percent) 
------------------------------------------------------------------------
Dinesh Brothers, Pvt. Ltd..................................         0.00
Super Castings (India) Pvt. Ltd............................         0.00
Kajaria Iron Castings 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) the International Price 
Reimbursement Scheme; (3) Free Trade Zones; (4) Preferential Freight 
Rates; (5) a Preferential Diesel Fuel Program; and (6) the 100 Percent 
Export-Oriented Units Program.
    We also determined that exporters did not apply for or receive 
benefits from a seventh program, called Exim Script. This program was 
introduced on July 4, 1991 to replace the replenishment license. The 
Exim Scrip program was terminated on March 1, 1992.

Preliminary Results of Review

    We preliminarily determine that the following net subsidies exist 
for the period January 1, 1991 through December 31, 1991:

------------------------------------------------------------------------
                                                             Net subsidy
                   Manufacturer/exporter                      (percent) 
------------------------------------------------------------------------
Dinesh Brothers, Pvt. Ltd..................................         0.00
Super Castings (India) Pvt. Ltd............................        41.75
Kajaria Iron Castings Pvt. Ltd.............................        16.14
All Others.................................................         5.54
------------------------------------------------------------------------

    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, 1991, and on or before December 31, 1991. 
Because the total net subsidy for Dinesh Brothers Pvt., Ltd. is 
determined to be zero, we intend to instruct the Customs Service not to 
assess countervailing duties on shipments of the subject merchandise 
with respect to that company.
    The Department also intends, as a result of the termination of 
benefits attributable to the CCS program, to instruct the Customs 
Service to collect a cash deposit of estimated countervailing duties of 
5.13 percent for all firms except Dinesh Brothers, Pvt. Ltd., Super 
Castings (India) Pvt. Ltd., and Kajaria Iron Castings Pvt. Ltd, 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. Because Super Castings and Kajaria did not 
use the CCS program, the cash deposit rates for those companies will 
equal the calculated net subsidies of 41.75 percent and 16.14 percent, 
respectively. Because the net subsidy for Dinesh Brothers Pvt., Ltd. is 
zero, the Department intends to instruct the Customs Service not to 
collect cash deposits on shipments of this merchandise from this 
company entered or withdrawn 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 
methodology and interested parties may request a hearing not later than 
ten 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 ten days after the representative's [[Page 4600]] 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. 95-1762 Filed 1-23-95; 8:45 am]
BILLING CODE 3510-DS-P