[Federal Register Volume 60, Number 167 (Tuesday, August 29, 1995)]
[Notices]
[Pages 44843-44849]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-21436]



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DEPARTMENT OF COMMERCE
[C-533-063]


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

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

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

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SUMMARY: On January 24, 1995, the Department of Commerce (the 
Department) published in the Federal Register its preliminary results 
of administrative review of the countervailing duty order on Certain 
Iron-Metal Castings From India for the period January 1, 1991 to 
December 31, 1991. We have completed this review and determine the net 
subsidies to be 0.00 percent ad valorem for Dinesh Brothers, Pvt. Ltd., 
41.75 percent for Super Castings (India) Pvt. Ltd., 16.14 percent for 
Kajaria Iron Castings Pvt. Ltd., and 5.53 percent ad valorem for all 
other companies. We will instruct the U.S. Customs Service to assess 
countervailing duties as indicated above.

EFFECTIVE DATE: August 29, 1995.

FOR FURTHER INFORMATION CONTACT: Robert Copyak and Alexander Braier, 
Office of Countervailing Compliance, Import Administration, 
International Trade Administration, U.S. Department of Commerce, 14th 
Street and Constitution Avenue, N.W., Washington, D.C. 20230; 
telephone: (202) 482-2786.

SUPPLEMENTARY INFORMATION:

Background

    On January 24, 1995 the Department published in the Federal 
Register (60 FR 4596) the preliminary results of its administrative 
review of the countervailing duty order on Certain Iron-Metal Castings 
From India. The Department has now completed this administrative review 
in accordance with section 751 of the Tariff Act of 1930, as amended 
(the Act).
    We invited interested parties to comment on the preliminary 
results. On February 23, 1995, case briefs were submitted by the 
Municipal Castings Fair Trade Council (MCFTC) (petitioners), and the 
Engineering Export Promotion Council of India (EEPC) and individually-
named producers of the subject merchandise which exported iron-metal 
castings to the United States during the review period (respondents). 
On March 2, 1995, rebuttal briefs were submitted by the MCFTC and the 
EEPC. The comments addressed in this notice were presented in the case 
briefs.
    The review covers the period January 1, 1991 through December 31, 
1991. The review involves 14 companies and the following programs:

(1) Pre-shipment export financing
(2) Post-shipment export financing
(3) Income tax deductions under Section 80HHC
(4) Cash Compensatory Support (CCS) Program
(5) Sale of Import Licenses
(6) Advance Licenses
(7) Market Development Assistance
(8) International Price Reimbursement Scheme
(9) Free Trade Zones
(10) Preferential Freight Rates
(11) Preferential Diesel Fuel Program
(12) 100 Percent Export-Oriented Units Program

Applicable Statute and Regulations

    The Department is 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 
to 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 
Request for Public Comments, 54 FR 23366 (May 31, 1989) (Proposed 
Rules), are provided solely for further explanation of the Department's 
countervailing duty practice. Although the Department has withdrawn the 
particular rulemaking proceeding pursuant to which the Proposed Rules 
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 (Jan. 3, 1995).

Scope of the 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 Cash Deposit Purposes

    Pursuant to Ceramica Regiomontana, S.A. v. United States, 853 F. 
Supp. 431, 439 (CIT 1994), the Department 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 (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 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 

[[Page 44844]]
companies are assigned the country-wide rate.

Analysis of Comments

Comment 1

    Petitioners state that the Department improperly calculated the 
amount of countervailable benefit conferred by the Cash Compensatory 
Support (CCS) program. They state that the Department failed to follow 
its standard practice of calculating benefits from a program based upon 
the date the benefit is received rather than the date the benefit is 
earned. Petitioners argue that the Department only calculates benefits 
on an ``as earned'' basis when the benefit is earned on a shipment-by-
shipment basis and the exact amount of the benefit is known at the time 
of export. Petitioners claim that the CCS program does not meet this 
exception because the exact amount of benefits to be received under the 
CCS program is not known at the time of export.
    Respondents state that petitioners are incorrect. Respondents claim 
that the exporter knew at the time of shipment the amount of rebate he 
or she would receive under the CCS program.

Department's Position

    CCS rebates are paid upon export and are calculated as a percentage 
of the f.o.b. invoice price. Thus, these rebates are earned on a 
shipment-by-shipment basis, and the exact amount of the rebate is known 
at the time of export. Therefore, the Department calculated the benefit 
from the CCS program on an ``as earned'' basis based upon the date of 
export, consistent with our long-standing practice and in conformity 
with the Proposed Rules. Section 355.48(b)(7) of the Proposed Rules 
provides that, in cases of an export benefit provided as a percentage 
of the value of the exported merchandise (such as a cash payment or an 
over-rebate of indirect taxes), the timing of the receipt of 
countervailable benefits will be the date of export. See, e.g., Certain 
Textile Mill Products and Apparel From Colombia, 52 FR 13272 (April 22, 
1987), Cotton Shop Towels From Pakistan, 53 FR 34340 (September 6, 
1988), and Certain Textile Mill Products From Thailand, 52 FR 7636 
(March 12, 1987).
    Petitioners argue that the benefits from the CCS program should not 
be calculated in this manner because it was not clear at the time of 
export whether the exporter would receive the full amount of the CCS 
rebate. They base this argument on (1) the fact that, in the official 
publication in which the Government of India established the CCS rates, 
it reserved the right to withdraw or alter the rebates, and (2) the 
fact that the CCS rebate percentages would be reduced if the exporter 
waited six months or after the date of export or longer to submit the 
application for the rebates. However, the fact that a government may 
reserve the right to alter or terminate a program does not affect the 
timing of the receipt of benefits, or whether the exporter knew the 
amount of benefits he or she would receive. Indeed, one of the criteria 
used by the Department to determine whether a program which rebates 
indirect taxes is countervailable is whether the government 
periodically reviews and revises the rebate level based on changes in 
the indirect tax incidence incurred by the exporter. See, e.g., Leather 
Wearing Apparel From Argentina 59 FR 25611 (May 17, 1994).
    Under the CCS program, exporters knew at the time of export that 
they would receive the full amount of the CCS rebate if they submitted 
their applications within six months of the date of export. Therefore, 
petitioners second point also does not merit a change in our long-
standing policy of calculating the benefit from the overrebate of 
indirect taxes based on the date of export of the merchandise.

Comment 2

    Petitioners claim that the Department improperly set the cash 
deposit rate for the CCS program at zero. Petitioners state that the 
Department may only adjust the cash deposit rate if there has been a 
program-wide change as defined under section 355.50 of the Department's 
Proposed Rules. Petitioners claim that the CCS program does not qualify 
for an adjusted cash deposit rate under section 355.50 because the 
Government of India has only provided the Department with a copy of an 
ambiguous announcement of a suspension of the CCS program. They state 
that the announcement by India's Ministry of Commerce does not 
constitute an ``official act, such as the enactment of a statute, 
regulation, or decree'' as required by section 355.50 of the 
Department's regulations. Petitioners further state that the CCS 
program has only been suspended, not terminated. Petitioners state 
that, in Certain Fresh Cut Flowers from Ecuador, 52 FR 1361 (January 
13, 1987), the Department determined that an indefinitely-suspended 
program implied the reinstatement of the program was possible and 
therefore refused to consider the indefinite suspension a program-wide 
change.
    Respondents argue that the method of termination was as official as 
necessary under the Indian system of government. They state that the 
Department verified that the program was terminated and that no claims 
for benefits under the program were made by castings exporters after 
the termination date. Respondents further state that the Department 
verified that there were no outstanding residual benefits under the CCS 
program. Therefore, respondents conclude that the Department should 
maintain the CCS deposit rate at zero.

Department's Position

    Section 355.50(a) of the Proposed Rules states that the Department 
may adjust the cash deposit rate when (1) there has been a program-wide 
change which occurred prior to the Department's preliminary results of 
review and (2) the Department is able to measure the change in the 
amount of countervailable subsidies provided under the program in 
question. In addition, Sec. 355.50(b)(2) states that the change in the 
program must be effectuated by an official act, such as the enactment 
of a statute, regulation, or decree, or contained in the schedule of an 
existing statute, regulation, or decree. India's Ministry of Commerce 
terminated the CCS program as of July 3, 1991. Therefore, there was a 
program-wide change in the CCS program which (1) occurred prior to the 
January 24, 1995 preliminary results of review and (2 ) resulted in a 
change in the amount of countervailable subsidies that the Department 
was able to measure. This program-wide change was effectuated by an 
official government announcement which satisfies the requirements of 
Sec. 355.50(b)(2).
    We agree with petitioners that it is our practice not to adjust the 
cash deposit rate for programs which are suspended rather than 
terminated. However, we disagree with petitioners' assertion that the 
CCS program is only suspended. While the India Ministry of Commerce 
announcement terminating the program refers to the program as being 
suspended, the conclusion of the notice states that the program has 
been terminated. See the December 13, 1993 verification report entitled 
Verification of the Government of India (GOI) Questionnaire Response 
for the 1990 Countervailing Duty Order on Certain Iron-metal Castings 
from India. As the verification report explains, officials from the 
Government of India confirmed that the CCS program is terminated. 
Therefore, we have determined that the CCS program has been terminated.
    Furthermore, Sec. 355.50(d) states that the Department will only 
adjust the cash deposit rates for terminated programs if it determines 
that residual benefits will not be bestowed under the terminated 

[[Page 44845]]
program. As stated in the Preliminary Results of this review, to 
ascertain whether castings exporters received any residual benefits 
from this terminated program, we reviewed the exporters accounting 
ledgers through September 1993 (which was the time of our verification 
for the 1990 administrative review and over two years after the 
effective termination of the CCS program which was July 3, 1991). Based 
upon this examination, we found no evidence of any application for or 
receipt of residual benefits under the CCS program.
    Therefore, we confirm the decision made in the Preliminary Results 
that the cash deposit rate be adjusted to zero for the CCS program.

Comment 3

    Petitioners argue that, to the extent that any respondent received 
CCS payments on non-subject castings, the Department should calculate 
and countervail the value of CCS payments on non-subject castings in 
these administrative reviews. They state that the Department's failure 
to countervail subsidies on non-subject castings exports is at odds 
with the language and intent of the countervailing duty law, which 
applies to any subsidy whether bestowed ``directly or indirectly.'' 
They argue that subsidies conferred on non-subject castings should be 
countervailed because these subsidies provide indirect benefits on 
exports of the subject castings.
    Respondents state that petitioners have misapplied the term 
``indirectly.'' They state that the CCS paid on other merchandise is 
not ``indirectly'' paid on subject castings merely because it is paid 
to the same producer. Respondents argue that there is no benefit--
either direct or indirect--to the subject merchandise when benefits are 
paid on other products. Respondents state that petitioners are putting 
forth the old ``money is fungible'' argument, which has never been 
accepted by the Department. They state the Department should not do so 
now.

Department's Position

    Section 771(5)(A)(ii) of the Act states that subsidies can be 
``paid or bestowed directly or indirectly on the manufacture, 
production, or export of any class or kind of merchandise''. However, 
petitioners have misinterpreted the term ``indirect subsidy.'' They 
argue that a subsidy tied to the export of product B may provide an 
indirect subsidy to product A, or that a reimbursement of costs 
incurred in the manufacture of product B may provide an indirect 
subsidy upon the manufacture of product A. As such, they argue that 
grants that are tied to the production or export of product B, should 
also be countervailed as a benefit upon the production or export of 
product A. This is at odds with established Department practice with 
respect to the treatment of subsidies, including indirect subsidies. 
The term ``indirect subsidies'' as used by the Department refers to the 
manner of delivery of the benefit which is conferred upon the 
merchandise subject to an investigation or review. The term, as used by 
the Department, does not imply that a benefit tied to one type of 
product also provides an indirect subsidy to another product. This kind 
of interpretation proposed by petitioners is clearly not within the 
purview or intent of the statutory language under section 
771(5)(B)(ii).
    In our Proposed Rules, we have clearly spelled out the Department's 
practice with respect to this issue. ``Where the Secretary determines 
that a countervailable benefit is tied to the production or sale of a 
particular product or products, the Secretary will allocate the benefit 
solely to that product or products. If the Secretary determines that a 
countervailable benefit is tied to a product other than the 
merchandise, the Secretary will not find a countervailable subsidy on 
the merchandise.'' Section 355.47(a). This practice of tying benefits 
to specific products is an established tenet of the Department's 
administration of the countervailing duty law. See, e.g., Industrial 
Nitrocellulose from France, 52 FR 833 (January 9, 1987); Apparel from 
Thailand, 50 FR 9818 (March 12, 1985); and Extruded Rubber Thread from 
Malaysia, 60 FR 17515 (April 9, 1995).

Comment 4

    Respondents argue that the CCS program does not provide an over-
rebate of indirect taxes. They argue that the charges paid to the 
Indian port authority on imported pig iron are taxes paid to the 
Government of India and contend that, while the port charges are 
labeled as ``wharfage, berthage, pilotage, and towage,'' these charges 
are more in the nature of taxes since they are not tied to the real 
cost of these services. Accordingly, respondents state that the 
Department should reconsider its finding that these charges are service 
charges rather than taxes and therefore are not eligible for rebate 
under the CCS program. In addition, they argue that, even if the CCS 
payments may have been over-rebated, the Department has miscalculated 
the over-rebate by disallowing respondents' claim that ``port dues'' be 
treated as an indirect tax. Respondents state that dues are not fees 
for services and therefore should have been allowed as offsets to the 
CCS.
    Petitioners claim that information provided by respondents 
themselves reveals that the port and harbor ``taxes'' rebated under the 
CCS program are not indirect taxes but are charges for services. They 
state that respondents' position is based upon the claim that payment 
for these charges is made to the Calcutta Port Trust, an alleged entity 
of the Government of India. Petitioners state that a payment made to a 
government does not inherently mean that the payment is a tax. The type 
of port charges under discussion in the CCS program are similar to the 
user fees charged by the U.S. government. User fees are charged by the 
government to help defray the government's cost of providing a service 
to the public, and are not regarded as taxes under U.S. law.

Department's Position

    The CCS program was established to provide a rebate of indirect 
taxes incurred on items physically incorporated into an exported 
product. Items (h) and (i) of the Illustrative List of Export Subsidies 
permits the non-excessive rebate of indirect taxes and import charges 
paid on items physically incorporated into an export product. However, 
the Items (h) and (i) do not permit the rebate of service charges on 
such items.
    During the verification of the 1990 administrative review, we 
examined information which showed that the port charges claimed by the 
exporters to be indirect taxes were, in fact, service charges. The 
documentation gathered at verification indicates that the item claimed 
as port charges included berthage, port dues, pilotage, and towage 
charges. See the 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 B009 of the Main Commerce Building). Because this was verified at 
the company level, we afforded the Government of India the opportunity 
to provide information to demonstrate that the port and harbor 
collections were actually indirect taxes rather than charges for 
services. The information provided by the Government of India did not 
demonstrate that these charges, which were used in the calculation of 
the indirect tax incidence, were indirect taxes or import charges that 
are allowable under item (h) or (i) of the 

[[Page 44846]]
Illustrative List of Export Subsidies. Therefore, we determined that 
the charges in question were service charges rather than import 
charges. As such, we disallowed these items in the calculation of the 
indirect tax incidence on items physically incorporated in the 
manufacture of castings under the CCS program. 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).

Comment 5

    Petitioners claim that the Department understated the benefit to 
Carnation Enterprise from the CCS program in the 1991 administrative 
review. They state that the Department relied upon Carnation's claim 
that it was eligible for only a two percent CCS rebate in calculating 
its benefit from the CCS program because the company imported more than 
80 percent of their pig iron. Petitioners state that information in 
Carnation's questionnaire indicates that the company understated its 
CCS rebate. Furthermore, petitioners contend that during the 
verification of Carnation's response for the 1990 review, the 
Department confirmed that all claims filed by Carnation for CCS 
benefits for subject castings were for rebates of five percent. 
Therefore, they argue that in its final analysis the Department should 
recalculate the benefits to Carnation under the CCS program based on a 
rebate rate of five percent.
    Respondents state that petitioners' claim is based on the fact that 
(1) Carnation's financial statement shows less than 80 percent 
utilization of pig iron and (2) that the financial statements show that 
CCS receipts are greater than five percent of export sales. Respondents 
state that percentages of utilization of pig iron from year to year do 
not necessarily mean that less than (or more than) a certain amount was 
imported. Carry over of inventories will also affect the calculated 
ratios. In addition, the amount of CCS rebates paid on non-subject 
merchandise is greater than five percent. Therefore, the fact that the 
financial statement shows more than five percent CCS in terms of sales 
does not negate the fact that only two percent was received on subject 
castings.

Department's Position

    In its response to the questionnaire in the 1991 administrative 
review, Carnation specifically stated that the CCS rebate in effect for 
its exports of the subject castings was only two percent. The company 
stated that because it imported more than 80 percent of its pig iron 
during this period it was only eligible for a two percent CCS rebate. 
In addition, the company also stated that it did not use the CCS 
program after February 1, 1991. There is no information on the record 
which contradicts that statement. Therefore, the benefit calculated for 
Carnation in the 1991 administrative review for the CCS program was 
based on a two percent rebate.
Comment 6

    Petitioners state that the Department improperly failed to 
countervail the value of advance licenses, because advance licenses are 
simply export subsidies and not the equivalent of a duty drawback 
program. Petitioners claim that the advance license program does not 
meet the criteria of a duty drawback system which would be permissible 
in light of Item (i) of the Illustrative List of Export Subsidies, 
annexed to the General Agreement on Tariffs and Trade (GATT) Subsidies 
Code (Illustrative List). They base this claim on the fact that (1) the 
advance licenses were not limited to use just for importing duty-free 
input materials because the licenses could be sold to other companies; 
(2) eligibility for drawback is always contingent upon the claimant 
demonstrating that the amount of input material contained in an export 
is equal to the amount of such material imported, which the respondents 
failed to do; and (3) the Government of India made no attempt to 
determine the amount of material that was physically incorporated 
(making normal allowances for waste) in the exported product as 
required under Item (i). For these reasons, petitioners state that the 
Department should countervail in full the value of advance licenses 
received by respondents during the period of review.
    Respondents state that advance licenses allow importation of raw 
materials duty free for the purposes of producing export products. They 
state that if Indian exporters did not have advance licenses, the 
exporters would import the raw materials, pay duty, and then receive 
drawback upon export. Respondents argue that, although advance licenses 
are slightly different from a duty drawback system because they allow 
imports duty free rather than provide for remittance of duty upon 
exportation, this does not make them countervailable. Respondents also 
state that no advance licenses were sold.

Department's Position

    Petitioners have only pointed out the administrative differences 
between a duty drawback system and the advance license scheme used by 
Indian exporters. Such administrative differences can also be found 
between a duty drawback system and an export trade zone or a bonded 
warehouse. Each of these systems has the same function: each exists so 
that exporters may import raw materials to be incorporated into an 
exported product without the assessment of import duties.
    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. 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 determined that respondents used advance licenses in a way that is 
equivalent to how a duty drawback scheme would work. 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 to the products 
exported, we determine that use of the advance licenses was not 
countervailable.

Comment 7

    Petitioners claim that the Department understated the benchmark 
interest rate used to calculate the benefits for pre-shipment and post-
shipment loans. They state that, rather than using the interest rate 
obtained from commercial banks during verification or the average 
lending rates published by the International Market Fund (IMF), the 
Department used the average interest rates published by the Reserve 
Bank of India (RBI) for small-scale industry loans to calculate the 
benchmark. Petitioners claim that these were regulated and preferential 
small-scale industry rates which were used to calculate average 
benchmark interest rates. As such, the Department merely compared 
interest rates for one type of preferential loan to interest rates for 
another type of preferential loan.
    Respondents state that the RBI rates used by the Department are the 
commercial rates available in India. Therefore, it is those rates which 
should be used as the benchmark.

[[Page 44847]]


Department's Position

    We have used the average interest rates for loans to small-scale 
industries as published by the RBI as the benchmark for the 
administrative reviews of this order. (See, e.g., the 1988 and 1989 
Final Results of Countervailing Duty Administrative Review: Certain 
Iron Metal Castings from India, 56 FR 52515 and 56 FR 52521; October 
21, 1991.)
    It is the Department's long-standing policy that a program is not 
specific under the countervailing duty law solely because it is limited 
to small firms or to small- and medium-sized firms. See, e.g., 
Sec. 355.43(b)(7) of the Proposed Rules, and Textile Mill Products and 
Apparel from Singapore, 50 FR 9840 (March 12, 1985). Therefore, 
interest rates which are set for a loan program provided to small-size 
firms and industries can be used as an appropriate benchmark. (See, 
e.g., the discussion of the benchmark used in the FOGAIN program in 
Bricks From Mexico, 49 FR 19564 (May 8, 1984).) Because the castings 
exporters qualify as small-scale industry firms, we have used the 
interest rates set under this program as our benchmark.

Comment 8

    Petitioners argue that the Department has improperly failed to 
countervail IPRS benefits bestowed on non-subject castings. They state 
that the Department's failure to countervail such subsidies is at odds 
with the language and intent of the countervailing duty law, which 
applies to any bounty or grant whether bestowed directly or indirectly. 
In addition, because eligibility for IPRS payments is based on the use 
of domestic pig iron, and pig iron is fungible, castings exporters can 
easily avoid paying countervailable duties by making no claims for IPRS 
payments on the subject castings but rather make all such claims on 
non-subject castings. Therefore, if a castings exporter used 
approximately equal amounts of pig iron and scrap to manufacture its 
castings, it could receive IPRS payments for all of the pig iron it 
consumed by claiming that 100 percent of its pig iron was used to 
produce non-subject castings. Thus, petitioners state that, although 
IPRS claims would only be for exports of non-subject castings, the IPRS 
payments would reimburse the producer for the cost of pig iron actually 
consumed to manufacture subject castings as well as non-subject 
castings.

Department's Position

    Our response to petitioners' argument that International Price 
Reimbursement Scheme (IPRS) rebates received on non-subject exports 
provides an indirect benefit to exports of the subject merchandise can 
be found in the Department's Position for Comment 3 above. We find no 
merit in petitioners' claim that the castings exporters can avoid 
paying countervailing duties by shifting their claims for IPRS payments 
from subject to non-subject castings. When claims are filed for IPRS 
payments, the amount of the rebate determined by the Government of 
India is based on the contention that 100 percent of the material used 
in the production of the exported good is domestic pig iron. This being 
the case, it is impossible to shift the claims from subject to non-
subject merchandise because the IPRS payments are based upon 100 
percent use of domestic pig iron regardless of the actual content of 
domestic pig iron, imported pig iron, or scrap used in the production 
of the exported good. In addition, at the point in time when the 
companies submitted their IPRS claims covering the period of this 
administrative review, the Department's policy was to countervail the 
full amount of IPRS rebates. Therefore, there was no incentive for the 
castings exporters to shift their domestic pig iron claims from subject 
to non-subject castings.

Comment 9

    Petitioners state that under Sec. 355.44 of the Proposed Rules, the 
Department defines a countervailable benefit as the full or partial 
exemption, remission, or deferral of a direct tax or social welfare 
charge in excess of the tax the firm otherwise would pay absent a 
government program. They state that, under the regulations, to examine 
the taxes the firm otherwise would have paid, the Department will take 
into account the firm's total tax liability as a result of a firm's use 
of a tax subsidy. Therefore, petitioners argue that the Department's 
approach to the treatment of tax subsidies should likewise apply to the 
receipt of the IPRS subsidies on non-subject castings, in that both 
types of subsidies reduce a firm's total costs whether it be in the 
form of taxes or the cost of pig iron inputs.
    Respondents state that petitioners' argument is misplaced. They 
state that the IPRS is not remotely like a tax program. Furthermore, 
respondents claim that the IPRS received on non-subject merchandise 
does not benefit other merchandise the way a tax reduction might 
benefit all production.
Department's Position

    Section 355.44(i)(1) of the Proposed Rules states that the 
countervailable benefit conferred by a tax program is the amount of 
taxes a company otherwise would have paid absent the use of the 
program. To determine that amount, the Department must examine the 
company's total tax liability and the effect of the tax program on that 
liability, as there are numerous variables which affect that liability. 
For example, if a tax program allows an exporter a tax deduction based 
on the value of 20 percent of its export sales, this does not 
necessarily mean that there is a benefit from this program. If the 
company has a net loss for the year before taking any tax deductions, 
then there is no benefit in the period of review provided from this tax 
program. With or without the use of this tax program, the company's tax 
liability is still zero.
    The methodology the Government of India used to determine the 
amount of the benefit conferred by a tax program has no effect on how 
the Department determines whether a grant received by a company 
provides a countervailable benefit to the subject merchandise. Grants 
that are tied to the production or export of only non-subject 
merchandise do not provide a countervailable benefit to the subject 
merchandise. As stated in our response to Comment 3, the allocation of 
countervailable benefits conferred upon a specific product or market is 
clearly detailed in Sec. 355.47 of the Proposed Rules. This allocation 
methodology applies equally to grants as it does to tax programs. 
Although to determine the benefit from an export tax program, the 
Department must examine whether the tax program changes the company's 
total tax liability, as explained above, the Department will allocate 
any benefit found from the use of that export tax program only over the 
company's export sales, not the company's total sales. See, e.g. 
Extruded Rubber Thread from Malaysia. It is for these reasons that we 
have determined that IPRS rebates provided upon non-subject merchandise 
do not provide a benefit to the subject castings exported to the United 
States.

Comment 10

    Petitioners state that the Department should countervail benefits 
provided to castings exporters through exchange rate schemes. A 
verification report for the 1990 administrative review explains that, 
previously, companies converted dollars to rupees at exchange rates no 
higher than 25 rupees per dollar, but, under a new scheme, the RBI 
allowed companies to convert 40 percent of their 

[[Page 44848]]
dollars at this rate and remaining 60 percent of their dollars at a 
rate of 30 rupees per dollar. See the December 13, 1993 verification 
report entitled Meetings with Commercial Banks for the 1990 
Administrative Review of the Countervailing Duty Order on Certain Iron-
metal Castings from India. Petitioners state that this program is 
targeted to certain export markets because it provides benefits for 
export earnings in U.S. dollars.
    Respondents state that this allegation of a new subsidy is well 
beyond the deadline established under 19 CFR 355.31(c)(1)(ii). They 
also state that there is nothing in the record to suggest that this is 
a subsidy. Respondents contend that it appears that the program merely 
allows exporters to convert some of their dollars at the commercial 
rate, rather than the controlled rate. Furthermore, they state that 
there is no information in the record that respondents used this 
program. Respondents also claim that the fact the program refers to the 
conversion of dollars into rupees is not an indication of targeting 
because the U.S. dollar is the currency of international commerce.

Department's Position

    The time limits for making allegations of a new subsidy in an 
administrative review are established under 19 CFR 355.31(c)(1)(ii). 
The allegation made by petitioner is untimely under the regulations and 
must be rejected. Further, this alleged subsidy program was not in 
place during the period of the administrative review. Rather, it was 
instituted in March 1992. See the Reserve Bank of India Annual Report 
1993-94 (page 22) which is on file in the Central Records Unit (room 
B009 of the Main Commerce Building).

Comment 11

    Respondents state that countervailing the CCS payments and the 
income tax deductions under section 80HHC of the Income Tax Act double 
counts the subsidy from the CCS program. They argue that, under section 
80HHC, payments received under the CCS program are considered export 
income which may be deducted from taxable income to determine the tax 
payable by the exporter. Therefore, respondents argue that, since CCS 
payments are also part of the deductions under 80HHC, to countervail 
the payments and then the deduction is to double count the CCS benefit. 
In addition, respondent's state that, just as the CCS payments form a 
component of profit for purposes of the 80HHC tax deduction, so do the 
payments received by respondents under the IPRS program. They argue 
that since IPRS rebates are no longer paid on subject castings exported 
to the United States, the deduction by respondents of IPRS rebates from 
income for 80HHC purposes is not a countervailable subsidy benefitting 
subject castings exported to the United States.
    Petitioners claim that there is no double-counting of benefits 
because respondents first benefit from the excessive rebates under the 
CCS program, and also benefited again because the 80HHC program 
eliminated the need to pay taxes on the income from those rebates. 
Regarding respondents' comment on IPRS, petitioners state that 
respondents have argued for many years that IPRS payments merely 
represent the difference between the cost of domestic pig iron and the 
international price for pig iron. Therefore, petitioners conclude that 
because IPRS payments are not profit, they do not represent a benefit 
under 80HHC, and there is no reason to factor out the IPRS payments 
when calculating the subsidy from the 80HHC tax program.

Department's Position

    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. The benefit conferred by this program 
is the amount of taxes that would have been paid by the castings 
exporters absent this program. Therefore, the full amount of the tax 
savings realized by castings exporters from this exemption under the 
80HHC program is countervailable.
    Respondents' argument that we should adjust the benefit of the 
80HHC tax program to account for CCS and IPRS rebates is at odds with 
the language and intent of the statute. The only permissible offsets to 
a countervailable subsidy are those provided under section 771(6) of 
the Act. The Department has consistently interpreted this provision of 
the statute as the exclusive source of permissible offsets. Such 
offsets include application fees paid to attain the subsidy, losses in 
the value of the subsidy resulting from deferred receipt, and export 
taxes specifically intended to offset the subsidy received. Adjustments 
which do not strictly fit the descriptions under section 771(6) are 
disallowed. (See, e.g., Textile Mill Products From Mexico, 50 FR 10824 
(March 18, 1985).) Adjusting the benefit conferred by the 80HHC tax 
program to account for the CCS and IPRS rebates is not a permissible 
offset under section 771(6) of the Act. In addition, we also note that, 
with respect to respondents' CCS argument, that it is the Department's 
established policy to disregard the secondary tax effects of 
countervailable subsidies. See , e.g., Certain Fresh Atlantic 
Groundfish From Canada, 51 FR 10041 (March 24, 1986) and Fresh and 
Chilled Atlantic Salmon From Norway, 56 FR 7678 (February 25, 1991).

Comment 12

    Respondents claim the subsidy calculated for Commex under the 80HHC 
tax program is over-stated because the Department used the tax rate for 
corporations to calculate the tax amount Commex would have paid without 
the tax deduction provided by this program. They claim that Commex is a 
partnership, not a corporation. Therefore, respondents state that the 
Department should correct this error and use the tax rate for 
partnerships to calculate the subsidy provided to Commex under the 
80HHC tax program in the 1991 administrative review.

Department's Position

    For the preliminary results of the 1991 administrative review, the 
income tax rate for corporations was used to calculate the benefit 
provided to Commex under the 80HHC tax program. A review of the record 
shows that Commex is a registered partnership. Therefore, we have 
recalculated the benefit provided to Commex under the 80HHC tax program 
using the tax rates applicable to a registered partnership firm. This 
recalculation changed the ad valorem subsidy for this program from 1.22 
percent to 0.39 percent. In addition, this recalculation also resulted 
in a change to the country-wide all-other rate and to the country-wide 
all-other cash deposit rate for the 1991 administrative review. The 
country wide rate changed from 5.54 to 5.53 percent ad valorem and the 
country-wide cash deposit rate changed from 3.06 to 3.05 percent ad 
valorem.

Comment 13

     Respondents state that it is not appropriate to include company 
rates that are based on best information available (BIA) in the 
calculation of the country-wide rate. Respondents also state that the 
inclusion in the country-wide rate of companies' rates which are 
``significantly'' higher than the country-wide rate is improper when 
those companies are also given their own separate company-specific 
rates. See 19 CFR 355.22(d)(3) for explanation about the calculation of 
individual, ``significantly different'' rates. Respondents argue that 
Ceramica Regiomontana, S.A. v. United States, 

[[Page 44849]]
853 F. Supp. 431 (CIT 1994) does not require the Department to include 
``significantly'' higher rates in calculation of the country-wide rate. 
They state that a careful reading of that case, as well as Ipsco Inc. 
v. United States, 899 F. 2d 1192 (Fed. Cir. 1990), demonstrates that 
the courts in both cases were only concerned about the over-statement 
of rates owing to elimination of de minimis or zero margins from the 
country-wide rate calculation. Respondents claim that every company's 
rate is being pulled up to a percentage greater than it should be 
because the Department has included in the weighted-average country-
wide rate the rates of companies which received their own 
``significantly'' higher company-specific rates. Thus, they state that 
the country-wide rate is excessive for every company to which it 
applies. Respondents state that, not only is it unfair to charge this 
excessive countervailing duty, it is also contrary to law, in conflict 
with the international obligations of the United States, and violative 
of due process.
    Petitioners state that respondents have misread Ceramica and Ipsco. 
They state that the plain language of Ceramica requires the Department 
to calculate a country-wide rate by weight averaging the benefits 
received by all companies by their proportion of exports to the United 
States. Petitioners state that while Ceramica and Ipsco dealt factually 
with the circumstances in which respondent companies had lower-than-
average rates, the principle on which these cases is based applies 
equally to instances in which some companies have higher-than-average 
rates. They state that the courts have determined that the benefits 
received by all companies under review are to be weight-averaged in the 
calculation of the country-wide rate. Therefore, petitioners conclude 
that the Department followed the clear directives from the court.

Department's Position

    We disagree with respondents that ``significantly different'' 
higher rate (including BIA rates) should not be included in the 
calculation in the calculation of the CVD country-wide rate. 
Respondents' reliance on Ceramica and Ipsco is misplaced. In those 
cases, the Department excluded the zero and de minimis company-specific 
rates that were calculated before calculating the country-wide rate. 
The court in Ceramica, however, rejected this calculation methodology. 
Based upon the Federal Circuit's opinion in Ipsco, the court held that 
the Department is required to calculate a country-wide CVD rate 
applicable to non-de minimis firms 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.'' Ceramica, 
853 F. Supp. at 439 (emphasis on ``all'' added).
    Thus, the court held that the rates of all firms must be taken into 
account in determining the country-wide rate. As a result of Ceramica, 
Commerce no longer calculates, as it formerly did, an ``all others'' 
country-wide rate. Instead, it now calculates a single country-wide 
rate at the outset, and then determines, based on that rate, which of 
the company-specific rates are ``significantly'' different.
    Given that the courts in both Ipsco and Ceramica state that the 
Department should include all company rates, both de minimis and non de 
minimis, there is no legal basis for excluding ``significantly 
different'' higher rates, including BIA rates. To exclude these higher 
rates, while at the same time including zero and de minimis rates, 
would result in a similar type of country-wide rates bias of which the 
courts were critical when the Department excluded zero and de minimis 
rates under its former calculation methodology.

Final Results of Review

    For the period January 1, 1991 through December 31, 1991, we 
determine the net subsidies to be 0.00 percent ad valorem for Dinesh 
Brothers, Pvt. Ltd., 41.75 percent for Super Castings (India) Pvt. Ltd. 
, 16.14 percent for Kajaria Iron Castings Pvt. Ltd., and 5.53 percent 
ad valorem for all other companies.
     The Department will instruct the U.S. Customs Service to assess 
the following countervailing duties:

------------------------------------------------------------------------
                                                                 Rate   
                   Manufacturer/Exporter                      (percent) 
------------------------------------------------------------------------
Dinesh Brothers, Pvt. Ltd..................................         0.00
Super Castings (India) Pvt. Ltd............................        41.75
Kajaria Iron Castings Pvt. Ltd.............................        16.14
All Other Companies........................................         5.53
------------------------------------------------------------------------

    The Department will also instruct the U.S. Customs Service to 
collect a cash deposit of estimated countervailing duties of 5.12 
percent of the f.o.b. invoice price on all shipments of the subject 
merchandise entered, or withdrawn from warehouse, for consumption on or 
after the date of publication of the final results of this review from 
all companies except Super Castings (India) Pvt. Ltd., Kajaria Iron 
Castings Pvt. Ltd. and Dinesh Brothers, Pvt. Ltd.. 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 will 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.
    This notice serves as the only reminder to parties subject to APO 
of their responsibilities concerning the return or destruction of 
proprietary information disclosed under APO in accordance with 19 CFR 
353.34(d). Failure to comply is a violation of the APO.
    This administrative review and notice are in accordance with 
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)) and 19 CFR 355.22.

    Dated: August 17, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-21436 Filed 8-28-95; 8:45 am]
BILLING CODE 3510-DS-P