[Federal Register Volume 60, Number 167 (Tuesday, August 29, 1995)]
[Notices]
[Pages 44839-44843]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-21433]



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DEPARTMENT OF COMMERCE
[C-533-063]


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

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

ACTION: Notice of preliminary results of countervailing duty 
administrative review.

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SUMMARY: The Department of Commerce (the Department) is conducting an 
administrative review of the countervailing duty order on certain iron-
metal castings from India for the period January 1, 1992 through 
December 31, 1992. We preliminarily determine the net subsidy to be 
12.93 percent ad valorem for Kajaria Iron Castings (Kajaria); 0.00 
percent ad valorem for Dinesh Brothers, Pvt. Ltd. (Dinesh) and 3.54 
percent ad valorem for all other companies. Interested parties are 
invited to comment on these preliminary results. Parties who submit 
comments in this proceeding are requested to submit with their comments 
(1) a statement of the issue and (2) a brief summary of their position.

EFFECTIVE DATE: August 29, 1995.

FOR FURTHER INFORMATION CONTACT: Elizabeth Graham or Kristin Mowry, 
Office of Countervailing Investigations, International Trade 
Administration, U.S. Department of Commerce, Washington, D.C. 20230; 
telephone: (202) 482-4105 and 482-3798.

SUPPLEMENTARY INFORMATION:

Background

    On October 16, 1980, the Department published in the Federal 
Register (45 FR 68650) the countervailing duty order on certain iron-
metal castings from India. On October 8, 1992, the Department published 
in the Federal Register a notice of ``Opportunity to Request an 
Administrative Review'' (57 FR 46371) of this countervailing duty 
order. On October 27, 1992, we received a timely request for review 
from the Municipal Castings Fair Trade Council and individually-named 
members (petitioners), all of which are interested parties.
    We initiated the review, covering the period January 1, 1992 
through December 31, 1992, on November 17, 1993 (58 FR 60600). The 
review covers 14 companies (11 exporters and three producers of the 
subject merchandise), which account for virtually all exports of the 
subject merchandise from India, and 12 programs.

Applicable Statute and Regulations

    The Department is now conducting this administrative review in 
accordance with section 751(a) of the Tariff Act of 1930 as amended 
(the Act). Unless otherwise indicated, all citations to the statute and 
the Department's regulations are in reference to the provisions as they 
existed on December 31, 1994. However, references to the Department's 
Countervailing Duties: Notice of Proposed Rulemaking and 

[[Page 44840]]
Request for Public Comments, 54 FR 23366 (May 31, 1989) (Proposed 
Regulations), are provided solely for further explanation of the 
Department's countervailing practice. Although the Department has 
withdrawn the particular rulemaking proceeding pursuant to which the 
Proposed Regulations were issued, the subject matter of these 
regulations is being considered in connection with an ongoing 
rulemaking proceeding which, among other things, is intended to conform 
the Department's regulations to the Uruguay Round Agreements Act. See 
60 FR 80 (January 3, 1995).

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.

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 calculated the net subsidy on a country-wide basis by first 
calculating the 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, including all companies, even 
those with de minimis and zero rates. 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 (1994), 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). Two companies (Kajaria and Dinesh) 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

I. Programs Conferring Subsidies

A. 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 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 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 13 to 15 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 selects the predominant 
source of short-term financing in the country in question. (See section 
355.44(3)(b)(i) of the Proposed Regulations).
    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 rate published in a Reserve Bank of India 
periodical, Reserve Bank of India Annual Report 1992-93, that was 
submitted by the GOI. This publication provided us with the actual 
short-term small-scale industry interest rate of 15 percent.
    During the review period, 9 of the 14 respondent companies made 
payments on Pre-Shipment Export loans for shipments of subject castings 
to the United States.
    To calculate the benefit from the pre-shipment loans to these nine 
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 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 0.06 percent ad valorem for all manufacturers and 
exporters in India of certain iron-metal castings, except for Kajaria 
and Dinesh which have significantly different aggregate benefits. The 
net subsidy for Kajaria is 0.30 percent ad valorem. The net subsidy for 
Dinesh is 0.00 percent ad valorem.
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. In general, post-shipment loans are granted for a 
period of up to 180 days. The interest rate for post-shipment financing 
ranged from 12.5 to 24.75 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 

[[Page 44841]]
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 percent as our short-term interest rate 
benchmark for these loans.
    On January 1, 1992, the GOI introduced a program entitled ``Scheme 
for Post-Shipment Credit Denominated in Foreign Currency'' (PSCFC). The 
loans are denominated in dollars and provided at interest rates at or 
above the London Interbank Offering Rate (LIBOR). Upon presentation of 
the export documents, the bank will credit the exporter's account in 
rupees for the loan amount less interest. The interest rate charged on 
these loans ranged from 6.5 percent to 8.5 percent during the review 
period.
    Our normal practice is to use a foreign currency benchmark where 
loans are denominated in foreign currency. In this case, however, the 
Indian exporter borrowing under this program receives rupees. The loans 
are generally repaid in dollars when the customer makes payment. 
However, if the customer defaults, the exporter must repay the loan in 
rupees. Therefore, as explained more fully below, although the loans 
are tied to foreign exchange, foreign currency benchmarks are not 
appropriate.
    Under these loans, the rupee equivalent of the amount of principal 
repaid will vary according to the exchange rate. This occurs because 
the principal remains constant in dollar terms, but as the dollar/rupee 
exchange rate varies, the amount of rupees necessary to repay the 
constant dollar amount varies. In this situation, the preferred 
benchmark would be the interest rate on alternative dollar-indexed 
loans in India. However, we have not been able to locate such a 
benchmark, and must, therefore, use as a benchmark a rupee-denominated 
interest rate. To make dollar-denominated post-shipment export 
financing rates comparable to the benchmark, we took account of the 
effect of movements in the rupee-dollar exchange rate over the loan 
period.
    On March 1, 1992, the GOI introduced the Liberalised Exchange Rate 
Management System, whereby the rupee was made partly convertible. Under 
this system, 40 percent of all foreign exchange remitted was required 
to be exchanged at the official exchange rate and the remaining 60 
percent at a market determined rate.
    Because Indian exporters and banks use two exchange rates, we have 
used both of those rates (in the proportions, 40 percent at the 
official rate and 60 percent at the market rate) to calculate the 
amount of interest paid in rupees, adjusting for exchange rate 
fluctuations between the day of receipt and the day of repayment. We 
then compared the interest that would be paid on a benchmark rupee loan 
to the interest paid on the dollar-indexed loans. In this calculation, 
we have followed our consistent methodology of assuming that interest 
would be paid on the rupee loans at the time of repayment. (See section 
355.48(b)(3) of the Proposed Regulations.)
    During the review period, 11 of the 14 respondent companies made 
payments on post-shipment export loans for shipments of subject 
castings to the United States. One of these 11 companies, Serampore 
Industries Private Ltd. (Serampore), provided incomplete post-shipment 
loan information in its response to our questionnaire. We have 
requested Serampore provide the complete post-shipment loan 
information. Since we have not received the information in time for 
these preliminary results, in accordance with section 776(c) of the 
Act, we have assigned Serampore the highest subsidy rate for post-
shipment loans calculated for another company in this review. We will 
use the information provided by Serampore in our final results of this 
review.
    Also during the review period, the Reserve Bank of India refinanced 
banks' rupee post-shipment export credit at a rate of 11 percent per 
annum, while credit under the PSCFC scheme was refinanced at 5.5 
percent per annum. Such refinancing practices encourage lending to the 
export sector; thus, driving down interest rates for exporters while 
driving up interest rates for domestic firms. Similar practices by 
other central banks of foreign governments have been considered to have 
been subsidizing their export sector, and thus found to be 
countervailable. However, we were unable to locate a reference to use 
as a benchmark for such refinancing practices. We will continue to 
search for such a benchmark, and invite interested parties to submit 
relevant information.
    To calculate the ad valorem subsidy 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 0.43 percent ad valorem for all manufacturers and 
exporters in India of certain iron-metal castings, except for Kajaria 
and Dinesh which have significantly different aggregate benefits. The 
net subsidy for Kajaria is 0.15 percent ad valorem. The net subsidy for 
Dinesh is 0.00 percent ad valorem.

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.
    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 2.97 percent ad valorem for all manufacturers and 
exporters in India of certain iron-metal castings, except for Kajaria 
and Dinesh which have significantly different aggregate benefits. The 
net subsidy for Kajaria is 12.39 percent ad valorem. The net subsidy 
for Dinesh is 0.00 percent ad valorem.

4. Import Mechanisms

    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, 
Replenishment Licenses, Exim Scrip Licenses, and Special Exim Licenses. 
However, exporters reported that the Replenishment Licenses and Exim 
Scrip Licenses they sold during the review period were for non-subject 
merchandise. The GOI reported that the Replenishment License Program 
was terminated for exports made after February 29, 1992. The 
Replenishment License Program was replaced by the Exim Scrip Program, 
which was itself terminated on March 1, 1992. On April 1, 1992, the 
Special Exim License Program was created to replace the Exim Scrip 
Program.
    Additional licenses permit the exporter to import a variety of 
products 

[[Page 44842]]
in an amount equal to ten percent of the ``net foreign exchange'' 
earned in the previous year. Imports under an additional license are 
subject to customs duties and there is no obligation to export the 
products incorporating the imported inputs.
    Special Exim Licenses are issued to exporters based on their net 
foreign exchange earnings. Special Exim Licenses specify the products 
that may be imported using the license and the exporter is not required 
to incorporate the inputs into the products it exports.
    Replenishment Licenses permit the replacement of imported inputs 
used in exported products. The types and amounts of products which can 
be imported under a Replenishment License are contingent upon the 
particular product exported. Exporters are required to pay import 
duties on the inputs imported under a Replenishment License, but the 
importer is not required to incorporate the inputs into the product it 
exports. Additionally, Replenishment Licenses may not be issued to 
exporters utilizing Advance Licenses to import inputs.
    Exim Scrip Licenses are issued for 30 percent of the F.O.B. value 
of the exports. Import duties are payable on inputs imported under 
these licenses and like Replenishment Licenses, they may not be issued 
to exporters utilizing Advance Licenses to import inputs.
    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.
    Since companies receive Additional Licenses and Special Exim 
Licenses based on their total export earnings from the previous year, 
we calculated the subsidies by dividing the total amount of proceeds a 
company received from sales of Additional Licenses and Special Exim 
Licenses by the total value of its exports of all products to all 
markets.
    Companies receive Replenishment Licenses and Exim Scrip Licenses 
based on individual export shipments. Since the Replenishment Licenses 
and Exim Scrip Licenses sold by exporters during the review period were 
for non-subject merchandise, we do not consider these sales to have 
benefitted exports of the subject merchandise.
    We preliminarily determine the net subsidy from the sale of 
Additional and Special Exim Licenses to be 0.08 percent ad valorem for 
all manufacturers and exporters in India of certain iron-metal 
castings, except for Kajaria and Dinesh which have significantly 
different aggregate benefits. The net subsidy for Kajaria is 0.09 
percent ad valorem. The net subsidy for Dinesh is 0.00 percent ad 
valorem.

II. Program Preliminary Found Not To Confer Subsidies Advance Licenses

    The purpose of the advance license is to allow an importer to 
import raw materials used in the production of an exported product 
without first having to pay duty. Companies importing under advance 
licenses are obligated to export the products made using the duty-free 
imports.
    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. Item (i) of the Illustrative 
List specifies that the remission or drawback of import duties levied 
on imported goods that are physically incorporated into an exported 
product is not a countervailable subsidy, if the remission or drawback 
is not excessive. We consider respondents' use of advance licenses to 
be the equivalent of a duty drawback scheme. That is, they used the 
licenses in order to import, net of duty, raw materials which were 
physically incorporated into the exported products. Since the amount of 
raw materials imported was not excessive vis-a-vis the products 
exported, we preliminarily determine that use of the advance licenses 
was not countervailable. 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).

III. Programs Preliminarily Found Not To Be Used

    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) Falta Free Trade Zones and Other Free Trade 
Zones Program; (4) Preferential Freight Rates; (5) Preferential Diesel 
Fuel Program; and (6) 100 Percent Export-Oriented Units Program.

IV. Program Preliminarily Found To Be Terminated

    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) dated December 13, 1993, located in the 
Central Records Unit, room B-099, Department of Commerce). However, 
exporters have two years in which to file applications for CCS rebates 
for exports made prior to July 3, 1991. We have found no evidence of 
any residual benefits during this review period. Therefore, we 
preliminarily determine that exporters of certain iron-metal castings 
did not apply for or receive benefits under this program with respect 
to exports of the subject merchandise to the United States during the 
review period.

Preliminary Results of Review

    For the period January 1, 1992 through December 31, 1992, we 
preliminarily determine the net subsidy to be 12.93 ad valorem for 
Kajaria; 0.00 percent for Dinesh; and 3.54 percent ad valorem for all 
other companies. If the final results of this review remain the same as 
these preliminary results, the Department intends to instruct the U.S. 
Customs Service to assess the following 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, 1992, and on or 
before December 31, 1992. 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.
    Parties to the proceeding may request disclosure of the calculation 
methodology and interested parties may request a hearing not later than 
10 days after the date of publication of this notice. Interested 
parties may submit written arguments in case briefs on these 
preliminary results within 30 days of the day 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 
Sec. 355.38(e). 

[[Page 44843]]

    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 client or employer 
becomes a party to the proceeding, but in no event later than the date 
the case briefs, under section 355.38(c)of the Department's 
regulations, are due. The Department will publish the final results of 
this administrative review, including the results of its analysis of 
issues raised in any case or rebuttal brief or at a hearing.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. Sec. 1675(a)(1)) and 19 CFR 
Sec. 355.22.

    Dated: August 18, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-21433 Filed 8-28-95; 8:45 am]
BILLING CODE 3510-DS-P