[Federal Register Volume 64, Number 142 (Monday, July 26, 1999)]
[Notices]
[Pages 40438-40445]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-18856]


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DEPARTMENT OF COMMERCE

International Trade Administration
[C-533-818]


Preliminary Affirmative Countervailing Duty Determination and 
Alignment of Final Countervailing Duty Determination With Final 
Antidumping Duty Determination: Certain Cut-to-Length Carbon-Quality 
Steel Plate From India

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

EFFECTIVE DATE: July 26, 1999.

FOR FURTHER INFORMATION CONTACT: Robert Copyak or Eric B. Greynolds, 
Office of CVD/AD Enforcement VI, Import Administration, U.S. Department 
of Commerce, Room 4012, 14th Street and Constitution Avenue, NW, 
Washington, DC 20230; telephone: (202) 482-2786.

PRELIMINARY DETERMINATION: The Department of Commerce (the Department) 
preliminarily determines that countervailable subsidies are being 
provided to certain producers and exporters of certain cut-to-length 
carbon-quality steel plate from India. For information on the estimated 
countervailing duty rate, see the ``Suspension of Liquidation'' section 
of this notice.

SUPPLEMENTARY INFORMATION:

Petitioners

    The petition in this investigation was filed by Bethlehem Steel 
Corporation; U.S. Steel Group, a unit of USX Corporation; Gulf States 
Steel Inc.; IPSCO Steel Inc.; Tuscaloosa Steel Corporation; and the 
United Steelworkers of America (the petitioners).

Case History

    Since the publication of the notice of initiation in the Federal 
Register (see Notice of Initiation of Countervailing Duty 
Investigations: Certain Cut-To-Length Carbon-Quality Steel Plate from 
France, India, Indonesia, Italy, and the Republic of Korea, 64 FR 12996 
(March 16, 1999) (Initiation Notice)), the following events have 
occurred: On March 19, 1999, we issued our original countervailing duty 
questionnaire to the Government of India (GOI) and to producers/
exporters of the subject merchandise. On April 21, 1999, we postponed 
the preliminary determination of this investigation to no later than 
July 16, 1999. See Certain Cut-to-Length Carbon-Quality Steel Plate 
from France, India, Indonesia, Italy, and the Republic of Korea: 
Postponement of Time Limit for Countervailing Duty Investigations, 64 
FR 23057 (April 29, 1999).
    On May 10, 1999, we received responses to our initial questionnaire 
from the GOI and from the Steel Authority of India (SAIL), the only 
producer and exporter of the subject merchandise. We issued 
supplemental questionnaires on June 3, 1999, and June 15, 1999. We 
received responses to these questionnaires on June 25, 1999, and July 
6, 1999.

Scope of Investigation

    The products covered by this investigation are certain hot-rolled 
carbon-quality steel: (1) Universal mill plates (i.e., flat-rolled 
products rolled on four faces or in a closed box pass, of a width 
exceeding 150 mm but not exceeding 1250 mm, and of a nominal or actual 
thickness of not less than 4 mm, which are cut-to-length (not in coils) 
and without patterns in relief), of iron or non-alloy-quality steel; 
and (2) flat-rolled products, hot-rolled, of a nominal or actual 
thickness of 4.75 mm or more and of a width which exceeds 150 mm and 
measures at least twice the thickness, and which are cut-to-length (not 
in coils).
    Steel products to be included in this scope are of rectangular, 
square, circular or other shape and of rectangular or non-rectangular 
cross-section where such non-rectangular cross-section is achieved 
subsequent to the rolling process (i.e., products which have been 
``worked after rolling'')--for example, products which have been 
beveled or rounded at the edges. Steel products that meet the noted 
physical characteristics that are painted, varnished or coated with 
plastic or other non-metallic substances are included within this 
scope. Also, specifically included in this scope are high strength, low 
alloy (HSLA) steels. HSLA steels are recognized as steels with micro-
alloying levels of elements such as chromium, copper, niobium, 
titanium, vanadium, and molybdenum.
    Steel products to be included in this scope, regardless of 
Harmonized Tariff Schedule of the United States (HTSUS) definitions, 
are products in which: (1) Iron predominates, by weight, over each of 
the other contained elements, (2) the carbon content is two percent or 
less, by weight, and (3) none of the elements listed below is equal to 
or exceeds the quantity, by weight, respectively indicated:

1.80 percent of manganese, or
1.50 percent of silicon, or
1.00 percent of copper, or
0.50 percent of aluminum, or
1.25 percent of chromium, or
0.30 percent of cobalt, or
0.40 percent of lead, or
1.25 percent of nickel, or
0.30 percent of tungsten, or
0.10 percent of molybdenum, or
0.10 percent of niobium, or
0.41 percent of titanium, or
0.15 percent of vanadium, or
0.15 percent zirconium.

    All products that meet the written physical description, and in 
which the chemistry quantities do not equal or exceed any one of the 
levels listed above, are within the scope of this investigation unless 
otherwise specifically excluded. The following products are 
specifically excluded from this investigation: (1) Products clad, 
plated, or coated with metal, whether or not painted, varnished or 
coated with plastic or other non-metallic substances; (2) SAE grades 
(formerly AISI grades) of series 2300 and above; (3) products made to 
ASTM A710 and A736 or their proprietary equivalents; (4) abrasion-
resistant steels (i.e., USS AR 400, USS AR 500); (5) products made to 
ASTM A202, A225, A514 grade S, A517 grade S, or their proprietary 
equivalents; (6) ball bearing steels; (7) tool steels; and (8) silicon 
manganese steel or silicon electric steel.
    The merchandise subject to this investigation is classified in the 
HTSUS under subheadings: 7208.40.3030, 7208.40.3060, 7208.51.0030, 
7208.51.0045, 7208.51.0060, 7208.52.0000, 7208.53.0000, 7208.90.0000, 
7210.70.3000, 7210.90.9000, 7211.13.0000, 7211.14.0030, 7211.14.0045, 
7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7225.40.3050, 
7225.40.7000, 7225.50.6000, 7225.99.0090, 7226.91.5000, 7226.91.7000, 
7226.91.8000, 7226.99.0000.
    Although the HTSUS subheadings are provided for convenience and 
Customs purposes, the Department's written

[[Page 40439]]

description of the merchandise under investigation is dispositive.

Scope Comments

    As stated in our notice of initiation, we set aside a period for 
parties to raise issues regarding product coverage. In particular, we 
sought comments on the specific levels of alloying elements set out in 
the description below, the clarity of grades and specifications 
excluded from the scope, and the physical and chemical description of 
the product coverage.
    On March 29, 1999, Usinor, a respondent in the French antidumping 
and countervailing duty investigations and Dongkuk Steel Mill Co., Ltd. 
and Pohang Iron and Steel Co., Ltd., respondents in the Korean 
antidumping and countervailing duty investigations (collectively the 
Korean respondents), filed comments regarding the scope of the 
investigations. On April 14, 1999, the petitioners responded to 
Usinor's and the Korean respondents' comments. In addition, on May 17, 
1999, ILVA S.p.A. (ILVA), a respondent in the Italian antidumping and 
countervailing duty investigations, requested guidance on whether 
certain products are within the scope of these investigations.
    Usinor requested that the Department modify the scope to exclude: 
(1) Plate that is cut to non-rectangular shapes or that has a total 
final weight of less than 200 kilograms; and (2) steel that is 4'' or 
thicker and which is certified for use in high-pressure, nuclear or 
other technical applications; and (3) floor plate (i.e., plate with 
``patterns in relief'') made from hot-rolled coil. Further, Usinor 
requested that the Department provide clarification of scope coverage 
with respect to what it argues are over-inclusive HTSUS subheadings 
included in the scope language.
    The Department has not modified the scope of these investigations 
because the current language reflects the product coverage requested by 
the petitioners, and Usinor's products meet the product description. 
With respect to Usinor's clarification request, we do not agree that 
the scope language requires further elucidation with respect to product 
coverage under the HTSUS. As indicated in the scope section of every 
Department antidumping and countervailing duty proceeding, the HTSUS 
subheadings are provided for convenience and Customs purposes only; the 
written description of the merchandise under investigation or review is 
dispositive.
    The Korean respondents requested confirmation whether the maximum 
alloy percentages listed in the scope language are definitive with 
respect to covered HSLA steels.
    At this time, no party has presented any evidence to suggest that 
these maximum alloy percentages are inappropriate. Therefore, we have 
not adjusted the scope language. As in all proceedings, questions as to 
whether or not a specific product is covered by the scope and should be 
timely raised with Department officials.
    ILVA requested guidance on whether certain merchandise produced 
from billets is within the scope of the current CTL plate 
investigations. According to ILVA, the billets are converted into wide 
flats and bar products (a type of long product). ILVA notes that one of 
the long products, when rolled, has a thickness range that falls within 
the scope of these investigations. However, according to ILVA, the 
greatest possible width of these long products would only slightly 
overlap the narrowest category of width covered by the scope of the 
investigations. Finally, ILVA states that these products have different 
production processes and properties than merchandise covered by the 
scope of the investigations and therefore are not covered by the scope 
of the investigations.
    As ILVA itself acknowledges, the particular products in question 
appear to fall within the parameters of the scope and, therefore, we 
are treating them as covered merchandise for purposes of these 
investigations.

The Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions of the Tariff Act of 1930, as amended by 
the Uruguay Round Agreements Act effective January 1, 1995 (the Act). 
In addition, unless otherwise indicated, all citations to the 
Department's regulations are to the current regulations as codified at 
19 CFR part 351 (1998) and to the substantive countervailing duty 
regulations published in the Federal Register on November 25, 1998 (63 
FR 65348) (CVD Regulations).

Injury Test

    Because India is a ``Subsidies Agreement country'' within the 
meaning of section 701(b) of the Act, the International Trade 
Commission (ITC) is required to determine whether imports of the 
subject merchandise from India materially injure, or threaten material 
injury to, a U.S. industry. On April 8, 1999, the ITC published its 
preliminary determination that there is a reasonable indication that an 
industry in the United States is being materially injured, or 
threatened with material injury, by reason of imports from India of the 
subject merchandise. See Certain Cut-To-Length Carbon-Quality Steel 
Plate from the Czech Republic, France, India, Indonesia, Italy, Japan, 
Korea, and Macedonia, 64 FR 17198 (April 8, 1999).

Alignment With Final Antidumping Duty Determination

    On July 2, 1999, the petitioners submitted a letter requesting 
alignment of the final determination in this investigation with the 
final determination in the companion antidumping duty investigation. 
See Initiation of Antidumping Duty Investigations: Certain Cut-to-
length Carbon-Quality Steel Plate from the Czech Republic, France, 
India, Indonesia, Italy, Japan, the Republic of Korea, and the Former 
Yugoslav Republic of Macedonia, 64 FR 12959 (March 16, 1999). 
Therefore, in accordance with section 705(a)(1) of the Act, we are 
aligning the final determination in this investigation with the final 
determinations in the antidumping duty investigations of cut-to-length 
plate.

Period of Investigation (POI)

    Because SAIL is the only exporter/producer of the subject 
merchandise, the POI for which we are measuring subsidies is the period 
for SAIL's most recently completed fiscal year, April 1, 1997 through 
March 31, 1998.

Subsidies Valuation Information

Allocation Period

    Section 351.524(d)(2) of the CVD Regulations states that we will 
presume the allocation period for non-recurring subsidies to be the 
average useful life (AUL) of renewable physical assets for the industry 
concerned, as listed in the Internal Revenue Service's (IRS) 1977 Class 
Life Asset Depreciation Range System and updated by the Department of 
Treasury. The presumption will apply unless a party claims and 
establishes that these tables do not reasonably reflect the AUL of the 
renewable physical assets for the company or industry under 
investigation, and the party can establish that the difference between 
the company-specific or country-wide AUL for the industry under 
investigation is significant.
    In this investigation, no party to the proceeding has claimed that 
the AUL listed in the IRS tables does not reasonably reflect the AUL of 
the renewable physical assets for the firm or industry under 
investigation. Therefore, according to Sec. 351.524(d)(2) of the CVD

[[Page 40440]]

Regulations, we have allocated SAIL's non-recurring benefits over 15 
years, the AUL listed in the IRS tables for the steel industry.

Benchmarks for Loans and Discount Rate

    For those programs which require the application of a short-term 
interest rate benchmark, we used as our benchmark a company-specific, 
short-term commercial interest rate for both rupee-and U.S. dollar-
denominated loans for the POI as reported by SAIL. Where a long-term 
interest-rate benchmark was required, the selection of a benchmark is 
specified in the program-specific sections of this notice.
    In addition, because SAIL did not report rupee-denominated long-
term commercial loans, we could not use a company-specific interest 
rate as our discount rate. Therefore, the discount rate used was the 
lending rate on rupee lending from private creditors as reported in the 
International Financial Statistics.

I. Programs Preliminarily Determined To Be Countervailable

A. Duty Entitlement Passbook Scheme (DEPS)
    In its May 10, 1999, response to the Department's original 
questionnaire, the GOI submitted copies of two publically available 
Ministry of Commerce publications--``Export and Import Policy'' and 
``Handbook of Procedures'' (see Exhibits P and Q of the public version 
on file in room B-099 of the Main Commerce Building ). These 
publications set forth the rules and regulations of the several 
programs which allow duty exemptions on imports. Chapter 7 of the 
``Export and Import Policy'' contains the details of India's Duty 
Exemption Scheme, which consists of the DEPS and ``Duty Free Licenses'' 
(Advance Licenses, Advance Intermediate Licenses, and Special Imprest 
Licenses).
    The DEPS formerly was the Passbook Scheme (PBS), which was enacted 
on April 1, 1995, under the auspices of the Directorate General of 
Foreign Trade (DGFT). Under the PBS, GOI-designated manufacturers/
exporters, upon export of finished goods, could claim credits on 
certain imported inputs which could be used to pay customs duties on 
subsequent imports. The amount of credit granted was determined 
according to the GOI's ``Standard Input/Output'' (SIO) norm schedule 
that established the quantities of normally imported raw materials used 
to produce one unit of the finished product. Using the SIO norm 
schedule, the GOI granted a credit based on an estimation of the 
customs duty that would have otherwise been charged absent the program. 
Rather than receiving the import duty refund in cash, participating 
companies received their credits in the form of a ``passbook'' from the 
DGFT which, in turn, could be used to pay import duties on subsequent 
GOI-approved imports by means of a debit entry in the company's 
passbook. According to the GOI, the passbook program was discontinued 
on April 1, 1997. However, exporters may continue to use a passbook 
credit that was issued prior to the termination for a period of up to 
three years after the issuance date. Thus, exporters can, conceivably, 
continue to use credits earned under the PBS program until their 
credits have been used up or until March 31, 2000. SAIL has reported 
that it did not use or receive credits under the PBS during the POI.
    On the same date that the PBS was terminated, the GOI enacted the 
DEPS. Under the DEPS, exporters are eligible to receive a specified 
percentage of duty credits against the f.o.b. value of their exports. 
As with the PBS, the GOI determines the amount of credit that can be 
applied towards a company's remission of import duties according to the 
GOI's SIO norm schedule, which sets forth the average amount of inputs 
imported for the manufacture of a specific product and the average 
amount of duty payable on those imported inputs.
    Under the DEPS, an exporter may obtain credits on a pre-export or 
post-export basis. Eligibility for the DEPS pre-export program is 
limited to manufacturers/exporters that have exported for a three year 
period prior to applying for the program. A pre-export credit is capped 
at five percent of the average export performance of the applicant 
during the preceding three years. The GOI and the company have stated 
that SAIL did not use or receive DEPS pre-export credits during the 
POI.
    All exporters are eligible to participate in the DEPS post-export 
program, provided that the exported product is listed in the GOI's SIO 
norm schedule. According to the GOI, post-export DEPS credits allow 
exporters to receive exemptions on any subsequent import regardless of 
whether it is incorporated into the production of an export product. In 
addition, credits earned under the DEPS post-export program are valid 
for 12 months and are freely transferable. During the POI, SAIL 
received and used post-export DEPS credits.
    Section 351.519 of the CVD Regulations sets forth the criteria 
regarding the remission, exemption or drawback of import duties. Under 
351.519(a)(4), the entire amount of an import duty exemption is 
countervailable if the government does not have in place a system or 
procedure to confirm which imports are consumed in the production of 
the exported product, or if the government has not carried out an 
examination of actual imports involved to confirm which imports are 
consumed in the production of the exported product.
    According to the GOI, once a post-export DEPS credit is earned, 
companies may use the credit for the exemption of duties on any import 
regardless of whether the import is consumed in the production of an 
export product. Because the GOI reported that exporters are free to use 
products imported with post-export DEPS credits without restriction, we 
preliminary determine that the GOI does not have a system in place to 
confirm that imports are consumed in the production of an exported 
product, nor has it carried out such an examination. Consequently, 
under Sec. 351.519(a)(4) of the CVD Regulations, the entire amount of 
the import duty exemption provides a benefit. Furthermore, a financial 
contribution, as defined under section 771(5)(D)(ii) of the Act, is 
provided under the program because the GOI is foregoing customs duties. 
In addition, this program can only be used by exporters, and, thus, the 
subsidy is specific under section 771(5A)(A) of the Act.
    SAIL reported its receipt of DEPS post-export credits during the 
POI for exports of subject merchandise to the United States and the 
application fees it paid in order to receive the credits. We 
preliminarily determine that the fees paid qualify as an ``* * * 
application fee, deposit, or similar payment paid in order to qualify 
for, or to receive, the benefit of the countervailable subsidy.'' See 
section 771(6)(A) of the Act. Thus, to calculate the subsidy, we have 
calculated the amount of DEPS import duty exemptions received by SAIL 
and the amount of revenue earned on DEPS export credits which have been 
sold by SAIL during the POI that were attributable to exports of 
subject merchandise to the United States (less the applicable fees 
paid). We then divided that amount by SAIL's total exports of subject 
merchandise to the United States during the POI. On this basis, we 
preliminarily determine the net countervailable subsidy to be 0.55 
percent ad valorem.
B. Advance Licenses
    Under India's Duty Exemption Scheme, companies may also import

[[Page 40441]]

inputs duty-free through the use of import licenses. Using advance 
licenses, companies are able to import inputs ``required for the 
manufacture of goods'' without paying India's basic customs duty (see 
chapter 7 of ``Export and Import Policy''). Advance intermediate 
licenses and special imprest licenses are also used to import inputs 
duty-free. During the POI, SAIL used advance licences and also sold 
some advance licenses. SAIL reported that it did not use or sell any 
advance intermediate licenses or special imprest licenses during the 
POI.
    In Certain Iron-Metal Castings from India: Final Results of 
Countervailing Duty Administrative Review, 62 FR 32297, 32306 (June 13, 
1997) (1994 Castings), the Department found that the advance licenses 
system accomplished, in essence, what a drawback system is intended to 
accomplish, i.e., finished products produced with imported inputs are 
allowed to be exported free of the import duties assessed on the 
imported inputs. The Department concluded that, because the imported 
inputs were used to produce castings which were subsequently exported, 
the duty-free importation of these inputs under the advance license 
program did not constitute a countervailable subsidy. See 1994 Castings 
62 FR at 32306.
    Subsequently, in Certain Iron-Metal Castings from India: Final 
Results of Countervailing Duty Administrative Review, 63 FR 64050, 
64058-59 (Nov. 18, 1998) (1996 Castings), we stated that we would 
reevaluate the program in light of new information as to how the 
program operates. In the petition, petitioners provided new substantive 
information which indicated that the GOI does not value the licenses 
according to the inputs actually consumed in the production of the 
exported good. Based on this information, we initiated a reexamination 
of the advanced license program.
    As stated earlier, Sec. 351.519 of the CVD Regulations sets the 
criteria used to determine whether programs which provide for the 
remission, exemption, or drawback of import duties are countervailable. 
Under Sec. 351.519(a)(4), the government must have a system in place or 
must carry out an examination to confirm that inputs are consumed in 
the production of the exported product. Absent these procedures, the 
entire amount of the import duty exemption provides a countervailable 
benefit.
    Because the GOI reported in its questionnaire response that 
products imported under an advance license need not be consumed in the 
production of the exported product, we preliminarily determine that the 
GOI has no system in place to confirm that the inputs are consumed in 
the production of the exported product, nor has the GOI carried out 
such an examination. Consequently, under Sec. 351.519(a)(4) of the CVD 
Regulations, the entire amount of the duty exemption under the advance 
licenses program is countervailable. Because only exporters can receive 
advance licenses, this program constitutes an export subsidy under 
section 771(5A)(B) of the Act. In addition, a financial contribution is 
provided by the program under section 771(5)(D)(ii) of the Act.
    The GOI also allows companies to sell advance licenses to other 
companies in India. The Department has previously determined that the 
sale of import licenses constitutes a countervailable export subsidy. 
See, e.g., 1996 Castings and 1994 Castings. No new substantive 
information or evidence of changed circumstances has been submitted in 
this proceeding to warrant reconsideration of this determination. 
Therefore, in accordance with section 771(5A)(B) of the Act, we 
continue to find that this program constitutes an export subsidy and 
that the financial contribution in the form of the revenue received on 
the sale of licenses constitutes the benefit.
    SAIL reported the advance licenses it used and sold during the POI 
which it received for exports of subject merchandise to the United 
States and the application fees it paid in order to receive these 
licenses. We preliminarily determine that the fees paid qualify as an 
``* * * application fee, deposit, or similar payment paid in order to 
qualify for, or to receive, the benefit of the countervailable 
subsidy.'' See section 771(6)(A) of the Act. Under Sec. 351.524(c) of 
the CVD Regulations, this program provides a recurring benefit. 
Therefore, to calculate the subsidy for the Advance Licenses program, 
we added the values of the import duty exemptions realized by SAIL from 
its use of advance licenses during the POI (net of application fees) 
and the proceeds it realized from sales of advance licenses during the 
POI (net of application fees). We then divided this total by the value 
of SAIL's exports of subject merchandise to the United States during 
the POI. On this basis, we preliminarily determine the net 
countervailable subsidy to be 12.90 percent ad valorem.
C. Special Import Licenses (SILs)
    During the POI, SAIL sold through public auction two other types of 
import licenses--SILs for Quality and SILs for Star Trading Houses. 
SILs for Quality are licenses granted to exporters which meet 
internationally-accepted quality standards for their products, such as 
IS0 9000 (series) and ISO 14000 (series). SILs for Star Trading Houses 
are licenses granted to exporters that meet certain export targets. 
Both types of SILs permit the holder to import products listed on a 
``Restricted List of Imports'' in amounts up to the face value of the 
SIL but do not relieve the importer of import duties.
    SAIL reported that it sold SILs during the POI. As explained above, 
the Department's practice is that the sale of special import licenses 
constitutes an export subsidy because companies received these licenses 
based on their status as exporters. See, e.g., 1996 Castings and 1994 
Castings. No new substantive information or evidence of changed 
circumstances has been submitted in this proceeding to warrant 
reconsideration of this determination. Therefore, in accordance with 
section 771(5A)(B) of the Act, we continue to find that this program 
constitutes a countervailable export subsidy, and the financial 
contribution in the form of the revenue received on the sale of 
licenses constitutes the benefit.
    During the POI, SAIL sold numerous SILs. Because the receipt of 
SILs cannot be segregated by type or destination of export, we 
calculated the subsidies by dividing the total amount of proceeds 
received from the sales of these licenses by the value of SAIL's total 
exports. On this basis, we preliminarily determine the net 
countervailable subsidy be 0.15 percent ad valorem.
D. Export Promotion Capital Goods Scheme (EPCGS)
    The EPCGS provides for a reduction or exemption of customs duties 
and an exemption from excise taxes on imports of capital goods. Under 
this program, producers may import capital goods at reduced rates of 
duty by undertaking to earn convertible foreign exchange equal to four 
to six times the value of the capital goods within a period of five to 
eight years. For failure to meet the export obligation, a company is 
subject to payment of all or part of the duty reduction, depending on 
the extent of the export shortfall, plus penalty interest.
    In the Final Negative Countervailing Duty Determination: Elastic 
Rubber Tape From India, 64 FR 19125 (April 19, 1999) (ERT), we 
determined that the import duty reduction provided under the EPCGS was 
a countervailable export subsidy. See ERT 64 FR at 19129-30. We also 
determined that the exemption from the excise tax provided under this 
program was not countervailable. See ERT 64 FR at 19130. No new

[[Page 40442]]

information or evidence of changed circumstances have been provided to 
warrant a reconsideration of these determinations. Therefore, we 
continue to find that import duty reductions provided under the EPCGS 
to be countervailable export subsidies.
    SAIL reported that it imported machinery under the EPCGS during the 
POI and in the years prior to the POI. For some of its imported 
machinery, SAIL met its export commitments prior to the POI. Therefore, 
the amount of duty for which it had claimed exemption has been 
completely waived by the GOI. However, SAIL has not completed its 
export commitments for other imports of capital machinery. Therefore, 
although SAIL received a reduction in import duties when the capital 
machinery was imported, the final waiver on the potential obligation to 
repay the duties has not yet been made by the GOI.
    We preliminary determine that SAIL benefitted in two ways by 
participating in this program during the POI. The first benefit 
received by SAIL under this program is the benefit on the import duty 
reductions received on imported capital equipment which has been 
formally waived by the GOI because SAIL met its export requirements 
with respect to those imports. Prior to the POI, SAIL met its export 
requirements for certain capital imports it made under the EPCGS and, 
therefore, upon that fulfillment, the GOI formally waived the unpaid 
duties on those imports. Because the GOI has formally waived the unpaid 
duties on these imports, we have treated the full amount of the duty 
exemption as a grant received in the year the export requirement for 
the import was met since that was the year the final waiver of unpaid 
duties was received.
    Section 351.524 of the CVD Regulations specifies the criteria to be 
used by the Department in determining how to allocate the benefits from 
a countervailable subsidy program. Under the CVD Regulations, recurring 
benefits will be expensed in the year of receipt, while non-recurring 
benefits will be allocated over time. In this investigation, non-
recurring benefits will be allocated over 15 years, the AUL of assets 
used by the steel industry as reported in the IRS tables.
    Normally, tax benefits are considered to be recurring benefits and 
are expensed in the year of receipt. Since import duties are a type of 
tax, the benefit provided under this program is a tax benefit, and, 
thus, normally would be considered a recurring benefit. However, the 
CVD Regulations recognize that under certain circumstances it may be 
more appropriate to allocate the benefits of a program traditionally 
considered as a recurring subsidy, rather than to expense the benefits 
in the year of receipt. For example, Sec. 351.524(c)(2) of the CVD 
Regulations allows a party to claim that a recurring subsidy should be 
treated as a non-recurring subsidy and enumerates the criteria to be 
used by the Department in evaluating that claim. In addition, in the 
Explanation of the Final Rules (the Preamble) to the CVD Regulations, 
the Department provides an example of when it may be more appropriate 
to consider the benefits of a tax program non-recurring, and, thus, 
allocate those benefits over time. In the Preamble to the CVD 
Regulations we stated that if a government provides an import duty 
exemption tied to major capital equipment purchases, such as the 
program at issue here, that it may be appropriate to conclude that, 
because these duty exemptions are tied to capital assets, the benefits 
from such duty exemptions should be considered non-recurring, even 
though import duty exemptions are on the list of recurring subsidies. 
See CVD Regulations, 63 FR at 65393. Therefore, because the benefit 
received from the waiver of import duties under the EPCGS program is 
tied to the capital assets of SAIL, we consider the benefit to be non-
recurring. Accordingly, we have allocated the benefit from this program 
over the average useful life of assets in the industry, as set forth in 
the ``Subsidies Valuation Information'' section, above.
    The second type of benefit received under this program was provided 
by the import duty reductions received on imports of capital equipment 
for which SAIL had not yet met its export requirements. For those 
capital equipment imports, we determine that SAIL had unpaid duties 
which formally had not been waived by the GOI. Thus, the company had 
outstanding contingent liabilities during the POI. When a company has 
an outstanding liability and repayment of that liability is contingent 
upon subsequent events, our practice is to treat any balance on that 
unpaid liability as an interest-free loan. See Sec. 351.505(d)(1) of 
the CVD Regulations.
    In this investigation, the amount of contingent liability which 
would be treated as an interest-free loan is the amount of the import 
duty reduction received by SAIL, but not yet finally waived by the GOI. 
Thus, for duty reductions received on imports of capital equipment for 
which SAIL had not yet met its export requirements, we consider the 
full amount of SAIL's unpaid customs duty on those imports which are 
outstanding during the POI to be an interest-free loan. We calculated 
this portion of the benefit as the interest that SAIL would have paid 
during the POI had it borrowed the full amount of the duty reduction at 
the benchmark rate. Pursuant to Sec. 351.505(d)(1) of the CVD 
Regulations, we used a long-term interest rate as our benchmark for 
measuring the subsidy because the event upon which repayment of the 
duties depends (i.e., the date of expiration of the time period for 
SAIL to fulfill its export commitments) occurs at a point in time more 
than one year after the date the capital goods were imported. Because 
SAIL did not report any rupee-denominated long-term loans for the year 
in which SAIL imported the capital equipment, we could not use a 
company-specific benchmark interest rate as a discount rate in 
calculating the benefit provided to SAIL under this program. Thus, we 
used, as the discount rate, the lending rate on rupee-lending from 
private creditors, which is published in International Financial 
Statistics.
    To calculate the subsidy, we divided the combined benefit allocable 
to the POI by SAIL's total exports from its Bhilai facility during the 
POI because SAIL only reported the capital equipment imported under the 
EPCGS for the Bhilai facility. (We used this methodology for the 
purpose of the preliminary determination because SAIL only reported the 
capital equipment imported under the EPCGS by the Bhilai facility, the 
only plant which produced the subject merchandise exported to the 
United States. We are seeking additional information on all import duty 
exemptions on imports of all capital equipment by SAIL for purposes of 
the final determination). On this basis, we preliminarily determine the 
net countervailable subsidy to be 0.25 percent ad valorem.
E. Pre-shipment and Post-shipment Export Financing
    The Reserve Bank of India (RBI), through commercial banks, provides 
short-term pre-shipment financing, or ``packing credits,'' to 
exporters. Upon presentation of a confirmed export order or letter of 
credit to a bank, companies may receive pre-shipment loans for working 
capital purposes, i.e., for the purchase of raw materials, warehousing, 
packing, and transporting of export merchandise. Exporters may also 
establish pre-shipment credit lines upon which they may draw as needed. 
Credit line limits are established by commercial banks, based upon a 
company's creditworthiness and past export performance, and may be

[[Page 40443]]

denominated in either Indian rupees or in foreign currency. Companies 
that have pre-shipment credit lines typically pay interest on a 
quarterly basis on the outstanding balance of the account at the end of 
each period.
    Commercial banks extending export credit to Indian companies must, 
by law, charge interest on this credit at rates determined by the RBI. 
During the POI, the rate of interest charged on pre-shipment, rupee-
denominated export loans up to 180 days was 12.0 and 13.0 percent. For 
those loans over 180 days and up to 270 days, banks charged interest at 
15.0 percent. The interest charged on foreign currency denominated 
export loans up to 180 days during the POI was a 6-month LIBOR rate 
plus 2.0 percent for banks with foreign branches, or plus 2.5 percent 
for banks without foreign branches. For those foreign currency 
denominated loans exceeding 180 days and up to 270 days, the interest 
charged was 6-month LIBOR plus 4.0 percent for banks with foreign 
branches, or plus 4.5 percent for banks without foreign branches. 
Exporters did not receive the concessional interest rate if the loan 
was beyond 270 days.
    Post-shipment export financing consists of loans in the form of 
discounted trade bills or advances by commercial banks. Exporters 
qualify for this program by presenting their export documents to their 
lending bank. The credit covers the period from the date of shipment of 
the goods, to the date of realization of export proceeds from the 
overseas customer. Post-shipment financing is, therefore, a working 
capital program used to finance export receivables. This financing is 
normally denominated in either rupees or in foreign currency, except 
when an exporter used foreign currency pre-shipment financing, then the 
exporter is restricted to post-shipment export financing denominated in 
the same foreign currency.
    In general, post-shipment loans are granted for a period of no more 
than 180 days. The interest rate charged on these foreign currency 
denominated loans during the POI was LIBOR plus 2.0 percent for banks 
with overseas branches or LIBOR plus 2.5 percent for banks without 
overseas branches. For loans not repaid within the due date, exporters 
lose the concessional interest rate on this financing.
    The Department has previously found both pre-shipment export 
financing and post-shipment export financing to be countervailable, 
because receipt of export financing under these programs was contingent 
upon export performance and the interest rates were lower than the 
rates the exporters would have paid on comparable commercial loans. 
See, e.g., 1995 Castings, 62 FR at 32998. No new substantive 
information or evidence of changed circumstances has been submitted in 
this investigation to warrant reconsideration of this finding. 
Therefore, in accordance with section 771(5A)(B) of the Act, we 
continue to find that pre-and post-shipment export financing constitute 
countervailable export subsidies.
    To determine the benefit conferred under the pre-export financing 
program for rupee-denominated loans, we compared the interest rate 
charged on these loans to a benchmark interest rate. SAIL reported 
that, during the POI, it received and paid interest on commercial, 
short-term, rupee-denominated cash credit loans which were not provided 
under a GOI program. Cash credit loans are the most comparable type of 
short-term loans to use as a benchmark because like the pre-export 
loans received under this program, cash credit loans are denominated in 
rupee and take the form of a line of credit which can be drawn down by 
the recipient. Thus, we used these loans to calculate a company-
specific, weighted-average, rupee-denominated benchmark interest rate. 
We compared this company-specific benchmark rate to the interest rates 
charged on SAIL's pre-shipment rupee loans and found that the interest 
rates charged were lower than the benchmark rates. Therefore, in 
accordance with section 771(5)(E)(ii) of the Act, this program 
conferred countervailable benefits during the POI because the interest 
rates charged on these loans were less than what a company otherwise 
would have had to pay on a comparable short-term commercial loan.
    To calculate the benefit from these pre-shipment loans, we compared 
the actual interest paid on the loans with the amount of interest that 
would have been paid at the benchmark interest rate. Where the 
benchmark interest exceeded the actual interest paid, the difference is 
the benefit. We then divided the total amount of benefit by SAIL's 
total exports. On this basis, we preliminarily determine the net 
countervailable subsidy to be 0.10 percent ad valorem.
    During the POI, SAIL also took out U.S. pre-and post-shipment 
export financing denominated in U.S. dollars. To determine the benefit 
conferred from this non-rupee pre-and post-shipment export financing, 
we again compared the program interest rates to a benchmark interest 
rate. We used the company-specific interest rates from SAIL's ``bankers 
acceptance facility'' loans to derive the benchmark. SAIL's bankers 
acceptance facility loans were the only commercial short-term dollar 
lending received by the company during the POI. Because the effective 
rates paid by the exporters are discounted rates, we derived from the 
bankers acceptance facility rates a discounted weighted-average, 
dollar-denominated benchmark. We compared this company-specific 
benchmark rate to the interest rates charged on pre-shipment and post-
shipment dollar-denominated loans and determined that the program 
interest rates were higher than the benchmark rate. Therefore, we 
preliminarily determine that SAIL did not benefit from dollar-
denominated pre-and post-shipment export financing during the POI.
F. Loan Guarantees From the GOI
    In its questionnaire response, the GOI reported that it has not 
extended loan guarantees pursuant to any program per se. Rather, the 
Ministry of Finance extends loan guarantees to selected Indian 
companies on an ad hoc basis, normally to public sector companies in 
particular industries. The GOI also reported that GOI loan guarantees 
are not contingent on export performance nor are they contingent on the 
use of domestic over imported goods. The GOI stated that, while it has 
not extended loan guarantees to the steel sector since 1992, it 
continues to extend loan guarantees to other industrial sectors on an 
ad hoc basis.
    During the POI, SAIL had outstanding several long-term, foreign 
currency loans on which it received loan guarantees from the GOI. These 
loans originated from both foreign commercial banks and international 
lending/development institutions. According to SAIL, the loan 
guarantees were earmarked for certain activities related to the 
company's steel production (i.e. worker training, modernization 
activities, etc.). In contradiction to the GOI's response, SAIL 
reported that it finalized its loan agreements, and, thus, its loan 
guarantees as late as 1994.
    Section 351.506 of the CVD Regulations states that in the case of a 
loan guarantee, a benefit exists to the extent that the total amount a 
firm pays for the loan with a government-provided guarantee is less 
than the total amount the firm would pay for a comparable commercial 
loan that the firm could actually obtain on the market absent the 
government-provided guarantee, including any differences in guarantee 
fees. Thus, to determine whether this program confers a benefit, we 
compared the total amount SAIL paid, including effective interest and 
guarantee fees, on

[[Page 40444]]

each of its outstanding foreign currency loans with the total amount it 
would have paid on a comparable commercial loan.
    According to SAIL's response, the original loan amounts were 
denominated in foreign currencies. However, SAIL only reported the 
rupee-denominated payments on these loans, and reported only a 
weighted-average interest rate on these loans derived from these rupee 
payments. Therefore, for this preliminary determination, we are unable 
to use a foreign currency benchmark to calculate the benefit conferred 
by these loan guarantees. (We also note that SAIL did not report any 
non-GOI guaranteed long-term foreign currency loans, thus, even if SAIL 
had properly reported the interest rates charged on these loans, we 
could not use a company-specific benchmark interest rate.) SAIL also 
did not report any long-term rupee loans from commercial sources. 
Therefore, we used as the benchmark the long-term interest rate for 
loans denominated in rupees from private creditors, which is published 
in International Financial Statistics. (We are seeking additional 
information from SAIL on the actual fees charged on these guarantees. 
We will also seek information on interest rates and guarantee fees 
charged by commercial banks on foreign currency loans provided within 
India.)
    Using these two rates for comparison purposes, we found that the 
total amount paid by SAIL on the GOI guaranteed loans was less than 
what the company would have paid on a comparable commercial loan. Thus, 
we preliminary determine that the loan guarantees from the GOI 
conferred a benefit upon SAIL. We preliminarily determine that this 
program is specific under section 771(5A)(D)(iii)(II) of the Act 
because it is limited to certain companies selected by the GOI on an ad 
hoc basis. In addition, a financial contribution is provided under the 
program as defined under section 771(5)(D)(i) of the Act. To calculate 
the subsidy, we divided the benefit calculated from the loan guarantees 
by SAIL's total sales during the POI. On this basis, we preliminarily 
determine the net countervailable subsidy to be 0.50 percent ad 
valorem.
    We did not include in our calculations the loans which originated 
from international lending/development institutions. According to 
Sec. 351.527 of the CVD Regulations, the Department does not generally 
consider loans provided by international lending/development 
institutions such as the World Bank to be countervailable. However, we 
will continue to consider the issue for the final determination.

II. Program Preliminarily Determined To Be Not Countervailable

Government of India (GOI) Loans through the Steel Development Fund 
(SDF)
    The SDF was established in 1978 at a time when the steel sector was 
subject to price and distribution controls. From 1978 through 1994, an 
SDF levy was imposed on all sales made by India's integrated producers. 
The proceeds from this levy were then remitted to the Joint Plant 
Committee (JPC), the administrating authority consisting of four major 
integrated steel producers in India that have contributed to the fund 
over the years. The GOI reported in its questionnaire response that 
these levies, interest earned on loans, and repayments of loans due are 
the only sources of funds for the SDF.
    Under the SDF program, companies that have contributed to the fund 
are eligible to take out long-term loans from the fund at favorable 
rates. All loan requests are subject to review by the JPC along with 
the Development Commission for Iron and Steel. In its questionnaire 
response, the GOI has claimed that it has never contributed any funds, 
either directly or indirectly, to the SDF. Thus, we preliminarily 
determine that the SDF program is not countervailable because it does 
not constitute a financial contribution as defined under section 
771(5)(D)(ii) of the Act.

III. Programs Preliminarily Determined To Be Not Used

    Based upon the information provided in the responses, we 
preliminarily determine that SAIL did not apply for or receive benefits 
under the following programs during the POI:

A. Passbook Scheme
B. Advanced Intermediate Licenses
C. Special Imprest Licenses
D. Tax Exemption for Export Profits (Section 80 HHC of the India Tax 
Act)

Verification

    In accordance with section 782(i) of the Act, we will verify the 
information submitted by respondents prior to making our final 
determination.

Suspension of Liquidation

    In accordance with section 703(d)(1)(A)(i) of the Act, we have 
calculated an individual rate for the company under investigation--
SAIL. We will use this rate for purposes of the ``all others'' rate.

------------------------------------------------------------------------
          Producer/exporter                    Net subsidy rate
------------------------------------------------------------------------
Steel Authority of India (SAIL).....  14.45% ad valorem.
All Others..........................  14.45% ad valorem.
------------------------------------------------------------------------

    In accordance with section 703(d) of the Act, we are directing the 
U.S. Customs Service to suspend liquidation of all entries of the 
subject merchandise from India, which are entered or withdrawn from 
warehouse, for consumption on or after the date of the publication of 
this notice in the Federal Register, and to require a cash deposit or 
bond for such entries of the merchandise in the amounts indicated 
above. This suspension will remain in effect until further notice.

ITC Notification

    In accordance with section 703(f) of the Act, we will notify the 
ITC of our determination. In addition, we are making available to the 
ITC all nonprivileged and nonproprietary information relating to this 
investigation. We will allow the ITC access to all privileged and 
business proprietary information in our files, provided the ITC 
confirms that it will not disclose such information, either publicly or 
under an administrative protective order, without the written consent 
of the Assistant Secretary for Import Administration.
    If our final determination is affirmative, the ITC will make its 
final determination within 45 days after the Department makes its final 
determination.

Public Comment

    In accordance with 19 CFR 351.310, we will hold a public hearing, 
if requested, to afford interested parties an opportunity to comment on 
this preliminary determination. The hearing is tentatively scheduled to 
be held 57 days from the date of publication of the preliminary 
determination at the U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW, Washington, DC 20230. Individuals who wish to 
request a hearing must submit a written request within 30 days of the 
publication of this notice in the Federal Register to the Assistant 
Secretary for Import Administration, U.S. Department of Commerce, Room 
1870, 14th Street and Constitution Avenue, NW, Washington, DC 20230. 
Parties should confirm by telephone the time, date, and place of the 
hearing 48 hours before the scheduled time.
    Requests for a public hearing should contain: (1) The party's name, 
address, and telephone number; (2) the number of participants; and, (3) 
to the extent

[[Page 40445]]

practicable, an identification of the arguments to be raised at the 
hearing. In addition, six copies of the business proprietary version 
and six copies of the nonproprietary version of the case briefs must be 
submitted to the Assistant Secretary no later than 50 days from the 
date of publication of the preliminary determination. As part of the 
case brief, parties are encouraged to provide a summary of the 
arguments not to exceed five pages and a table of statutes, 
regulations, and cases cited. Six copies of the business proprietary 
version and six copies of the nonproprietary version of the rebuttal 
briefs must be submitted to the Assistant Secretary no later than 5 
days from the date of filing of case briefs. An interested party may 
make an affirmative presentation only on arguments included in that 
party's case or rebuttal briefs. Written arguments should be submitted 
in accordance with 19 CFR 351.309 and will be considered if received 
within the time limits specified above.
    This determination is published pursuant to sections 703(f) and 
777(i) of the Act.

    Dated: July 16, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-18856 Filed 7-23-99; 8:45 am]
BILLING CODE 3510-DS-P