96-31094. Certain Iron-Metal Castings From India: Preliminary Results of Countervailing Duty Administrative Review  

  • [Federal Register Volume 61, Number 236 (Friday, December 6, 1996)]
    [Notices]
    [Pages 64669-64676]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 96-31094]
    
    
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    DEPARTMENT OF COMMERCE
    [C-533-063]
    
    
    Certain Iron-Metal Castings From India: Preliminary Results of 
    Countervailing Duty Administrative Review
    
    AGENCY: Import Administration, International Trade Administration, 
    Department of Commerce.
    
    
    [[Page 64670]]
    
    
    ACTION: Notice of preliminary results of countervailing duty 
    administrative review.
    
    -----------------------------------------------------------------------
    
    SUMMARY: The Department of Commerce (``the Department'') is conducting 
    an administrative review of the countervailing duty order on certain 
    iron-metal castings from India. For information on the net subsidy 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: December 6, 1996.
    
    FOR FURTHER INFORMATION CONTACT:
    Christopher Cassel or Lorenza Olivas, Office of CVD/AD Enforcement VI, 
    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 published in the Federal 
    Register (45 FR 50739) the countervailing duty order on certain iron-
    metal castings from India. On October 5,1995, the Department published 
    a notice of ``Opportunity to Request Administrative Review'' (60 FR 
    52149) of this countervailing duty order. We received a timely request 
    for review, and we initiated the review, covering the period January 1, 
    1994, through December 31, 1994, on November 16, 1995 (60 FR 57573).
        In accordance with section 355.22(a) of the Department's Interim 
    Regulations, this review covers only those producers or exporters of 
    the subject merchandise for which a review was specifically requested. 
    See Antidumping and Countervailing Duties: Interim Regulations: Request 
    for Comments, 60 FR 25130 (May 11, 1995) (``Interim Regulations''). The 
    producers/exporters of the subject merchandise for which the review was 
    requested are:
    
    Calcutta Ferrous         Kajaria Iron Casting     RSI Limited           
                              Pvt. Ltd.                                     
    Carnation Enterprise     Kejriwal Iron & Steel    Seramapore Industries 
     Pvt. Ltd                 Works                    Pvt. Ltd             
    Commex Corporation       Nandikeshwari Iron       Shree Rama Enterprise 
                              Foundry Pvt. Ltd                              
    Crescent Foundry Co.     Orissa Metal Industries  Shree Uma Foundries   
     Pvt. Ltd                                                               
    Delta Enterprises        R.B. Agarwalla &         Siko Exports          
                              Company Pvt. Ltd                              
    Dinesh Brothers          R.B. Agarwalla & Co      Super Iron Foundry    
    Uma Iron & Steel         Victory Casting Ltd                            
                                                                            
    
    Delta Enterprises, Orissa Metal Industries, R.B. Agarwalla & Co. Pvt. 
    Ltd., Shree Uma Foundries and Uma Iron & Steel did not export the 
    subject merchandise during the period of review (``POR''). Therefore, 
    these companies have not been assigned an individual company rate for 
    this administrative review. This review covers nineteen programs.
        On May 29, 1996, we extended the period for completion of the 
    preliminary and final results pursuant to section 751(a)(3) of the 
    Tariff Act of 1930, as amended. See Certain Iron-Metal Castings From 
    India; Extension of Time Limit for Countervailing Duty Administrative 
    Review, 61 FR 26879. As explained in the memoranda from the Assistant 
    Secretary for Import Administration to the File, dated November 22, 
    1995, and January 11, 1996 (on file in the public file of the Central 
    Records Unit, Room B-099 of the Department of Commerce), all deadlines 
    were further extended to take into account the partial shutdowns of the 
    Federal Government from November 15 through November 21, 1995, and 
    December 15, 1995, through January 6, 1996. Therefore, the deadline for 
    these preliminary results is no later than November 27, 1996, and the 
    deadline for the final results of this review is no later than 180 days 
    from the date on which these preliminary results are published in the 
    Federal Register.
    
    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. References to the 
    Countervailing Duties; Notice of Proposed Rulemaking and Request for 
    Public Comments, 54 FR 23366 (May 31, 1989) (``Proposed Regulations''), 
    are provided solely for further explanation of the Department's 
    countervailing duty practice. Although the Department has withdrawn the 
    particular rulemaking proceeding pursuant to which the Proposed 
    Regulations were issued, the subject matter of these regulations is 
    being considered in connection with an ongoing rulemaking proceeding 
    which, among other things, is intended to conform the Department's 
    regulations to the URAA. See Advance Notice of Proposed Rulemaking and 
    Request for Public Comments, 50 FR 80 (January 3, 1995); Antidumping 
    Duties; Countervailing Duties: Notice of Proposed Rulemaking and 
    Request for Public Comments, 61 FR 7308 (February 27, 1996).
    
    Scope of the Review
    
        Imports covered by the 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 (``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.
    
    Verification
    
        As provided in section 782(i) of the Act, we verified information 
    submitted by the Government of India and certain producers/exporters of 
    the subject merchandise. We followed standard verification procedures, 
    including meeting with government and company officials and examination 
    of relevant accounting and financial records and other original source 
    documents. Our verification results are outlined in the public versions 
    of the verification reports, which are on file in the Central Records 
    Unit (Room B-099 of the Main Commerce Building).
    
    Analysis of Programs
    
    I. Programs Conferring Subsidies
    
    A. Programs Previously Determined To Confer Subsidies
    
    1. Pre-Shipment Export Financing
        The Reserve Bank of India (``RBI''), through commercial banks, 
    provides pre-shipment financing, or ``packing credits,'' to exporters. 
    Upon presentation of a confirmed export order or letter of credit, 
    companies may
    
    [[Page 64671]]
    
    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 the 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. 
    During the POR, the rate of interest charged on pre-shipment export 
    loans was 13.0 percent. For packing credits not repaid within 180 days, 
    banks could charge interest at 15.0 percent for the number of days the 
    loan was overdue. Exporters lose the concessional interest rates if the 
    loan is not repaid within 270 days. If that occurred, banks could 
    charge interest at 15.0 percent plus two (2.0) percent penalty interest 
    for the duration of the loan. From October 18, 1994, banks could charge 
    commercial interest rates on pre-shipment loans not repaid within 270 
    days. These rates are based on the prime lending rate (``PLR''), and 
    ranged from 15.0 percent to 22.0 percent, depending on a company's 
    credit rating. The non-concessional interest rate for export financing 
    is designated as ``export credit not otherwise specified'' and is 
    published in the RBI's Annual Report. This rate has been synchronized 
    with the normal lending rate as applicable to domestic financing in 
    India. Interest charges under this program must be liquidated with 
    export proceeds. If the interest is paid with sources other than 
    foreign currency export proceeds, the interest element of the loan will 
    not be treated as export credit, and will be charged at rates 
    applicable to domestic credit.
        The Department found this program to be an export subsidy, and thus 
    countervailable, in prior administrative reviews of this order, because 
    receipt of pre-shipment export financing was 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); Final Results 
    of Countervailing Duty Administrative Review: Certain Iron-Metal 
    Castings From India, 56 FR 52515 (October 21, 1991) (``1987 and 1988 
    Indian Castings Final Results''), and Certain Iron-Metal Castings From 
    India; Final Results of Countervailing Duty Administrative Review, 
    being simultaneously published with this notice (``1993 Indian Casings 
    Final Results'').
        In prior administrative reviews of this order, the Department used 
    the small-scale industry (``SSI'') short-term interest rate published 
    in the RBI's Annual Report as its benchmark to measure the benefit 
    under the pre-shipment export financing scheme. See, e.g., 1988 Indian 
    Castings Final Results, 56 FR 52515, and 1993 Indian Castings Final 
    Results. However, during this administrative review we received 
    allegations that castings exporters may benefit from programs 
    administered by the Small Industries Development Bank of India 
    (``SIDBI''). These allegations led us to reexamine the SSI interest 
    rate. At verification, we learned that producers/exporters of the 
    subject merchandise would not finance their domestic operations at the 
    SSI interest rate. Therefore, we now determine that the SSI interest 
    rate is no longer an appropriate ``comparable'' short-term benchmark, 
    in accordance with section 771(5)(E)(ii) of the Act.
        As we explained in our November 21, 1996, Decision Memorandum on 
    Appropriate Benchmark for Preferential Short-Term Financing, we have 
    determined that the appropriate comparable short-term benchmark is the 
    ``Cash Credit'' interest rate reported by the Government of India 
    (``GOI'') in its March 13, 1996, questionnaire response. According to 
    GOI and Bank officials, the ``cash credit'' interest rate is for 
    domestic working capital finance, comparable to pre- and post-shipment 
    export working capital finance. See Verification of the Government of 
    India Questionnaire Responses at 4-6 (November 19, 1996) (``GOI 
    Verification Report'') (public version, on file in the public file of 
    the Central Records Unit, Room B-099 of the Department of Commerce). 
    During the POR, this rate was 16.5 percent. We compared this benchmark 
    to the interest rate charged on pre-shipment rupee loans and found that 
    for loans granted under this program, the interest rate charged was 
    lower than the ``cash credit'' benchmark. Accordingly, this program 
    continues to be countervailable because the interest rate on these 
    loans is less than what a company would have to pay on a comparable 
    short-term loan. See section 771(5)(E)(ii) of the Act.
        Eleven of the fifteen respondent companies used pre-shipment export 
    loans for shipments of subject castings to the United States during the 
    POR. To calculate the benefit from the pre-shipment loans to these 
    eleven companies, we compared the actual interest paid on these loans 
    with the amount of interest that would have been paid using the 
    benchmark interest rate of 16.5 percent. Where the benchmark rate 
    exceeded the program rate, the difference between those amounts is the 
    benefit. 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 for the producers/exporters 
    of the subject merchandise to be as follows:
    
    ------------------------------------------------------------------------
                                                                      Net   
                                                                    subsidy 
                  Net subsidies--producer/exporter                   rate   
                                                                   (percent)
    ------------------------------------------------------------------------
    Calcutta Ferrous............................................        0.12
    Carnation Enterprise Pvt. Ltd...............................        0.24
    Commex Corporation..........................................        0.03
    Crescent Foundry Co. Pvt. Ltd...............................        0.04
    Dinesh Brothers.............................................        0.57
    Kajaria Iron Castings Pvt. Ltd..............................        0.40
    Kejriwal Iron & Steel Works.................................        0.00
    Nandikeshwari Iron Foundry Pvt. Ltd.........................        0.24
    R.B. Agarwalla & Company....................................        0.03
    RSI Limited.................................................        0.59
    Seramapore Industries Pvt. Ltd..............................        0.04
    Shree Rama Enterprise.......................................        0.00
    Siko Exports................................................        0.00
    Super Iron Foundry..........................................        0.25
    Victory Castings Ltd........................................        0.25
    ------------------------------------------------------------------------
    
    2. Pre-Shipment Credit in Foreign Currency (``PCFC'')
        On November 8, 1993, the GOI introduced a modified pre-shipment 
    financing scheme, Pre-Shipment Credit in Foreign Currency, to help 
    exporters obtain additional export credit at internationally 
    competitive interest rates. Under this scheme, commercial banks may 
    extend PCFC loans in all convertible currencies for a period up to 180 
    days on the basis of a firm's export order or irrevocable letter of 
    credit. Because the bank's investment is denominated in foreign 
    currency, this financing is properly viewed as foreign currency 
    denominated financing. Accordingly, Indian commercial banks may draw 
    upon foreign exchange balances in Exchange Earners' Foreign Currency 
    Accounts, and Resident and Non-Resident Foreign Currency Accounts as a 
    source of funds. Commercial banks may also raise lines of credit 
    abroad. Under RBI regulations,
    
    [[Page 64672]]
    
    however, commercial banks may not pay more than one (1.0) percent over 
    the six month London Interbank Offering Rate (``LIBOR'') on overseas 
    lines of credit.
        The interest rate charged by commercial banks on PCFC loans is 
    linked to LIBOR, and, as per RBI regulations, may not exceed two (2.0) 
    percent over LIBOR. See GOI Verification Report, Exhibit 6 at 11 and 
    18. Because LIBOR varies on a daily basis, the actual interest rate on 
    a PCFC loan may, therefore, vary depending on when the loan was taken 
    out. Interest on PCFC loans is paid on the foreign currency amount of 
    the loan. Banks may extend the credit period beyond 180 days and charge 
    additional interest of two (2.0) percent above the rate charged for the 
    initial 180 day period. If export has not taken place within 360 days, 
    or if the export order is canceled, banks may liquidate the loan by 
    selling the equivalent amount of foreign currency (principal plus 
    interest) at the selling foreign exchange rate prevailing on the day of 
    liquidation. The interest recovered on the liquidated loan will be 
    charged on the rupee equivalent of the principal amount at the rate of 
    ``Export Credit Not Otherwise Specified,'' plus a penalty rate of two 
    (2.0) percent. Until October 17, 1994, this rate was set by the RBI at 
    15.0 percent (not including the penalty). Thereafter, commercial banks, 
    were free to determine the rate. As of May 18, 1994, Indian commercial 
    banks could also extend PCFC loans under a line of credit, or ``running 
    account facility,'' similar to the line of credit under the pre-
    shipment rupee financing scheme described above.
        Receipt of PCFC loans is contingent upon export performance. 
    Therefore, we determine that this program constitutes an export 
    subsidy, in accordance with section 771(5A)(B) of the Act, to the 
    extent that the interest rate on these loans is less than what a 
    company would have to pay on a comparable commercial short-term loan.
        Because PCFC loans are denominated in foreign currency, our normal 
    practice would be to use a foreign currency benchmark, which would be 
    the interest rate on alternative foreign-indexed loans in India. 
    However, we have not been able to find such a benchmark, and have, 
    therefore, used as a benchmark the rupee-denominated benchmark interest 
    rate, adjusted to take into account the ``expected'' movements in the 
    rupee/dollar exchange rate. (PCFC loans taken out by castings exporters 
    were dollar-denominated.) We did this by comparing the spot rate on the 
    day the PCFC loan was taken out with the six-month forward exchange 
    rates. Because we had only limited data on forward rates, we could not 
    match the forward rates with the period covered by the loan terms. We 
    therefore used the forward exchange rate that most closely matched the 
    loan period. We compared the adjusted benchmark to the interest rate 
    charged on PCFC loans and found that for loans granted under this 
    program the interest rate charged was lower than the benchmark. 
    Therefore, in accordance with section 771(5)(E)(ii) of the Act, we 
    determine that this program confers countervailable benefits.
        One of the fifteen respondent companies used PCFC financing for 
    shipments of subject castings to the United States during the POR. To 
    calculate the benefit from the PCFC loans to this company, we compared 
    the actual interest paid on these loans with the amount of interest 
    that would have been paid using the adjusted benchmark interest. If the 
    benchmark rate exceeded the program rate, the difference between those 
    amounts is the benefit. Because the company was unable to segregate 
    PCFC financing applicable to subject merchandise exported to the United 
    States, we divided the benefit from all PCFC loans by total exports. On 
    this basis, we preliminarily determine the net subsidy from this 
    program to be 0.45 percent for Calcutta Ferrous and 0.00 percent for 
    all other producers/exporters of the subject merchandise.
    3. 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 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. In general, post-shipment loans are 
    granted for a period of up to 90 days. The interest rate charged on 
    these loans was 13.0 percent during the POR. For loans not repaid 
    within the negotiated number of days (90 days maximum), banks must 
    charge interest at 15.0 percent for the number of days the loan was 
    overdue. If the loan is not repaid within 180 days, exporters lose the 
    concessional interest rates on this financing, and interest is charged 
    at 20.0 percent for the duration of the loan. As of October 18, 1994, 
    banks could charge commercial interest rates on post-shipment loans not 
    repaid within 180 days. These rates are based on the PLR, and ranged 
    from 15.0 percent to 22.0 percent during 1994.
        In the 1993 Indian Castings Final Results, the Department found 
    this program to be an export subsidy, because receipt of the post-
    shipment financing was contingent upon export performance. The 
    Department also found that the program conferred countervailable 
    benefits, because the interest rates were preferential. For reasons 
    stated in the prior section for pre-shipment financing above, we are 
    using the ``cash credit'' interest rate as our benchmark. Because loans 
    under this program are discounted, and the effective rate paid by 
    exporters on these loans is a discounted rate, we calculated from the 
    ``cash credit'' benchmark a discount rate of 14.16 percent for the POR. 
    We compared this benchmark to the interest rate charged on post-
    shipment loans and found that the program interest rate charged was 
    lower than the benchmark. Therefore, in accordance with section 
    771(5)(E)(ii) of the Act, this program continues to be countervailable, 
    because the interest rate on these loans is less than what a company 
    would have to pay on a comparable commercial short-term loan.
        During the POR, two of the fifteen respondent companies made 
    payments on post-shipment loans for shipments of subject castings to 
    the United States. to calculate the benefit from these preferential 
    loans we followed the same short-term loan methodology discussed above 
    for pre-shipment financing. Because the company was unable to segregate 
    post-shipment financing applicable to subject merchandise exported to 
    the United States, we divided the benefit from all post-shipment loans 
    by total exports. On this basis, we preliminarily determine the net 
    subsidy from this program to be 0.03 percent for Dinesh Brothers Pvt. 
    Ltd, 0.02 percent for Super Iron Foundry and 0.00 percent for all other 
    producers/exporters of the subject merchandise.
    4. Post-Shipment Export Credit in Foreign Currency (``PSCFC'')
        On January 1, 1992, the GOI introduced a modified post-shipment 
    financing scheme, i.e., post-shipment export credit in foreign 
    currency. Under this modified scheme, exporters may discount foreign 
    currency export bill at foreign currency interest rates linked to 
    LIBOR. Loans under this financing scheme are not provided to the 
    exporter in the foreign currency, but the post-shipment credit 
    liability of the exporter is denominated in foreign currency, which is 
    then liquidated with export proceeds in foreign currency. PSCFC loans 
    are normally granted for a period of up to 180 days and the interest 
    rate is fixed and announced by the RBI. See GOI Verification Report at 
    2-3 and Exhibit 6. The interest amount,
    
    [[Page 64673]]
    
    calculated at the applicable foreign currency interest rate, is 
    deducted from the total amount of the bill, and the exporter's account 
    is credited for the rupee equivalent of the net foreign currency 
    amount. During the POR, the interest rate for PSCFC loans was 6.5 
    percent for the negotiated term of the loan (up to 180 days). Interest 
    for overdue loans was charged at 8.5 percent. If the loan is not repaid 
    within 30 days beyond the negotiated due date, the loan is converted 
    into rupee credit, and interest is charged at a commercial interest 
    rate over the entire loan period. During the POR, non-export related 
    short-term commercial interest rates in India ranged from 15.0 to 22.0 
    percent. Where the overseas customer defaults and the export bill 
    cannot be liquidated with export proceeds, the exporter must repay the 
    rupee equivalent of the bill at the exchange rate prevailing on the day 
    of liquidation by the bank.
        In the 1993 Indian Castings Final Results, the Department found 
    this program to be an export subsidy, and thus countervailable, because 
    receipt of PSCFC loans was contingent upon export performance, and the 
    interest rates were preferential. We also stated in the 1993 
    administrative review that where loans were denominated in foreign 
    currency, such as PSCFC, our normal practice would be to use a foreign 
    currency benchmark to determine whether the loans are preferential. 
    Because we were unable to locate an interest rate for alternative 
    foreign currency-indexed loans in India, we adjusted the rupee-
    denominated SSI benchmark interest rate, taking into account movements 
    in the rupee-dollar exchange rate over the term of the loan (all PSCFC 
    loans by castings exporters were dollar-denominated). However, during 
    this administrative review we obtained additional information 
    concerning the operation of the PSCFC program which has led us to 
    modify this approach.
        Under the PSCFC program, companies can elect to have export bills 
    converted into rupees using either the spot rate of exchange or the 
    forward rate of exchange. If the spot rate of exchange is used, and the 
    bank (holding the bill) realizes and exchange rate gain due to exchange 
    rate movements up to the date the bill comes due, the bank must, by 
    law, transfer this gain to the exporter. On the other hand, if the bank 
    suffers an exchange rate loss, exporters, by law, must cover that loss. 
    See GOI Verification Report at 5, and Memorandum Re: Meeting with Bank 
    of America Officials at 3 (November 21, 1996) (public document, on file 
    in the public file of the Central Records Unit, Room B-099 of the 
    Department of Commerce). Thus, the bank, in effect, faces an exchanges 
    rate that is fixed over the ``life of the bill.'' Under such 
    circumstances, where the rupee value of the bill--from the bank's 
    standpoint--is, in fact, fixed at the time of discount, the rate of 
    discount measured in either dollars or rupees is the same. Therefore, 
    the PSCFC discount rate can be viewed equivalently as either a dollar-
    denominated rate or a rupee-denominated rate. If viewed as a dollar-
    denominated rate, no exchange rate adjustment to the rupee-denominated 
    benchmark is warranted, because the banks face no exchange rate risks 
    in holding the bills. Thus, however the PSCFC discount rate is viewed, 
    a rupee-benchmark is appropriate for benefit calculation purposes where 
    the exporter opts to convert his bills using the spot rate of exchange.
        Where the exporter opts, instead, to convert bills using the 
    forward rate of exchange, the PSCFC discount rate is properly viewed as 
    dollar-denominated, but a downward adjustment to this rate is warranted 
    due to the forward premium that attached to the dollar throughout the 
    POR. Use of the forward rate transferred this premium to the exporter, 
    increasing the rupees (and dollar-equivalent) the bank pays the 
    exporter at the time of discount. Since the face value (in dollars) of 
    the bill remains fixed, this increase in the dollar-equivalent paid to 
    the exporter effectively reduces the discount rate charged by the bank. 
    Because we attempt to compare effective interest rates to effective 
    interest rates, it was necessary to adjust the interest rate for 
    exporters that opted to convert their bills at the forward rate of 
    exchange. Accordingly, the Department used a dollar-denominated 
    benchmark rate and reduced the PSCFC discount rate by the forward 
    premium rate prevailing at the time of discount. Because we had only 
    limited data on forward rates, we could not match exactly forward rates 
    with bill specific discount periods. Therefore, we have used forward 
    rates that most closely matched the discounting period.
        For reasons stated in the pre-shipment financing section above, we 
    are using the ``cash credit'' interest rate as our benchmark for PSCFC 
    loans. Because loans under this program are discounted, and the 
    effective rate paid by exporters on these loans is a discounted rate, 
    we derived a benchmark discount rate of 14.16 percent for the POR. 
    However, as stated above, where exporters converted their bills at the 
    forward rate of exchange, we adjusted the rupee-denominated discount 
    benchmark by expected movements in the exchange rate over the term of 
    the loan. We compared this benchmark discount rate to the interest rate 
    charged on PSCFC loans and found that the program interest rate charged 
    was lower than the benchmark. Therefore, in accordance with section 
    771(5)(E)(ii) of the Act, this program continues to confer 
    countervailable benefits, because the interest rates on these loans are 
    less than what a company would have to pay on a comparable commercial 
    short-term loan.
        During the POR, thirteen of the fifteen respondent companies made 
    payments on PSCFC loans for shipments of subject castings to the United 
    States. 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 or exports of the 
    subject merchandise to the United States, depending on whether the 
    company was able to tie each loan to individual destinations. On this 
    basis, we preliminarily determine the net subsidy from this program to 
    be as follows:
    
    ------------------------------------------------------------------------
                                                                      Net   
                                                                    subsidy 
                  Net subsidies--producer/exporter                   rate   
                                                                   (percent)
    ------------------------------------------------------------------------
    Calcutta Ferrous............................................        1.91
    Carnation Enterprise Pvt. Ltd...............................        0.14
    Commex Corporation..........................................        0.91
    Crescent Foundry Co. Pvt. Ltd...............................        0.59
    Dinesh Brothers.............................................        1.45
    Kajaria iron Castings Pvt. Ltd..............................        3.54
    Kejriwal Iron & Steel Works.................................        0.10
    Nandikeshwari Iron Foundry Pvt. Ltd.........................        2.74
    R.B. Agarwalla & Company....................................        0.67
    RSI Limited.................................................        2.21
    Seramapore Industries Pvt. Ltd..............................        2.15
    Shree Rama Enterprise.......................................        0.00
    Siko Exports................................................        2.23
    Super Iron Foundry..........................................        0.00
    Victory Castings Ltd........................................        1.77
    ------------------------------------------------------------------------
    
    5. 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 the 1988 Indian Castings Final Results, the 
    Department found this program to be an export subsidy, and thus 
    countervailable, because receipt of benefits was contingent upon export 
    performance. No new information or evidence of changed circumstances 
    has been submitted in this proceeding to warrant reconsideration of 
    this finding. Therefore, in accordance with section 772(5A)(B) of the 
    Act, we continue to find that this program constitutes an export 
    subsidy, and that financial
    
    [[Page 64674]]
    
    contributions in the form of tax revenue not collected, are 
    countervailable.
        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 as follows:
    
    ------------------------------------------------------------------------
                                                                 New subsidy
                 Net subsidies--producer/exporter                   rate    
                                                                  (percent) 
    ------------------------------------------------------------------------
    Calcutta Ferrous..........................................          3.19
    Carnation Enterprise Pvt. Ltd.............................          2.15
    Commex Corporation........................................          0.45
    Crescent Foundry Co. Pvt. Ltd.............................          7.52
    Dinesh Brothers...........................................          0.00
    Kajaria iron Castings Pvt. Ltd............................         11.64
    Kejriwal Iron & Steel Works...............................         15.04
    Nandikeshwari Iron Foundry Pvt. Ltd.......................          0.28
    R.B. Agarwalla & Company..................................          3.86
    RSI Limited...............................................          4.89
    Seramapore Industries Pvt. Ltd............................          7.02
    Shree Rama Enterprise.....................................         13.09
    Siko Exports..............................................          2.28
    Super Iron Foundry........................................          0.05
    Victory Castings Ltd......................................          0.00
    ------------------------------------------------------------------------
    
    6. Import Mechanisms (Sale of Licenses)
        The GOI allows companies to transfer certain types of import 
    licenses to other companies in India. During the POR, producers/
    exporters of subject castings sold Special Import Licenses. In prior 
    administrative reviews of this order, the Department found this program 
    to be an export subsidy, and thus countervailable, because companies 
    received these licenses based on their status as exporters. See, e.g., 
    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 section 
    771(5A)(B) of the Act, we continue to find that this program 
    constitutes an export subsidy, and that financial contributions in the 
    form of the revenue earned on the sale of licenses, are 
    countervailable.
        Because the sale of Special Import Licenses could not be tied to 
    specific shipments, we calculated the subsidies by dividing the total 
    amount of proceeds a company received from sales of these licenses by 
    the total value of its exports of all products to all markets. We 
    preliminarily determine the net subsidy from the sale of Special 
    Licenses to be as follows:
    
    ------------------------------------------------------------------------
                                                                      Net   
                                                                    subsidy 
                  Net subsidies--producer/exporter                   rate   
                                                                   (percent)
    ------------------------------------------------------------------------
    Calcutta Ferrous............................................        0.00
    Carnation Enterprise Pvt. Ltd...............................        0.00
    Commex Corporation..........................................        0.00
    Crescent Foundry Co. Pvt. Ltd...............................        0.00
    Dinesh Brothers.............................................        0.00
    Kajaria Iron Castings Pvt. Ltd..............................        0.24
    Kejriwal Iron & Steel Works.................................        0.06
    Nandikeshwari Iron Foundry Pvt. Ltd.........................        0.00
    R.B. Agarwalla & Company....................................        0.00
    RSI Limited.................................................        0.00
    Seramapore Industries Pvt. Ltd..............................        0.15
    Shree Rama Enterprise.......................................        0.00
    Siko Exports................................................        0.00
    Super Iron Foundry..........................................        0.00
    Victory Castings Ltd........................................        0.00
    ------------------------------------------------------------------------
    
    7. Exemption of Export Credit From Interest Taxes
        Indian commercial banks are required to pay a three percent tax on 
    all interest accrued from borrowers. This tax is passed on to borrowers 
    in its entirety. As of April 1, 1993, the GOI exempted form the 
    interest tax all interest accruing or arising to any commercial bank on 
    loans and advances made to any exporter as export credit. In the 1993 
    Indian Castings Final Results, we determined that this exemption is an 
    export subsidy, and thus countervailable, because only interest 
    accruing or arising on loans and advances made to exporters in the form 
    of export credit is exempt from the interest tax. No new information or 
    evidence of changed circumstances has been submitted in this proceeding 
    to warrant reconsideration of this finding. Therefore, in accordance 
    with section 771(5A)(B) of the Act, we continue to find that this 
    program constitutes an export subsidy, and that financial 
    contributions, in the form of tax revenue not collected, are 
    countervailable.
        During the POR, fourteen of the fifteen respondent companies made 
    interest payments on export related loans, through the pre- and post-
    shipment financing schemes, and, thus, were exempted from the interest 
    tax under this export program. To calculate the benefit to each 
    company, we first determined the total amount of interest paid by each 
    producer/exporter of subject castings during the POR by adding all 
    interest payments made on pre- and post-shipment loans. Next, we 
    multiplied this amount by three percent, the amount of tax that the 
    interest would have been subject to without the exemption. We then 
    divided the benefit by the value of the company's total exports or 
    exports of subject merchandise to the United States, depending on 
    whether the export financing was on total exports or only exports of 
    subject casting to the United States. On this basis, we preliminarily 
    determine the net subsidy from this program to be as follows:
    
    ------------------------------------------------------------------------
                                                                      Net   
                                                                    subsidy 
                   Net subsides--producer/exporter                   rate   
                                                                   (percent)
    ------------------------------------------------------------------------
    Calcutta Ferrous............................................        0.09
    Carnation Enterprise Pvt. Ltd...............................        0.03
    Commex Corporation..........................................        0.03
    Crescent Foundry Co. Pvt. Ltd...............................        0.02
    Dinesh Brothers.............................................        0.16
    Kajaria Iron Castings Pvt. Ltd..............................        0.24
    Kejriwal Iron & Steel Works.................................        0.00
    Nandikeshwari Iron Foundry Pvt. Ltd.........................        0.15
    R.B. Agarwalla & Company....................................        0.02
    RSI Limited.................................................        0.12
    Seramapore Industries Pvt. Ltd..............................        0.06
    Shree Rama Enterprise.......................................        0.00
    Siko Exports................................................        0.13
    Super Iron Foundry..........................................        0.07
    Victory Castings Ltd........................................        0.08
    ------------------------------------------------------------------------
    
    B. Other Program Preliminarily Determined To Confer Subsidies Payment 
    of Premium Against Advance Licenses
    
        The Advance License scheme allows exporters to import raw materials 
    used in the production of an exported product duty free. During the 
    1993 administrative review, we found that exporters could pay for goods 
    imported under an Advance License at two exchange rates under the 
    Liberalized Exchange Rate Management System (``LERMS''). The LERMS was 
    in effect from March 1, 1992 through February 28, 1993. Under the 
    LERMS, the GOI maintained a dual exchange rate system where all foreign 
    currency export proceeds were remitted at two exchange rates: Forty 
    percent of the export value was exchanged at the official RBI rate and 
    sixty percent at the (higher) market-determined rate. Purchases of most 
    imports were made at the market exchange rate. This applied to both 
    exporters and non-exporters. Exporters holding Advance Licenses under 
    the Duty Exemption Scheme, however, could purchase imports at the dual 
    exchange rates. Because forty percent of the value of the imported 
    goods was exchanged at the lower official exchange rate, the net cost 
    of these goods to the exporter was lowered. Advance Licenses are issued 
    to companies based on their status as exporters. Therefore, in the 1993 
    review, we determined that provisions allowing exporters to import 
    goods at exchange rates more favorable than those available to non-
    exporters
    
    [[Page 64675]]
    
    was an export subsidy, and thus countervailable. See 1993 Indian 
    Castings Final Results. We verified that the LERMS was terminate 
    effective February 28, 1993.
        During the POR, however, exporters could obtain a premium from the 
    GOI equal to eight (8.0) percent of the value of their unutilized 
    Advance Licenses. The purpose of the premium is to compensate exporters 
    for ``losses'' incurred due to the equalization of exchange rates in 
    March 1993. To qualify for this premium, companies must have exported 
    goods prior to March 1993 and realized export proceeds at the 60/40 
    ratio. These companies must also have experienced delays in the 
    delivery of imported raw material inputs under an Advance License for 
    the exports. To fulfill the export obligation, these companies had to 
    use domestically-soured inputs. Under the Advance License scheme, 
    exporters then may obtain special permission from licensing authorities 
    to dispose of the raw material inputs that were imported duty free in 
    their own production or by transferring them to another company. If the 
    goods are transferred for use in domestically sold goods, the imported 
    goods will subject to duty. In either case, the exporter must show that 
    the export obligation has been met for which the company imported duty 
    free raw materials. However, because the exchange rates were equalized, 
    the exporters would now have to pay for the Advance License imports at 
    the full market exchange rate. Thus, the eight percent premium is 
    designed to compensate the exporter for the fact that export proceeds 
    were realized at lower exchange rates, while the raw material imports 
    intended for use in the exported goods were paid for at higher exchange 
    rates.
        Receipt of the premium is limited to companies that imported raw 
    materials under an Advance License. Because Advance Licenses are issued 
    to companies based on their status as exporters, we determine that 
    receipt of this compensation is an export subsidy, and thus 
    countervailable. See section 771(5A)(B) of the Act. During the POR, 
    only Dinesh Brothers Pvt. Ltd. received the premium against Advance 
    Licenses. We calculated the benefit to Dinesh by dividing the amount of 
    the compensation by the value of the company's total exports during 
    1994. On this basis, we preliminarily determine the net subsidy from 
    this program to be 3.65 percent ad valorem for Dinesh Brothers and 0.00 
    percent for all other companies.
    
    II. 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 period of review:
        1. Market Development Assistance (MDA).
        2. Rediscounting of Export Bills Abroad.
        3. International Price Reimbursement Scheme (IPRS).
        4. Cash Compensatory Support Program (CCS).
        5. Programs Operated by the Small Industries Development Bank of 
    India (SIDBI).
        6. Export Promotion Replenishment Scheme (EPRS) (IPRS Replacement).
        7. Export Promotion Capital Goods Scheme.
        8. Benefits for Export Oriented Units and Export Processing Zones.
        9. Special Imprest Licenses.
        10. Special Benefits.
        11. Duty Drawback on Excise Taxes.
    
    Preliminary Results of Review
    
        In accordance with section 355.22(c)(4)(ii) of the Department's 
    Interim Regulations, we calculated an individual subsidy rate for each 
    producer/exporter subject to this administrative review. For the period 
    January 1, 1994 through December 31, 1994, we preliminarily determine 
    the net subsidy for the reviewed companies to be as follows:
    
    ------------------------------------------------------------------------
                                                                      Net   
                                                                    subsidy 
                  Net subsidies--producer/exporter                   rate   
                                                                   (percent)
    ------------------------------------------------------------------------
    Calcutta Ferrous............................................        5.77
    Carnation Enterprise Pvt. Ltd...............................        2.56
    Commex Corporation..........................................        1.42
    Crescent Foundry Co. Pvt. Ltd...............................        8.16
    Dinesh Brothers.............................................        5.85
    Kajaria Iron Castings Pvt. Ltd..............................       16.06
    Kejriwal Iron & Steel Works.................................       15.21
    Nandikeshwari Iron Foundry Pvt. Ltd.........................        3.40
    R.B. Agarwalla & Company Pvt. Ltd...........................        4.59
    RSI Limited.................................................        7.82
    Seramapore Industries Pvt. Ltd..............................        9.43
    Shree Rama Enterprise.......................................       13.90
    Siko Exports................................................        4.65
    Super Iron Foundry..........................................        0.39
    Victory Castings Ltd........................................        2.10
    ------------------------------------------------------------------------
    
        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. As provided for in the Act, any rate less than 0.5 percent 
    ad valorem in an administrative review is de minimis. Accordingly, for 
    those exporters with de minimis rates, no countervailing duties will be 
    assessed or cash deposits required.
        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 
    Sec. 355.22(a) of the Interim Regulations. Pursuant to 19 CFR 
    355.22(g), 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), the antidumping regulation on automatic assessment, which is 
    identical to 19 CFR 355.33(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 are those established in the most recently completed 
    administrative proceeding. 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, 1994 through December 31, 1994, the assessment rates 
    applicable to all non-reviewed companies covered
    
    [[Page 64676]]
    
    by this order are the cash deposit rates in effect at the time of 
    entry.
    
    Public Comment
    
        Parties to the proceeding may request disclosure of the calculation 
    methodology and interested parties may request a hearing not later than 
    10 days after the date of publication of this notice. 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. 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 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.
        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 355.38, 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 in accordance with 
    section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)).
    
        Dated: November 27, 1996.
    Robert S. LaRussa,
    Acting Assistant Secretary for Import Administration.
    [FR Doc. 96-31094 Filed 12-5-96; 8:45 am]
    BILLING CODE 3510-D5-M
    
    
    

Document Information

Effective Date:
12/6/1996
Published:
12/06/1996
Department:
Commerce Department
Entry Type:
Notice
Action:
Notice of preliminary results of countervailing duty administrative review.
Document Number:
96-31094
Dates:
December 6, 1996.
Pages:
64669-64676 (8 pages)
Docket Numbers:
C-533-063
PDF File:
96-31094.pdf