Certain Iron-Metal Castings From India Preliminary Results of Countervailing Duty Administrative Review

DEPARTMENT OF COMMERCE

[C-533-063]

Certain Iron-Metal Castings From India Preliminary Results of

Countervailing Duty Administrative Review

AGENCY: International Trade Administration/Import Administration,

Commerce.

ACTION: Notice of Preliminary Results of Countervailing Duty

Administrative Review.

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SUMMARY: The Department of Commerce is conducting an administrative

review of the countervailing duty order on certain iron-metal castings

from India for the period January 1, 1990 through December 31, 1990. We

preliminarily determine the net subsidy to be 10.16 percent ad valorem

for all manufacturers and exporters in India of certain iron-metal

castings, except for certain firms which have significantly different

aggregate benefits. A complete listing of the net subsidies for these

firms can be found in the ``Preliminary Results of Review'' section of

this notice. We invite interested parties to comment on these

preliminary results.

EFFECTIVE DATE: January 24, 1995.

FOR FURTHER INFORMATION CONTACT: Robert Copyak or Lorenza Olivas,

Office of Countervailing Compliance, International Trade

Administration, U.S. Department of Commerce, Washington, D.C. 20230;

telephone: (202) 482-2786.

SUPPLEMENTARY INFORMATION:

Background

On October 2, 1991, the Department of Commerce (the Department)

published in the Federal Register a notice of ``Opportunity to Request

Administrative Review'' (56 FR 49878) of the countervailing duty order

on certain iron-metal castings from India (45 FR 68650; October 16,

1980). On October 23, 1991, the Municipal Castings Fair Trade Council

and individually-named members, all of which are interested parties,

requested an administrative review of the order. In addition, various

respondent companies submitted timely requests for review. We initiated

the review, covering the period January 1, 1990 through December 31,

1990, on November 22, 1991 (56 FR 58878). The Department is now

conducting this administrative review in accordance with section 751(a)

of the Tariff Act of 1930 (the Act).

Scope of Review

Imports covered by this review are shipments of Indian manhole

covers and frames, clean-out covers and frames, and catch basin grates

and frames. These articles are commonly called municipal or public

works castings and are used for access or drainage for public utility,

water, and sanitary systems. During the review period, such merchandise

was classifiable under the Harmonized Tariff Schedule (HTS) item

numbers 7325.10.0010 and 7325.10.0050. The HTS item numbers are

provided for convenience and Customs purposes. The written description

remains dispositive.

The review period is January 1, 1990 through December 31, 1990.

This review involves 14 producers/exporters and 14 programs.

Calculation Methodology for Assessment and Deposit Purposes

Pursuant to Ceramica Regiomontana, S.A. v. United States, 853 F. Supp.

431 (CIT 1994), Commerce is required to calculate a country-wide CVD

rate, i.e., the all-other rate, by ``weight averaging the benefits

received by all companies by their proportion of exports to the United

States, inclusive of zero rate firms and de minimis firms.'' Therefore,

we first calculated a subsidy rate for each company subject to the

administrative review. We then weight-averaged the rate received by

each company using as the weight its share of total Indian exports to

the United States of subject merchandise. We then summed the individual

companies' weight-averaged rates to determine the subsidy rate from all

programs benefitting exports of subject merchandise to the United

States.

Since the country-wide rate calculated using this methodology was

above de minimis, as defined by 19 CFR Sec. 355.7 (1993), we proceeded

to the next step and examined the net subsidy rate calculated for each

company to determine whether individual company rates differed

significantly from the weighted-average country-wide rate, pursuant to

19 CFR Sec. 355.22(d)(3). Three companies received significantly

different net subsidy rates during the review period pursuant to 19 CFR

Sec. 355.22(d)(3). These companies are treated separately for

assessment and cash deposit purposes. All other companies are assigned

the country-wide rate.

Analysis of Programs

1. Pre-Shipment Export Financing

The Reserve Bank of India, through commercial banks, provides pre-

shipment financing, or ``packing credit,'' to exporters. With these

pre-shipment loans, exporters may purchase raw materials and packing

materials based on presentation of a confirmed order or

[[Page 4593]] letter of credit. In addition, exporters may establish

pre-shipment credit lines under this program with limits contingent

upon the value of exports. In prior administrative reviews of this

order, this program was determined to be countervailable because

receipt of the loans under this program is contingent upon export

performance and the interest rates were preferential. (See, e.g., Final

Results of Countervailing Duty Administrative Review: Certain Iron-

Metal Castings From India (56 FR 41658; August 22, 1991) (1987 Indian

Castings Final Results); Final Results of Countervailing Duty

Administrative Review: Certain Iron-Metal Castings From India (56 FR

52515; October 21, 1991) (1988 Indian Castings Final Results); and

Final Results of Countervailing Duty Administrative Review: Certain

Iron-Metal Castings From India (56 FR 52521; October 21, 1991) (1989

Indian Castings Final Results).) There has been no new information or

evidence of changed circumstances in this review to warrant

reconsideration of this program's countervailability.

During the review period, there were two types of pre-shipment

export financing arrangements. For pre-shipment loans with periods of

180 days or less, the interest rate was 7.5 percent per annum. For

loans with periods exceeding 180 days, the interest rate was 9.5

percent per annum. In either case, a ``penalty'' interest rate of 15.5

percent was charged on an unpaid balance from the end of the loan

period forward.

In the case of a short-term loan provided by a government, the

Department will use as a benchmark the average interest rate for an

alternative source of short-term financing in the country in question.

In determining this benchmark, the Department will normally rely upon

the predominant source of short-term financing in the country in

question. (See Countervailing Duties; Notice of Proposed Rulemaking and

Request for Public Comments, section 355.44(b)(3)(i) (Proposed Rules)

(54 FR 23380; May 31, 1989).

The Government of India classifies the manufacturers and exporters

subject to this review as small-scale industries. Since the interest

rates on loans to small-scale industries were set by the Reserve Bank

of India, we used the small-scale industry short-term interest rates

published in the Reserve Bank of India periodicals ``Report on Trend

and Progress in India: 1989-90'' and ``Reserve Bank of India Bulletin

October 1989 (Supplement)'' to calculate a benchmark interest rate of

15.08 percent. Because the Reserve Bank of India devised different

interest rates for the latter months of the review period, this 15.08

percent benchmark is a weighted-average of the highest rate for small-

scale industry loans between 200,000 and 2,500,000 rupees for the

period January 1 through September 21, 1990, and the rate for small-

scale industry loans over 50,000 rupees for the period September 22

through December 31, 1990. We compared this benchmark to the interest

rate charged on pre-shipment loans and found that the interest rate

charged under this program was lower than the benchmark. The use of

this benchmark rate is consistent with prior reviews of this order.

(See 1988 and 1989 Indian Castings Final Results).

During the review period, 12 of the 14 respondent companies made

payments on pre-shipment export loans for shipments of subject castings

to the United States. While all 12 of these companies provided specific

loan information as requested in our questionnaires, the submission

containing the pre-shipment loan information for Super Castings (India)

Private Ltd. was untimely and therefore returned. (See the April 21,

1994 memorandum titled Removal of Information from the Administrative

Record for the 1990 Administrative Review of the Countervailing Duty

Order on Certain Iron-metal Castings from India, on file in the public

file of the Central Records Unit, Room B-099.) To calculate the benefit

from these loans to the other 11 companies, we compared the actual

interest each company paid during the review period with the interest

that would have been paid on these loans using the benchmark rate of

15.08 percent. The difference is the benefit. We divided the benefit by

either total exports or total exports of subject merchandise to the

United States, depending on how the pre-shipment financing was

reported. That is, if a company was able to segregate pre-shipment

loans 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 reported

aggregate pre-shipment financing, we divided the benefit from all pre-

shipment loans by total exports. For Super Castings (India) Private

Ltd., we used the highest individual company benefit rate from this

program as best information available. On this basis, we preliminarily

determine the net subsidy from this program to be 1.11 percent ad

valorem for all manufacturers and exporters in India of certain iron-

metal castings, except for those firms listed below which have

significantly different aggregate benefits. The net subsidies for those

firms are as follows:

------------------------------------------------------------------------

Net

Manufacturer/exporter subsidy

(percent)

------------------------------------------------------------------------

Nandikeshwari Iron Foundary.................................. 0.00

Overseas Iron Foundry Pvt. Ltd............................... 5.27

Sitaram Madhogarhia & Sons Pvt. Ltd.......................... 0.41

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2. Post-Shipment Export Financing

The Reserve Bank of India, through commercial banks, provides post-

shipment loans to exporters upon presentation of export documents.

Post-shipment financing also includes bank discounting of foreign

customer receivables. As with pre-shipment financing, exporters may

establish post-shipment credit lines with their commercial banks. In

general, post-shipment loans are granted for a period of up to 180

days. In prior administrative reviews of this order, this program was

determined to be countervailable because receipt of the loans under

this program is contingent upon export performance and the interest

rates were preferential. (See 1988 and 1989 Indian Castings Final

Results.) There has been no new information or evidence of changed

circumstances in this review to warrant reconsideration of this

program's countervailability. The interest rate for post-shipment

financing was 8.65 percent during the review period. For reasons stated

above for pre-shipment financing, we are using 15.08 percent as our

short-term interest rate benchmark.

During the review period, 12 of the 14 respondent companies made

payments on post-shipment export loans for shipments of subject

castings to the United States. Only 11 of those 12 companies, however,

provided specific loan information as requested in our questionnaires.

Super Castings (India) Private Ltd. stated in its response to our

original questionnaire that its information about its post-shipment

loans was forthcoming; despite another request for the information in

our supplemental questionnaire, the company never submitted it. To

calculate the benefit from these loans to the other 11 companies, we

followed the same short-term loan methodology discussed above for pre-

shipment financing. We divided the benefit by either total exports or

exports of subject merchandise to the United States, depending on

whether the company was able to segregate the post-shipment

[[Page 4594]] financing on the basis of destination of the exported

good. For the company that did not submit specific loan information, we

used the highest individual company benefit rate from this program as

best information available. On this basis, we preliminarily determine

the net subsidy from this program to be 1.49 percent ad valorem for all

manufacturers and exporters in India of certain iron-metal castings,

except for those firms listed below which have significantly different

aggregate benefits. The net subsidies for those firms are as follows:

------------------------------------------------------------------------

Net

Manufacturer/exporter subsidy

(percent)

------------------------------------------------------------------------

Nandikeshwari Iron Foundry................................... 0.00

Overseas Iron Foundry Pvt. Ltd............................... 2.83

Sitaram Madhogarhia & Sons Pvt. Ltd.......................... 1.85

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3. Income Tax Deductions Under Section 80HHC

Under section 80HHC of the Income Tax Act, the Government of India

allows exporters to deduct from taxable income profits derived from the

export of goods and merchandise. In prior administrative reviews of

this order, this program has been determined to be countervailable

because receipt of benefits under this program is contingent upon

export performance. (See 1988 and 1989 Indian Castings Final Results.)

There has been no new information or evidence of changed circumstances

in this review to warrant reconsideration of this program's

countervailability.

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 2.59 percent ad valorem for all manufacturers and

exporters in India of certain iron-metal castings, except for those

firms listed below which have significantly different aggregate

benefits. The net subsidies for those firms are as follows:

------------------------------------------------------------------------

Net

Manufacturer/exporter subsidy

(percent)

------------------------------------------------------------------------

Nandikeshwari Iron Foundry................................... 0.05

Overseas Iron Foundry Pvt. Ltd............................... 6.18

Sitaram Madhogarhia & Sons Pvt. Ltd.......................... 15.82

------------------------------------------------------------------------

4. Cash Compensatory Support (CCS) Program

In 1966, the Government of India established the CCS program which

provides a cumulative tax rebate paid upon export and is calculated as

percentage of the f.o.b. invoice price. We verified that the rebate

rate for exports of castings was set at a maximum of five percent for

the review period.

As stated in Sec. 355.44(i)(4)(ii) of the Proposed Rules (54 FR

23382), the Department will find that the entire amount of any such

rebate is countervailable unless the following conditions are met: (1)

The program operates for the purpose of rebating prior stage cumulative

indirect taxes and/or import charges; (2) the government accurately

ascertained the level of the rebate; and (3) the government reexamines

its schedules periodically to reflect the amount of actual indirect

taxes and/or import charges paid. In prior administrative reviews of

this order, the Department determined that these conditions have been

met, and, as such, the entire amount of the rebate has not been

countervailed (see, e.g., the 1989 Indian Castings Final Results).

However, once a rebate program meets this threshold, the Department

must still determine in each case whether there is an overrebate; that

is, the Department must still analyze whether the rebate for the

subject merchandise exceeds the total amount of indirect taxes and

import duties borne by inputs that are physically incorporated into the

exported product. If the rebate exceeds the amount of allowable

indirect taxes and import duties, the Department will, pursuant to

Sec. 355.44(i)(4)(i) of the Proposed Rules, find a countervailable

benefit equal to the difference between the rebate rate and the

allowable rate determined by the Department (i.e., the overrebate).

Since the last completed review of this order, the Indian

manufacturers of castings have moved from domestic pig iron to imported

pig iron as the basic raw material used in the production of exports

destined for the U.S. market. In this review, the manufacturers

presented a tax incidence calculation based on the Indian government's

rebate system on castings. The companies also provided information on

the taxes paid. Based on our examination of the indirect tax incidence

on inputs of castings, we preliminarily determine that two items listed

as taxes, the port tax and harbor tax (incurred with respect to

imported pig iron), were charges for services rather than indirect

taxes. At verification, the information we examined shows that the port

tax included in the indirect tax incidence is a wharfage charge. The

documentation submitted at verification on the harbor tax indicates

that this item included berthage, port dues, pilotage, and towing

charges. (See February 25, 1994 report titled Verification of

Information Submitted by RSI India Pvt. Ltd. for the 1990

Administrative Review of the Countervailing Duty Order on Certain Iron-

Metal Castings from India which is on file in the Central Records Unit

(room B099 of the Main Commerce Building).)

Since the information we verified was at the company level, we

afforded the Government of India the opportunity to provide information

which demonstrates that the port and harbor collections discussed above

were actually indirect taxes rather than charges for services and, if

so, that they were accurately reflected in the rebate rate authorized

for subject castings. We received a response from the Government of

India on April 25, 1994. The information provided did not demonstrate

that these charges, which were used in the calculation of tax

incidence, are indirect taxes or fiscal charges. Therefore, we

determine that the charges for wharfage, berthage, pilotage, and towage

are service charges rather than import charges. For further discussion

of this analysis, see the May 26, 1994 briefing paper titled Cash

Compensatory Support (CCS) Program which is on file in the Central

Records Unit (room B009 of the Main Commerce Building).

Because these claimed charges on the physically incorporated items

are service charges rather than indirect taxes or import charges, we

have preliminarily disallowed these items in the calculation of the

indirect tax incidence. Therefore, we recalculated the indirect tax

incidence incurred on the items physically incorporated in the

manufacture of castings. We then compared that recalculated tax

incidence rate to the rebates authorized on castings exports under the

CCS program. Based on this comparison, we preliminarily determine that

this program provides an overrebate of indirect taxes. The amount of

the overrebate is a countervailable benefit provided to exporters of

the subject [[Page 4595]] castings. On this basis, we preliminarily

determine the net subsidy from this program to be 4.24 percent ad

valorem for all manufacturers and exporters in India of certain iron-

metal castings.

On February 1, 1991, manufacturers and exporters of castings agreed

to stop applying for CCS rebates on exports of the subject castings to

the United States. We also verified that the Government of India

terminated the program effective July 3, 1991. However, exporters have

two years in which to file applications for CCS rebates for exports

made prior to July 3, 1991. To ascertain whether castings exporters

received any residual benefits from this terminated program, we

reviewed the companies' accounting ledgers through September 1993 (the

time of our verification). We found no evidence of any application for

or receipt of residual benefits under this program as of that date,

which exceeded the two year period following the termination of the

program during which castings exporters could file CCS applications.

Therefore, we plan not to include the subsidy conferred by this program

in the cash deposit rate to be established in the final results of this

review. (See section 355.50(a) of the Proposed Rules.)

5. The Sale of Import Licenses

The GOI allows companies to transfer certain types of import

licenses to other companies in India. During the review period,

castings manufacturers/exporters sold additional licenses and

replenishment licenses. Because the companies received these licenses

based on their status as exporters, we preliminarily determine that the

sale of these licenses is countervailable. See the 1988 and 1989 Indian

Castings Final Results. There has been no new information or evidence

of changed circumstances in this review to warrant reconsideration of

this program's countervailability.

A company receives an additional license based on its total export

earnings from the previous year. Therefore, we calculated the subsidy

by dividing the total amount of proceeds a company received from sales

of additional licenses by the total value of its exports of all

products to all markets.

A company receives replenishment licenses based on individual

export shipments. Therefore, we calculated the subsidy by dividing the

amount of proceeds a company received from sales of replenishment

licenses that was attributable to shipments of subject castings to the

United States by the total value of the company's exports of subject

castings to the United States.

We preliminarily determine the net subsidy from sales of import

licenses to be 0.45 percent ad valorem for all manufacturers and

exporters in India of certain iron-metal castings, except for those

firms listed below which have significantly different aggregate

benefits. The net subsidies for those firms are as follows:

------------------------------------------------------------------------

Net

Manufacturer/exporter subsidy

(percent)

------------------------------------------------------------------------

Nandikeshwari Iron Foundry................................... 0.00

Overseas Iron Foundry Pvt. Ltd............................... 0.00

Sitaram Madhogarhia & Sons Pvt. Ltd.......................... 0.00

------------------------------------------------------------------------

6. Advance Licenses

Generally, a company can receive an advance license if it has

received a foreign purchase order or if it has an established history

of exporting. Products imported under an advance license enter the

country duty-free, and companies importing under advance licenses are

obligated to export the products made using the duty-free imports. A

product imported under an advance license does not necessarily have to

be physically incorporated into the exported product. The amount of

imports allowed under an advance license is closely linked to the

amount of exports to be produced.

During the review period, eight of the respondent castings

manufacturers/exporters used advance licenses to import pig iron, an

input which is physically incorporated into the subject iron-metal

castings exported to the United States. We consider the use of advance

licenses in this case to be the equivalent of a duty drawback program:

customs duties were not paid on imported products that were physically

incorporated in the subject castings which were exported to the United

States. See the 1988 and 1989 Indian Castings Final Results, and the

Final Affirmative Countervailing Duty Determination: Steel Wire Rope

from India (Steel Wire Rope), (56 FR 46293, September 11, 1991).

Therefore, we preliminarily determine that the use of advance licenses

for the importation of pig iron is not countervailable.

Other Programs

We also examined the following programs and preliminarily determine

that exporters of certain iron-metal castings did not apply for or

receive benefits under these programs with respect to exports of the

subject merchandise to the United States during the review period: (1)

Market Development Assistance; (2) International Price Reimbursement

Scheme; (3) Free Trade Zones; (4) Preferential Freight Rates; (5) 100

Percent Export-Oriented Units Program; (6) Exim Scrip; and (7) Income

Tax Deductions under sections 80GGA, 80HH, 80HHA, and 80I of the Income

Tax Act. Moreover, we verified that the exporters did not purchase

diesel fuel at a discount, and that a program designed to provide

preferentially priced oil for running generators was never funded. This

program was abolished on April 1, 1993, and we did not find any

evidence of residual benefits.

Preliminary Results of Review

We preliminarily determine that the following net subsidies exist

for the period January 1, 1990 through December 31, 1990:

------------------------------------------------------------------------

Net

Manufacturer/exporter subsidy

(percent)

------------------------------------------------------------------------

Nandikeshwari Iron Foundry................................... 4.29

Overseas Iron Foundry Pvt. Ltd............................... 18.52

Sitaram Madhogarhia & Sons Pvt. Ltd.......................... 22.32

Country-wide All-other Rate.................................. 10.16

------------------------------------------------------------------------

If the final results of this review remain the same as these

preliminary results, the Department intends to instruct the Customs

Service to assess countervailing duties at the above percentages of the

f.o.b. invoice price on shipments of the subject merchandise exported

on or after January 1, 1990, and on or before December 31, 1990.

The Department also intends, as a result of the termination of

benefits attributable to the CCS program, to instruct the Customs

Service to collect cash deposits of estimated countervailing duties at

the following rates:

------------------------------------------------------------------------

Net

Manufacturer/exporter subsidy

(percent)

------------------------------------------------------------------------

Nandikeshwari Iron Foundry................................... 0.05

Overseas Iron Foundry Pvt. Ltd............................... 14.28

Sitaram Madhogarhia & Sons Pvt. Ltd.......................... 18.08

Country-wide All-other Cash Deposit Rate..................... 5.92

------------------------------------------------------------------------

The country-wide all-other cash deposit rate of 5.92 percent

applies to all but the above-listed companies on shipments of this

merchandise entered, or withdrawn from warehouse, for consumption on or

after the date of publication of the final results of this

administrative review.

Parties to the proceeding may request disclosure of the calculation

[[Page 4596]] methodology and interested parties may request a hearing

not later than 10 days after date of publication of this notice. In

accordance with 19 CFR 355.38(c)(1)(ii), interested parties may submit

written arguments in case briefs on these preliminary results within 30

days of the date of publication. Rebuttal briefs, limited to arguments

raised in case briefs, may be submitted seven days after the time limit

for filing the case brief. Any hearing, if requested, will be held

seven days after the scheduled date for submission of rebuttal briefs.

Copies of case briefs and rebuttal briefs must be served on interested

parties in accordance with 19 CFR 355.38(e).

Representatives of parties to the proceeding may request disclosure

of proprietary information under administrative protective order no

later than 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 are due under 19 CFR 355.38(c).

The Department will publish the final results of this

administrative review, including the results of its analysis of issues

raised in any case or rebuttal briefs.

This administrative review and notice are in accordance with

section 751(a)(1) of the Tariff Act (19 U.S.C. 1675(a)(1)) and 19 CFR

355.22.

Dated: January 9, 1995.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 95-1761 Filed 1-23-95; 8:45 am]

BILLING CODE 3510-DS-P