[Federal Register Volume 69, Number 81 (Tuesday, April 27, 2004)]
[Notices]
[Pages 22763-22769]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-9477]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-533-839]


Notice of Preliminary Affirmative Countervailing Duty 
Determination and Alignment with Final Antidumping Duty Determination: 
Carbazole Violet Pigment 23 from India

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

EFFECTIVE DATE: April 27, 2004.

PRELIMINARY DETERMINATION:

    The Department of Commerce (the Department) preliminarily 
determines that countervailable subsidies are being provided to 
producers and exporters of Carbazole Violet Pigment 23 (CVP - 23) from 
India. For information on the estimated subsidy rates, see the 
``Suspension of Liquidation'' section of this notice.

FOR FURTHER INFORMATION CONTACT: Sean Carey or Addilyn Chams-Eddine, 
Office of AD/CVD Enforcement VII, Import Administration, U.S. 
Department of Commerce, Room 7866, 14th Street and Constitution Avenue, 
N.W., Washington, D.C. 20230; telephone

[[Page 22764]]

(202) 482-3964 and (202) 482-0648 respectively.

SUPPLEMENTARY INFORMATION:

Case History

    The petition in this investigation was filed on November 21, 2003, 
by Nation Ford Chemical Company and Sun Chemical Company (petitioners). 
This investigation was initiated on December 11, 2003. See Notice of 
Initiation of Countervailing Duty Investigation: Carbazole Violet 
Pigment 23 (CVP - 23) from India, 68 FR 70778 (December 19, 2003). On 
December 19, 2003, we issued a questionnaire to the Government of India 
(GOI) and requested that the GOI forward the relevant sections of the 
questionnaire to Indian producers/exporters of CVP-23.
    On January 16, 2004, petitioners timely requested a 65-day 
postponement of the preliminary determination for this investigation. 
On January 22, 2004, the Department extended the deadline for the 
preliminary determination to April 19, 2004 in accordance with section 
703(c)(1)(A) of the Tariff Act of 1930 (the Act). See Postponement of 
Preliminary Countervailing Duty Determination: Carbazole Violet Pigment 
23 from India, 69 FR 4291 (January 29, 2004).
    On February 10, 2004, the GOI submitted its questionnaire response. 
In its questionnaire response, the GOI identified four Indian companies 
that produced and/or exported CVP-23 to the United States during the 
period of investigation (POI), and indicated which programs had been 
used by these companies. These four companies were Alpanil Industries, 
Ltd. (Alpanil), AMI Pigments Pvt. Ltd. (AMI), Meghmani Organics Ltd. 
(Meghmani), and Pidilite Industries Ltd. (Pidilite). In addition, two 
of the four companies identified by the GOI, Alpanil and Pidilite, also 
submitted questionnaire responses to the Department on February 10, 
2004.
    The GOI provided additional information on February 18, 2004, in 
response to the Department's request, indicating the non-use of two 
additional programs identified by the GOI in its February 10, 2004 
response: the Duty Free Replenishment Certificate (DFRC) and the 
Advance License Scheme. In addition, the GOI indicated that AMI, one of 
the producer/exporters of CVP-23 during the POI, that is not 
participating in this investigation and has not responded to any of the 
Department's questionnaires, utilized the Duty Entitlement Passbook 
Scheme (DEPS). The GOI provided the Department the amount of DEPS 
credits utilized by AMI during the POI. Finally, the GOI also noted 
that Alpanil's affiliated company, Meghmani Organics Ltd. (Meghmani), 
exported a small amount of subject merchandise to the United States 
during the POI. Other than the information provided through the GOI and 
Alpanil, Meghmani has not responded to the Department's questionnaire.
    On February 25, 2004, petitioners submitted a timely allegation, in 
accordance with section 351.301(d)(4)(i)(A) of the Department's 
regulations, of additional countervailable subsidies and requested that 
the Department initiate an investigation for sales tax incentive 
programs in the states of Gujarat and Maharashtra. On March 9, 2004, 
the Department issued supplemental questionnaires to the GOI, Alpanil, 
and Pidilite. On March 12, 2004, the Department initiated an 
investigation on these two new alleged subsidy programs and issued 
questionnaires to the GOI and the Indian producers/exporters of CVP-23. 
See Memorandum to Joseph A. Spetrini, Deputy Assistant Secretary for 
Import Administration, through Barbara E. Tillman, Office of AD/CVD 
Enforcement VII; Countervailing Duty Investigation of Carbazole Violet 
Pigment 23 (CVP-23) from India, dated March 12, 2004.
    The GOI, Alpanil, and Pidilite submitted their responses to our 
supplemental questionnaires on March 24, 2004. We received the GOI's 
questionnaire response for the two new subsidy programs on March 26, 
2004. Alpanil and Pidilite filed their respective responses to this 
questionnaire on March 29, 2004. On April 2, 2004, the Department 
contacted the GOI and requested further clarification concerning the 
identification of Indian producers/exporters that used the sales tax 
incentive program in the state of Maharashtra. See Memorandum to the 
File from Sean Carey, Trade Analyst, Office VII; Clarification on Usage 
of the State of Maharashtra's Sales Tax Incentive Program by Indian 
Producers/Exporters of Carbazole Violet Pigment 23 (CVP-23), dated 
April 6, 2004. This information was submitted to the Department on 
April 8, 2004.
    On April 5, 2004, Alpanil submitted additional information that was 
requested by the Department. On April 6, 2004, the Department requested 
additional information from Alpanil concerning Meghmani's overall use 
of the CVD programs under investigation. As of the date of this 
preliminary determination, we have not received a response.

Scope of the Investigation

    The merchandise covered by this investigation is carbazole violet 
23 identified as Color Index No. 51319 and Chemical Abstract No. 6358-
30-1, with the chemical name of diindolo [3,2-b:3',2'-
m]triphenodioxazine, 8,18-dichloro-5, 15 5,15-diethy-5,15-dihydro-, and 
molecular formula of 
C[bdi3][bdi4]H[bdi2][bdi2];C[bdi1][bdi2]N[bdi4]O[bdi2].\1\ The subject 
merchandise includes the crude pigment in any form (e.g., dry powder, 
paste, wet cake) and finished pigment in the form of presscake and dry 
color. Pigment dispersions in any form (e.g. pigments dispersed in 
oleoresins, flammable solvents, water) are not included within the 
scope of the investigation.
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    \1\ The bracketed section of the product description, [3,2-
b:3',2'-m], is not business proprietary information. In this case, 
the brackets are simply part of the chemical nomenclature. See 
December 4, 2003, amendment to petition (supplemental petition) at 
8.
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    The merchandise subject to this investigation is classifiable under 
subheading 3204.17.9040 of the Harmonized Tariff Schedule of the United 
States (HTSUS). Although the HTSUS subheading is provided for 
convenience and customs purposes, the written description of the 
merchandise under investigation is dispositive.

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 January 13, 2004, the ITC published its 
preliminary determination that there is a reasonable indication that an 
industry in the United States is materially injured by reason of 
imports from China and India of subject merchandise. See Carbazole 
Violet Pigment 23 From China and India, 69 FR 20021 (January 13, 2004).

Alignment With Final Antidumping Duty Determination

    On January 16, 2004, the petitioners submitted a letter requesting 
alignment of the final determination in this investigation with the 
final determination in the companion antidumping duty investigation. 
Therefore, in accordance with section 705(a)(1) of the Act, we are 
aligning the final determination in this investigation with the final 
determination in the antidumping duty investigation of CVP-23 from 
India.

[[Page 22765]]

Period of Investigation

    The period of investigation (POI) for which we are measuring 
subsidies is April 1, 2002, through March 31, 2003, which corresponds 
to the most recently completed fiscal year for the respondent 
companies.

Subsidies Valuation Information

Benchmarks for Loans and Discount Rate

    In accordance with section 351.505(a)(3)(ii) of the Department's 
regulations, for those programs requiring the application of a 
benchmark interest rate, and where company-specific interest rates on 
comparable commercial loans are not available, we may use a national 
average interest rate for comparable commercial loans. With respect to 
the rupee-denominated, short-term benchmark used in calculating the 
benefit for post-shipment export financing, we used a national average 
interest rate since Alpanil, the only producer/exporter of CVP-23 which 
reported to have used this program, stated that it did not have any 
comparable short-term commercial loans. We calculated a national 
average short-term interest rate using information from the 
International Monetary Fund's publication International Financial 
Statistics (March 2004), which shows the average short- and medium-
term, rupee-denominated financing from private creditors for the fiscal 
quarters which correspond to our POI.

Cross-Ownership and Attribution of Subsidies

    Because Alpanil reported that it is affiliated with Meghmani, an 
exporter of subject merchandise and producer of non-subject 
merchandise, by virtue of common owners, we must examine whether cross-
ownership exists between the two companies within the meaning of 
section 351.525(b)(6) of our regulations. Section 351.525(b)(6)(vi) of 
the regulations defines cross-ownership as existing ``where one 
corporation can use or direct the individual assets of the other 
corporation(s) in essentially the same ways it can use its own assets. 
Normally, this standard will be met where there is a majority voting 
ownership interest between two corporations or through common ownership 
of two (or more) corporations.''
    The record indicates that Alpanil and Meghmani have three common 
owners that account for 55 percent and 50 percent, respectively, of the 
ownership interest in each company. See Exhibit CVD-1 of Alpanil's 
February 10, 2004 questionnaire response. Although we requested that 
the GOI and Alpanil obtain or provide a complete questionnaire response 
for Meghmani in order to further evaluate the issue of cross-ownership 
and the role these individual owners play in administering and 
directing Alpanil and Meghmani, this information was not provided. See 
Alpanil's March 24, 2004 supplemental questionnaire response at 2 and 
the GOI's March 24, 2004 supplemental questionnaire response at 1.
    Since we have received incomplete information from the GOI, 
Alpanil, and Meghmani with regard to the issue of cross-ownership, we 
have preliminarily resorted to facts otherwise available pursuant to 
section 776(a) of the Act. Therefore, we preliminarily determine that 
cross-ownership exists between Alpanil and Meghmani since the facts 
available indicate that three mutual owners of both companies have the 
capacity to control, influence, and direct the operations of Alpanil 
and Meghmani through their combined majority voting ownership interest. 
Accordingly, we have attributed Meghmani's subsidies to the products 
sold by Alpanil during the POI in accordance with section 
351.525(b)(6)(v) of the Department's regulations, in determining a 
combined Alpanil/Meghmani ad valorem rate. In instances where Meghmani 
acted as Alpanil's trading company during the POI, we have 
preliminarily calculated Alpanil/Meghmani's subsidy rate for each 
export subsidy program by cumulating Meghmani's export subsidies with 
Alpanil's export subsidies in accordance with section 351.525(c) of the 
Department's regulations. See ``Duty Entitlement Passbook Scheme'' and 
``Income Tax Exemption Scheme'' sections of this notice, below.

I. Programs Preliminarily Determined to be Countervailable

A. GOI Programs

    1. Pre-Shipment Export Financing
    The Reserve Bank of India (RBI), through commercial banks, provides 
short-term pre-shipment export 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. 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 denominated either in Indian 
rupees or in foreign currency. Commercial banks extending export credit 
to Indian companies must, by law, charge interest on this credit at 
rates capped by the RBI.
    The Department has previously determined that this export financing 
is countervailable to the extent that the interest rates are set by the 
GOI and are lower than the rates exporters would have paid on 
comparable commercial loans. See Notice of Final Affirmative 
Countervailing Duty Determination: Polyethylene Terephthalate Film, 
Sheet, and Strip from India (PET Film from India), 67 FR 34905 (May 16, 
2002). Specifically, the Department determined that the GOI's issuance 
of financing at preferential rates constituted a financial contribution 
pursuant to section 771(5)(D)(i) of the Act. See the ``Pre-Shipment and 
Post-Shipment Export Financing'' section of the PET Film from India 
Issues and Decision Memorandum on file in the Department's Central 
Records Unit (CRU) and available online at http://www.ia.ita.doc.gov. 
The Department further determined that the interest savings under this 
program conferred a benefit pursuant to section 771(5)(E)(ii) of the 
Act. In addition, the Department determined this program, which is 
contingent upon exports, to be specific within the meaning of section 
771(5A)(B) of the Act. No new information or evidence of changed 
circumstances have been presented in this investigation to warrant 
reconsideration of this finding.
    The GOI reported that only Alpanil used this program during the 
POI. Pidilite reported its non-use of this program in its February 10, 
2004 questionnaire response. Alpanil reported that it used the pre-
shipment export financing program during the POI by way of a credit 
line established through a commercial bank. According to Alpanil, this 
pre-shipment financing operates on a running account where interest is 
calculated on the daily outstanding amount and paid quarterly. Alpanil 
stated that in cases where the pre-shipment financing exceeded 180 
days, there is no actual repayment schedule; however, the amount 
outstanding is recoverable on demand at a commercial rate of interest 
applied to the outstanding balances. See Alpanil's February 10, 2004 
questionnaire response at pages 29-31.
    To calculate the benefit conferred by the pre-shipment export 
financing, we compared the actual interest paid on the credit line with 
the amount of interest that would have been paid at the benchmark 
interest rate for short- to medium-term loans. See ``Benchmarks for 
Loans and Discount Rate'' section, above. Since the benchmark rate

[[Page 22766]]

exceeded the actual interest rate paid quarterly on Alpanil's credit 
line, a benefit is conferred. We then divided the total amount of the 
benefit by Alpanil's total direct exports during the POI. Accordingly, 
we preliminarily determine the net countervailable subsidy under the 
pre-shipment export financing program to be
    0.17 percent ad valorem for Alpanil/Meghmani (see ``Cross-Ownership 
and Attribution of Subsidies'' section above), and zero for AMI and 
Pidilite.
    2. Duty Entitlement Passbook Scheme (DEPS)
    India's DEPS was enacted on April 1, 1997, as a successor to the 
Passbook Scheme (PBS). As with PBS, the DEPS enables exporting 
companies to earn import duty exemptions in the form of passbook 
credits rather than cash. All exporters are eligible to earn DEPS 
credits on a post-export basis, provided that the GOI has established a 
standard input/output norm (SION) for the exported product. DEPS 
credits can be used for any subsequent imports, regardless of whether 
they are consumed in the production of an export product. DEPS credits 
are valid for twelve months and are transferable after the foreign 
exchange is realized from the export sales on which the DEPS credits 
are earned. With respect to subject merchandise, the GOI has 
established a SION. Therefore, CVP-23 exporters were eligible to earn 
credits equal to 15 percent of the FOB value of their export shipments 
during the fiscal year ending March 31, 2003.
    The Department has previously determined that the DEPS is 
countervailable. In PET Film From India, the Department determined that 
under the DEPS, a financial contribution, as defined under section 
771(5)(D)(ii) of the Act, is provided because (1) the GOI provides 
credits for the future payment of import duties; and (2), the GOI does 
not have in place and does not apply a system that is reasonable and 
effective for the purposes intended to confirm which inputs, and in 
what amounts, are consumed in the production of the exported products. 
Therefore, under section 351.519(a)(4) of the Department's regulations 
and section 771(5)(E) of the Act, the entire amount of import duty 
exemption earned during the POI constitutes a benefit. Finally, this 
program can only be used by exporters and, therefore, it is specific 
under section 771(5A)(B) of the Act. See the ``DEPS'' section of the 
PET Film from India Issues and Decision Memorandum on file in the CRU 
and available online at http://www.ia.ita.doc.gov. No new information 
or evidence of changed circumstances have been presented in this 
investigation to warrant reconsideration of this finding. Therefore, we 
continue to find that the DEPS is countervailable.
    Under section 351.524(c) of the Department's regulations, this 
program provides a recurring benefit because DEPS credits provide 
exemption from import duties. Benefits from the DEPS program are 
conferred as of the date of exportation of the shipment for which the 
pertinent DEPS credits are earned. See comment 4, ``Timing and 
Calculation of DEPS Benefits,'' Final Affirmative Countervailing Duty 
Determination: Certain Cut-to-Length Carbon-Quality Steel Plate From 
India, 64 FR 73131, 73140, (December 29, 1999).
    The GOI reported that Alpanil, AMI, and Pidilite used this program 
during the POI. Alpanil indicated in its response that Meghmani 
transferred its DEPS credits to Alpanil during the POI. See Alpanil's 
March 24, 2004 supplemental questionnaire response at 3. We calculated 
the DEPS program rate using the value of the post-export credits that 
the respondents earned for their export shipments of subject 
merchandise to the United States during the POI by multiplying the FOB 
value of each export shipment by the relevant percentage of DEPS credit 
allowed under the program for exports of subject merchandise. We then 
subtracted as an allowable offset the actual amount of application fees 
paid for each license in accordance with section 771(6) of the Act. 
Finally, we took this sum (the total value of the licenses net of 
application fees paid) and divided it by each respondent's total 
respective exports of subject merchandise to the United States during 
the POI.
    On this basis, we preliminarily determine Pidilite's net 
countervailable subsidy from the DEPS program to be 14.93 percent ad 
valorem. For Alpanil/Meghmani, we preliminarily determine the net 
countervailable subsidy from this program to be 14.93 percent ad 
valorem which is inclusive of DEPS credits earned by Meghmani that were 
transferred to Alpanil during the POI. See ``Cross-Ownership and 
Attribution of Subsidies'' section of this notice, noted above.
    For AMI, we have information from the GOI's February 10, 2004, 
questionnaire response showing that AMI utilized this program during 
the POI. Since AMI has not participated in this investigation and 
necessary information is not available on the record, we have applied 
facts available in accordance with section 776(a). In applying facts 
available, we have made an adverse inference pursuant to section 
776(b), since AMI has not cooperated to the best of its ability to 
respond to the Department's request for information by virtue of its 
complete lack of participation in this investigation.
    Consistent with our practice, we have used, as adverse facts 
available, the highest company-specific DEPS program rate calculated in 
an Indian proceeding. The rate we have calculated for the purposes of 
this preliminary determination for Alpanil/Meghmani, 14.93 percent ad 
valorem, is the highest company-specific DEPS program rate calculated. 
This rate is higher than the company-specific DEPS program rate 
calculated in any other completed Indian proceeding. See e.g., PET Film 
from India Issues and Decision Memorandum on file in the CRU and 
available online at http://www.ia.ita.doc.gov. Accordingly, we used 
this rate to preliminarily determine an ad valorem rate of 14.93 
percent for AMI during the POI. We believe this information is reliable 
and relevant because this company-specific DEPS rate was calculated 
using information in the record of this investigation (for a company in 
the same industry during the same period).
    3. Income Tax Exemption Scheme (Section 80 HHC)
    In Certain Iron-Metal Castings From India: Final Results of 
Countervailing Duty Administrative Review (Iron-Metal Castings from 
India), 65 FR 31515 (May 18, 2000), the Department determined that 
deductions of profit derived from exports under section 80HHC of 
India's Income Tax Act are countervailable. No new information or 
evidence of changed circumstances has been submitted in this 
investigation to warrant reconsideration of this finding. Therefore, we 
continue to find this program countervailable because it is contingent 
upon export performance and, therefore, is specific in accordance with 
section 771(5A)(B) of the Act. Pursuant to section 771(5)(D)(ii) of the 
Act, the GOI provides a financial contribution in the form of tax 
revenue not collected. Finally, a benefit is conferred in the amount of 
tax savings in accordance with section 771(5)(E) of the Act.
    The GOI reported that only Alpanil and Pidilite used this program 
during the POI. However, according to Alpanil, Meghmani also received 
80 HHC tax benefits during the POI. See Alpanil's March 24, 2004 
supplemental questionnaire response. To calculate the benefit each 
responding company received under this program, we subtracted the total 
amount of income tax the company actually paid during

[[Page 22767]]

the POI from the amount of tax the company otherwise would have paid 
had it not claimed a deduction under section 80 HHC. Since the 
Department has previously found section 80 HHC to be an ``untied'' 
export subsidy program where the benefits provided are attributable to 
all products exported by the company, we then divided this difference 
by the FOB value of the company's total exports during the POI. See 
e.g., Final Affirmative Countervailing Duty Determination: Certain 
Pasta from Turkey, 61 FR 30366, 30370 (June 14, 1996). For Pidilite, we 
preliminarily determine the net countervailable subsidy from this 
program to be 3.00 percent ad valorem.
    According to Alpanil, Alpanil and Meghmani received tax benefits 
under this program during the POI. See Alpanil's March 24, 2004 
supplemental questionnaire response at 3. Meghmani did not file a 
questionnaire response with the necessary information to cumulate 
Meghmani's export subsidies with Alpanil's under this program. 
Similarly, Meghmani's affiliate, Alpanil, did not provide such 
information. Therefore, we have resorted to facts available pursuant to 
section 776(a) of the Act. Furthermore, by virtue of their complete 
failure to respond to questions on Meghmani's utilization of this 
program, Meghmani and Alpanil did not act to the best of their 
abilities in providing the information we requested concerning 
Meghmani's use of the programs under investigation (see ``Case 
History'' section, above). Therefore, we have resorted to adverse facts 
available in accordance with section 776(b) of the Act. As noted above 
in the ``Cross-Ownership and Attribution of Subsidies'' section of this 
notice, we are cumulating Meghmani's export subsidies with Alpanil's 
export subsidies in accordance with section 351.525(c) of the 
Department's regulations.
    The record indicates that Alpanil received 80 HHC deductions for 
its direct export sales, as well as for its indirect export sales to 
Meghmani as a ``supporting manufacturer.'' See exhibit CVD-4 of 
Alpanil's February 10, 2004 questionnaire response. According to 
Alpanil, ``where a supporting manufacturer supplies to an Export or 
Trading House, the deduction[ilcub]s[ircub] he receives under section 
80 HHC are to the extent of profits derived from the sale of goods to 
the Export or Trading House. Similarly, the deductions that an Export 
or Trading House is entitled to on profits from the export of goods are 
reduced by the profits attributable to the sales made by the supporting 
manufacturer to the Export or Trading House.'' See Alpanil's 
supplemental questionnaire response at pages 8 through 9. We have 
complete information that can be used in the calculation of Alpanil's 
portion of the 80 HHC benefits that can be attributed to the ad valorem 
rate for Alpanil/Meghmani during the POI. See ``Cross-Ownership and 
Attribution of Subsidies'' section, above.
    In the case of Meghmani, we do not have the necessary sales and tax 
information needed to calculate Meghmani's portion of the 80 HHC's 
benefits in question. Section 776(b) of the Act indicates that the 
Department may use publicly available information from other 
proceedings for purposes of determining the adverse facts available 
rate for a program in which there is no information on record. 
Therefore, as adverse facts available, we have calculated the benefit 
to Meghmani by first using the highest company-specific program rate of 
14.90 percent ad valorem from Iron-Metal Castings from India, 65 FR 
31515 (May 18, 2000).
    Section 776(c) of the Act provides that the Department shall, ``to 
the extent practicable,'' corroborate secondary information using 
independent sources reasonably at its disposal. The Statement of 
Administrative Action accompanying the URAA (SAA) further provides that 
to corroborate secondary information means that the Department will 
satisfy itself that the secondary information to be used has probative 
value. SAA at 870; also, section 351.308(d) of the Department's 
regulations. However, unlike other types of information, such as 
publicly available data on national inflation rates or national average 
interest rates, there are typically no independent sources for data on 
company-specific benefits resulting from countervailable subsidy 
programs. The only source for such information normally is 
administrative determinations.
    While we find the information from Iron-Metal Castings from India 
to be reliable as the 80 HHC program has not changed since that 
determination made, it may not be completely relevant to the extent 
that differences exist in the profit margins of the two types of 
products (steel and chemicals). However, the fact that corroboration 
may not be practicable in a given case does not prevent the Department 
from applying an adverse inference as appropriate, and does not prevent 
the Department from using secondary information. See section 351.308(d) 
of the Department's regulations. Accordingly, we find it reasonable to 
use this highest company-specific program rate from Iron-Metal Castings 
from India in order to draw the appropriate adverse inference in this 
case, and to adequately account for Meghmani's failure to respond to 
any of the Department's questionnaires.
    Finally, using the only export information available on record for 
both companies, we weight-averaged Alpanil's calculated rate and 
Meghmani's adverse facts available rate by Alpanil's direct exports of 
subject merchandise to the United States and Alpanil's indirect exports 
of subject merchandise to the United States through Meghmani. By using 
a weighted-average program rate for Meghmani, we find that we can 
capture any potential 80 HHC benefits from Meghmani's direct exports 
and indirect exports from producers other than Alpanil. We 
preliminarily determine the net countervailable subsidy for Alpanil/
Meghmani under this program to be 2.81 percent ad valorem.

B. State of Gujarat (SOG) Program:

    Sales Tax Incentive Scheme
    Under the 1995 Industrial Policy of Gujarat, companies located in 
specific areas of Gujarat are exempted from payment of sales tax on the 
purchase of raw materials, consumable stores, packing materials, and 
processing materials. See Exhibit 2 of the GOI's March 26, 2004 
questionnaire response. Other available benefits include exemption or 
deferment from sales tax and turnover tax on the sale of intermediate 
products, by-products, and scrap. After the deferral period expires, 
the companies are required to submit the deferred sales taxes to the 
SOG in equal installments over six years. Id. at pages 9 and10.
    According to Section 87 of Gujarat Sales Tax Act of 1969, sales 
made outside of Gujarat are already exempt from this sales tax. See 
Alpanil's March 29, 2004 Additional Allegations response at 2. 
Accordingly, the sales tax exemption covered by the SOG's sale tax 
incentive scheme only applies to sales within the state of Gujarat that 
would normally be assessed this sales tax.
    The Department preliminarily determines that this program is 
specific within the meaning of section 771(5A)(D)(iv) of the Act 
because the benefits are limited to industries located within 
designated geographical areas. We also preliminarily find that the SOG 
provided a financial contribution under section 771(5)(D)(ii) of the 
Act by foregoing the collection of sales tax revenue, and that the 
Indian companies benefitted under section 771(5)(E) of the Act, in the 
amount of sales tax exempted on purchases noted above.

[[Page 22768]]

    Although Alpanil reported receiving exemptions under the SOG's 
sales tax incentive scheme, and Pidilite claimed that it did not use 
this program during the POI, we do not have definitive information from 
the GOI concerning whether AMI and Meghmani used this program during 
the POI. On April 2, 2004, we sought further clarification from the GOI 
regarding AMI's and Meghmani's use of this program. On April 8, 2004, 
the GOI subsequently filed a response indicating that (1) Alpanil would 
provide the requisite information on the use of this program by 
Meghmani; and, (2) the GOI had no details concerning AMI's use of the 
program. As noted above in the ``Case History'' section, we also sent a 
letter to Alpanil on April 6, 2004 seeking information on Meghmani's 
use of this and the other programs under investigation for the POI. As 
of the date of this preliminary determination, we have not received a 
response.
    Information from the GOI indicates that AMI and Meghmani are both 
located in the state of Gujarat. See GOI's February 10, 2004 
questionnaire response at pages 2-3. Because AMI and Meghmani did not 
respond to the Department's questionnaires, and the GOI did not 
indicate in its response whether AMI or Meghmani utilized this program 
during the POI, the record does not contain any information 
demonstrating that AMI and Meghmani do not participate in the SOG's 
sales tax incentive scheme. Therefore, we must resort to facts 
available under section 776(a) of the Act. Furthermore, AMI and 
Meghmani failed to cooperate to the best of their abilities by failing 
to respond to the Department's questionnaires. As such, pursuant to 
section 776(b) of the Act, we have made the adverse inference that both 
companies benefitted from this program during the POI. See e.g., 
Certain Cold-Rolled Carbon Steel Flat Products from Korea; Final 
Affirmative CVD Determination, 67 FR 62102 (October 3, 2002).
    Because a company-specific rate for this program has never been 
previously determined by the Department, we relied on the information 
provided in Alpanil's response to determine the adverse facts available 
rate to apply to Alpanil/Meghmani and to AMI. Accordingly, we divided 
Alpanil's reported sales tax exemption for the POI, by the relevant in-
state sales that would normally be assessed this tax. Based on this 
calculation, we preliminarily determine the net countervailable subsidy 
for Alpanil/Meghmani to be 4.38 percent ad valorem, and 4.38 percent ad 
valorem for AMI. Furthermore, the rate is based on actual information 
reported by a respondent in this investigation, and is thereby reliable 
and relevant to this investigation.

II. Programs Preliminarily Determined To Be Not Used

    We preliminarily determine that the producers/exporters of CVP-23 
did not apply for or receive benefits under the programs listed below. 
For purposes of this preliminary determination, we have relied on the 
GOI's response to preliminarily determine non-use of the programs 
listed below for AMI and Meghmani. During the course of verification, 
if we are unable to establish through the information provided by the 
GOI that each of these non-responding companies did not utilize each of 
these programs (or any of the programs listed above for which non-use 
by an individual company was reported), we may resort to adverse facts 
available in determining the program rate for the final determination 
for the relevant program and company in question.

A. GOI Programs

    1. Export Promotion Capital Goods Scheme (EPCGS)
    2. Export Processing Zones (EPZs) / Export Oriented Units (EOUs) 
Programs
    3. Income Tax Exemption Scheme (Sections 10A and 10B)
    4. Market Development Assistance
    5. Special Imprest Licenses
    6. Duty Free Replenishment Certificate
    7. Advance License Scheme
    8. CENVAT Refund for Exports

B. State Program

    State of Maharastra (SOM) Program: Sales Tax Incentives

III. Program Preliminarily Determined To Be Terminated

GOI Program: Exemption of Export Credit from Interest Taxes

    Indian commercial banks were required to pay a tax on all interest 
accrued from borrowers. The banks passed 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. The Department has previously found this tax exemption 
to be an export subsidy, and thus countervailable, because only 
interest accruing on loans and advances made to exporters in the form 
of export credit was exempt from interest tax. See e.g., Final Results 
of Countervailing Duty Administrative Review: Certain Iron-Metal 
Castings from India, 61 FR 64676, 64686 (December 6, 1996).
    The GOI reported that the tax on interest on any category of loan 
was eliminated prior to the POI. Specifically, the GOI submitted 
Section 4(3) of the Interest Tax Act which provides that ``no interest 
tax shall be charged in respect of any chargeable interest accruing or 
arising after the 31st day of March, 2000.'' See Appendix 6 of the 
GOI's February 10, 2004 questionnaire response. In addition, the 
information reported by the responding companies indicates that they 
are no longer required to pay tax on any interest on any loans. 
Therefore, in accordance with section 351.526(d) of the Department's 
regulations, we preliminarily determine that this program has been 
terminated. If, however, we are unable to establish at verification 
that there are no residual benefits accruing to exporters of CVP-23 
from India from this program, and that the GOI has not implemented a 
replacement program, we will not find, for purposes of the final 
determination that this program has been terminated in accordance with 
section 351.526(d) of the regulations.

IV. Program for Which Additional Information is Needed

Central Value Added Tax (CENVAT) Credits for Domestic Consumption

    According to the GOI, the Modified Value Added Tax (MODVAT) was 
established in 1986 in order to do away with the cascading effect of 
domestic commodity taxes paid on inputs used in the manufacture of the 
final product. The MODVAT was renamed the Central Value Added Tax 
(CENVAT) in 2000. Under the CENVAT Scheme, according to the GOI 
questionnaire responses, every manufacturer of excisable goods is 
required to register under the Central Excise Act. CENVAT credits are 
earned on the taxes or duties paid on inputs and capital goods received 
for the manufacture of any dutiable final product, including the Excise 
Duty, Special Excise Duty (SED), Additional Duty of Excise (AED), and 
Countervailing Duty (CVD). According to the GOI, CENVAT credits can be 
used to offset CENVAT owed on any final product cleared for domestic 
consumption. On final products cleared for export, no CENVAT is 
required to be paid. The GOI reported that every Indian manufacturer of 
excisable goods is eligible to use this program. All companies can 
claim these credits. See GOI's February 10, 2004 questionnaire response 
at pages 63-64. During the POI, Alpanil and Pidilite claimed CENVAT 
credits.

[[Page 22769]]

    Based on the information on the record of this investigation, we 
are unable to determine whether CENVAT credits for domestic consumption 
are provided to a specific enterprise or industry, or group thereof. 
Although it appears that all manufacturers can use this program, we are 
unable to assess whether CENVAT credits are limited, in fact, to a 
specific enterprise or industry, or group thereof, in accordance with 
section 751(5A)(D)(iii) of the Act. Neither can we determine whether 
the provision of CENVAT credit against countervailing duties paid 
provides a benefit to a specific enterprise or industry, or group 
thereof in accordance with section 751(5A)(D)(iii) of Act. Therefore, 
for purposes of this preliminary determination, additional information 
is needed before making a decision with respect to this program. We 
will seek additional information from the GOI prior to our verification 
and final determination.

Verification

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

Suspension of Liquidation

    In accordance with section 703(d)(1)(A)(i) of the Act, we have 
determined individual rates for Alpanil/Meghmani, Pidilite and AMI. To 
calculate the ``all others'' rate, we weight-averaged the individual 
rates of Alpanil/Meghmani and Pidilite by each company's respective 
sales of subject merchandise made to the United States during the POI. 
We did not include AMI's rate in the calculation of the ``all others'' 
rate because its rate was based on facts available. These rates are 
summarized in the table below:

------------------------------------------------------------------------
                 Producer/Exporter                    Net subsidy rate
------------------------------------------------------------------------
Alpanil Industries/Meghmani Organics Ltd..........    22.29 % ad valorem
Pidilite Industries Corporation Ltd...............    17.93 % ad valorem
AMI Pigments Pvt. Ltd.............................    19.31 % ad valorem
All Others........................................    20.09 % ad valorem
------------------------------------------------------------------------

    In accordance with section 703(d)(1)(B) of the Act, we are 
directing U.S. Customs and Border Protection 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 the posting of a 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 non-privileged and non-proprietary 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.
    In accordance with section 705(b)(2) of the Act, 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. 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 will 
be notified of the schedule for the hearing and 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) 
party's name, address, and telephone number; (2) the number of 
participants; and, (3) to the extent practicable, an identification of 
the arguments to be raised at the hearing.
    In addition, unless otherwise notified, six copies of the business 
proprietary version and six copies of the non-proprietary 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 briefs, 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 non-proprietary version of 
the rebuttal briefs must be submitted to the Assistant Secretary no 
later than 5 days from the date of filing of the case briefs. An 
interested party may make an affirmative oral presentation at any 
hearing 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 issued and published pursuant to 
sections 703(f) and 777(i) of the Act.

    Dated: April 19, 2004.
James J. Jochum,
Assistant Secretary for Import Administration.
[FR Doc. 04-9477 Filed 4-26-04; 8:45 am]
BILLING CODE 3510-DS-S