[Federal Register Volume 64, Number 142 (Monday, July 26, 1999)]
[Notices]
[Pages 40438-40445]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-18856]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-533-818]
Preliminary Affirmative Countervailing Duty Determination and
Alignment of Final Countervailing Duty Determination With Final
Antidumping Duty Determination: Certain Cut-to-Length Carbon-Quality
Steel Plate From India
AGENCY: Import Administration, International Trade Administration,
Department of Commerce
EFFECTIVE DATE: July 26, 1999.
FOR FURTHER INFORMATION CONTACT: Robert Copyak or Eric B. Greynolds,
Office of CVD/AD Enforcement VI, Import Administration, U.S. Department
of Commerce, Room 4012, 14th Street and Constitution Avenue, NW,
Washington, DC 20230; telephone: (202) 482-2786.
PRELIMINARY DETERMINATION: The Department of Commerce (the Department)
preliminarily determines that countervailable subsidies are being
provided to certain producers and exporters of certain cut-to-length
carbon-quality steel plate from India. For information on the estimated
countervailing duty rate, see the ``Suspension of Liquidation'' section
of this notice.
SUPPLEMENTARY INFORMATION:
Petitioners
The petition in this investigation was filed by Bethlehem Steel
Corporation; U.S. Steel Group, a unit of USX Corporation; Gulf States
Steel Inc.; IPSCO Steel Inc.; Tuscaloosa Steel Corporation; and the
United Steelworkers of America (the petitioners).
Case History
Since the publication of the notice of initiation in the Federal
Register (see Notice of Initiation of Countervailing Duty
Investigations: Certain Cut-To-Length Carbon-Quality Steel Plate from
France, India, Indonesia, Italy, and the Republic of Korea, 64 FR 12996
(March 16, 1999) (Initiation Notice)), the following events have
occurred: On March 19, 1999, we issued our original countervailing duty
questionnaire to the Government of India (GOI) and to producers/
exporters of the subject merchandise. On April 21, 1999, we postponed
the preliminary determination of this investigation to no later than
July 16, 1999. See Certain Cut-to-Length Carbon-Quality Steel Plate
from France, India, Indonesia, Italy, and the Republic of Korea:
Postponement of Time Limit for Countervailing Duty Investigations, 64
FR 23057 (April 29, 1999).
On May 10, 1999, we received responses to our initial questionnaire
from the GOI and from the Steel Authority of India (SAIL), the only
producer and exporter of the subject merchandise. We issued
supplemental questionnaires on June 3, 1999, and June 15, 1999. We
received responses to these questionnaires on June 25, 1999, and July
6, 1999.
Scope of Investigation
The products covered by this investigation are certain hot-rolled
carbon-quality steel: (1) Universal mill plates (i.e., flat-rolled
products rolled on four faces or in a closed box pass, of a width
exceeding 150 mm but not exceeding 1250 mm, and of a nominal or actual
thickness of not less than 4 mm, which are cut-to-length (not in coils)
and without patterns in relief), of iron or non-alloy-quality steel;
and (2) flat-rolled products, hot-rolled, of a nominal or actual
thickness of 4.75 mm or more and of a width which exceeds 150 mm and
measures at least twice the thickness, and which are cut-to-length (not
in coils).
Steel products to be included in this scope are of rectangular,
square, circular or other shape and of rectangular or non-rectangular
cross-section where such non-rectangular cross-section is achieved
subsequent to the rolling process (i.e., products which have been
``worked after rolling'')--for example, products which have been
beveled or rounded at the edges. Steel products that meet the noted
physical characteristics that are painted, varnished or coated with
plastic or other non-metallic substances are included within this
scope. Also, specifically included in this scope are high strength, low
alloy (HSLA) steels. HSLA steels are recognized as steels with micro-
alloying levels of elements such as chromium, copper, niobium,
titanium, vanadium, and molybdenum.
Steel products to be included in this scope, regardless of
Harmonized Tariff Schedule of the United States (HTSUS) definitions,
are products in which: (1) Iron predominates, by weight, over each of
the other contained elements, (2) the carbon content is two percent or
less, by weight, and (3) none of the elements listed below is equal to
or exceeds the quantity, by weight, respectively indicated:
1.80 percent of manganese, or
1.50 percent of silicon, or
1.00 percent of copper, or
0.50 percent of aluminum, or
1.25 percent of chromium, or
0.30 percent of cobalt, or
0.40 percent of lead, or
1.25 percent of nickel, or
0.30 percent of tungsten, or
0.10 percent of molybdenum, or
0.10 percent of niobium, or
0.41 percent of titanium, or
0.15 percent of vanadium, or
0.15 percent zirconium.
All products that meet the written physical description, and in
which the chemistry quantities do not equal or exceed any one of the
levels listed above, are within the scope of this investigation unless
otherwise specifically excluded. The following products are
specifically excluded from this investigation: (1) Products clad,
plated, or coated with metal, whether or not painted, varnished or
coated with plastic or other non-metallic substances; (2) SAE grades
(formerly AISI grades) of series 2300 and above; (3) products made to
ASTM A710 and A736 or their proprietary equivalents; (4) abrasion-
resistant steels (i.e., USS AR 400, USS AR 500); (5) products made to
ASTM A202, A225, A514 grade S, A517 grade S, or their proprietary
equivalents; (6) ball bearing steels; (7) tool steels; and (8) silicon
manganese steel or silicon electric steel.
The merchandise subject to this investigation is classified in the
HTSUS under subheadings: 7208.40.3030, 7208.40.3060, 7208.51.0030,
7208.51.0045, 7208.51.0060, 7208.52.0000, 7208.53.0000, 7208.90.0000,
7210.70.3000, 7210.90.9000, 7211.13.0000, 7211.14.0030, 7211.14.0045,
7211.90.0000, 7212.40.1000, 7212.40.5000, 7212.50.0000, 7225.40.3050,
7225.40.7000, 7225.50.6000, 7225.99.0090, 7226.91.5000, 7226.91.7000,
7226.91.8000, 7226.99.0000.
Although the HTSUS subheadings are provided for convenience and
Customs purposes, the Department's written
[[Page 40439]]
description of the merchandise under investigation is dispositive.
Scope Comments
As stated in our notice of initiation, we set aside a period for
parties to raise issues regarding product coverage. In particular, we
sought comments on the specific levels of alloying elements set out in
the description below, the clarity of grades and specifications
excluded from the scope, and the physical and chemical description of
the product coverage.
On March 29, 1999, Usinor, a respondent in the French antidumping
and countervailing duty investigations and Dongkuk Steel Mill Co., Ltd.
and Pohang Iron and Steel Co., Ltd., respondents in the Korean
antidumping and countervailing duty investigations (collectively the
Korean respondents), filed comments regarding the scope of the
investigations. On April 14, 1999, the petitioners responded to
Usinor's and the Korean respondents' comments. In addition, on May 17,
1999, ILVA S.p.A. (ILVA), a respondent in the Italian antidumping and
countervailing duty investigations, requested guidance on whether
certain products are within the scope of these investigations.
Usinor requested that the Department modify the scope to exclude:
(1) Plate that is cut to non-rectangular shapes or that has a total
final weight of less than 200 kilograms; and (2) steel that is 4'' or
thicker and which is certified for use in high-pressure, nuclear or
other technical applications; and (3) floor plate (i.e., plate with
``patterns in relief'') made from hot-rolled coil. Further, Usinor
requested that the Department provide clarification of scope coverage
with respect to what it argues are over-inclusive HTSUS subheadings
included in the scope language.
The Department has not modified the scope of these investigations
because the current language reflects the product coverage requested by
the petitioners, and Usinor's products meet the product description.
With respect to Usinor's clarification request, we do not agree that
the scope language requires further elucidation with respect to product
coverage under the HTSUS. As indicated in the scope section of every
Department antidumping and countervailing duty proceeding, the HTSUS
subheadings are provided for convenience and Customs purposes only; the
written description of the merchandise under investigation or review is
dispositive.
The Korean respondents requested confirmation whether the maximum
alloy percentages listed in the scope language are definitive with
respect to covered HSLA steels.
At this time, no party has presented any evidence to suggest that
these maximum alloy percentages are inappropriate. Therefore, we have
not adjusted the scope language. As in all proceedings, questions as to
whether or not a specific product is covered by the scope and should be
timely raised with Department officials.
ILVA requested guidance on whether certain merchandise produced
from billets is within the scope of the current CTL plate
investigations. According to ILVA, the billets are converted into wide
flats and bar products (a type of long product). ILVA notes that one of
the long products, when rolled, has a thickness range that falls within
the scope of these investigations. However, according to ILVA, the
greatest possible width of these long products would only slightly
overlap the narrowest category of width covered by the scope of the
investigations. Finally, ILVA states that these products have different
production processes and properties than merchandise covered by the
scope of the investigations and therefore are not covered by the scope
of the investigations.
As ILVA itself acknowledges, the particular products in question
appear to fall within the parameters of the scope and, therefore, we
are treating them as covered merchandise for purposes of these
investigations.
The 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 effective January 1, 1995 (the Act).
In addition, unless otherwise indicated, all citations to the
Department's regulations are to the current regulations as codified at
19 CFR part 351 (1998) and to the substantive countervailing duty
regulations published in the Federal Register on November 25, 1998 (63
FR 65348) (CVD Regulations).
Injury Test
Because India is a ``Subsidies Agreement country'' within the
meaning of section 701(b) of the Act, the International Trade
Commission (ITC) is required to determine whether imports of the
subject merchandise from India materially injure, or threaten material
injury to, a U.S. industry. On April 8, 1999, the ITC published its
preliminary determination 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. See Certain Cut-To-Length Carbon-Quality Steel
Plate from the Czech Republic, France, India, Indonesia, Italy, Japan,
Korea, and Macedonia, 64 FR 17198 (April 8, 1999).
Alignment With Final Antidumping Duty Determination
On July 2, 1999, the petitioners submitted a letter requesting
alignment of the final determination in this investigation with the
final determination in the companion antidumping duty investigation.
See Initiation of Antidumping Duty Investigations: Certain Cut-to-
length Carbon-Quality Steel Plate from the Czech Republic, France,
India, Indonesia, Italy, Japan, the Republic of Korea, and the Former
Yugoslav Republic of Macedonia, 64 FR 12959 (March 16, 1999).
Therefore, in accordance with section 705(a)(1) of the Act, we are
aligning the final determination in this investigation with the final
determinations in the antidumping duty investigations of cut-to-length
plate.
Period of Investigation (POI)
Because SAIL is the only exporter/producer of the subject
merchandise, the POI for which we are measuring subsidies is the period
for SAIL's most recently completed fiscal year, April 1, 1997 through
March 31, 1998.
Subsidies Valuation Information
Allocation Period
Section 351.524(d)(2) of the CVD Regulations states that we will
presume the allocation period for non-recurring subsidies to be the
average useful life (AUL) of renewable physical assets for the industry
concerned, as listed in the Internal Revenue Service's (IRS) 1977 Class
Life Asset Depreciation Range System and updated by the Department of
Treasury. The presumption will apply unless a party claims and
establishes that these tables do not reasonably reflect the AUL of the
renewable physical assets for the company or industry under
investigation, and the party can establish that the difference between
the company-specific or country-wide AUL for the industry under
investigation is significant.
In this investigation, no party to the proceeding has claimed that
the AUL listed in the IRS tables does not reasonably reflect the AUL of
the renewable physical assets for the firm or industry under
investigation. Therefore, according to Sec. 351.524(d)(2) of the CVD
[[Page 40440]]
Regulations, we have allocated SAIL's non-recurring benefits over 15
years, the AUL listed in the IRS tables for the steel industry.
Benchmarks for Loans and Discount Rate
For those programs which require the application of a short-term
interest rate benchmark, we used as our benchmark a company-specific,
short-term commercial interest rate for both rupee-and U.S. dollar-
denominated loans for the POI as reported by SAIL. Where a long-term
interest-rate benchmark was required, the selection of a benchmark is
specified in the program-specific sections of this notice.
In addition, because SAIL did not report rupee-denominated long-
term commercial loans, we could not use a company-specific interest
rate as our discount rate. Therefore, the discount rate used was the
lending rate on rupee lending from private creditors as reported in the
International Financial Statistics.
I. Programs Preliminarily Determined To Be Countervailable
A. Duty Entitlement Passbook Scheme (DEPS)
In its May 10, 1999, response to the Department's original
questionnaire, the GOI submitted copies of two publically available
Ministry of Commerce publications--``Export and Import Policy'' and
``Handbook of Procedures'' (see Exhibits P and Q of the public version
on file in room B-099 of the Main Commerce Building ). These
publications set forth the rules and regulations of the several
programs which allow duty exemptions on imports. Chapter 7 of the
``Export and Import Policy'' contains the details of India's Duty
Exemption Scheme, which consists of the DEPS and ``Duty Free Licenses''
(Advance Licenses, Advance Intermediate Licenses, and Special Imprest
Licenses).
The DEPS formerly was the Passbook Scheme (PBS), which was enacted
on April 1, 1995, under the auspices of the Directorate General of
Foreign Trade (DGFT). Under the PBS, GOI-designated manufacturers/
exporters, upon export of finished goods, could claim credits on
certain imported inputs which could be used to pay customs duties on
subsequent imports. The amount of credit granted was determined
according to the GOI's ``Standard Input/Output'' (SIO) norm schedule
that established the quantities of normally imported raw materials used
to produce one unit of the finished product. Using the SIO norm
schedule, the GOI granted a credit based on an estimation of the
customs duty that would have otherwise been charged absent the program.
Rather than receiving the import duty refund in cash, participating
companies received their credits in the form of a ``passbook'' from the
DGFT which, in turn, could be used to pay import duties on subsequent
GOI-approved imports by means of a debit entry in the company's
passbook. According to the GOI, the passbook program was discontinued
on April 1, 1997. However, exporters may continue to use a passbook
credit that was issued prior to the termination for a period of up to
three years after the issuance date. Thus, exporters can, conceivably,
continue to use credits earned under the PBS program until their
credits have been used up or until March 31, 2000. SAIL has reported
that it did not use or receive credits under the PBS during the POI.
On the same date that the PBS was terminated, the GOI enacted the
DEPS. Under the DEPS, exporters are eligible to receive a specified
percentage of duty credits against the f.o.b. value of their exports.
As with the PBS, the GOI determines the amount of credit that can be
applied towards a company's remission of import duties according to the
GOI's SIO norm schedule, which sets forth the average amount of inputs
imported for the manufacture of a specific product and the average
amount of duty payable on those imported inputs.
Under the DEPS, an exporter may obtain credits on a pre-export or
post-export basis. Eligibility for the DEPS pre-export program is
limited to manufacturers/exporters that have exported for a three year
period prior to applying for the program. A pre-export credit is capped
at five percent of the average export performance of the applicant
during the preceding three years. The GOI and the company have stated
that SAIL did not use or receive DEPS pre-export credits during the
POI.
All exporters are eligible to participate in the DEPS post-export
program, provided that the exported product is listed in the GOI's SIO
norm schedule. According to the GOI, post-export DEPS credits allow
exporters to receive exemptions on any subsequent import regardless of
whether it is incorporated into the production of an export product. In
addition, credits earned under the DEPS post-export program are valid
for 12 months and are freely transferable. During the POI, SAIL
received and used post-export DEPS credits.
Section 351.519 of the CVD Regulations sets forth the criteria
regarding the remission, exemption or drawback of import duties. Under
351.519(a)(4), the entire amount of an import duty exemption is
countervailable if the government does not have in place a system or
procedure to confirm which imports are consumed in the production of
the exported product, or if the government has not carried out an
examination of actual imports involved to confirm which imports are
consumed in the production of the exported product.
According to the GOI, once a post-export DEPS credit is earned,
companies may use the credit for the exemption of duties on any import
regardless of whether the import is consumed in the production of an
export product. Because the GOI reported that exporters are free to use
products imported with post-export DEPS credits without restriction, we
preliminary determine that the GOI does not have a system in place to
confirm that imports are consumed in the production of an exported
product, nor has it carried out such an examination. Consequently,
under Sec. 351.519(a)(4) of the CVD Regulations, the entire amount of
the import duty exemption provides a benefit. Furthermore, a financial
contribution, as defined under section 771(5)(D)(ii) of the Act, is
provided under the program because the GOI is foregoing customs duties.
In addition, this program can only be used by exporters, and, thus, the
subsidy is specific under section 771(5A)(A) of the Act.
SAIL reported its receipt of DEPS post-export credits during the
POI for exports of subject merchandise to the United States and the
application fees it paid in order to receive the credits. We
preliminarily determine that the fees paid qualify as an ``* * *
application fee, deposit, or similar payment paid in order to qualify
for, or to receive, the benefit of the countervailable subsidy.'' See
section 771(6)(A) of the Act. Thus, to calculate the subsidy, we have
calculated the amount of DEPS import duty exemptions received by SAIL
and the amount of revenue earned on DEPS export credits which have been
sold by SAIL during the POI that were attributable to exports of
subject merchandise to the United States (less the applicable fees
paid). We then divided that amount by SAIL's total exports of subject
merchandise to the United States during the POI. On this basis, we
preliminarily determine the net countervailable subsidy to be 0.55
percent ad valorem.
B. Advance Licenses
Under India's Duty Exemption Scheme, companies may also import
[[Page 40441]]
inputs duty-free through the use of import licenses. Using advance
licenses, companies are able to import inputs ``required for the
manufacture of goods'' without paying India's basic customs duty (see
chapter 7 of ``Export and Import Policy''). Advance intermediate
licenses and special imprest licenses are also used to import inputs
duty-free. During the POI, SAIL used advance licences and also sold
some advance licenses. SAIL reported that it did not use or sell any
advance intermediate licenses or special imprest licenses during the
POI.
In Certain Iron-Metal Castings from India: Final Results of
Countervailing Duty Administrative Review, 62 FR 32297, 32306 (June 13,
1997) (1994 Castings), the Department found that the advance licenses
system accomplished, in essence, what a drawback system is intended to
accomplish, i.e., finished products produced with imported inputs are
allowed to be exported free of the import duties assessed on the
imported inputs. The Department concluded that, because the imported
inputs were used to produce castings which were subsequently exported,
the duty-free importation of these inputs under the advance license
program did not constitute a countervailable subsidy. See 1994 Castings
62 FR at 32306.
Subsequently, in Certain Iron-Metal Castings from India: Final
Results of Countervailing Duty Administrative Review, 63 FR 64050,
64058-59 (Nov. 18, 1998) (1996 Castings), we stated that we would
reevaluate the program in light of new information as to how the
program operates. In the petition, petitioners provided new substantive
information which indicated that the GOI does not value the licenses
according to the inputs actually consumed in the production of the
exported good. Based on this information, we initiated a reexamination
of the advanced license program.
As stated earlier, Sec. 351.519 of the CVD Regulations sets the
criteria used to determine whether programs which provide for the
remission, exemption, or drawback of import duties are countervailable.
Under Sec. 351.519(a)(4), the government must have a system in place or
must carry out an examination to confirm that inputs are consumed in
the production of the exported product. Absent these procedures, the
entire amount of the import duty exemption provides a countervailable
benefit.
Because the GOI reported in its questionnaire response that
products imported under an advance license need not be consumed in the
production of the exported product, we preliminarily determine that the
GOI has no system in place to confirm that the inputs are consumed in
the production of the exported product, nor has the GOI carried out
such an examination. Consequently, under Sec. 351.519(a)(4) of the CVD
Regulations, the entire amount of the duty exemption under the advance
licenses program is countervailable. Because only exporters can receive
advance licenses, this program constitutes an export subsidy under
section 771(5A)(B) of the Act. In addition, a financial contribution is
provided by the program under section 771(5)(D)(ii) of the Act.
The GOI also allows companies to sell advance licenses to other
companies in India. The Department has previously determined that the
sale of import licenses constitutes a countervailable export subsidy.
See, e.g., 1996 Castings and 1994 Castings. No new substantive
information or evidence of changed circumstances has been submitted in
this proceeding to warrant reconsideration of this determination.
Therefore, in accordance with section 771(5A)(B) of the Act, we
continue to find that this program constitutes an export subsidy and
that the financial contribution in the form of the revenue received on
the sale of licenses constitutes the benefit.
SAIL reported the advance licenses it used and sold during the POI
which it received for exports of subject merchandise to the United
States and the application fees it paid in order to receive these
licenses. We preliminarily determine that the fees paid qualify as an
``* * * application fee, deposit, or similar payment paid in order to
qualify for, or to receive, the benefit of the countervailable
subsidy.'' See section 771(6)(A) of the Act. Under Sec. 351.524(c) of
the CVD Regulations, this program provides a recurring benefit.
Therefore, to calculate the subsidy for the Advance Licenses program,
we added the values of the import duty exemptions realized by SAIL from
its use of advance licenses during the POI (net of application fees)
and the proceeds it realized from sales of advance licenses during the
POI (net of application fees). We then divided this total by the value
of SAIL's exports of subject merchandise to the United States during
the POI. On this basis, we preliminarily determine the net
countervailable subsidy to be 12.90 percent ad valorem.
C. Special Import Licenses (SILs)
During the POI, SAIL sold through public auction two other types of
import licenses--SILs for Quality and SILs for Star Trading Houses.
SILs for Quality are licenses granted to exporters which meet
internationally-accepted quality standards for their products, such as
IS0 9000 (series) and ISO 14000 (series). SILs for Star Trading Houses
are licenses granted to exporters that meet certain export targets.
Both types of SILs permit the holder to import products listed on a
``Restricted List of Imports'' in amounts up to the face value of the
SIL but do not relieve the importer of import duties.
SAIL reported that it sold SILs during the POI. As explained above,
the Department's practice is that the sale of special import licenses
constitutes an export subsidy because companies received these licenses
based on their status as exporters. See, e.g., 1996 Castings and 1994
Castings. No new substantive information or evidence of changed
circumstances has been submitted in this proceeding to warrant
reconsideration of this determination. Therefore, in accordance with
section 771(5A)(B) of the Act, we continue to find that this program
constitutes a countervailable export subsidy, and the financial
contribution in the form of the revenue received on the sale of
licenses constitutes the benefit.
During the POI, SAIL sold numerous SILs. Because the receipt of
SILs cannot be segregated by type or destination of export, we
calculated the subsidies by dividing the total amount of proceeds
received from the sales of these licenses by the value of SAIL's total
exports. On this basis, we preliminarily determine the net
countervailable subsidy be 0.15 percent ad valorem.
D. Export Promotion Capital Goods Scheme (EPCGS)
The EPCGS provides for a reduction or exemption of customs duties
and an exemption from excise taxes on imports of capital goods. Under
this program, producers may import capital goods at reduced rates of
duty by undertaking to earn convertible foreign exchange equal to four
to six times the value of the capital goods within a period of five to
eight years. For failure to meet the export obligation, a company is
subject to payment of all or part of the duty reduction, depending on
the extent of the export shortfall, plus penalty interest.
In the Final Negative Countervailing Duty Determination: Elastic
Rubber Tape From India, 64 FR 19125 (April 19, 1999) (ERT), we
determined that the import duty reduction provided under the EPCGS was
a countervailable export subsidy. See ERT 64 FR at 19129-30. We also
determined that the exemption from the excise tax provided under this
program was not countervailable. See ERT 64 FR at 19130. No new
[[Page 40442]]
information or evidence of changed circumstances have been provided to
warrant a reconsideration of these determinations. Therefore, we
continue to find that import duty reductions provided under the EPCGS
to be countervailable export subsidies.
SAIL reported that it imported machinery under the EPCGS during the
POI and in the years prior to the POI. For some of its imported
machinery, SAIL met its export commitments prior to the POI. Therefore,
the amount of duty for which it had claimed exemption has been
completely waived by the GOI. However, SAIL has not completed its
export commitments for other imports of capital machinery. Therefore,
although SAIL received a reduction in import duties when the capital
machinery was imported, the final waiver on the potential obligation to
repay the duties has not yet been made by the GOI.
We preliminary determine that SAIL benefitted in two ways by
participating in this program during the POI. The first benefit
received by SAIL under this program is the benefit on the import duty
reductions received on imported capital equipment which has been
formally waived by the GOI because SAIL met its export requirements
with respect to those imports. Prior to the POI, SAIL met its export
requirements for certain capital imports it made under the EPCGS and,
therefore, upon that fulfillment, the GOI formally waived the unpaid
duties on those imports. Because the GOI has formally waived the unpaid
duties on these imports, we have treated the full amount of the duty
exemption as a grant received in the year the export requirement for
the import was met since that was the year the final waiver of unpaid
duties was received.
Section 351.524 of the CVD Regulations specifies the criteria to be
used by the Department in determining how to allocate the benefits from
a countervailable subsidy program. Under the CVD Regulations, recurring
benefits will be expensed in the year of receipt, while non-recurring
benefits will be allocated over time. In this investigation, non-
recurring benefits will be allocated over 15 years, the AUL of assets
used by the steel industry as reported in the IRS tables.
Normally, tax benefits are considered to be recurring benefits and
are expensed in the year of receipt. Since import duties are a type of
tax, the benefit provided under this program is a tax benefit, and,
thus, normally would be considered a recurring benefit. However, the
CVD Regulations recognize that under certain circumstances it may be
more appropriate to allocate the benefits of a program traditionally
considered as a recurring subsidy, rather than to expense the benefits
in the year of receipt. For example, Sec. 351.524(c)(2) of the CVD
Regulations allows a party to claim that a recurring subsidy should be
treated as a non-recurring subsidy and enumerates the criteria to be
used by the Department in evaluating that claim. In addition, in the
Explanation of the Final Rules (the Preamble) to the CVD Regulations,
the Department provides an example of when it may be more appropriate
to consider the benefits of a tax program non-recurring, and, thus,
allocate those benefits over time. In the Preamble to the CVD
Regulations we stated that if a government provides an import duty
exemption tied to major capital equipment purchases, such as the
program at issue here, that it may be appropriate to conclude that,
because these duty exemptions are tied to capital assets, the benefits
from such duty exemptions should be considered non-recurring, even
though import duty exemptions are on the list of recurring subsidies.
See CVD Regulations, 63 FR at 65393. Therefore, because the benefit
received from the waiver of import duties under the EPCGS program is
tied to the capital assets of SAIL, we consider the benefit to be non-
recurring. Accordingly, we have allocated the benefit from this program
over the average useful life of assets in the industry, as set forth in
the ``Subsidies Valuation Information'' section, above.
The second type of benefit received under this program was provided
by the import duty reductions received on imports of capital equipment
for which SAIL had not yet met its export requirements. For those
capital equipment imports, we determine that SAIL had unpaid duties
which formally had not been waived by the GOI. Thus, the company had
outstanding contingent liabilities during the POI. When a company has
an outstanding liability and repayment of that liability is contingent
upon subsequent events, our practice is to treat any balance on that
unpaid liability as an interest-free loan. See Sec. 351.505(d)(1) of
the CVD Regulations.
In this investigation, the amount of contingent liability which
would be treated as an interest-free loan is the amount of the import
duty reduction received by SAIL, but not yet finally waived by the GOI.
Thus, for duty reductions received on imports of capital equipment for
which SAIL had not yet met its export requirements, we consider the
full amount of SAIL's unpaid customs duty on those imports which are
outstanding during the POI to be an interest-free loan. We calculated
this portion of the benefit as the interest that SAIL would have paid
during the POI had it borrowed the full amount of the duty reduction at
the benchmark rate. Pursuant to Sec. 351.505(d)(1) of the CVD
Regulations, we used a long-term interest rate as our benchmark for
measuring the subsidy because the event upon which repayment of the
duties depends (i.e., the date of expiration of the time period for
SAIL to fulfill its export commitments) occurs at a point in time more
than one year after the date the capital goods were imported. Because
SAIL did not report any rupee-denominated long-term loans for the year
in which SAIL imported the capital equipment, we could not use a
company-specific benchmark interest rate as a discount rate in
calculating the benefit provided to SAIL under this program. Thus, we
used, as the discount rate, the lending rate on rupee-lending from
private creditors, which is published in International Financial
Statistics.
To calculate the subsidy, we divided the combined benefit allocable
to the POI by SAIL's total exports from its Bhilai facility during the
POI because SAIL only reported the capital equipment imported under the
EPCGS for the Bhilai facility. (We used this methodology for the
purpose of the preliminary determination because SAIL only reported the
capital equipment imported under the EPCGS by the Bhilai facility, the
only plant which produced the subject merchandise exported to the
United States. We are seeking additional information on all import duty
exemptions on imports of all capital equipment by SAIL for purposes of
the final determination). On this basis, we preliminarily determine the
net countervailable subsidy to be 0.25 percent ad valorem.
E. Pre-shipment and Post-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 to a bank, companies may receive pre-shipment loans for working
capital purposes, i.e., for the purchase of raw materials, warehousing,
packing, 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, and may be
[[Page 40443]]
denominated in either Indian rupees or in foreign currency. 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.
Commercial banks extending export credit to Indian companies must,
by law, charge interest on this credit at rates determined by the RBI.
During the POI, the rate of interest charged on pre-shipment, rupee-
denominated export loans up to 180 days was 12.0 and 13.0 percent. For
those loans over 180 days and up to 270 days, banks charged interest at
15.0 percent. The interest charged on foreign currency denominated
export loans up to 180 days during the POI was a 6-month LIBOR rate
plus 2.0 percent for banks with foreign branches, or plus 2.5 percent
for banks without foreign branches. For those foreign currency
denominated loans exceeding 180 days and up to 270 days, the interest
charged was 6-month LIBOR plus 4.0 percent for banks with foreign
branches, or plus 4.5 percent for banks without foreign branches.
Exporters did not receive the concessional interest rate if the loan
was beyond 270 days.
Post-shipment export financing consists of loans in the form of
discounted trade bills or advances by commercial banks. Exporters
qualify for this program by presenting their export documents to their
lending bank. 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 financing is, therefore, a working
capital program used to finance export receivables. This financing is
normally denominated in either rupees or in foreign currency, except
when an exporter used foreign currency pre-shipment financing, then the
exporter is restricted to post-shipment export financing denominated in
the same foreign currency.
In general, post-shipment loans are granted for a period of no more
than 180 days. The interest rate charged on these foreign currency
denominated loans during the POI was LIBOR plus 2.0 percent for banks
with overseas branches or LIBOR plus 2.5 percent for banks without
overseas branches. For loans not repaid within the due date, exporters
lose the concessional interest rate on this financing.
The Department has previously found both pre-shipment export
financing and post-shipment export financing to be countervailable,
because receipt of export financing under these programs was contingent
upon export performance and the interest rates were lower than the
rates the exporters would have paid on comparable commercial loans.
See, e.g., 1995 Castings, 62 FR at 32998. No new substantive
information or evidence of changed circumstances has been submitted in
this investigation to warrant reconsideration of this finding.
Therefore, in accordance with section 771(5A)(B) of the Act, we
continue to find that pre-and post-shipment export financing constitute
countervailable export subsidies.
To determine the benefit conferred under the pre-export financing
program for rupee-denominated loans, we compared the interest rate
charged on these loans to a benchmark interest rate. SAIL reported
that, during the POI, it received and paid interest on commercial,
short-term, rupee-denominated cash credit loans which were not provided
under a GOI program. Cash credit loans are the most comparable type of
short-term loans to use as a benchmark because like the pre-export
loans received under this program, cash credit loans are denominated in
rupee and take the form of a line of credit which can be drawn down by
the recipient. Thus, we used these loans to calculate a company-
specific, weighted-average, rupee-denominated benchmark interest rate.
We compared this company-specific benchmark rate to the interest rates
charged on SAIL's pre-shipment rupee loans and found that the interest
rates charged were lower than the benchmark rates. Therefore, in
accordance with section 771(5)(E)(ii) of the Act, this program
conferred countervailable benefits during the POI because the interest
rates charged on these loans were less than what a company otherwise
would have had to pay on a comparable short-term commercial loan.
To calculate the benefit from these 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 interest exceeded the actual interest paid, the difference is
the benefit. We then divided the total amount of benefit by SAIL's
total exports. On this basis, we preliminarily determine the net
countervailable subsidy to be 0.10 percent ad valorem.
During the POI, SAIL also took out U.S. pre-and post-shipment
export financing denominated in U.S. dollars. To determine the benefit
conferred from this non-rupee pre-and post-shipment export financing,
we again compared the program interest rates to a benchmark interest
rate. We used the company-specific interest rates from SAIL's ``bankers
acceptance facility'' loans to derive the benchmark. SAIL's bankers
acceptance facility loans were the only commercial short-term dollar
lending received by the company during the POI. Because the effective
rates paid by the exporters are discounted rates, we derived from the
bankers acceptance facility rates a discounted weighted-average,
dollar-denominated benchmark. We compared this company-specific
benchmark rate to the interest rates charged on pre-shipment and post-
shipment dollar-denominated loans and determined that the program
interest rates were higher than the benchmark rate. Therefore, we
preliminarily determine that SAIL did not benefit from dollar-
denominated pre-and post-shipment export financing during the POI.
F. Loan Guarantees From the GOI
In its questionnaire response, the GOI reported that it has not
extended loan guarantees pursuant to any program per se. Rather, the
Ministry of Finance extends loan guarantees to selected Indian
companies on an ad hoc basis, normally to public sector companies in
particular industries. The GOI also reported that GOI loan guarantees
are not contingent on export performance nor are they contingent on the
use of domestic over imported goods. The GOI stated that, while it has
not extended loan guarantees to the steel sector since 1992, it
continues to extend loan guarantees to other industrial sectors on an
ad hoc basis.
During the POI, SAIL had outstanding several long-term, foreign
currency loans on which it received loan guarantees from the GOI. These
loans originated from both foreign commercial banks and international
lending/development institutions. According to SAIL, the loan
guarantees were earmarked for certain activities related to the
company's steel production (i.e. worker training, modernization
activities, etc.). In contradiction to the GOI's response, SAIL
reported that it finalized its loan agreements, and, thus, its loan
guarantees as late as 1994.
Section 351.506 of the CVD Regulations states that in the case of a
loan guarantee, a benefit exists to the extent that the total amount a
firm pays for the loan with a government-provided guarantee is less
than the total amount the firm would pay for a comparable commercial
loan that the firm could actually obtain on the market absent the
government-provided guarantee, including any differences in guarantee
fees. Thus, to determine whether this program confers a benefit, we
compared the total amount SAIL paid, including effective interest and
guarantee fees, on
[[Page 40444]]
each of its outstanding foreign currency loans with the total amount it
would have paid on a comparable commercial loan.
According to SAIL's response, the original loan amounts were
denominated in foreign currencies. However, SAIL only reported the
rupee-denominated payments on these loans, and reported only a
weighted-average interest rate on these loans derived from these rupee
payments. Therefore, for this preliminary determination, we are unable
to use a foreign currency benchmark to calculate the benefit conferred
by these loan guarantees. (We also note that SAIL did not report any
non-GOI guaranteed long-term foreign currency loans, thus, even if SAIL
had properly reported the interest rates charged on these loans, we
could not use a company-specific benchmark interest rate.) SAIL also
did not report any long-term rupee loans from commercial sources.
Therefore, we used as the benchmark the long-term interest rate for
loans denominated in rupees from private creditors, which is published
in International Financial Statistics. (We are seeking additional
information from SAIL on the actual fees charged on these guarantees.
We will also seek information on interest rates and guarantee fees
charged by commercial banks on foreign currency loans provided within
India.)
Using these two rates for comparison purposes, we found that the
total amount paid by SAIL on the GOI guaranteed loans was less than
what the company would have paid on a comparable commercial loan. Thus,
we preliminary determine that the loan guarantees from the GOI
conferred a benefit upon SAIL. We preliminarily determine that this
program is specific under section 771(5A)(D)(iii)(II) of the Act
because it is limited to certain companies selected by the GOI on an ad
hoc basis. In addition, a financial contribution is provided under the
program as defined under section 771(5)(D)(i) of the Act. To calculate
the subsidy, we divided the benefit calculated from the loan guarantees
by SAIL's total sales during the POI. On this basis, we preliminarily
determine the net countervailable subsidy to be 0.50 percent ad
valorem.
We did not include in our calculations the loans which originated
from international lending/development institutions. According to
Sec. 351.527 of the CVD Regulations, the Department does not generally
consider loans provided by international lending/development
institutions such as the World Bank to be countervailable. However, we
will continue to consider the issue for the final determination.
II. Program Preliminarily Determined To Be Not Countervailable
Government of India (GOI) Loans through the Steel Development Fund
(SDF)
The SDF was established in 1978 at a time when the steel sector was
subject to price and distribution controls. From 1978 through 1994, an
SDF levy was imposed on all sales made by India's integrated producers.
The proceeds from this levy were then remitted to the Joint Plant
Committee (JPC), the administrating authority consisting of four major
integrated steel producers in India that have contributed to the fund
over the years. The GOI reported in its questionnaire response that
these levies, interest earned on loans, and repayments of loans due are
the only sources of funds for the SDF.
Under the SDF program, companies that have contributed to the fund
are eligible to take out long-term loans from the fund at favorable
rates. All loan requests are subject to review by the JPC along with
the Development Commission for Iron and Steel. In its questionnaire
response, the GOI has claimed that it has never contributed any funds,
either directly or indirectly, to the SDF. Thus, we preliminarily
determine that the SDF program is not countervailable because it does
not constitute a financial contribution as defined under section
771(5)(D)(ii) of the Act.
III. Programs Preliminarily Determined To Be Not Used
Based upon the information provided in the responses, we
preliminarily determine that SAIL did not apply for or receive benefits
under the following programs during the POI:
A. Passbook Scheme
B. Advanced Intermediate Licenses
C. Special Imprest Licenses
D. Tax Exemption for Export Profits (Section 80 HHC of the India Tax
Act)
Verification
In accordance with section 782(i) of the Act, we will verify the
information submitted by respondents prior to making our final
determination.
Suspension of Liquidation
In accordance with section 703(d)(1)(A)(i) of the Act, we have
calculated an individual rate for the company under investigation--
SAIL. We will use this rate for purposes of the ``all others'' rate.
------------------------------------------------------------------------
Producer/exporter Net subsidy rate
------------------------------------------------------------------------
Steel Authority of India (SAIL)..... 14.45% ad valorem.
All Others.......................... 14.45% ad valorem.
------------------------------------------------------------------------
In accordance with section 703(d) of the Act, we are directing the
U.S. Customs Service to suspend liquidation of all entries of the
subject merchandise from India, which are entered or withdrawn from
warehouse, for consumption on or after the date of the publication of
this notice in the Federal Register, and to require a cash deposit or
bond for such entries of the merchandise in the amounts indicated
above. This suspension will remain in effect until further notice.
ITC Notification
In accordance with section 703(f) of the Act, we will notify the
ITC of our determination. In addition, we are making available to the
ITC all 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 an administrative protective order, without the written consent
of the Assistant Secretary for 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 351.310, we will hold a public hearing,
if requested, to afford interested parties an opportunity to comment on
this preliminary determination. The hearing is tentatively scheduled to
be held 57 days from the date of publication of the preliminary
determination at the U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW, Washington, DC 20230. Individuals who wish to
request a hearing must submit a written request within 30 days of the
publication of this notice in the Federal Register to the Assistant
Secretary for Import Administration, U.S. Department of Commerce, Room
1870, 14th Street and Constitution Avenue, NW, Washington, DC 20230.
Parties should confirm by telephone the time, date, and place of the
hearing 48 hours before the scheduled time.
Requests for a public hearing should contain: (1) The party's name,
address, and telephone number; (2) the number of participants; and, (3)
to the extent
[[Page 40445]]
practicable, an identification of the arguments to be raised at the
hearing. In addition, six copies of the business proprietary version
and six copies of the nonproprietary version of the case briefs must be
submitted to the Assistant Secretary no later than 50 days from the
date of publication of the preliminary determination. As part of the
case brief, parties are encouraged to provide a summary of the
arguments not to exceed five pages and a table of statutes,
regulations, and cases cited. Six copies of the business proprietary
version and six copies of the nonproprietary version of the rebuttal
briefs must be submitted to the Assistant Secretary no later than 5
days from the date of filing of case briefs. 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 19 CFR 351.309 and will be considered if received
within the time limits specified above.
This determination is published pursuant to sections 703(f) and
777(i) of the Act.
Dated: July 16, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-18856 Filed 7-23-99; 8:45 am]
BILLING CODE 3510-DS-P
