[Federal Register Volume 60, Number 15 (Tuesday, January 24, 1995)]
[Notices]
[Pages 4596-4600]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-1762]
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DEPARTMENT OF COMMERCE
[C-533-063]
Certain Iron-Metal Castings From India: Preliminary Results of
Countervailing Duty Administrative Review
AGENCY: International Trade Administration/Import Administration,
Department of Commerce.
ACTION: Notice of Preliminary Results of Countervailing Duty
Administrative Review.
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SUMMARY: The Department of Commerce is conducting an administrative
review of the countervailing duty order on certain iron-metal castings
from India for the period January 1, 1991 through December 31, 1991. We
preliminarily determine the net subsidy to be 5.54 percent ad valorem
for all manufacturers and exporters in India of certain iron-metal
castings, except for certain firms which have significantly different
aggregate benefits. A complete listing of the net subsidies for these
firms can be found in the ``Preliminary Results of Review'' section of
this notice. We invite interested parties to comment on these
preliminary results.
EFFECTIVE DATE: January 24, 1995.
FOR FURTHER INFORMATION CONTACT: Lorenza Olivas or Alexander Braier,
Office of Countervailing Compliance, International Trade
Administration, U.S. Department of Commerce, Washington, DC. 20230;
telephone: (202) 482-2786.
SUPPLEMENTARY INFORMATION:
Background
On October 8, 1992, the Department of Commerce (the Department)
published in the Federal Register a notice of ``Opportunity to Request
Administrative Review'' (57 FR 46371) of the countervailing duty order
on certain iron-metal castings from India (45 FR 68650; October 16,
1980). On October 27, 1992, the Municipal Castings Fair Trade Council
and individually-named members, all of which are interested parties,
requested an administrative review of the order. We initiated the
review, covering the period January 1, 1991 through December 31, 1991,
on November 27, 1992 (55 FR 56318). The Department is now conducting
this administrative review in accordance with section 751(a) of the
Tariff Act of 1930 (the Act).
Scope of Review
Imports covered by the review are shipments of Indian manhole
covers and frames, clean-out covers and frames, and catch basin grates
and frames. These articles are commonly called municipal or public
works castings and are used for access or drainage for public utility,
water, and sanitary systems. During the review period, such merchandise
was classifiable under the Harmonized Tariff Schedule (HTS) item
numbers 7325.10.0010 and 7325.10.0050. The HTS item numbers are
provided for convenience and Customs purposes. The written description
remains dispositive.
The review period is January 1, 1991 through December 31, 1991.
This review involves 14 producers/exporters and 12 programs.
Calculation Methodology for Assessment and Deposit Purposes
Pursuant to Ceramica Regiomontana, S.A. v. United States, 853 F.
Supp. 431 (CIT 1994), Commerce is required to calculate a country-wide
CVD rate, i.e., the all-other rate, by ``weight averaging the benefits
received by all companies by their proportion of exports to the United
States, inclusive of zero rate firms and de minimis firms.'' Therefore,
we first calculated a subsidy rate for each company subject to the
administrative review. We then weight-averaged the rate received by
each company using as the weight its share of total Indian exports to
the United States of subject merchandise. We then summed the individual
companies' weight-averaged rates to determine the subsidy rate from all
programs benefitting exports of subject merchandise to the United
States.
Since the country-wide rate calculated using this methodology was
above de minimis, as defined by 19 CFR 355.7 (1993), we proceeded to
the next step and examined the net subsidy rate calculated for each
company to determine whether individual company rates differed
significantly from the weighted-average country-wide rate, pursuant to
19 CFR 355.22(d)(3). Three companies (Dinesh Brothers, Pvt. Ltd., Super
Castings (India) Pvt. Ltd., and Kajaria Iron Castings Pvt. Ltd.)
received significantly different net subsidy rates during the review
period pursuant to 19 CFR 355.22(d)(3). These companies are treated
separately for assessment and cash deposit purposes. All other
companies are assigned the country-wide rate.
Analysis of Programs
1. Pre-Shipment Export Financing
The Reserve Bank of India, through commercial banks, provides pre-
shipment financing, or ``packing credit,'' to exporters. With these
pre-shipment loans, exporters may purchase raw materials and packing
materials based on presentation of a confirmed order or letter of
credit. In addition, exporters may establish pre-shipment credit lines
under this program with limits contingent upon the value of exports. In
general, the loans are granted for a period of up to 180 days. In prior
administrative reviews of this order, this program was determined to be
countervailable because receipt of the loans under this program is
contingent upon export performance and the interest rates were
preferential. (See e.g., Final Results of Countervailing Duty
Administrative Review: Certain Iron-Metal Castings From India (56 FR
41658; (August 22, 1991) (1987 Indian Castings Final Results); Final
Results of Countervailing Duty Administrative Review: Certain Iron-
Metal Castings From India (56 FR 52515; October 21, 1991) (1988 Indian
Castings Final Results); and Final Results of
[[Page 4597]] Countervailing Duty Administrative Review: Certain Iron-
Metal Castings From India (56 FR 52521; October 21, 1991) (1989 Indian
Castings Final Results).) There has been no new information or evidence
of changed circumstances in this review to warrant reconsideration of
this program's countervailability. During the review period, the rate
of interest charged on pre-shipment export loans ranged from 7.50 to 17
percent, depending on the length and date of the loan.
In the case of a short-term loan provided by a government, the
Department uses the average interest rate for an alternative source of
short-term financing in the country in question as a benchmark. In
determining this benchmark, the Department relies upon the predominant
source of short-term financing in the country in question. (See
Countervailing Duties; Notice of Proposed Rulemaking and Request for
Public Comments, Sec. 355.44(b)(3)(i) (Proposed Rules) (54 FR 23380;
May 31, 1989).
The Government of India (GOI) classifies the companies under review
as small-scale industry companies. Therefore, we used the small-scale
industry short-term interest rates published in the Reserve Bank of
India periodicals Reserve Bank of India Report on Trend and Progress of
Banking in India: 1990-91 (Appendix II) and Reserve Bank of India
Annual Report 1991-92 that were submitted by the GOI. These
publications provided us with the actual short-term small-scale
industry interest rate of 14 percent for loans through October 8, 1991.
Since they provided only minimum interest rates for October 9, 1991
through December 31, 1991, we used the International Monetary Fund
publication International Financial Statistics (IFS) for the remainder
of the year. The IFS reported that the short-term interest rate in
India for the period October 9, 1991 through December 31, 1991 was 20
percent. Therefore, we weight-averaged these two rates based on the
number of months of the year each applied, and calculated a benchmark
of 15.38 percent for this review.
During the review period, 11 of the 14 respondent companies made
payments on pre-shipment export loans for shipments of subject castings
to the United States. One of these 11 companies, Super Castings (India)
Private Ltd. (Super Castings), provided aggregate pre-shipment loan and
post-shipment loan information in its response to our original
questionnaire. We were not able to distinguish which entries were pre-
shipment loans based on the information submitted by the company. Super
Castings did not respond to a second request for information on pre-
shipment loans in our supplemental questionnaire. Therefore, in
accordance with section 776(c) of the Act, we assumed as best
information available (BIA) that all reported loans were pre-shipment
loans.
To calculate the benefit from the pre-shipment loans to these
eleven companies, we compared the actual interest paid on these loans
during the review period with the interest that would have been paid
using the benchmark interest rate of 15.38 percent. If the benchmark
rate exceeded the program rate, the difference between those amounts is
the benefit. We then divided the benefit by either total exports or by
total exports of the subject merchandise to the United States,
depending on how the pre-shipment financing was reported. That is, if a
company was able to segregate pre-shipment financing applicable to
subject merchandise exported to the United States, we divided the
benefit derived from only those loans by total exports of subject
merchandise to the United States. If a firm was unable to segregate
pre-shipment financing, we divided the benefit from all pre-shipment
loans by total exports. On this basis, we preliminarily determine the
net subsidy from this program to be one percent ad valorem for all
manufacturers and exporters in India of certain iron-metal castings,
except for those firms listed below which have significantly different
aggregate benefits. The net subsidy for those firms is as follows:
------------------------------------------------------------------------
Net subsidy
Manufacturer/exporter (percent)
------------------------------------------------------------------------
Dinesh Brothers, Pvt. Ltd.................................. 0.00
Super Castings (India) Pvt. Ltd............................ 23.00
Kajaria Iron Castings Pvt. Ltd............................. 0.68
------------------------------------------------------------------------
2. Post-Shipment Export Financing
The Reserve Bank of India, through commercial banks, provides post-
shipment loans to exporters upon presentation of export documents.
Post-shipment financing also includes bank discounting of foreign
customer receivables. As with pre-shipment financing, exporters may
establish post-shipment credit lines with their commercial banks. In
general, post-shipment loans are granted for a period of up to 180
days. The interest rate for post-shipment financing was 8.65 percent
during the review period.
In prior administrative reviews of this order, this program was
determined to be countervailable because receipt of the loans under
this program is contingent upon export performance and the interest
rates were preferential. (See the 1988 and 1989 Indian Castings Final
Results.) There has been no new information or evidence of changed
circumstances in this review to warrant reconsideration of this
program's countervailability. For reasons stated above for pre-shipment
financing, we are using 15.38 percent as our short-term interest rate
benchmark.
During the review period, 12 of the 14 respondent companies made
payments on post-shipment export loans for shipments of subject
castings to the United States. One of these 12 companies, Super
Castings, provided aggregate post-shipment loan and pre-shipment loan
information in its response to our original questionnaire. Our
treatment of Super Castings is described under our analysis of pre-
shipment financing. To calculate the benefit from these loans to the
other 11 companies, we followed the same short-term loan methodology
discussed above for pre-shipment financing. We divided the benefit by
either total exports or exports of the subject merchandise to the
United States, depending on whether the company was able to segregate
the post-shipment financing on the basis of destination of the exported
good. On this basis, we preliminarily determine the net subsidy from
this program to be 0.42 percent ad valorem for all manufacturers and
exporters in India of certain iron-metal castings, except for those
firms listed below which have significantly different aggregate
benefits. The net subsidy for those firms is as follows:
------------------------------------------------------------------------
Net subsidy
Manufacturer/exporter (percent)
------------------------------------------------------------------------
Dinesh Brothers, Pvt. Ltd.................................. 0.00
Super Castings (India) Pvt. Ltd............................ 0.00
Kajaria Iron Castings Pvt. Ltd............................. 0.00
------------------------------------------------------------------------
3. Income Tax Deductions Under Section 80HHC
Under section 80HHC of the Income Tax Act, the GOI allows exporters
to deduct profits derived from the export of goods and merchandise from
taxable income. In prior administrative reviews of this order, this
program has been determined to be countervailable because receipt of
benefits under this program is contingent upon export performance. (See
the 1988 and 1989 Indian Castings Final Results.) There has been no new
information or evidence of changed circumstances in this review to
warrant reconsideration of this program's countervailability.
[[Page 4598]]
To calculate the benefit to each company, we subtracted the total
amount of income tax the company actually paid during the review period
from the amount of tax the company would have paid during the review
period had it not claimed any deductions under section 80HHC. We then
divided this difference by the value of the company's total exports. On
this basis, we preliminarily determine the net subsidy from this
program to be 1.47 percent ad valorem for all manufacturers and
exporters in India of certain iron-metal castings, except for those
firms listed below which have significantly different aggregate
benefits. The net subsidy for those firms is as follows:
------------------------------------------------------------------------
Net subsidy
Manufacturer/exporter (percent)
------------------------------------------------------------------------
Dinesh Brothers, Pvt. Ltd.................................. 0.00
Super Castings (India) Pvt. Ltd............................ 18.75
Kajaria Iron Castings Pvt. Ltd............................. 15.46
------------------------------------------------------------------------
4. Cash Compensatory Support (CCS) Program
In 1966, the GOI established the CCS program which provides a
cumulative tax rebate paid upon export and is calculated as a
percentage of the f.o.b. invoice price. We verified that the rebate
rate for exports of castings was set at a maximum of five percent for
the review period.
As stated in Sec. 355.44(i)(4)(ii) of the Proposed Rules (54 FR
23382), the Department will find that the entire amount of any such
rebate is countervailable unless the following conditions are met: (1)
The program operates for the purpose of rebating prior stage cumulative
indirect taxes and/or import charges; (2) the government accurately
ascertained the level of the rebate; and (3) the government reexamines
its schedules periodically to reflect the amount of actual indirect
taxes and/or import charges paid. In prior administrative reviews of
this order, the Department determined that these conditions have been
met, and, as such, the entire amount of the rebate has not been
countervailed (see, e.g., the 1989 Indian Castings Final Results).
However, even if a rebate program meets one of these conditions,
the Department must still determine in each case whether there is an
over-rebate; that is, the Department must still analyze whether the
rebate for the subject merchandise exceeds the total amount of indirect
taxes and import duties borne by inputs that are physically
incorporated into the exported product. If the rebate exceeds the
amount of allowable indirect taxes and import duties, the Department
will, pursuant to Sec. 355.44(i)(4)(i) of the Proposed Rules, find a
countervailable benefit equal to the difference between the rebate rate
and the allowable rate determined by the Department (i.e., the over-
rebate).
During this review period, the Indian manufacturers of castings
have replaced domestic pig iron with imported pig iron as the basic raw
material used in the production of exports destined for the U.S.
market. Therefore, the manufacturers presented a tax incidence
calculation based on the Indian government's rebate system on castings.
The companies also provided information on the taxes paid. Based on our
examination of the indirect tax incidence on inputs of castings, we
preliminarily determine that two items listed as taxes, the port tax
and harbor tax (incurred with respect to imported pig iron), were
charges for services rather than indirect taxes. During the
verification of the 1990 administrative review, the information we
examined showed that the port tax included in the indirect tax
incidence is a wharfage charge. The documentation submitted at the 1990
verification on the harbor tax indicated that this item included
berthage, port dues, pilotage, and towing charges. (See February 25,
1994 report titled Verification of Information Submitted by RSI India
Pvt. Ltd. for the 1990 Administrative Review of the Countervailing Duty
Order on Certain Iron-Metal Castings from India (public version), which
is on file in the Central Records Unit (room B099 of the Main Commerce
Building).)
We afforded the GOI the opportunity to provide information to
demonstrate that the port and harbor collections discussed above were
actually indirect taxes rather than charges for services and, if so,
that they were accurately reflected in the rebate rate authorized for
subject castings. We received a response from the GOI on April 26,
1994. The information provided did not demonstrate that the port tax
and the harbor tax, which were used in the calculation of tax
incidence, are indirect taxes. Therefore, we determine that the port
dues and the charges for wharfage, berthage, pilotage, and towage are
service charges rather than import charges. For further discussion of
this analysis, see the May 26, 1994 briefing paper titled Cash
Compensatory Support (CCS) Program which is on file in the Central
Records Unit (room B099 of the Main Commerce Building).
Because these two claimed charges on the physically incorporated
items are service charges rather than indirect taxes or import charges,
we have preliminarily disallowed these items in the calculation of the
indirect tax incidence. Therefore, we recalculated the indirect tax
incidence incurred on the items physically incorporated in the
manufacture of castings. We then compared that recalculated tax
incidence rate to the rebates authorized on castings exports under the
CCS program. Based on this comparison, we preliminarily determine that
this program provides an over-rebate of indirect taxes. The amount of
the over-rebate is a countervailable benefit provided to exporters of
the subject castings.
We verified that on February 1, 1991, manufacturers and exporters
of castings stopped applying for CCS rebates on exports of subject
castings to the United States. Thus, to calculate the ad valorem
benefit to each company which applied for CCS rebates, we multiplied
the over-rebate rate by each company's exports of subject castings to
the United States during the month of January, 1991. We then divided
this amount by each company's total exports of subject castings to the
United States during the period of review. On this basis, we
preliminarily determine the net subsidy from this program to be 0.41
percent ad valorem for all manufacturers and exporters in India of
certain iron-metal castings, except for those firms listed below which
have significantly different aggregate benefits. The net subsidies for
those firms are as follows:
------------------------------------------------------------------------
Net subsidy
Manufacturer/exporter (percent)
------------------------------------------------------------------------
Dinesh Brothers, Pvt. Ltd.................................. 0.00
Super Castings (India) Pvt. Ltd............................ 0.00
Kajaria Iron Castings Pvt. Ltd............................. 0.50
------------------------------------------------------------------------
During the 1990 review, we verified that the GOI terminated the CCS
program effective July 3, 1991. (See the Verification of the Government
of India (GOI) Questionnaire Responses for the 1990 Administrative
Review of the Countervailing Duty Order on Certain Iron-Metal Castings
from India (public version).) However, exporters have two years in
which to file applications for CCS rebates for exports made prior to
July 3, 1991. To ascertain whether castings exporters received any
residual benefits from this terminated program, we reviewed the
companies' accounting ledgers through September 1993 (the time of our
1990 verification) (see verification report, Id). We found no evidence
of any applications for or receipts of residual benefits under this
program as of that date, which exceeded the two year period following
the [[Page 4599]] termination of the program, during which castings
exporters could file CCS applications. Therefore, we plan not to
include the subsidy conferred by this program in the cash deposit rate
to be established in the final results of this review. (See
Sec. 355.50(a) of the Proposed Rules.)
5. The Sale of Import Licenses
The GOI allows companies to transfer certain types of import
licenses to other companies in India. During the review period,
castings manufacturers/exporters sold additional licenses and
replenishment licenses. Because the companies received these licenses
based on their status as exporters, we preliminarily determine that the
sale of these licenses is countervailable. See the 1988 and 1989 Indian
Castings Final Results. There has been no new information or evidence
of changed circumstances in this review to warrant reconsideration of
this program's countervailability.
A company receives an additional license based on its total export
earnings from the previous year. Therefore, we calculated the subsidy
by dividing the total amount of proceeds a company received from sales
of additional licenses by the total value of its exports of all
products to all markets.
A company receives replenishment licenses based on individual
export shipments. Therefore, we calculated the subsidy by dividing the
amount of proceeds a company received from sales of replenishment
licenses that was attributable to shipments of subject castings to the
United States by the total value of the company's exports of subject
castings to the United States.
We preliminarily determine the net subsidy from the sale of all
import licenses to be 0.18 percent ad valorem for all manufactures and
exporters in India of certain iron-metal castings, except for those
firms listed below which have significantly different aggregate
benefits. The net subsidies for those firms are as follows:
------------------------------------------------------------------------
Net subsidy
Manufacturer/exporter (percent)
------------------------------------------------------------------------
Dinesh Brothers, Pvt. Ltd.................................. 0.00
Super Castings (India) Pvt. Ltd............................ 0.00
Kajaria Iron Castings Pvt. Ltd............................. 0.00
------------------------------------------------------------------------
6. Advance Licenses
Generally, a company can receive an advance license if it has
received a foreign purchase order or if it has an established history
of exporting. Products imported under an advance license enter the
country duty-free, and companies importing under advance licenses are
obligated to export the products made using the duty-free imports. A
product imported under an advance license does not necessarily have to
be physically incorporated into the exported product. The amount of
imports allowed under an advance license is closely linked to the
amount of exports to be produced.
During the review period, eight of the respondent castings
manufacturers/exporters used advance licenses to import pig iron, an
input which is physically incorporated into the subject iron-metal
castings exported to the United States. We consider the use of advance
licenses in this case to be the equivalent of a duty drawback program:
Customs duties were not paid on imported products that were physically
incorporated in the subject castings which were exported to the United
States. See the 1988 and 1989 Indian Castings Final Results, and the
Final Affirmative Countervailing Duty Determination: Steel Wire Rope
from India (Steel Wire Rope),(56 FR 46293, September 11, 1991).
Therefore, we preliminarily determine that the use of advance licenses
for the importation of pig iron is not countervailable.
Other Programs
We also examined the following programs and preliminarily determine
that exporters of certain iron-metal castings did not apply for or
receive benefits under these programs with respect to exports of the
subject merchandise to the United States during the review period: (1)
Market Development Assistance; (2) the International Price
Reimbursement Scheme; (3) Free Trade Zones; (4) Preferential Freight
Rates; (5) a Preferential Diesel Fuel Program; and (6) the 100 Percent
Export-Oriented Units Program.
We also determined that exporters did not apply for or receive
benefits from a seventh program, called Exim Script. This program was
introduced on July 4, 1991 to replace the replenishment license. The
Exim Scrip program was terminated on March 1, 1992.
Preliminary Results of Review
We preliminarily determine that the following net subsidies exist
for the period January 1, 1991 through December 31, 1991:
------------------------------------------------------------------------
Net subsidy
Manufacturer/exporter (percent)
------------------------------------------------------------------------
Dinesh Brothers, Pvt. Ltd.................................. 0.00
Super Castings (India) Pvt. Ltd............................ 41.75
Kajaria Iron Castings Pvt. Ltd............................. 16.14
All Others................................................. 5.54
------------------------------------------------------------------------
If the final results of this review remain the same as these
preliminary results, the Department intends to instruct the Customs
Service to assess countervailing duties at the above percentages of the
f.o.b. invoice price on shipments of the subject merchandise exported
on or after January 1, 1991, and on or before December 31, 1991.
Because the total net subsidy for Dinesh Brothers Pvt., Ltd. is
determined to be zero, we intend to instruct the Customs Service not to
assess countervailing duties on shipments of the subject merchandise
with respect to that company.
The Department also intends, as a result of the termination of
benefits attributable to the CCS program, to instruct the Customs
Service to collect a cash deposit of estimated countervailing duties of
5.13 percent for all firms except Dinesh Brothers, Pvt. Ltd., Super
Castings (India) Pvt. Ltd., and Kajaria Iron Castings Pvt. Ltd, on
shipments of this merchandise entered, or withdrawn from warehouse, for
consumption on or after the date of publication of the final results of
this administrative review. Because Super Castings and Kajaria did not
use the CCS program, the cash deposit rates for those companies will
equal the calculated net subsidies of 41.75 percent and 16.14 percent,
respectively. Because the net subsidy for Dinesh Brothers Pvt., Ltd. is
zero, the Department intends to instruct the Customs Service not to
collect cash deposits on shipments of this merchandise from this
company entered or withdrawn for consumption on or after the date of
publication of the final results of this administrative review.
Parties to the proceeding may request disclosure of the calculation
methodology and interested parties may request a hearing not later than
ten days after date of publication of this notice. In accordance with
19 CFR 355.38(c)(1)(ii), 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 seven days after the time limit for
filing the case brief. Any hearing, if requested, will be held seven
days after the scheduled date for submission of rebuttal briefs. Copies
of case briefs and rebuttal briefs must be served on interested parties
in accordance with 19 CFR 355.38(e).
Representatives of parties to the proceeding may request disclosure
of proprietary information under administrative protective order no
later than ten days after the representative's [[Page 4600]] client or
employer becomes a party to the proceeding, but in no event later than
the date the case briefs are due under 19 CFR 355.38(c).
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 briefs.
This administrative review and notice are in accordance with
section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR
355.22.
Dated: January 9, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-1762 Filed 1-23-95; 8:45 am]
BILLING CODE 3510-DS-P
