[Federal Register Volume 59, Number 104 (Wednesday, June 1, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-13316]
[[Page Unknown]]
[Federal Register: June 1, 1994]
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DEPARTMENT OF COMMERCE
[C-533-812]
Preliminary Affirmative Countervailing Duty Determination:
Certain Carbon Steel Butt-Weld Pipe Fittings From India
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: June 1, 1994.
FOR FURTHER INFORMATION CONTACT: Julie Anne Osgood or Annika O'Hara,
Office of Countervailing Investigations, Import Administration, U.S.
Department of Commerce, Room 3099, 14th Street and Constitution Avenue,
N.W., Washington, D.C. 20230; telephone (202) 482-0167 and (202) 482-
4198, respectively.
PRELIMINARY DETERMINATION: The Department of Commerce (``the
Department'') preliminarily determines that benefits which constitute
subsidies within the meaning of section 701 of the Tariff Act of 1930,
as amended (``the Act''), are being provided to manufacturers,
producers, or exporters in India of certain carbon steel butt-weld pipe
fittings. For information on the estimated net subsidies, please see
the Suspension of Liquidation section of this notice.
Case History
Since the publication of the notice of initiation in the Federal
Register, 59 FR 14148 (March 25, 1994), the following events have
occurred.
On April 5, 1994, we issued a questionnaire to the Government of
India (``GOI'') in Washington, D.C. concerning petitioner's
allegations. On May 9, 1994, we received questionnaire responses from
the GOI, Karmen Steels of India (``Karmen''), and Sivanandha Pipe
Fittings Limited (``Sivanandha''). According to the GOI, Karmen,
Sivanandha, and Tata Iron & Steel Limited (``Tata'') accounted for over
85 percent of exports of butt-weld pipe fittings to the United States.
Therefore, these companies are the respondents in this investigation.
However, Tata did not respond to the Department's questionnaire.
We issued deficiency questionnaires on May 11, 1994, to the GOI,
Karmen, and Sivanandha. We received responses on May 18, 1994.
Scope of Investigation
The products covered by this investigation are certain carbon steel
butt-weld pipe fittings (``pipe fittings'') having an inside diameter
of less than fourteen inches (355 millimeters), imported in either
finished or unfinished condition. Pipe fittings are formed or forged
steel products used to join pipe sections in piping systems where
conditions require permanent welded connections, as distinguished from
fittings based on other methods of fastening (e.g., threaded, grooved,
or bolted fittings). Butt-weld fittings come in a variety of shapes
which include ``elbows'', ``tees'', ``caps'', and ``reducers.'' The
edges of finished pipe fittings are beveled, so that when a fitting is
placed against the end of a pipe (the ends of which have also been
beveled), a shallow channel is created to accommodate the ``bead'' of
the weld which joins the fitting to the pipe. These pipe fittings are
currently classifiable under subheading 7307.93.3000 of the Harmonized
Tariff Schedule of the United States (``HTSUS'').
Although the HTSUS subheading is provided for convenience and
customs purposes, our written description of the scope of this
proceeding is dispositive.
Injury Test
Because India is a ``country under the Agreement'' within the
meaning of section 701(b) of the Act, the U.S. International Trade
Commission (``ITC'') is required to determine whether imports of pipe
fittings from India materially injure, or threaten material injury to,
a U.S. industry. On April 20, 1994, the ITC preliminarily determined
that there is a reasonable indication that an industry in the United
States is being materially injured or threatened with material injury
by reason of imports from India of the subject merchandise (59 FR
18825).
Analysis of Programs
For purposes of this preliminary determination, the period for
which we are measuring subsidies (the period of investigation
(``POI'')) is the respondents' fiscal year: April 1, 1993 to March 31,
1994.
Non-Responding Company
Since Tata did not respond to our countervailing duty
questionnaire, we have used best information available (``BIA'') in
accordance with Sec. 355.37(a) of the Department's regulations. As BIA,
we have used information provided in the petition except where we have
calculated a rate for a given program in a previous countervailing duty
investigation or administrative review for India which is higher than
that provided in the petition. We did not include in the BIA subsidy
rate for Tata programs for which we have no basis to calculate a
benefit (i.e., programs for which rates are not calculated in the
petition, programs not previously investigated, or programs previously
found not used). Based on this approach, we calculated a BIA rate for
Tata of 23.03 percent ad valorem.
Calculation of Country-Wide Rate
In determining the benefits to the subject merchandise from the
various programs described below, we used the following calculation
methodology. We first calculated a country-wide rate for each program.
This rate comprised the ad valorem benefit received by each firm
weighted by each firm's share of exports of the subject merchandise to
the United States. The program rates were then added together to arrive
at the country-wide rate.
Pursuant to 19 CFR 355.20(d) of the Department's regulations, we
compared the total ad valorem benefit received by each firm to the
country-wide rate for all programs. The rates for Karmen and Tata were
significantly different from the country-wide rate. Therefore, Karmen
and Tata received company- specific rates. Because Sivanandha was the
only company whose total ad valorem benefit was not significantly
different from the country-wide rate for all programs, we based the
all-other rate only on benefits received by Sivanandha. We then
assigned this all-other rate to all other manufacturers, producers, and
exporters.
Consistent with our practice in preliminary determinations, when a
response to an allegation denies that a program exists, that producers
of the subject merchandise receive benefits under a program, or that
producers of the subject merchandise are eligible for a program, and
the Department has no persuasive evidence showing that the response is
incorrect, we accept the response for purposes of the preliminary
determination. All such responses, however, are subject to
verification. If the response cannot be supported at verification, and
the program is otherwise countervailable, the program will be
considered a subsidy in the final determination.
Karmen's Exports of Refurbished Pipe Fittings
Karmen reported in its responses that in addition to its production
of new pipe fittings, the company imports rusty, unused pipe fittings
from a Singaporean company which it refurbishes and subsequently re-
exports to a customer of the Singaporean company in the United States.
For purposes of this preliminary determination, we have considered this
refurbished merchandise to be covered by this proceeding. For the final
determination, we will seek additional information concerning the
following: (1) the nature and extent of the processing operation, and
(2) the extent to which the refurbished pipe fittings are being
subsidized.
In its responses, Karmen reported only the value added in the
refurbishing process for these sales. The U.S. Customs Service,
however, collects duties based on the full value of the subject
merchandise exported, i.e., the value of the pipe fittings and any
value-added through the refurbishing process. Therefore, to avoid an
over-assessment of the duty, we have adjusted Karmen's sales value used
as the denominator in our subsidy rate calculation. For purposes of
this preliminary determination, we have valued Karmen's exports of
refurbished pipe fittings using the price per metric ton of new pipe
fittings because we do not have an actual export value of refurbished
pipe fittings.
Based upon our analysis of the petition and the responses to our
questionnaires, we preliminarily determine the following:
A. Programs Preliminarily Determined to be Countervailable
1. Preferential Pre-Shipment Financing
Pre-shipment financing is extended to exporters prior to shipment
as working capital for purchasing raw materials, processing, packing,
warehousing, transporting and shipping. Any exporter showing a
confirmed export order or a letter of credit is eligible for this
program. Generally, the loans are extended for 180 days. According to
the responses, both Karmen and Sivanandha used pre-shipment financing
during the POI.
Because only exporters are eligible for loans under this program,
we preliminarily determine that they are countervailable to the extent
they are provided at a preferential interest rate. We have used the
average annual commercial interest rate on short-term financing in the
POI as the benchmark interest rate. The GOI reported a short-term
financing rate of 16.5 percent. We compared this benchmark rate to the
interest rate charged on pre-shipment loans and found that the interest
rate charged was lower than the benchmark rate. Therefore, we determine
that loans provided under this program are countervailable.
To calculate the benefit, we followed the short-term loan
methodology which has been applied consistently in our past
determinations and is described in more detail in the Subsidies
Appendix accompanying Cold-Rolled Carbon Steel Flat-Rolled Products
from Argentina: Final Affirmative Countervailing Duty Determination and
Countervailing Duty Order, 49 FR 18006 (April 26, 1984); see also,
Alhambra Foundry v. United States, 626 F. Supp. 402 (CIT 1985).
We compared the amount of interest paid during the POI to the
amount of interest that would have been paid at the benchmark rate. The
difference between these two amounts is the benefit. We then divided
the benefit by total exports. On this basis, we preliminarily determine
the estimated net subsidy from this program to be 0.23 percent ad
valorem for Karmen and 0.84 ad valorem for all other manufacturers,
producers, and exporters of pipe fittings in India.
2. Income Tax Deductions Under Section 80HHC
Income tax benefits are available to exporters in India under
Section 80HHC of the Income Tax Act of 1961. This program allows
exporters to reduce their taxable income by the profits earned on
exports. Both Karmen and Sivanandha claimed deductions under this
program on their income tax returns filed in the POI.
Since tax deductions under Section 80HHC are available only to
exporters, we preliminarily determine that this program is
countervailable. To calculate the benefit, we multiplied the amount of
the deduction claimed by each company by the corporate income tax rate
and divided the result by total exports. On this basis, we
preliminarily determine the estimated net subsidy from this program to
be 1.07 percent ad valorem for Karmen and 2.69 ad valorem for all other
manufacturers, producers, and exporters of pipe fittings in India.
B. Programs Preliminarily Determined not to Provide Benefits During the
POI
1. Advance Licenses and Advance Customs Clearance Permits (``ACCP's'')
Under the GOI's Duty Exemption Scheme, inputs used in the
production of exports may enter the country duty-free. Two mechanisms
under the Duty Exemption Scheme are Advanced Licenses and Advanced
Custom Clearance Permits (``ACCP's''). Sivanandha used Advanced
Licenses to import seamless carbon steel pipes in the POI. Karmen used
ACCP's to import rusty unused butt-weld pipe fittings in the POI.
Both Advance Licenses and ACCP's permit the importation of goods
duty free provided the imports are used in the production of goods
which are subsequently re-exported. We consider the use of Advance
Licenses and ACCP's to be the equivalent of a duty-drawback program
(see Final Affirmative Countervailing Duty Determination: Steel Wire
Rope from India, 56 FR 46292 (September 11, 1991).
Under Sec. 355.44(i)(4)(1) of the Department's proposed regulations
(see Countervailing Duties; Notice of Proposed Rulemaking and Request
for Public Comments, 54 FR 23366 (May 31, 1989), the non-excessive
drawback of import duties is not countervailable if the imported inputs
are subsequently physically incorporated into exported products.
According to the questionnaire responses, inputs imported under Advance
Licenses and ACCP's were physically incorporated into pipe fittings
which were subsequently re-exported. Therefore, we preliminarily
determine that Advance Licenses and ACCP's did not provide a
countervailable benefit in the POI.
2. International Price Reimbursement Scheme
The International Price Reimbursement Scheme (``IPRS'') was
established to compensate Indian exporters for the difference between
the world market price and the domestic price of inputs. According to
the responses, as of April 1, 1993, the input product used in the
production of pipe fittings, i.e., seamless carbon steel pipe, was no
longer eligible for IPRS benefits. However, residual benefits could be
received after that date and, in fact, Karmen indicated in its response
that it received residual benefits under this program during the POI
for exports of pipe fittings shipped prior to the POI.
Respondents maintain that the IPRS program is permissible within
the framework of Item (d) of the Illustrative List of Export Subsidies
annexed to the Agreement on the Interpretation and Application of
Article VI, XVI and XXIII of the General Agreement of Tariff and Trade
(1979). Pursuant to the Court of International Trade's decision in
Creswell Trading Co. v. United States, 783 F. Supp. 1418 (CIT 1992),
the IPRS program must be examined in light of Item (d). Accordingly, if
the IPRS program does not provide a reimbursement which exceeds the
difference between the international price and the domestic price, the
program does not provide a countervailable benefit.
As discussed above, since the IPRS program was designed to
compensate exporters for the difference between the world market price
and the domestic price of inputs and since information provided in
Karmen's response demonstrates that it was reimbursed in an amount
equal to the difference between the domestic price and the
international price, we preliminarily determine that the IPRS program
is not countervailable with respect to inputs used in the production of
pipe fittings.
C. Programs Preliminarily Determined to be not Used
The Department preliminarily determines that the following programs
were not used during the POI.
A. Preferential Post-Shipment Financing
B. Additional and Replenishment Licenses
C. Market Development Assistance
D. Export Promotion, Capital Goods Scheme
E. Benefits for 100 Percent Export-Oriented Units
F. Benefits Provided to Export Processing Zones Verification
In accordance with section 776(b) of the Act, we will verify the
accuracy of the information used in making our final determination.
Suspension of Liquidation
In accordance with section 703(d) of the Act, we are directing the
U.S. Customs Service to suspend liquidation of all entries of pipe
fittings from India, which are entered or withdrawn from warehouse, for
consumption on or after the date of the publication of this notice in
the Federal Register, and to require a cash deposit or bond for such
entries of the merchandise in the amounts indicated below. This
suspension will remain in effect until further notice.
------------------------------------------------------------------------
Percent ad
Pipe fittings valorem
------------------------------------------------------------------------
Karmen Steels of India..................................... 1.30
Tata Iron & Steel Limited.................................. 23.03
All-Others................................................. 3.53
------------------------------------------------------------------------
ITC Notification
In accordance with section 703(f) of the Act, we will notify the
ITC of our determination. In addition, we are making available to the
ITC all nonprivileged and nonproprietary information relating to this
investigation. We will allow the ITC access to all privileged and
business proprietary information in our files, provided the ITC
confirms that it will not disclose such information, either publicly or
under administrative protective order, without written consent of the
Deputy Assistant Secretary for Investigations, Import Administration.
If our final determination is affirmative, the ITC will make its
final determination within 45 days after the Department makes its final
determination.
Public Comment
In accordance with 19 CFR 355.38, we will hold a public hearing, if
requested, to afford interested parties an opportunity to comment on
this preliminary determination on Wednesday, July 27, 1994, at 10 a.m.
at the U.S. Department of Commerce, Room 3708, 14th Street and
Constitution Avenue, NW., Washington, DC 20230. Individuals who wish to
request a hearing must submit such a request within ten business days
of the publication of this notice in the Federal Register to the
Assistant Secretary for Import Administration, U.S. Department of
Commerce, room B099, 14th Street and Constitution Avenue, NW.,
Washington, DC 20230. Parties should confirm by telephone the time,
date, and place of the hearing 48 hours before the scheduled time.
Requests should contain: (1) The party's name, address, and
telephone number; (2) the number of participants; (3) the reason for
attending; and (4) a list of the issues to be discussed. In addition,
case briefs must be submitted to the Assistant Secretary no later than
July 18, 1994. Rebuttal briefs must be submitted to the Assistant
Secretary no later than July 25, 1994. An interested party may make an
affirmative presentation only on arguments included in that party's
case or rebuttal briefs. Written arguments should be submitted in
accordance with section 355.38 of the Department's regulations and will
be considered if received within the time limits specified above.
This determination is published pursuant to section 703(f) of the
Act (19 U.S.C. 1671b(f)).
Susan G. Esserman,
Assistant Secretary for Import Administration.
Dated: May 24, 1994.
[FR Doc. 94-13316 Filed 5-31-94; 8:45 am]
BILLING CODE 3510-DS-P
