[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