[Federal Register Volume 64, Number 218 (Friday, November 12, 1999)]
[Notices]
[Pages 61592-61602]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-29204]


-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

International Trade Administration
[C-533-063]


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

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

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

-----------------------------------------------------------------------

SUMMARY: The Department of Commerce is conducting an administrative 
review of the countervailing duty order on certain iron-metal castings 
from India. The period covered by this administrative review is January 
1, 1997 through December 31, 1997. For information on the net 
countervailable subsidy rate for each reviewed company, as well as for 
all non-reviewed companies, please see the Preliminary Results of 
Review section of this notice. If the final results remain the same as 
these preliminary results of administrative review, we will instruct 
the U.S. Customs Service to assess countervailing duties as detailed in 
the Preliminary Results of Review section of this notice. Interested 
parties are invited to comment on these preliminary results. (See 
Public Comment section of this notice.)

EFFECTIVE DATE: November 12, 1999.

FOR FURTHER INFORMATION CONTACT: Kristen Johnson or Michael Grossman, 
Office of CVD/AD Enforcement VI, Group II, 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 October 16, 1980, the Department of Commerce (the Department) 
published in the Federal Register (45 FR 50739) the countervailing duty 
order on certain iron-metal castings from India. On October 14, 1998, 
the Department notified all interested parties of the opportunity to 
request an administrative review of this order. We received timely 
requests for review, and we initiated a review covering the period 
January 1, 1997 through December 31, 1997, on November 30, 1998 (63 FR 
65748).
    In accordance with 19 CFR 351.213(b), this review covers only those 
producers or exporters of the subject merchandise for which a review 
was specifically requested. The producers/exporters of the subject 
merchandise for which the review was requested are:

AGV Exports,
Agarwal Hardware,
Ambika Exports,
Bengal Export Corporation,
Bengal Iron Corporation,
Bhagyadevi Factory,
Calcutta Ferrous Ltd.,
Carnation Enterprise Pvt. Ltd.,
Carnation Industries,1
---------------------------------------------------------------------------

    \1\ Carnation Industries was formerly Carnation Enterprise Pvt. 
Ltd.
---------------------------------------------------------------------------

Commex Corporation,
Crescent Foundry Co. Pvt. Ltd.,
Delta Enterprises,
Delta Corporation Ltd.,
Dinesh Brothers Pvt. Ltd.,
Dugar International,
Edcons Castings,
Essen International,
Ganapati Suppliers,
Global Intertrade,
Hargolal & Sons,
Hindustahn Malleables & Forgings Ltd.,
J.K. Udyog,
Kajaria Iron Castings Ltd.,2
---------------------------------------------------------------------------

    \2\ Kajaria Iron Castings Ltd. was formerly Kajaria Iron 
Castings Pvt. Ltd.
---------------------------------------------------------------------------

Kajaria Iron Castings Pvt. Ltd.,
Kauntia Exports,
Kejriwal Iron & Steel Works,
Kiswok Industries Pvt. Ltd.,3
---------------------------------------------------------------------------

    \3\ Kiswok Industries Pvt. Ltd. was formerly Kejriwal Iron & 
Steel Works.
---------------------------------------------------------------------------

Metflow Corporation Pvt. Ltd.,
Nandikeshwari Iron Foundry Pvt. Ltd.,
Orissa Metal Industries,
Overseas Iron Foundry Pvt. Ltd.,
Rangilal & Sons,
RBA Exports,
R.B. Agarwalla & Company,
R.B. Agarwalla & Company Pvt. Ltd.,
RR Enterprise,
RSI Limited,
RS Ispat Pvt. Ltd.,
Samitex Corporation,
Sammitex,
Serampore Industries Pvt. Ltd.,
Shakti Isabgel Industries,
Shree Hanuman Foundry & Engineering Co. Ltd.,
Shree Rama Enterprises,
Shree Uma Foundries Pvt. Ltd.,
Siko Exports,
Sitaram Maohogarhia & Sons Pvt. Ltd.,
Sociedad J.B. Nagar,
SSL Exports,
Super Iron Foundry,
Tara Engineering Works,
Thames Engineering,
Tirupati International Pvt. Ltd.,
Trident Industries,
Trident International,
Uma Iron & Steel, and
Victory Castings Ltd.

    The following companies, for which a review was requested, 
certified that they either do not produce or did not export the subject 
merchandise to the United States during the period of review (POR): AGV 
Exports, Agarwal Hardware Works & Foundries Pvt. Ltd., Ambika Exports, 
Bengal Iron Corporation, Bhagyadevi Factory, Delta Enterprises, Edcons 
Castings Pvt. Ltd., Essen International, Hargolal & Sons, Hindustahn 
Malleables & Forgings Ltd., J.K. Udyog, Kauntia Exports, Metflow 
Corporation Pvt. Ltd., Orissa Metal Industries, Overseas Iron Foundry 
Pvt. Ltd., RBA Exports, R.B. Agarwalla & Company Pvt. Ltd., RR 
Enterprise, RS Ispat Pvt. Ltd., Samitex Corporation, Sammitex, Shree 
Hanuman Foundry & Engineering Co. Ltd., Shree Rama Enterprises, Shree 
Uma Foundries Pvt. Ltd., Siko Exports, Sitaram Madhogarhia & Sons Pvt. 
Ltd., Tara Engineering Works, Tirupati International Pvt. Ltd., and 
Tirupati Trading Company. In addition, the Government of India (GOI) 
certified that the following companies either do not exist or do not 
export the subject merchandise to the United States: Dugar 
International, Global Intertrade, Shakti Isabgel Industries, Sociedad 
J.B. Nagar, and Trident Industries. Therefore, in accordance with 
section 351.213(d)(3) of the Department's regulations, we are 
rescinding the review with respect to these companies.
    On December 1, 1998, the Department issued a questionnaire to the 
GOI and the producers/exporters of the subject merchandise. The 
Department received questionnaire responses from the GOI and the 
producers/exporters of the subject merchandise on February 1, 4, and 8, 
1999. The Department issued a supplemental questionnaire on April 26, 
1999. On April 28, 1999, the Department extended the preliminary 
results of this administrative review until no later than November 2, 
1999 (see 64 FR 23822, May 4, 1999). The Department then on June 2, 
1999, corrected the deadline for issuance of this notice of preliminary 
results to November 1, 1999. See Memorandum to the File: Correction of 
Deadline for Notice of Results of Preliminary Results, dated June 2, 
1999 (public document on file in the Central Records Unit (Room B-099 
of the Main Commerce Building) (CRU). The Department received the 
respondents' supplemental questionnaire responses on June 4, 14, 22, 
28, and July 9, 1999. Additional

[[Page 61593]]

supplemental questionnaires were issued to the respondents on July 30, 
1999, and August 4, 1999, and their responses were received on August 
11, 12, and 20, 1999.

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 (URAA) effective January 1, 1995 (the 
Act). The Department is conducting this administrative review in 
accordance with section 751(a) of the Act. In addition, unless 
otherwise indicated, all citations to the Department's regulations are 
to the regulations as codified at 19 CFR Part 351 (1998).

Scope of the Review

    Imports covered by this administrative 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 of the United States (HTSUS) item numbers 7325.10.0010 and 
7325.10.0050. The HTSUS item numbers are provided for convenience and 
Customs purposes. The written description remains dispositive.

Verification

    As provided in section 782(i) of the Act, we verified information 
submitted by the GOI, regional government of West Bengal, and certain 
producers/exporters of the subject merchandise over the dates of August 
19, 1999 through August 27, 1999. We followed standard verification 
procedures, including meeting with government and company officials and 
conducting an examination of all relevant accounting and financial 
records and other original source documents. Our verification results 
are outlined in public versions of the verification reports, which are 
on file in the Central Records Unit (Room B-099 of the Main Commerce 
Building).

Use of Facts Available

    The following companies, for which a review was requested, failed 
to respond to the Department's questionnaires: Delta Corporation Ltd., 
SSL Exports, Thames Engineering, and Trident International. Section 
776(a)(2) of the Act requires the use of facts available when an 
interested party withholds information that has been requested by the 
Department, or when an interested party fails to provide the 
information requested in a timely manner and in the form required. In 
such cases, the Department must use the facts otherwise available in 
reaching the applicable determination. Because these companies failed 
to submit the information that was specifically requested by the 
Department, we have based our preliminary results for these companies 
on the facts available. In addition, the Department finds that by not 
providing the requested information, the respondents have failed to 
cooperate to the best of their abilities.
    In accordance with section 776(b) of the Act, the Department may 
use an inference that is adverse to the interests of that party in 
selecting from among the facts otherwise available when the party has 
failed to cooperate by not acting to the best of its ability to comply 
with a request for information. Such adverse inference may include 
reliance on information derived from (1) the petition; (2) a final 
determination in a countervailing duty or an antidumping investigation; 
(3) any previous administrative review, new shipper review, expedited 
antidumping review, section 753 review, or section 762 review; or (4) 
any other information placed on the record. See Section 351.308(c) of 
the Department's regulations. In the absence of information from the 
respondents, we consider information placed on the record by other 
respondent producers/exporters to be the appropriate basis for a facts 
available countervailing duty rate calculation.
    Therefore, to calculate the ad valorem subsidy rate for these non-
respondent companies, we summed the highest company-specific net 
countervailable subsidy rate for each program under review. See 
Preliminary Results of Review section of the notice below for the 
preliminary ad valorem rate calculated for these companies.

Analysis of Programs

I. Programs Found To Confer Countervailable Subsidies

A. Pre-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, companies may receive pre-shipment loans for working capital 
purposes, i.e., for the purchase of raw materials and for packing, 
warehousing, 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. 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. In general, packing credits are granted for a period of up to 
180 days.
    Commercial banks extending export credit to Indian companies must, 
by law, charge interest on this credit at rates determined by the RBI. 
The rate of interest charged on pre-shipment export loans up to 180 
days was 13.0 percent for the period January 1, 1997 through October 
21, 1997, and 12.0 percent for the period October 22, 1997 through 
December 31, 1997. For pre-shipment loans not repaid within 180 days, 
the banks charged interest at the following rates for the number of 
days the loans were overdue: 15.0 percent for the period January 1, 
1997 through October 21, 1997, and 14.0 percent for the period October 
22, 1997 through December 31, 1997. An exporter would lose the 
concessional interest rate if the export loan was not repaid within 270 
days. If that occurred, the banks were able to assess interest at a 
non-concessional interest rate above the ceiling rate of interest set 
by the RBI.
    In prior administrative reviews of this order, the Department has 
found this program to be an export subsidy because receipt of pre-
shipment export financing is contingent upon export performance, and 
the interest rates are below those which would be obtained for 
comparable commercial financing. See, e.g., Final Results of 
Countervailing Duty Administrative Review: Certain Iron-Metal Castings 
From India, 63 FR 64050 (November 18, 1998) (1996 Indian Castings Final 
Results). No new information or evidence of changed circumstances has 
been submitted in this proceeding to warrant reconsideration of this 
finding. Therefore, in accordance with sections 771(5)(D) and (E) of 
the Act, we continue to find this program countervailable because it 
results in a financial contribution by the government in the form of a 
loan and provides a benefit to the recipient in the amount of the 
interest savings. Moreover, because receipt of the financing is 
contingent upon export performance, we continue to find the program to 
be an export subsidy under section 771(5A)(B) of the Act.
    To determine the benefit conferred under this program, we compared 
the interest rates charged under the pre-shipment financing program to 
a

[[Page 61594]]

benchmark interest rate. As our benchmark, we used the cash credit 
rate. In the 1994 administrative review of this order, the Department 
determined that, in the absence of a company-specific benchmark, the 
most comparable short-term benchmark to measure the benefit under the 
pre-shipment export financing scheme is the cash credit interest rate. 
See Final Results of Countervailing Duty Administrative Review: Certain 
Iron-Metal Castings From India, 62 FR 32297, 32304 (June 13, 1997) 
(1994 Indian Castings Final Results). The cash credit interest rate is 
for domestic working capital finance, and thus comparable to pre-and 
post-shipment export finance. For the POR, we calculated a cash credit 
rate of 16.31 percent based on the short-term interest rate and spread 
information reported by the GOI in its February 1, 1999 questionnaire 
response.
    We compared the cash credit benchmark rate to the interest rates 
charged on pre-shipment rupee loans and found that for loans granted 
under this program, the interest rates charged were lower than the 
benchmark rate. Therefore, in accordance with section 771(5)(E)(ii) of 
the Act, this program conferred countervailable benefits during the POR 
because the interest rates charged on the export loans were less than 
what a company otherwise would have paid on comparable short-term 
commercial loans.
    To calculate the benefit from the 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 rate exceeded the program rates, the difference between those 
amounts is the benefit.
    If the pre-shipment financing loans were received solely to finance 
exports of subject merchandise to the United States, we divided the 
benefit derived from those loans by exports of subject merchandise to 
the United States. For all other pre-shipment financing loans, we 
divided the benefit by total exports to all destinations. On this 
basis, we preliminarily determine the net countervailable subsidies 
from this program to be as follows:

------------------------------------------------------------------------
                                                             Ad valorem
Producers/exporters which used the program during the POR      rates
                                                           (percentages)
------------------------------------------------------------------------
Calcutta Ferrous Ltd.....................................          0.04
Commex Corporation.......................................          0.03
Dinesh Brothers (Pvt.) Ltd...............................          0.44
Ganapati Suppliers Pvt. Ltd..............................          0.24
Kajaria Iron Castings Ltd................................          0.22
Nandikeshwari Iron Foundry Pvt. Ltd......................          0.38
R.B. Agarwalla & Company.................................          0.17
RSI Limited..............................................          0.38
Serampore Industries Pvt. Ltd............................          0.19
Uma Iron & Steel Company.................................          0.03
Victory Castings Ltd.....................................          0.40
------------------------------------------------------------------------

B. Post-Shipment Export Financing
    Post-shipment export financing consists of loans in the form of 
trade bill discounting or advances by commercial banks. 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 finance, therefore, is a working capital finance or sales 
finance against receivables. The interest amount owed is deducted from 
the total amount of the bill at the time of discounting by the bank. 
The exporter's account is then credited for the rupee equivalent of the 
net amount.
    In general, post-shipment loans are granted for a period of up to 
90 days. The following interest rates were charged on post-shipment 
loans up to 90 days: 13.0 percent for the period January 1, 1997 
through June 23, 1997, 12.0 percent for the period June 24, 1997 
through October 21, 1997, and 11.0 percent for the period October 22, 
1997 through December 31, 1997.
    For loans not repaid within the negotiated number of days (90 days 
maximum), banks assessed the following rates of interest for the number 
of days the loans were overdue, up to six months from the date of 
shipment: 15.0 percent for the period January 1, 1997 through June 23, 
1997, 14.0 percent for the period June 24, 1997 through October 21, 
1997, and 13.0 percent for the period October 22, 1997 through December 
31, 1997. If a post-shipment loan was not repaid within six months of 
the date of shipment, an exporter would lose the concessional interest 
rate on the financing, and interest would be charged at a commercial 
rate determined by the banks.
    In prior administrative reviews, the Department has found this 
program to be an export subsidy because receipt of the post-shipment 
financing is contingent upon export performance, and the interest rates 
are below those which would be obtained for comparable commercial 
financing. See, e.g., 1996 Indian Castings Final Results at 63 FR 
64051. No new information or evidence of changed circumstances has been 
submitted in this proceeding to warrant reconsideration of this 
finding. Therefore, in accordance with sections 771(5)(D) and (E) of 
the Act, we continue to find this program countervailable because it 
results in a financial contribution by the government in the form of a 
loan and provides a benefit to the recipient in the amount of the 
interest savings. Moreover, because receipt of the financing is 
contingent upon export performance, we continue to find the program to 
be an export subsidy under section 771(5A)(B) of the Act.
    To determine the benefit conferred under this program, we compared 
the interest rates charged under the post-shipment financing program to 
a benchmark interest rate. To measure the benefit each company received 
under the post-shipment financing scheme, we used as our benchmark 
interest rate the cash credit rate for 1997, as discussed above in the 
pre-shipment export financing section. Because the loans under this 
program are discounted, and the effective interest rates paid by the 
exporters on the loans are discounted rates, we derived a discounted 
benchmark rate from the cash credit rate of 14.02 percent to measure 
the benefits conferred by this program.
    We compared the discounted cash credit benchmark rate to the 
interest rates charged on post-shipment loans. We found that for loans 
granted under this program, the interest rates charged were lower than 
the benchmark rate. Therefore, in accordance with section 771(5)(E)(ii) 
of the Act, this program conferred countervailable benefits during the 
POR where the interest rates charged on the loans were less than what a 
company otherwise would have paid on comparable short-term commercial 
loans.
    To calculate the benefit from these loans, we followed the same 
short-term loan methodology discussed above for pre-shipment financing. 
We divided the benefit by either total exports to all markets, total 
exports to the United States, or exports of the subject merchandise to 
the United States, depending on whether the company was able to 
segregate its post-shipment financing by merchandise and destination. 
On this basis, we preliminarily determine the net countervailable 
subsidies from this program to be as follows:

------------------------------------------------------------------------
                                                             Ad valorem
Producers/exporters which used the program during the POR      rates
                                                           (percentages)
------------------------------------------------------------------------
Bengal Export Corporation................................          0.23
Calcutta Ferrous Ltd.....................................          0.25

[[Page 61595]]

 
Calcutta Iron Foundry....................................          0.37
Carnation Industries Ltd.................................          0.25
Commex Corporation.......................................          0.19
Crescent Foundry Co. Pvt. Ltd............................          0.11
Dinesh Brothers (Pvt.) Ltd...............................          0.31
Ganapati Suppliers Pvt. Ltd..............................          0.40
Kajaria Iron Castings Ltd................................          0.35
Nandikeshwari Iron Foundry Pvt. Ltd......................          0.20
R.B. Agarwalla & Company.................................          0.22
RSI Limited..............................................          0.29
Serampore Industries Pvt. Ltd............................          0.24
Uma Iron & Steel Company.................................          0.20
Victory Castings Ltd.0.23%...............................          0.30
------------------------------------------------------------------------

C. Exemption of Export Credit From Interest Taxes
    Indian commercial banks are required to pay a tax on all interest 
accrued from borrowers. The banks pass along this interest tax to 
borrowers in its entirety. As of April 1, 1993, the GOI exempted from 
the interest tax all interest accruing to a commercial bank on export-
related loans. In the 1993 administrative review, we determined that 
this tax exemption is an export subsidy, and thus countervailable, 
because only interest accruing on loans and advances made to exporters 
in the form of export credit is exempt from the interest tax. See Final 
Results of Countervailing Duty Administrative Review: Certain Iron-
Metal Castings From India, 61 FR 64676, 64686 (December 6, 1996) (1993 
Indian Castings Final Results). No new information or evidence of 
changed circumstances has been submitted in this proceeding to warrant 
reconsideration of this finding. Therefore, in accordance with sections 
771(5)(D) and (E) of the Act, we continue to find this program 
countervailable because it results in a financial contribution by the 
government in the form of revenue forgone and provides a benefit to the 
recipient in the amount of the interest tax savings. Moreover, because 
receipt of the interest tax exemption is contingent upon export 
performance, we continue to find the program to be an export subsidy 
under section 771(5A)(B) of the Act.
    During the POR, fifteen of the respondent companies made interest 
payments on export-related loans, through either or both, the pre- and 
post-shipment financing schemes, and thus, were exempt from paying the 
interest tax under this program. To calculate the benefit for each 
company, we first determined the total amount of interest paid by each 
exporter during the POR by adding the interest payments made on all 
pre- and post-shipment export loans. We then multiplied this amount by 
the tax rate which the interest amount would have been subject to, if 
not for the exemption during the POR. During the POR, exporters were 
exempt from paying a three (3.0) percent interest tax for the period 
January 1, 1997 through March 31, 1997, and a two (2.0) percent 
interest tax for the period April 1, 1997 through December 31, 1997.
    Next, we divided the benefit by the f.o.b. value of each company's 
total exports to all markets, total exports to the United States, or 
exports of subject merchandise to the United States, depending on 
whether the export financing was tied to total exports or only exports 
of subject castings to the United States. On this basis, we 
preliminarily determine the net countervailable subsidies from this 
program to be as follows:

------------------------------------------------------------------------
                                                             Ad valorem
Producers/exporters which used the program during the POR      rates
                                                           (percentages)
------------------------------------------------------------------------
Bengal Export Corporation................................          0.05
Calcutta Ferrous Ltd.....................................          0.06
Calcutta Iron Foundry....................................          0.05
Carnation Industries Ltd.................................          0.14
Commex Corporation.......................................          0.04
Crescent Foundry Co. Pvt. Ltd............................          0.02
Dinesh Brothers (Pvt.) Ltd...............................          0.11
Ganapati Suppliers Pvt. Ltd..............................          0.13
Kajaria Iron Castings Ltd................................          0.16
Nandikeshwari Iron Foundry Pvt. Ltd......................          0.09
R.B. Agarwalla & Company.................................          0.07
RSI Limited..............................................          0.13
Serampore Industries Pvt. Ltd............................          0.07
Uma Iron & Steel Company.................................          0.06
Victory Castings Ltd.....................................          0.12
------------------------------------------------------------------------

D. Income Tax Deductions Under Section 80HHC
    Under section 80HHC of the Income Tax Act, the GOI allows exporters 
to deduct profits derived from the export of merchandise from taxable 
income. In prior administrative reviews of this order, the Department 
has found this program to be an export subsidy, and thus 
countervailable, because receipt of the benefit is contingent upon 
export performance. See, e.g., 1994 and 1996 Indian Castings Final 
Results at 62 FR 32298 and 63 FR 64051, respectively. No new 
information or evidence of changed circumstances has been submitted in 
this proceeding to warrant reconsideration of this finding. Therefore, 
in accordance with sections 771(5)(D) and (E) of the Act, we continue 
to find this program countervailable because it results in a financial 
contribution by the government in the form of tax revenue not collected 
which also constitutes the benefit. Moreover, because receipt of the 
tax deduction is contingent upon export performance, we continue to 
find the program to be an export subsidy under section 771(5A)(B) of 
the Act.
    In its questionnaire responses, Kiswok Industries (P) Ltd (Kiswok 
Industries) stated that its profit rate on export sales of subject 
castings is lower than the profit rate the company realizes on the 
export sales of other castings. The company submitted audited 
derivations of its profit rate for exports of subject castings in 1997, 
and its profit rate for exports of other castings for the same year. 
The company then calculated that portion of the 80HHC tax deduction 
which was applicable to export profit earned on subject castings.
    In prior reviews of this order, the Department has found the 
section 80HHC tax deduction program to be an ``untied'' export subsidy 
program. The benefits provided under this program are not tied to the 
production or sale of a particular product or products. It is the 
Department's consistent and long-standing practice to attribute a 
benefit from an export subsidy that is not tied to a particular product 
or market to all products exported by the company. See, e.g., Final 
Affirmative Countervailing Duty Determination: Certain Pasta from 
Turkey, 61 FR 30366, 30370, (June 14, 1996). Therefore, to calculate 
the benefit Kiswok Industries received under the section 80HHC program, 
we have not made any adjustments to our standard allocation 
methodology.
    To calculate the benefit each company received under section 80HHC, 
we subtracted the total amount of income tax the company actually paid 
during the review period from the amount of tax the company otherwise 
would have paid had it not claimed a deduction under section 80HHC. We 
then divided this difference by the f.o.b. value of the company's total 
exports.
    For those companies which used section 80HHC during the POR, we 
preliminarily determine the net countervailable subsidies from this 
program to be as follows:

------------------------------------------------------------------------
                                                             Ad valorem
Producers/exporters which used the program during the POR      rates
                                                           (percentages)
------------------------------------------------------------------------
Bengal Export Corporation................................          8.07
Calcutta Ferrous Ltd.....................................          1.66
Carnation Industries Ltd.................................          0.33
Commex Corporation.......................................          2.45
Crescent Foundry Co. Pvt. Ltd............................          0.71
Dinesh Brothers (Pvt.) Ltd...............................          0.74
Ganapati Suppliers Pvt. Ltd..............................          4.40
Kajaria Iron Castings Ltd................................          0.70
Kiswok Industries Pvt. Ltd...............................         14.90

[[Page 61596]]

 
Nandikeshwari Iron Foundry Pvt. Ltd......................          1.77
R.B. Agarwalla & Company.................................          3.10
RSI Limited..............................................          0.10
Serampore Industries Pvt. Ltd............................          0.54
Super Iron Foundry.......................................          1.08
Uma Iron & Steel Company.................................          1.81
------------------------------------------------------------------------

E. Import Mechanism (Sale of Licenses)
    The GOI allows companies to transfer certain types of import 
licenses to other companies in India. In prior administrative reviews 
of this order, the Department has found the sale of these licenses to 
be an export subsidy, and thus countervailable, because companies 
receive these licenses based on their status as exporters. See, e.g., 
1996 Indian Castings Final Results at 64051. No new information or 
evidence of changed circumstances has been submitted in this proceeding 
to warrant reconsideration of this finding. Therefore, in accordance 
with sections 771(5)(D) and (E) of the Act, we continue to find this 
program countervailable because it results in a financial contribution 
by the government and provides a benefit in the amount of revenue 
received on the sale of the license. Moreover, because receipt of the 
license is contingent upon export performance, we continue to find the 
program to be an export subsidy under section 771(5A)(B) of the Act.
    During the POR, two of the respondent companies sold Special Import 
Licenses. Special Import Licenses are issued to exporters classified as 
export houses, trading houses, and star trading houses by the Ministry 
of Commerce. Special Import Licenses are effective for a period of 12 
months and are issued at a certain percentage of f.o.b. value of 
exports. Because the sale of the Special Import Licenses were not tied 
to specific shipments, we calculated the net subsidy rates by dividing 
the total amount of proceeds each company received from the sale of the 
licenses by the total f.o.b. value of its exports of all products to 
all markets. We preliminarily determine the net countervailable 
subsidies from the sale of the Special Import Licenses to be as 
follows:

------------------------------------------------------------------------
                                                             Ad valorem
Producers/exporters which used the program during the POR      rates
                                                           (percentages)
------------------------------------------------------------------------
Kajara Iron Castings Ltd.................................          0.16
Serampore Industries Pvt. Ltd............................          0.47
------------------------------------------------------------------------

F. Passbook Scheme
    On April 1, 1996, the GOI introduced the Passbook Scheme which 
provided exporters with credits that could be used to pay the 
countervailing and custom duties levied on imported products. The 
Passbook Scheme was available to certain categories of exporters, i.e., 
those manufacturer and merchant exporters which were granted the status 
of export house, trading house, star trading house, or super star 
trading house. Upon the export of finished goods, which were produced 
with indigenous raw materials, and not imported materials, the exporter 
was eligible to claim credits which could be used to pay customs duties 
on subsequent imports. The passbook scheme was only applicable for 
those exported products for which standard input/output norms had been 
fixed. The standard input/output norms set out quantities of imported 
raw materials needed to produce one unit of finished output. The credit 
in the passbook scheme was calculated on the basis of input/output 
norms for the deemed input content of the exported product. The Indian 
Customs Authority (ICA) determined the basic customs duty payable 
against the input as if it had been imported and not sourced from the 
domestic market. A company's passbook account was then credited for the 
amount equivalent to the basic customs duty payable on such deemed 
imports. The company could then utilize the credits in its passbook 
account to pay the countervailing and customs duty levied on imported 
goods. Any good which was not included in the Negative List of Imports 
could be imported under the Passbook Scheme. Payment of the duties was 
made through a debit entry in the company's passbook account by the 
ICA.
    The GOI reported, and we verified, that it was not mandatory for 
the passbook holder to consume the goods, imported with passbook 
credits, in the production of exported products. There was no relation 
between the imported goods and the production of the exporter and no 
relation between the standard input/output norms of the export product 
and the goods being imported with passbook credits. The norms were 
simply used to calculate the credits. A company could not transfer or 
sell passbook credits received, but the goods imported with passbook 
credits could be transferred or sold in the domestic market. See 
Memorandum to David Mueller: Verification of the Questionnaire 
Responses Submitted by the Government of India, (September 9, 1999), at 
page 3-4, (public document on file in CRU) (GOI Verification Report).
    The Passbook Scheme was terminated effective April 1, 1997, with 
the introduction of the Duty Entitlement Passbook Scheme (see ``Duty 
Entitlement Passbook Scheme'' section below) . Exports made on or 
before March 31, 1997, were eligible for passbook credits. The last day 
a company could apply for passbook credits was December 31, 1997. A 
company had until June 30, 1999, to use the passbook credits to pay 
import duties.
    The Illustrative List of Export Subsidies, incorporated as Annex I 
of the Subsidies Agreement, under item (i) specifies that the remission 
or drawback of import charges in excess of those levied on imported 
inputs that are consumed in the production of the exported product 
constitutes an export subsidy. The SAA states that, though the 
Illustrative List has no direct application to the CVD portion of the 
Subsidies Agreement, the Department will adhere to the List, except 
where it is inconsistent with the principles set forth in the Act. See 
SAA at 928. Therefore, to determine whether inputs are consumed in the 
production process, the Department establishes whether the government 
of the exporting country has in place a system to confirm which inputs 
are consumed in the production process of the exported product. With 
respect to the Passbook Scheme, no such system existed. The credits 
granted to passbook holders were calculated on the basis of standard 
input/output norms independently of whether the inputs were imported, 
whether duty was paid on them, or whether the inputs were actually used 
for export production. Moreover, the passbook holder was under no 
obligation to either import the inputs used to produce the exported 
product against which the credits were received or consume the imported 
goods in the production of exported goods. Under the Passbook Scheme, 
upon the export of a finished product, a exporter was simply granted an 
amount of credit based on the amount of customs duty which would have 
been paid on the input materials had they been imported.
    Based on these facts, in accordance with sections 771 (5)(D), (E), 
and (5A)(B) of the Act, we preliminarily determine that the Passbook 
Scheme is a countervailable export subsidy. Within the meaning of 
section 771(5)(D) of the Act, a financial contribution was provided by 
the government in the form of customs duty revenue forgone. The amount 
of customs duty which should have been paid by the company to

[[Page 61597]]

import the goods constitutes the benefit under section 771(5)(E) of the 
Act. Because receipt of the passbook credits was contingent upon export 
performance, we preliminarily find the program to be an export subsidy 
under section 771(5A)(B) of the Act. During the POR, Calcutta Ferrous 
Ltd., Kajaria Iron Castings Ltd. (Kajaria Iron Castings), and 
Nandikeshwari Iron Foundry Pvt. Ltd. used passbook credits to import 
goods duty free.
    To calculate the benefit conferred by this program, we summed the 
amount of passbook credits each respondent company used during the POR 
to pay the customs duty on goods imported. We then divided the benefit 
by each company's f.o.b. value of total exports for 1997. On this 
basis, we preliminarily determine the net countervailable subsidies 
from the Passbook Scheme to be as follows:

------------------------------------------------------------------------
                                                             Ad valorem
Producers/exporters which used the program during the POR      rates
                                                           (percentages)
------------------------------------------------------------------------
Calcutta Ferrous Ltd.....................................          7.27
Kajaria Iron Castings Ltd................................          3.60
Nandikeshwari Iron Foundry Pvt. Ltd......................          9.82
------------------------------------------------------------------------

G. Duty Entitlement Passbook Scheme
    The Duty Entitlement Passbook Scheme (DEPB) was introduced on April 
1, 1997, to replace the Passbook Scheme. Like the Passbook Scheme, 
receipt of DEPB credits is contingent upon export performance. The DEPB 
provides credits to passbook holders either on a pre-export or post-
export basis. All merchant and manufacturing export units are eligible 
for DEPB credits. A company which exported during a three-year period 
prior to submitting an DEPB application is eligible for pre-export 
credits. DEPB on a pre-export basis assists an exporter in obtaining 
import materials required for the production of an exported good. DEPB 
on a post-export basis is virtually identical to the Passbook Scheme. 
Post-export credits, which are granted against exports already made, 
are allowed at a percentage of f.o.b. value of exports which is 
announced by the Ministry of Commerce. The DEPB percentage rates are 
determined on the basis of the standard input/output norms table, which 
sets forth the average amount of inputs required for the manufacture of 
one unit of finished product. The percentage of f.o.b. value at which 
castings exporters can claim DEPB credits is 6.0 percent. During the 
POR, those castings exporters which used the program received DEPB 
credits on a post-export basis. To calculate a castings exporter's DEPB 
credits on a post-export basis, the GOI simply multiplies the company's 
total f.o.b. value of exports by 6.0 percent. The company's passbook 
account is then credited in an amount equivalent to 6.0 percent of its 
total f.o.b. value of exports. DEPB credits, received on a post-export 
basis, are valid for a period of 12 months and can be used to pay the 
import duties on any good (i.e., raw material or capital good), except 
those included on the Negative List of Imports. The goods imported with 
DEPB credits can either be incorporated in the production of a domestic 
or export good, or directly sold on the domestic market. Similarly, 
DEPB credits earned on a post-export basis can be sold in the form of a 
license on the domestic market. During the POR, no respondent used DEPB 
credits to import goods, but three castings exporters sold DEPB 
licenses.
    Like the Passbook Scheme, we preliminarily find that DEPB on a 
post-export basis is not a permitted drawback or substitution drawback 
scheme. The GOI does not have in place a system or procedure to confirm 
whether the imported inputs are consumed in the production of an 
exported product. When a company exports goods, it is granted DEPB 
credits which can be used without restriction. With DEPB credits earned 
on a post-export basis, a company has the option of using the credits 
to: (1) import goods for domestic or export production, (2) import 
goods for domestic sale, or (3) sell the credits in the form of a 
license to another company.
    Therefore, in accordance with sections 771(5)(D), (E), and (5A)(B) 
of the Act, we preliminarily determine that DEPB on a post-export basis 
is a countervailable export subsidy. Within the meaning of section 771 
(5)(D) and (E) of the Act, a financial contribution is provided and the 
amount of revenue received on the sale of the DEPB license constitutes 
the benefit. Moreover, because receipt of the subsidy is contingent 
upon export performance, we preliminarily find the program to be an 
export subsidy under section 771(5A)(B) of the Act. During the POR, 
Dinesh Brothers (Pvt.) Ltd., Nandikeshwari Iron Foundry Pvt. Ltd., and 
Victory Castings sold DEPB credits on the domestic market.
    To calculate the benefit conferred by this program, we summed the 
revenue each company received from the sale of the DEPB post-export 
credits. If the DEPB credits were received on the basis of exports of 
subject merchandise to the United States, then we divided the benefit 
by the company's f.o.b. value of export of subject merchandise to the 
United States for 1997. For DEPB credits received on the basis of all 
exports, we divided the benefit by the company's f.o.b. value of total 
exports for 1997. On this basis, we preliminarily determine the net 
countervailable subsidies from DEPB on a post-export basis to be as 
follows:

------------------------------------------------------------------------
                                                             Ad valorem
Producers/exporters which used the program during the POR      rates
                                                           (percentages)
------------------------------------------------------------------------
Dinesh Brothers (Pvt.) Ltd...............................          0.11
Nandikeshwari Iron Foundry Pvt. Ltd......................          1.46
Victory Castings Ltd.....................................          1.06
------------------------------------------------------------------------

II. Programs Preliminarily Determined Not To Be Countervailable

A. Long-Term Financing From ``All-India Development Banks''
    In their ``Additional Subsidy Allegations'' submission of November 
6, 1998, petitioners allege that the GOI is providing long-term, low-
interest financing to certain Indian producers/exporters through a 
number of All-India Development Banks. The All-India Development Banks 
include the following financial institutions: Industrial Development 
Bank of India (IDBI), Industrial Investment Bank of India (IIBI), 
Industrial Credit and Investment Corporation of India, Industrial 
Financial Corporation of India, and Life Insurance Corporation (LIC). 
In their submission, petitioners allege that these financial 
institutions, which are either wholly- or majority-owned by the GOI, 
are ``non-conventional'' and ``non-commercial'' in nature. They contend 
that financial assistance provided by the All-India Development Banks 
is export-related and, therefore, specific.
    In its questionnaire responses, the GOI reported and we verified 
that the All-India Development Banks function as the principal 
financial institutions for promoting and developing industries. These 
credit agencies assist and promote industrial development, 
reconstruction and revival, and undertake the rehabilitation of medium-
and large-sized industrial units by providing assistance and operating 
schemes. Financial assistance is provided under a number of schemes, 
such as: project finance, equipment finance, asset credit, corporate 
loan, working capital loan, and equipment lease. With respect to the 
project finance scheme, the program under which two respondent 
companies received loans, the financial institutions provide long-and 
medium-term credits to promoters/

[[Page 61598]]

entrepreneurs who want to construct new industrial units, expand 
existing units, and rehabilitate sick units in India. Any company, a 
domestic producer or exporting unit, in any industrial sector can 
receive a term loan under the project finance scheme provided that the 
borrower is creditworthy and the proposed project is financially and 
commercially viable. Receipt of a loan is not contingent upon 
exportation.
    When deciding whether to grant a loan, the financial institutions 
examine the following financial indicators of the company: debt-to-
equity ratio, debt services coverage ratio, gross profit, operating 
profit, break-even ratio, internal rate of return, and cost of capital. 
In addition, the financial institutions request data regarding a 
borrower's sales information, which does include export data, market 
opportunities (both domestic and international), and domestic and 
international competition. This information is collected so the banks 
can assess the commercial viability of the promoters' project and the 
borrowers' financial health and thus, ability to repay the loan. See 
GOI Verification Report at 5.
    During the POR, Kajaria Iron Castings had outstanding project 
finance term loans from the IDBI, IIBI, and LIC, and Kiswok Industries 
had outstanding a project finance term loan from the IDBI. At 
verification, we meet with IDBI, IIBI, and LIC bank officials to 
discuss the number and types of companies to which the financial 
institutions have extended long-term loans under the project finance 
scheme over the period 1993 through 1997, in particular exporters and 
the basic metals sector. The officials stated that the banks do not 
maintain databases which indicate the number of loans and loan amounts 
granted specifically to exporters; however, their lending patterns to 
industrial borrowers are presented in their annual reports.
    At verification, we reviewed the banks' annual reports which 
discuss industry-wide term loan assistance provided from fiscal year 
1993-1994 through fiscal year 1997-1998. See GOI Verification Report at 
Exhibit 2. We noted that the institutions extended loans to a wide and 
diverse range of industries, including: food manufacturing, cotton 
textiles, paper and paper products, rubber products, chemical and 
pharmaceutical, fertilizers, cement, basic metals which includes iron, 
steel, and non-ferrous metals, metal products, machinery (other than 
electrical), electrical machinery/equipment, transport equipment, 
electricity generation, services including hotels, and others. The 
officials explained that the institutions lend long-term loans to a 
wide range of industries because the institutions' exposure to any one 
industry cannot exceed 15 percent of the total loan amount granted in a 
fiscal year.
    We analyzed whether the financial assistance provided by the All-
India Development Banks is export-related. Based on the fact that a 
company, whether a domestic producer or exporting unit, can receive a 
long-term loan from the All-India Development Banks and that the 
financing is not contingent upon export performance, we preliminarily 
determine that financing provided by the IDBI, IIBI, and LIC is not an 
export subsidy under section 771(5A)(B) of the Act.
    We also analyzed whether the long-term financing provided by the 
All-India Development Banks is specific in law (de jure specificity), 
or in fact (de facto specificity), within the meaning of section 
771(5A)(D)(i) and (iii) of the Act. See also SAA, H. Doc. No. 316, Vol. 
1, 103d Cong. 2d Sess. 932 (1994). First, we examined the respective 
banking acts for the IDBI, IIBI, and LIC. We noted that the banking act 
for each financial institution did not, in any way, limit the 
industries or companies to which the institutions can provide financial 
assistance or instruct the institutions to provide financial assistance 
to exporting units. We also examined the specifications for receipt of 
a term loan under the project finance scheme. We noted that any 
industrial concern is eligible for assistance. An industrial concern is 
defined as any concern engaged, or to be engaged in, a number of areas, 
including, but not limited to:
    (i) The manufacture, preservation or processing of goods; (ii) 
shipping; (iii) mining including development of mines; (iv) the hotel 
industry; (v) the transport of passengers of goods by road or by water 
or air; (vi) the generation, storage, or distribution of electricity of 
any other form or energy; (vii) providing medical, health, or other 
allied services, etc. See The Industrial Development Bank of India Act, 
1964, and the Industrial Reconstruction Bank of India Act, 1984, for a 
complete description of an industrial concern, submitted as Annexure II 
and Annexure III, respectively, in the GOI's June 22, 1999 response. 
Based on our analysis, we preliminarily determine that long-term loans 
provided by the IDBI, IIBI, and LIC are not de jure specific under 
section 771(5A)(D)(i) of the Act.
    We then examined data on the distribution of long-term loans under 
the project finance scheme by the financial institutions to determine 
whether the provision of the loans meet the criteria for de facto 
specificity under section 771(5A)(D)(iii) of the Act. We found that 
term loans provided under the project finance scheme were distributed 
to a large number of companies in a wide variety of industries. The 
basic metals sector did not receive a disproportionate amount of the 
loans provided by the financial institutions. We also found that the 
GOI did not exercise any discretion over the financial institutions 
with respect to their lending decisions. Based on these facts, we 
preliminarily determine that long-term loans provided by the IDBI, 
IIBI, and LIC are not de facto specific under section 771(5A)(D)(iii) 
of the Act. Therefore, based on our analysis, we preliminarily 
determine that long-term financial assistance provided by the All-India 
Development Banks is not countervailable.
B. Long-Term Loan From the West Bengal Industrial Finance Corporation
    Petitioners allege that the regional government of West Bengal is 
providing various subsidies to companies located in the region through 
such development policies as the West Bengal Incentive Scheme (see 
``West Bengal Incentive Scheme'' section below) and agencies such as 
the West Bengal Industrial Development Corporation and West Bengal 
Financial Corporation (WBFC). With respect to this review, petitioners 
requested the Department to examine the long-term loan which Victory 
Iron Works received from the WBFC.
    In 1996, Victory Iron Works received a long-term loan from the WBFC 
under the equipment refinance scheme (ERS) for upgrading machinery and 
for pollution and quality control equipment. At verification, we met 
with officials of the WBFC to discuss the nature and purpose of the 
state institution. We learned that the objective of the WBFC, like 
other state corporations, is to promote the industrial development of 
the region, in particular by providing financing to companies. They 
stated that the WBFC provides assistance to all small- and medium-sized 
manufacturing units in West Bengal in the form of term loans, working 
capital term loans, and consultancy, guidance, and counseling for 
preparation of project reports, market surveys, etc. To receive a loan 
under the ERS, a company must satisfy the following criteria: (1) The 
company must have been in operation for at least four years prior to 
the application date.

[[Page 61599]]

(2) The company must have earned a profit (declared dividends) in the 
two fiscal years prior to the application date. (3) The company must 
not have defaulted with a financial institution during its existence. 
(4) The financial assistance sought must be used for the purchase of 
machinery and equipment (i.e., loans under the ERS are provided for 
specific purchases). (5) The company's promoters must be able to 
contribute 25 percent of the total project's cost. (6) The project for 
which financing is sought must be commercially and economically viable. 
See Memorandum to David Mueller: Verification of the Questionnaire 
Responses Submitted by the Regional Government of West Bengal, 
(September 9, 1999), at 5-6, (public version is on file in the CRU) (WB 
Verification Report).
    At verification, we also discussed the number and types of 
companies to which the WBFC lends funds under the equipment refinance 
scheme. The officials provided data regarding the WBFC's lending 
pattern under the ERS for the years 1996-97, 1997-98, and 1998-99. See 
WB Verification Report at Exhibit 10. We noted that, in granting the 
term loans, the WBFC did not give preference to any particular 
industrial sector or extend disportionate financing to companies 
located in the backward regions of West Bengal. The WBFC provides 
financing to a wide range of industries, including, but not limited to: 
chemicals, basic metals, engineering, food processing, metal products, 
paper & paper products, printing and packaging, rubber, 
pharmaceuticals, services, and textiles.
    We analyzed whether the long-term financing provided by the WBFC is 
specific in law (de jure specificity), or in fact (de facto 
specificity), within the meaning of section 771(5A)(D)(i) and (iii) of 
the Act. See also SAA, H. Doc. No. 316, Vol. 1, 103d Cong. 2d Sess. 932 
(1994). We examined a profile of the WBFC, which was submitted as 
Annexure WB-III of the GOI's June 22, 1999 response. We noted that the 
WBFC provides financial assistance to new and existing industrial units 
in the small and medium sectors, which intend to expand, modernize, 
diversify, and upgrade their activities. We also examined the 
specifications for receipt of a term loan under the equipment refinance 
scheme. We noted that any small- or medium-sized concern is eligible 
for assistance provided the unit meets the criteria outlined above. 
Based on our analysis, we preliminarily determine that term loans 
provided by the WBFC are not de jure specific under section 
771(5A)(D)(i) of the Act.
    We then examined data on the distribution of term loans under the 
equipment refinance scheme to determine whether the provision of the 
loans meet the criteria for de facto specificity under section 
771(5A)(D)(iii) of the Act. We found that term loans provided under the 
scheme were distributed to a large number of companies in a wide 
variety of industries located across West Bengal. The basic metals 
sector did not receive a disproportionate amount of the loans provided 
by the institution. We also found that neither the regional government 
of West Bengal nor the GOI exercised any discretion over the WBFC with 
respect to its lending decisions. Based on these facts, we 
preliminarily determine that term loans provided by the WBFC are not de 
facto specific under section 771(5A)(D)(iii) of the Act. Therefore, we 
preliminarily determine that term loan assistance provided by the WBFC 
is not countervailable.
C. Leasing of Land From the Regional Government of West Bengal
    Petitioners allege that the regional government of West Bengal 
through the West Bengal Incentive Scheme of 1993, and the West Bengal 
Industrial Development Corporation (WBIDC), is providing subsidies to 
manufacturers and/or exporters of the subject merchandise. In their 
``Additional Subsidy Allegations'' submission of November 6, 1998, 
petitioners noted that Kajaria Iron Castings acquired land from the 
government of West Bengal for the construction of a pig iron plant and 
requested the Department to examine the land purchase. In its June 4, 
1999 questionnaire response, Kajaria Iron Castings reported that the 
company has not purchased land under the West Bengal Incentive Scheme 
of 1993, or from the WBIDC. Rather, the company is leasing industrial 
land in Durgapur from the Asansol Durgapur Development Authority 
(ADDA), an agency of the regional government of West Bengal.
    According to section 771(5)(E)(iv) of the Act, the adequacy of 
remuneration with respect to a government's provision of a good or 
service ``shall be determined in relation to prevailing market 
conditions for the good or service being provided or the goods being 
purchased in the country which is subject to the investigation or 
review. Prevailing market conditions include price, quality, 
availability, marketability, transportation, and other conditions of 
purchase or sale.'' Particular problems can arise in applying this 
standard when the government is the sole or predominant supplier of the 
good or service in the country or within the area where the respondent 
is located. In these situations, there may be no alternative market 
prices available in the country (e.g., private prices, competitively-
bid prices, import prices, or other types of market reference prices). 
Hence, it becomes necessary to examine other options for determining 
whether the good has been provided for less than adequate remuneration. 
This consideration of other options does not indicate a departure from 
our preference for relying on market conditions in the relevant 
country, specifically market prices, when determining whether a good or 
service is being provided at a price which reflects adequate 
remuneration.
    With respect to the leasing of land, some of the possible factors 
we can consider are whether the government has covered its costs, 
whether it has earned a reasonable rate of return in setting its rates, 
and whether it applied market principles in determining its prices. See 
Final Affirmative Countervailing Duty Determination: Steel Wire Rod 
From Germany, 62 FR 54990, 54994 (October 22, 1997). In the instant 
case, we attempted to obtain information on the market prices for 
leasing of industrial land in West Bengal through independent research 
and a private land broker in India. However, we have found no 
alternative market reference prices to use in determining whether the 
government is leasing the land for less than adequate remuneration. As 
such, we have examined whether the government's price was determined 
according to the same market factors that a private lessor would use in 
determining whether to lease land to a company. During the verification 
of this review, we met with officials of the ADDA to discuss the 
development authority's leasing of industrial land in West Bengal. See 
Memorandum to David Mueller: Verification of the Questionnaire 
Responses Submitted by the Asansol Durgapur Development Authority, 
(September 9, 1999), (public document on file in the CRU).
    In December 1995, Kajaria entered into a lease agreement with the 
ADDA to lease 132 acres of industrial land in Durgapur for the 
construction of a pig iron plant. The ADDA presently manages 60,000 
acres of land. Of the total land acreage only 600 acres are being used 
for industrial purposes. The majority of the land being leased by the 
ADDA is residential land. The ADDA is currently leasing industrial land 
to approximately 120 small-scale companies.

[[Page 61600]]

    The lease rates for industrial land in West Bengal are established 
by the ADDA. The ADDA takes into consideration the following factors to 
determine the price per acre of industrial land: (1) The cost of 
acquiring the land; (2) the cost of constructing needed infrastructure 
on the land (e.g., building roads, drainage facilities, electricity 
transformers); (3) the cost of filling the land; and (4) the 
authority's cost of capital. Because the topography, location, and 
types of infrastructure built on various tracks of land differ, the 
price per acre land, classified as either ``high land'' or ``low land'' 
by the ADDA, may vary. However, the factors examined by the ADDA to 
determine the leasing prices paid by all companies across West Bengal 
are uniform. The ADDA's prices per acre of land are set prices which 
are non-negotiable. The ADDA's price per acre of land does not vary 
with respect to the type of industry or company leasing the land. The 
ADDA advertizes in national and local newspapers the industrial land 
which is available for lease and the price per acre of high and low 
land. With this information a prospective lessee can compare the 
leasing prices of the ADDA to the price of land being sold by private 
land owners.
    The ADDA uses a standard agreement to lease industrial land to all 
companies in West Bengal. All companies which lease land from the ADDA 
must pay 50 percent of the total lease amount up-front to execute the 
lease agreement (the amount was 30 percent in 1995). After the lease 
agreement is executed a company then makes annual installment payments. 
The number of payments a company must make is outlined in the lease 
agreement. All companies must also make a yearly rent payment of 10 
rupees per acre of land.
    At verification, we found that a large number of companies are 
currently leasing industrial land from the ADDA. These enterprises 
represent a wide variety of industries, e.g., auto parts, ceramics, 
chemicals, electronic switches, engineering parts, fertilizers, glass, 
paints and polishes, pig iron, and tire retreading. The ADDA does not 
extend special leasing provisions or show a pricing preference to any 
particular industry or industries. We also ascertained that Kajaria 
Iron Castings is paying a standard lease rate which the ADDA charges 
all companies leasing land in West Bengal. The price per acre of 
industrial land is set in reference to market factors. Therefore, based 
on these facts, we preliminarily determine that Kajaria Iron Castings' 
lease rate is not countervailable.

III. Programs Preliminarily Found Not To Be Used

    We examined the following programs and preliminarily find that the 
producers/exporters of the subject merchandise did not apply for or 
receive benefits under these programs during the POR:
A. West Bengal Incentive Scheme 1993
    Petitioners allege in their ``Additional Subsidy Allegations'' 
submission of November 6, 1998, that the West Bengal Incentive Scheme 
1993 (Scheme 1993), a regional development policy, provides various 
benefits including a waiver of electricity duty, a state capital 
investment subsidy, a development subsidy, and sales tax deferments. 
They claim that both new and expanding industrial projects can receive 
benefits under the scheme. Petitioners assert that assistance provided 
under Scheme 1993 is specific insofar as it is provided in inverse 
proportion to the development level of areas within West Bengal.
    The regional government of West Bengal reported that Scheme 1993 
was introduced by the WBIDC on April 1, 1993. Though the program was 
terminated effective March 31, 1999, assistance is still being provided 
under the scheme. The objective of Scheme 1993 is to assist in the 
growth of medium- and large-scale industries, the tourism industry, the 
expansion of existing units, and revival of sick units in the state of 
West Bengal through the provision of incentives. All industrial 
projects which receive an industrial license, registration certificate, 
and term loans from a financial institution are eligible to receive 
benefits under Scheme 1993. The program offers various incentives and 
tax concessions to entrepreneurs and industrial units to assist them in 
the construction of new units or expansion of existing units, and the 
building of infrastructure in the backward areas of West Bengal. The 
amount of financial assistance an industrial unit is eligible to 
receive is determined by its location in West Bengal. The regional 
government reported that West Bengal is divided into four groups: Group 
A (i.e., Calcutta) is classified as developed while Groups B through D 
are categorized as less developed, with Group D deemed the most 
backward. Industrial units located in the more backward areas receive 
greater monetary assistance than those units located in the more 
developed areas. For example, financial assistance provided in the form 
of a state capital investment subsidy is as follows: Eligible units in 
Group B are entitled to receive a subsidy at the rate of 15 percent of 
the fixed capital investment made in the approved project or Rs. 15 
lakh, whichever is less. Eligible units in Group C are entitled to 
receive a subsidy at the rate of 20 percent of the fixed capital 
investment made in the approved project or Rs. 20 lakh, whichever is 
less. Eligible units in Group D are entitled to receive a subsidy at 
the rate of 20 percent of the fixed capital investment made in the 
approved project or Rs. 30 lakh, whichever is less.
    In its responses, the regional government reported that both 
Carnation Industries Ltd. (Carnation Industries) and Kajaria Iron 
Castings received state capital investment subsidies under Scheme 1993 
(see ``State Capital Investment Subsidy,'' section below). Kajaria Iron 
Castings also received a bridge loan (see ``Program Preliminarily Found 
To Be De Minimis--Bridge Loan'' section below).
    1. State Capital Investment Subsidy
    The regional government reported that state capital investment 
subsidies are provided by the WBIDC to industrial units as an incentive 
for the construction of new industries in the backward areas of West 
Bengal, where infrastructure is poor and industrialization is weak. The 
amount of cash payment a company is entitled to receive is based on the 
total capital investment cost and location of the project (see, ``West 
Bengal Incentive Scheme 1993'' section above). Of the total sanctioned 
grant amount, 85 percent may be disbursed in two or three installments, 
as funds are available, before the start of commercial production. The 
balance of the grant amount is disbursed after the commencement of 
production.
    In their questionnaire responses, Carnation Industries and Kajaria 
Iron Castings reported that they applied for and received state capital 
investment subsidies from the WBIDC. In November 1996, Carnation 
Industries was approved for a grant in connection with the construction 
of a new ductile iron plant in Uluberia, which is located in Group B. 
The company took receipt of the first disbursement of the subsidy in 
November 1997. The second disbursement of the subsidy occurred in 1998. 
The company reported that the following criteria had to be satisfied 
for receipt of the subsidy: (1) Receipt of a registration certificate 
from the Directorate of Industry of the State Government; (2) 
submission of detailed feasibility and project report; and (3) approval 
of the project and receipt of financial assistance from a commercial 
bank.

[[Page 61601]]

    At verification, we examined Carnation Industries' application for 
incentives under Scheme 1993 and the corresponding eligibility 
certification. We confirmed that Carnation Industries applied for and 
received a grant for the construction of a spheroidal graphite and 
malleable cast iron castings facility (i.e., ductile iron plant). See 
Memorandum to David Mueller: Verification of the Questionnaire 
Responses Submitted by Carnation Industries Ltd., (September 9, 1999), 
at 1-3 (public version on file in the CRU) (Carnation Verification 
Report). During verification, we discussed with WBIDC officials 
whether, at the point of bestowal, a state capital investment subsidy 
is tied to the production of a particular product or tied to a 
particular production facility. We learned that a state capital 
investment subsidy is tied to the production of that product/facility 
for which the company applied for an eligibility certificate. See WB 
Verification Report at 4.
    In regard to Carnation Industries, the company applied for 
incentives under Scheme 1993 specifically for the manufacture of 
spheroidal graphite CI castings and malleable cast iron at its Uluberia 
facility. All assistance Carnation receives under the scheme is for the 
manufacture of spheroidal graphite CI castings and malleable cast iron 
at its Uluberia facility. The WBIDC officials stated, at verification, 
that each company which receives assistance must submit a progress 
report on their facility which describes the types of products being 
produced. See Id.
    The scope of this order covers gray iron castings and not ductile 
iron castings, the goods produced at the Uluberia facility. At the 
point of bestowal, the grant was connected to the production of ductile 
iron castings, which is non-subject merchandise. Based on these facts, 
we preliminarily determine that the state capital investment subsidy 
which Carnation Industries received provides no benefits to the 
production and exportation of the subject merchandise, and therefore, 
the program was not used.
    With respect to Kajaria Iron Castings, the company was approved for 
a state capital investment subsidy in December 1995, for the 
construction of a pig iron plant in Durgapur (Group C). The first 
disbursement of the subsidy was received in 1998, which is outside the 
period of this review.

B. Market Development Assistance (MDA)
C. Rediscounting of Export Bills Abroad (EBR)
D. International Price Reimbursement Scheme (IPRS)
E. Cash Compensatory Support Program (CCS)
F. Programs Operated by the Small Industries Development Bank of India 
(SIDBI)
G. Export Promotion Replenishment Scheme (EPRS) (IPRS Replacement)
H. Export Promotion Capital Goods Scheme
I. Benefits for Export Oriented Units and Export Processing Zones
J. Special Imprest Licenses
K. Special Benefits
L. Duty Drawback on Excise Taxes
M. Payment of Premium Against Advance Licenses
N. Pre-Shipment Export Financing in Foreign Currency (PCFC)
O. Subsidies Provided by the State of Orissa
P. Advance Licenses

IV. Program Preliminarily Found To Be De Minimis

Bridge Loan
    The WBIDC provides bridge loans to entrepreneurs who are granted 
state capital investment subsidies under the West Bengal Incentive 
Scheme to bridge the time lag between the approval of the grant and the 
disbursement of the money. If the WBIDC anticipates a late disbursement 
of the grant, the agency encourages companies encountering financial 
difficulties to apply for a bridge loan. Not all companies awaiting a 
state capital investment subsidy are eligible to receive a bridge loan. 
To receive a bridge loan, a company must be financially solvent and be 
promoting a commercially viable project. A company which receives a 
bridge loan must use the funds for the advancement of the project. See 
WB Verification Report, at 2-3.
    The loans are provided against the grant receivable and are repaid 
when the grant is disbursed. Only those companies which have been 
approved for a grant are eligible to receive a bridge loan. At 
verification, we learned that the WBIDC charges a fixed interest rate 
of 20.0 percent against a bridge loan. However, if a company makes 
timely interest payments, then the interest rate is reduced to 16.0 
percent. Typically, bridge loans are short-term loans which are 
extended for a period up to the date of disbursement of the grant. See 
Id.
    Because receipt of the its grant was delayed, Kajaria Iron Castings 
applied for a short-term bridge loan with the WBIDC in September 1997. 
Kajaria Iron Castings took receipt of the loan in 1997, and made an 
interest payment during the POR. See Memorandum to David Mueller: 
Verification of the Questionnaire Responses Submitted by Kajaria Iron 
Castings Ltd., (September 9, 1999), at 4-5 (public version on file in 
the CRU) (Kajaria Verification Report).
    As discussed in the ``Pre-Shipment Export Finance'' section above, 
the short-term benchmark interest rate for the POR is 16.31 percent. To 
determine the benefit provided by the loan, we compared the cash credit 
benchmark rate to the interest rate charged on the bridge loan. We 
found that the interest paid on the bridge loan was less than the 
interest the company would have paid on a comparable short-term 
commercial loan. We calculated that the bridge loan provided a benefit 
of less than 0.005 percent ad valorem during the POR. Because the 
benefit provided by the bridge loan is less than 0.005 percent ad 
valorem and has no affect on the net countervailable subsidy rate for 
Kajaria Iron Castings, we preliminarily determine that it is not 
necessary, at this time, to analyze whether bridge loans provided under 
the West Bengal Incentive Scheme are specific. See Final Results of 
Countervailing Duty Administrative Review: Certain Hot-Rolled Lead and 
Bismuth Carbon Steel Products From the United Kingdom, 63 FR 18367, 
18370 (April 15, 1998).

V. Programs Preliminarily Found Not To Exist

A. State Value-Added Tax ``Set-Off'' Program
    The GOI reported in its February 1, 1999 questionnaire response 
that a state value-added tax ``set-off'' program does not yet exist. 
They reported that the state value-added tax scheme is only a concept 
at this time and has not yet been implemented.
B. Interest Rate Surcharge Exemption
    In its February 1, 1999 questionnaire response, the GOI stated that 
the RBI introduced an interest rate surcharge on import finance in 
October 1995. The surcharge was 15.0 percent over the cash credit rate 
and was exempt on packing credit provided for exports. The GOI further 
reported that the interest rate surcharge was withdrawn effective July 
24, 1996. In its July 14, 1999 response, the GOI submitted official 
documentation of the RBI, which announced the termination of the 
interest rate surcharge.

Preliminary Results of Review

    In accordance with section 777A(e)(1) of the Act, we calculated an 
individual ad valorem subsidy rate for each producer/exporter subject 
to this administrative review. For the period January 1, 1997 through 
December 31, 1997, we preliminarily determine the

[[Page 61602]]

net countervailable subsidy rates for the reviewed companies to be as 
follows:

------------------------------------------------------------------------
                                                             Ad valorem
                   Producers/exporters                         rates
                                                           (percentages)
------------------------------------------------------------------------
Bengal Export Corporation................................          8.35
Calcutta Ferrous Ltd.....................................          9.28
Calcutta Iron Foundry....................................          0.42
Carnation Industries Ltd.................................          0.72
Commex Corporation.......................................          2.71
Crescent Foundry Co. Pvt. Ltd............................          0.84
Delta Corporation Ltd....................................         27.65
Dinesh Brothers (Pvt.) Ltd...............................          1.71
Ganapati Suppliers Pvt. Ltd..............................          5.17
Kajaria Iron Castings Ltd................................          5.19
Kiswok Industries Pvt. Ltd...............................         14.90
Nandikeshwari Iron Foundry Pvt. Ltd......................         13.72
Rangilal & Sons..........................................          0.00
R.B. Agarwalla & Company.................................          3.56
RSI Limited..............................................          0.90
Seramapore Industries Pvt. Ltd...........................          1.51
SSL Exports..............................................         27.65
Super Iron Foundry.......................................          1.08
Thames Engineering.......................................         27.65
Trident International....................................         27.65
Uma Iron & Steel Company.................................          2.10
Victory Castings Ltd.....................................          1.88
------------------------------------------------------------------------

    If the final results of this review remain the same as these 
preliminary results, the Department intends to instruct the U.S. 
Customs Service (Customs) to assess countervailing duties as indicated 
above. The Department also intends to instruct Customs to collect cash 
deposits of estimated countervailing duties as indicated above of the 
f.o.b. invoice price on all shipments of the subject merchandise from 
reviewed companies, entered, or withdrawn from warehouse, for 
consumption on or after the date of publication of the final results of 
this review.
    Because the URAA replaced the general rule in favor of a country-
wide rate with a general rule in favor of individual rates for 
investigated and reviewed companies, the procedures for establishing 
countervailing duty rates, including those for non-reviewed companies, 
are now essentially the same as those in antidumping cases, except as 
provided for in section 777A(e)(2)(B) of the Act. The requested review 
will normally cover only those companies specifically named. See 19 CFR 
351.213(b). Pursuant to 19 CFR 351.212(c), for all companies for which 
a review was not requested, duties must be assessed at the cash deposit 
rate, and cash deposits must continue to be collected, at the rate 
previously ordered. As such, the countervailing duty cash deposit rate 
applicable to a company can no longer change, except pursuant to a 
request for a review of that company. See Federal-Mogul Corporation and 
the Torrington Company v. United States, 822 F.Supp. 782 (CIT 1993) and 
Floral Trade Council v. United States, 822 F.Supp. 766 (CIT 1993) 
(interpreting 19 CFR 353.22(e) (now 19 CFR 351.212(c)), the antidumping 
regulation on automatic assessment, which is identical to 19 CFR 
section 355.22(g)). Therefore, the cash deposit rates for all 
companies, except those covered by this review, will be unchanged by 
the results of this review.
    We will instruct Customs to continue to collect cash deposits for 
non-reviewed companies at the most recent company-specific or country-
wide rate applicable to the company. Accordingly, the cash deposit 
rates that will be applied to non-reviewed companies covered by this 
order will be the rate for that company established in the most 
recently completed administrative proceeding conducted under the URAA. 
See 1996 Indian Castings Final Results. If such a review has not been 
conducted, the rate established in the most recently completed 
administrative proceeding pursuant to the statutory provisions that 
were in effect prior to the URAA amendments is applicable. See 1993 
Indian Castings Final Results. These rates shall apply to all non-
reviewed companies until a review of a company assigned these rates is 
requested. In addition, for the period January 1, 1997 through December 
31, 1997, the assessment rates applicable to all non-reviewed companies 
covered by this order are the cash deposit rates in effect at the time 
of entry.

Public Comment

    Pursuant to 19 CFR 351.224(b), the Department will disclose to the 
parties of this proceeding within five days after the date of 
publication of this notice, the calculations performed in this review. 
Interested parties may request a hearing not later than 30 days after 
the date of publication of this notice. Pursuant to 19 CFR 309, 
interested parties may submit written arguments in case briefs on these 
preliminary results within 30 days of the date of publication. Rebuttal 
briefs, limited to arguments raised in case briefs, may be submitted 
five days after the time limit for filing the case brief. Parties who 
submit argument in this proceeding are requested to submit with the 
argument (1) A statement of the issue and (2) a brief summary of the 
argument. Any hearing, if requested, will be held two days after the 
scheduled date for submission of rebuttal briefs. Copies of case briefs 
and rebuttal briefs must be served on interested parties in accordance 
with 19 CFR 351.303(f).
    Representatives of parties to the proceeding may request disclosure 
of proprietary information under administrative protective order no 
later than 10 days after the representative's client or employer 
becomes a party to the proceeding, but in no event later than the date 
the case briefs, under 19 CFR 351.309(c)(ii), are due. The Department 
will publish the final results of this administrative review, including 
the results of its analysis of issues raised in any case or rebuttal 
brief or at a hearing.
    This administrative review and notice are issued and published in 
accordance with section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)), 19 
CFR 351.213.

    Dated: November 1, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-29204 Filed 11-10-99; 8:45 am]
BILLING CODE 3510-DS-P