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,

Department of Commerce.

ACTION: Notice of Preliminary Results of Countervailing Duty

Administrative Review.

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SUMMARY: The Department of Commerce is conducting an administrative

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

from India for the period January 1, 1991 through December 31, 1991. We

preliminarily determine the net subsidy to be 5.54 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: Lorenza Olivas or Alexander Braier,

Office of Countervailing Compliance, International Trade

Administration, U.S. Department of Commerce, Washington, DC. 20230;

telephone: (202) 482-2786.

SUPPLEMENTARY INFORMATION:

Background

On October 8, 1992, the Department of Commerce (the Department)

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

Administrative Review'' (57 FR 46371) of the countervailing duty order

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

1980). On October 27, 1992, the Municipal Castings Fair Trade Council

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

requested an administrative review of the order. We initiated the

review, covering the period January 1, 1991 through December 31, 1991,

on November 27, 1992 (55 FR 56318). 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 the 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, 1991 through December 31, 1991.

This review involves 14 producers/exporters and 12 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 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 355.22(d)(3). Three companies (Dinesh Brothers, Pvt. Ltd., Super

Castings (India) Pvt. Ltd., and Kajaria Iron Castings Pvt. Ltd.)

received significantly different net subsidy rates during the review

period pursuant to 19 CFR 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 letter of

credit. In addition, exporters may establish pre-shipment credit lines

under this program with limits contingent upon the value of exports. In

general, the 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 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

[[Page 4597]] 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, the rate

of interest charged on pre-shipment export loans ranged from 7.50 to 17

percent, depending on the length and date of the loan.

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

Department uses the average interest rate for an alternative source of

short-term financing in the country in question as a benchmark. In

determining this benchmark, the Department relies 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, Sec. 355.44(b)(3)(i) (Proposed Rules) (54 FR 23380;

May 31, 1989).

The Government of India (GOI) classifies the companies under review

as small-scale industry companies. Therefore, we used the small-scale

industry short-term interest rates published in the Reserve Bank of

India periodicals Reserve Bank of India Report on Trend and Progress of

Banking in India: 1990-91 (Appendix II) and Reserve Bank of India

Annual Report 1991-92 that were submitted by the GOI. These

publications provided us with the actual short-term small-scale

industry interest rate of 14 percent for loans through October 8, 1991.

Since they provided only minimum interest rates for October 9, 1991

through December 31, 1991, we used the International Monetary Fund

publication International Financial Statistics (IFS) for the remainder

of the year. The IFS reported that the short-term interest rate in

India for the period October 9, 1991 through December 31, 1991 was 20

percent. Therefore, we weight-averaged these two rates based on the

number of months of the year each applied, and calculated a benchmark

of 15.38 percent for this review.

During the review period, 11 of the 14 respondent companies made

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

to the United States. One of these 11 companies, Super Castings (India)

Private Ltd. (Super Castings), provided aggregate pre-shipment loan and

post-shipment loan information in its response to our original

questionnaire. We were not able to distinguish which entries were pre-

shipment loans based on the information submitted by the company. Super

Castings did not respond to a second request for information on pre-

shipment loans in our supplemental questionnaire. Therefore, in

accordance with section 776(c) of the Act, we assumed as best

information available (BIA) that all reported loans were pre-shipment

loans.

To calculate the benefit from the pre-shipment loans to these

eleven companies, we compared the actual interest paid on these loans

during the review period with the interest that would have been paid

using the benchmark interest rate of 15.38 percent. If the benchmark

rate exceeded the program rate, the difference between those amounts is

the benefit. We then divided the benefit by either total exports or by

total exports of the 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 financing applicable to

subject merchandise exported to the United States, we divided the

benefit derived from only those loans by total exports of subject

merchandise to the United States. If a firm was unable to segregate

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

loans by total exports. On this basis, we preliminarily determine the

net subsidy from this program to be one 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 subsidy for those firms is as follows:

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

Net subsidy

Manufacturer/exporter (percent)

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

Dinesh Brothers, Pvt. Ltd.................................. 0.00

Super Castings (India) Pvt. Ltd............................ 23.00

Kajaria Iron Castings Pvt. Ltd............................. 0.68

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

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. The interest rate for post-shipment financing was 8.65 percent

during the review period.

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 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. For reasons stated above for pre-shipment

financing, we are using 15.38 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. One of these 12 companies, Super

Castings, provided aggregate post-shipment loan and pre-shipment loan

information in its response to our original questionnaire. Our

treatment of Super Castings is described under our analysis of pre-

shipment financing. 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 the subject merchandise to the

United States, depending on whether the company was able to segregate

the post-shipment financing on the basis of destination of the exported

good. On this basis, we preliminarily determine the net subsidy from

this program to be 0.42 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 subsidy for those firms is as follows:

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

Net subsidy

Manufacturer/exporter (percent)

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

Dinesh Brothers, Pvt. Ltd.................................. 0.00

Super Castings (India) Pvt. Ltd............................ 0.00

Kajaria Iron Castings Pvt. Ltd............................. 0.00

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

3. Income Tax Deductions Under Section 80HHC

Under section 80HHC of the Income Tax Act, the GOI allows exporters

to deduct profits derived from the export of goods and merchandise from

taxable income. In 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

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.

[[Page 4598]]

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 1.47 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 subsidy for those firms is as follows:

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

Net subsidy

Manufacturer/exporter (percent)

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

Dinesh Brothers, Pvt. Ltd.................................. 0.00

Super Castings (India) Pvt. Ltd............................ 18.75

Kajaria Iron Castings Pvt. Ltd............................. 15.46

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

4. Cash Compensatory Support (CCS) Program

In 1966, the GOI established the CCS program which provides a

cumulative tax rebate paid upon export and is calculated as a

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, even if a rebate program meets one of these conditions,

the Department must still determine in each case whether there is an

over-rebate; 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 over-

rebate).

During this review period, the Indian manufacturers of castings

have replaced domestic pig iron with imported pig iron as the basic raw

material used in the production of exports destined for the U.S.

market. Therefore, 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. During the

verification of the 1990 administrative review, the information we

examined showed that the port tax included in the indirect tax

incidence is a wharfage charge. The documentation submitted at the 1990

verification on the harbor tax indicated 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 (public version), which

is on file in the Central Records Unit (room B099 of the Main Commerce

Building).)

We afforded the GOI the opportunity to provide information to

demonstrate 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 GOI on April 26,

1994. The information provided did not demonstrate that the port tax

and the harbor tax, which were used in the calculation of tax

incidence, are indirect taxes. Therefore, we determine that the port

dues and 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 B099 of the Main Commerce Building).

Because these two 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 over-rebate of indirect taxes. The amount of

the over-rebate is a countervailable benefit provided to exporters of

the subject castings.

We verified that on February 1, 1991, manufacturers and exporters

of castings stopped applying for CCS rebates on exports of subject

castings to the United States. Thus, to calculate the ad valorem

benefit to each company which applied for CCS rebates, we multiplied

the over-rebate rate by each company's exports of subject castings to

the United States during the month of January, 1991. We then divided

this amount by each company's total exports of subject castings to the

United States during the period of review. On this basis, we

preliminarily determine the net subsidy from this program to be 0.41

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 subsidy

Manufacturer/exporter (percent)

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

Dinesh Brothers, Pvt. Ltd.................................. 0.00

Super Castings (India) Pvt. Ltd............................ 0.00

Kajaria Iron Castings Pvt. Ltd............................. 0.50

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

During the 1990 review, we verified that the GOI terminated the CCS

program effective July 3, 1991. (See the Verification of the Government

of India (GOI) Questionnaire Responses for the 1990 Administrative

Review of the Countervailing Duty Order on Certain Iron-Metal Castings

from India (public version).) 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

1990 verification) (see verification report, Id). We found no evidence

of any applications for or receipts of residual benefits under this

program as of that date, which exceeded the two year period following

the [[Page 4599]] 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

Sec. 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 the sale of all

import licenses to be 0.18 percent ad valorem for all manufactures 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 subsidy

Manufacturer/exporter (percent)

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

Dinesh Brothers, Pvt. Ltd.................................. 0.00

Super Castings (India) Pvt. Ltd............................ 0.00

Kajaria Iron Castings 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) the International Price

Reimbursement Scheme; (3) Free Trade Zones; (4) Preferential Freight

Rates; (5) a Preferential Diesel Fuel Program; and (6) the 100 Percent

Export-Oriented Units Program.

We also determined that exporters did not apply for or receive

benefits from a seventh program, called Exim Script. This program was

introduced on July 4, 1991 to replace the replenishment license. The

Exim Scrip program was terminated on March 1, 1992.

Preliminary Results of Review

We preliminarily determine that the following net subsidies exist

for the period January 1, 1991 through December 31, 1991:

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

Net subsidy

Manufacturer/exporter (percent)

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

Dinesh Brothers, Pvt. Ltd.................................. 0.00

Super Castings (India) Pvt. Ltd............................ 41.75

Kajaria Iron Castings Pvt. Ltd............................. 16.14

All Others................................................. 5.54

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

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, 1991, and on or before December 31, 1991.

Because the total net subsidy for Dinesh Brothers Pvt., Ltd. is

determined to be zero, we intend to instruct the Customs Service not to

assess countervailing duties on shipments of the subject merchandise

with respect to that company.

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

benefits attributable to the CCS program, to instruct the Customs

Service to collect a cash deposit of estimated countervailing duties of

5.13 percent for all firms except Dinesh Brothers, Pvt. Ltd., Super

Castings (India) Pvt. Ltd., and Kajaria Iron Castings Pvt. Ltd, 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. Because Super Castings and Kajaria did not

use the CCS program, the cash deposit rates for those companies will

equal the calculated net subsidies of 41.75 percent and 16.14 percent,

respectively. Because the net subsidy for Dinesh Brothers Pvt., Ltd. is

zero, the Department intends to instruct the Customs Service not to

collect cash deposits on shipments of this merchandise from this

company entered or withdrawn 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

methodology and interested parties may request a hearing not later than

ten 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 ten days after the representative's [[Page 4600]] 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. 95-1762 Filed 1-23-95; 8:45 am]

BILLING CODE 3510-DS-P