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

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