[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]
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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.
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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. 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
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\1\ Carnation Industries was formerly Carnation Enterprise Pvt.
Ltd.
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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
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\2\ Kajaria Iron Castings Ltd. was formerly Kajaria Iron
Castings Pvt. Ltd.
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Kajaria Iron Castings Pvt. Ltd.,
Kauntia Exports,
Kejriwal Iron & Steel Works,
Kiswok Industries Pvt. Ltd.,3
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\3\ Kiswok Industries Pvt. Ltd. was formerly Kejriwal Iron &
Steel Works.
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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
