Certain Iron-Metal Castings From India: Preliminary Results and Partial Recission of Countervailing Duty Administrative Review

DEPARTMENT OF COMMERCE

International Trade Administration

[C-533-063]

Certain Iron-Metal Castings From India: Preliminary Results and

Partial Recission of Countervailing Duty Administrative Review

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

ACTION: Notice of preliminary results of countervailing duty

administrative review.

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

SUMMARY: The Department of Commerce is conducting an administrative

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

from India. The period covered by this administrative review is January

1, 1997 through December 31, 1997. For information on the net

countervailable subsidy rate for each reviewed company, as well as for

all non-reviewed companies, please see the Preliminary Results of

Review section of this notice. If the final results remain the same as

these preliminary results of administrative review, we will instruct

the U.S. Customs Service to assess countervailing duties as detailed in

the Preliminary Results of Review section of this notice. Interested

parties are invited to comment on these preliminary results. (See

Public Comment section of this notice.)

EFFECTIVE DATE: November 12, 1999.

FOR FURTHER INFORMATION CONTACT: Kristen Johnson or Michael Grossman,

Office of CVD/AD Enforcement VI, Group II, Import Administration,

International Trade Administration, U.S. Department of Commerce, 14th

Street and Constitution Avenue, N.W., Washington, D.C. 20230;

telephone: (202) 482-2786.

SUPPLEMENTARY INFORMATION:

Background

On October 16, 1980, the Department of Commerce (the Department)

published in the Federal Register (45 FR 50739) the countervailing duty

order on certain iron-metal castings from India. On October 14, 1998,

the Department notified all interested parties of the opportunity to

request an administrative review of this order. We received timely

requests for review, and we initiated a review covering the period

January 1, 1997 through December 31, 1997, on November 30, 1998 (63 FR

65748).

In accordance with 19 CFR 351.213(b), this review covers only those

producers or exporters of the subject merchandise for which a review

was specifically requested. The producers/exporters of the subject

merchandise for which the review was requested are:

AGV Exports,

Agarwal Hardware,

Ambika Exports,

Bengal Export Corporation,

Bengal Iron Corporation,

Bhagyadevi Factory,

Calcutta Ferrous Ltd.,

Carnation Enterprise Pvt. Ltd.,

Carnation Industries,1

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

\1\ Carnation Industries was formerly Carnation Enterprise Pvt.

Ltd.

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

Commex Corporation,

Crescent Foundry Co. Pvt. Ltd.,

Delta Enterprises,

Delta Corporation Ltd.,

Dinesh Brothers Pvt. Ltd.,

Dugar International,

Edcons Castings,

Essen International,

Ganapati Suppliers,

Global Intertrade,

Hargolal & Sons,

Hindustahn Malleables & Forgings Ltd.,

J.K. Udyog,

Kajaria Iron Castings Ltd.,2

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

\2\ Kajaria Iron Castings Ltd. was formerly Kajaria Iron

Castings Pvt. Ltd.

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

Kajaria Iron Castings Pvt. Ltd.,

Kauntia Exports,

Kejriwal Iron & Steel Works,

Kiswok Industries Pvt. Ltd.,3

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

\3\ Kiswok Industries Pvt. Ltd. was formerly Kejriwal Iron &

Steel Works.

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

Metflow Corporation Pvt. Ltd.,

Nandikeshwari Iron Foundry Pvt. Ltd.,

Orissa Metal Industries,

Overseas Iron Foundry Pvt. Ltd.,

Rangilal & Sons,

RBA Exports,

R.B. Agarwalla & Company,

R.B. Agarwalla & Company Pvt. Ltd.,

RR Enterprise,

RSI Limited,

RS Ispat Pvt. Ltd.,

Samitex Corporation,

Sammitex,

Serampore Industries Pvt. Ltd.,

Shakti Isabgel Industries,

Shree Hanuman Foundry & Engineering Co. Ltd.,

Shree Rama Enterprises,

Shree Uma Foundries Pvt. Ltd.,

Siko Exports,

Sitaram Maohogarhia & Sons Pvt. Ltd.,

Sociedad J.B. Nagar,

SSL Exports,

Super Iron Foundry,

Tara Engineering Works,

Thames Engineering,

Tirupati International Pvt. Ltd.,

Trident Industries,

Trident International,

Uma Iron & Steel, and

Victory Castings Ltd.

The following companies, for which a review was requested,

certified that they either do not produce or did not export the subject

merchandise to the United States during the period of review (POR): AGV

Exports, Agarwal Hardware Works & Foundries Pvt. Ltd., Ambika Exports,

Bengal Iron Corporation, Bhagyadevi Factory, Delta Enterprises, Edcons

Castings Pvt. Ltd., Essen International, Hargolal & Sons, Hindustahn

Malleables & Forgings Ltd., J.K. Udyog, Kauntia Exports, Metflow

Corporation Pvt. Ltd., Orissa Metal Industries, Overseas Iron Foundry

Pvt. Ltd., RBA Exports, R.B. Agarwalla & Company Pvt. Ltd., RR

Enterprise, RS Ispat Pvt. Ltd., Samitex Corporation, Sammitex, Shree

Hanuman Foundry & Engineering Co. Ltd., Shree Rama Enterprises, Shree

Uma Foundries Pvt. Ltd., Siko Exports, Sitaram Madhogarhia & Sons Pvt.

Ltd., Tara Engineering Works, Tirupati International Pvt. Ltd., and

Tirupati Trading Company. In addition, the Government of India (GOI)

certified that the following companies either do not exist or do not

export the subject merchandise to the United States: Dugar

International, Global Intertrade, Shakti Isabgel Industries, Sociedad

J.B. Nagar, and Trident Industries. Therefore, in accordance with

section 351.213(d)(3) of the Department's regulations, we are

rescinding the review with respect to these companies.

On December 1, 1998, the Department issued a questionnaire to the

GOI and the producers/exporters of the subject merchandise. The

Department received questionnaire responses from the GOI and the

producers/exporters of the subject merchandise on February 1, 4, and 8,

1999. The Department issued a supplemental questionnaire on April 26,

1999. On April 28, 1999, the Department extended the preliminary

results of this administrative review until no later than November 2,

1999 (see 64 FR 23822, May 4, 1999). The Department then on June 2,

1999, corrected the deadline for issuance of this notice of preliminary

results to November 1, 1999. See Memorandum to the File: Correction of

Deadline for Notice of Results of Preliminary Results, dated June 2,

1999 (public document on file in the Central Records Unit (Room B-099

of the Main Commerce Building) (CRU). The Department received the

respondents' supplemental questionnaire responses on June 4, 14, 22,

28, and July 9, 1999. Additional

[[Page 61593]]

supplemental questionnaires were issued to the respondents on July 30,

1999, and August 4, 1999, and their responses were received on August

11, 12, and 20, 1999.

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 (URAA) effective January 1, 1995 (the

Act). The Department is conducting this administrative review in

accordance with section 751(a) of the Act. In addition, unless

otherwise indicated, all citations to the Department's regulations are

to the regulations as codified at 19 CFR Part 351 (1998).

Scope of the Review

Imports covered by this administrative 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 of the United States (HTSUS) item numbers 7325.10.0010 and

7325.10.0050. The HTSUS item numbers are provided for convenience and

Customs purposes. The written description remains dispositive.

Verification

As provided in section 782(i) of the Act, we verified information

submitted by the GOI, regional government of West Bengal, and certain

producers/exporters of the subject merchandise over the dates of August

19, 1999 through August 27, 1999. We followed standard verification

procedures, including meeting with government and company officials and

conducting an examination of all relevant accounting and financial

records and other original source documents. Our verification results

are outlined in public versions of the verification reports, which are

on file in the Central Records Unit (Room B-099 of the Main Commerce

Building).

Use of Facts Available

The following companies, for which a review was requested, failed

to respond to the Department's questionnaires: Delta Corporation Ltd.,

SSL Exports, Thames Engineering, and Trident International. Section

776(a)(2) of the Act requires the use of facts available when an

interested party withholds information that has been requested by the

Department, or when an interested party fails to provide the

information requested in a timely manner and in the form required. In

such cases, the Department must use the facts otherwise available in

reaching the applicable determination. Because these companies failed

to submit the information that was specifically requested by the

Department, we have based our preliminary results for these companies

on the facts available. In addition, the Department finds that by not

providing the requested information, the respondents have failed to

cooperate to the best of their abilities.

In accordance with section 776(b) of the Act, the Department may

use an inference that is adverse to the interests of that party in

selecting from among the facts otherwise available when the party has

failed to cooperate by not acting to the best of its ability to comply

with a request for information. Such adverse inference may include

reliance on information derived from (1) the petition; (2) a final

determination in a countervailing duty or an antidumping investigation;

(3) any previous administrative review, new shipper review, expedited

antidumping review, section 753 review, or section 762 review; or (4)

any other information placed on the record. See Section 351.308(c) of

the Department's regulations. In the absence of information from the

respondents, we consider information placed on the record by other

respondent producers/exporters to be the appropriate basis for a facts

available countervailing duty rate calculation.

Therefore, to calculate the ad valorem subsidy rate for these non-

respondent companies, we summed the highest company-specific net

countervailable subsidy rate for each program under review. See

Preliminary Results of Review section of the notice below for the

preliminary ad valorem rate calculated for these companies.

Analysis of Programs

I. Programs Found To Confer Countervailable Subsidies

A. Pre-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, companies may receive pre-shipment loans for working capital

purposes, i.e., for the purchase of raw materials and for packing,

warehousing, 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. 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. In general, packing credits are granted for a period of up to

180 days.

Commercial banks extending export credit to Indian companies must,

by law, charge interest on this credit at rates determined by the RBI.

The rate of interest charged on pre-shipment export loans up to 180

days was 13.0 percent for the period January 1, 1997 through October

21, 1997, and 12.0 percent for the period October 22, 1997 through

December 31, 1997. For pre-shipment loans not repaid within 180 days,

the banks charged interest at the following rates for the number of

days the loans were overdue: 15.0 percent for the period January 1,

1997 through October 21, 1997, and 14.0 percent for the period October

22, 1997 through December 31, 1997. An exporter would lose the

concessional interest rate if the export loan was not repaid within 270

days. If that occurred, the banks were able to assess interest at a

non-concessional interest rate above the ceiling rate of interest set

by the RBI.

In prior administrative reviews of this order, the Department has

found this program to be an export subsidy because receipt of pre-

shipment export financing is contingent upon export performance, and

the interest rates are below those which would be obtained for

comparable commercial financing. See, e.g., Final Results of

Countervailing Duty Administrative Review: Certain Iron-Metal Castings

From India, 63 FR 64050 (November 18, 1998) (1996 Indian Castings Final

Results). No new information or evidence of changed circumstances has

been submitted in this proceeding to warrant reconsideration of this

finding. Therefore, in accordance with sections 771(5)(D) and (E) of

the Act, we continue to find this program countervailable because it

results in a financial contribution by the government in the form of a

loan and provides a benefit to the recipient in the amount of the

interest savings. Moreover, because receipt of the financing is

contingent upon export performance, we continue to find the program to

be an export subsidy under section 771(5A)(B) of the Act.

To determine the benefit conferred under this program, we compared

the interest rates charged under the pre-shipment financing program to

a

[[Page 61594]]

benchmark interest rate. As our benchmark, we used the cash credit

rate. In the 1994 administrative review of this order, the Department

determined that, in the absence of a company-specific benchmark, the

most comparable short-term benchmark to measure the benefit under the

pre-shipment export financing scheme is the cash credit interest rate.

See Final Results of Countervailing Duty Administrative Review: Certain

Iron-Metal Castings From India, 62 FR 32297, 32304 (June 13, 1997)

(1994 Indian Castings Final Results). The cash credit interest rate is

for domestic working capital finance, and thus comparable to pre-and

post-shipment export finance. For the POR, we calculated a cash credit

rate of 16.31 percent based on the short-term interest rate and spread

information reported by the GOI in its February 1, 1999 questionnaire

response.

We compared the cash credit benchmark rate to the interest rates

charged on pre-shipment rupee loans and found that for loans granted

under this program, the interest rates charged were lower than the

benchmark rate. Therefore, in accordance with section 771(5)(E)(ii) of

the Act, this program conferred countervailable benefits during the POR

because the interest rates charged on the export loans were less than

what a company otherwise would have paid on comparable short-term

commercial loans.

To calculate the benefit from the 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 rate exceeded the program rates, the difference between those

amounts is the benefit.

If the pre-shipment financing loans were received solely to finance

exports of subject merchandise to the United States, we divided the

benefit derived from those loans by exports of subject merchandise to

the United States. For all other pre-shipment financing loans, we

divided the benefit by total exports to all destinations. On this

basis, we preliminarily determine the net countervailable subsidies

from this program to be as follows:

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

Ad valorem

Producers/exporters which used the program during the POR rates

(percentages)

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

Calcutta Ferrous Ltd..................................... 0.04

Commex Corporation....................................... 0.03

Dinesh Brothers (Pvt.) Ltd............................... 0.44

Ganapati Suppliers Pvt. Ltd.............................. 0.24

Kajaria Iron Castings Ltd................................ 0.22

Nandikeshwari Iron Foundry Pvt. Ltd...................... 0.38

R.B. Agarwalla & Company................................. 0.17

RSI Limited.............................................. 0.38

Serampore Industries Pvt. Ltd............................ 0.19

Uma Iron & Steel Company................................. 0.03

Victory Castings Ltd..................................... 0.40

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

B. Post-Shipment Export Financing

Post-shipment export financing consists of loans in the form of

trade bill discounting or advances by commercial banks. 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 finance, therefore, is a working capital finance or sales

finance against receivables. The interest amount owed is deducted from

the total amount of the bill at the time of discounting by the bank.

The exporter's account is then credited for the rupee equivalent of the

net amount.

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

90 days. The following interest rates were charged on post-shipment

loans up to 90 days: 13.0 percent for the period January 1, 1997

through June 23, 1997, 12.0 percent for the period June 24, 1997

through October 21, 1997, and 11.0 percent for the period October 22,

1997 through December 31, 1997.

For loans not repaid within the negotiated number of days (90 days

maximum), banks assessed the following rates of interest for the number

of days the loans were overdue, up to six months from the date of

shipment: 15.0 percent for the period January 1, 1997 through June 23,

1997, 14.0 percent for the period June 24, 1997 through October 21,

1997, and 13.0 percent for the period October 22, 1997 through December

31, 1997. If a post-shipment loan was not repaid within six months of

the date of shipment, an exporter would lose the concessional interest

rate on the financing, and interest would be charged at a commercial

rate determined by the banks.

In prior administrative reviews, the Department has found this

program to be an export subsidy because receipt of the post-shipment

financing is contingent upon export performance, and the interest rates

are below those which would be obtained for comparable commercial

financing. See, e.g., 1996 Indian Castings Final Results at 63 FR

64051. No new information or evidence of changed circumstances has been

submitted in this proceeding to warrant reconsideration of this

finding. Therefore, in accordance with sections 771(5)(D) and (E) of

the Act, we continue to find this program countervailable because it

results in a financial contribution by the government in the form of a

loan and provides a benefit to the recipient in the amount of the

interest savings. Moreover, because receipt of the financing is

contingent upon export performance, we continue to find the program to

be an export subsidy under section 771(5A)(B) of the Act.

To determine the benefit conferred under this program, we compared

the interest rates charged under the post-shipment financing program to

a benchmark interest rate. To measure the benefit each company received

under the post-shipment financing scheme, we used as our benchmark

interest rate the cash credit rate for 1997, as discussed above in the

pre-shipment export financing section. Because the loans under this

program are discounted, and the effective interest rates paid by the

exporters on the loans are discounted rates, we derived a discounted

benchmark rate from the cash credit rate of 14.02 percent to measure

the benefits conferred by this program.

We compared the discounted cash credit benchmark rate to the

interest rates charged on post-shipment loans. We found that for loans

granted under this program, the interest rates charged were lower than

the benchmark rate. Therefore, in accordance with section 771(5)(E)(ii)

of the Act, this program conferred countervailable benefits during the

POR where the interest rates charged on the loans were less than what a

company otherwise would have paid on comparable short-term commercial

loans.

To calculate the benefit from these loans, we followed the same

short-term loan methodology discussed above for pre-shipment financing.

We divided the benefit by either total exports to all markets, total

exports to the United States, or exports of the subject merchandise to

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

segregate its post-shipment financing by merchandise and destination.

On this basis, we preliminarily determine the net countervailable

subsidies from this program to be as follows:

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

Ad valorem

Producers/exporters which used the program during the POR rates

(percentages)

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

Bengal Export Corporation................................ 0.23

Calcutta Ferrous Ltd..................................... 0.25

[[Page 61595]]

Calcutta Iron Foundry.................................... 0.37

Carnation Industries Ltd................................. 0.25

Commex Corporation....................................... 0.19

Crescent Foundry Co. Pvt. Ltd............................ 0.11

Dinesh Brothers (Pvt.) Ltd............................... 0.31

Ganapati Suppliers Pvt. Ltd.............................. 0.40

Kajaria Iron Castings Ltd................................ 0.35

Nandikeshwari Iron Foundry Pvt. Ltd...................... 0.20

R.B. Agarwalla & Company................................. 0.22

RSI Limited.............................................. 0.29

Serampore Industries Pvt. Ltd............................ 0.24

Uma Iron & Steel Company................................. 0.20

Victory Castings Ltd.0.23%............................... 0.30

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

C. Exemption of Export Credit From Interest Taxes

Indian commercial banks are required to pay a tax on all interest

accrued from borrowers. The banks pass along this interest tax to

borrowers in its entirety. As of April 1, 1993, the GOI exempted from

the interest tax all interest accruing to a commercial bank on export-

related loans. In the 1993 administrative review, we determined that

this tax exemption is an export subsidy, and thus countervailable,

because only interest accruing on loans and advances made to exporters

in the form of export credit is exempt from the interest tax. See Final

Results of Countervailing Duty Administrative Review: Certain Iron-

Metal Castings From India, 61 FR 64676, 64686 (December 6, 1996) (1993

Indian Castings Final Results). No new information or evidence of

changed circumstances has been submitted in this proceeding to warrant

reconsideration of this finding. Therefore, in accordance with sections

771(5)(D) and (E) of the Act, we continue to find this program

countervailable because it results in a financial contribution by the

government in the form of revenue forgone and provides a benefit to the

recipient in the amount of the interest tax savings. Moreover, because

receipt of the interest tax exemption is contingent upon export

performance, we continue to find the program to be an export subsidy

under section 771(5A)(B) of the Act.

During the POR, fifteen of the respondent companies made interest

payments on export-related loans, through either or both, the pre- and

post-shipment financing schemes, and thus, were exempt from paying the

interest tax under this program. To calculate the benefit for each

company, we first determined the total amount of interest paid by each

exporter during the POR by adding the interest payments made on all

pre- and post-shipment export loans. We then multiplied this amount by

the tax rate which the interest amount would have been subject to, if

not for the exemption during the POR. During the POR, exporters were

exempt from paying a three (3.0) percent interest tax for the period

January 1, 1997 through March 31, 1997, and a two (2.0) percent

interest tax for the period April 1, 1997 through December 31, 1997.

Next, we divided the benefit by the f.o.b. value of each company's

total exports to all markets, total exports to the United States, or

exports of subject merchandise to the United States, depending on

whether the export financing was tied to total exports or only exports

of subject castings to the United States. On this basis, we

preliminarily determine the net countervailable subsidies from this

program to be as follows:

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

Ad valorem

Producers/exporters which used the program during the POR rates

(percentages)

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

Bengal Export Corporation................................ 0.05

Calcutta Ferrous Ltd..................................... 0.06

Calcutta Iron Foundry.................................... 0.05

Carnation Industries Ltd................................. 0.14

Commex Corporation....................................... 0.04

Crescent Foundry Co. Pvt. Ltd............................ 0.02

Dinesh Brothers (Pvt.) Ltd............................... 0.11

Ganapati Suppliers Pvt. Ltd.............................. 0.13

Kajaria Iron Castings Ltd................................ 0.16

Nandikeshwari Iron Foundry Pvt. Ltd...................... 0.09

R.B. Agarwalla & Company................................. 0.07

RSI Limited.............................................. 0.13

Serampore Industries Pvt. Ltd............................ 0.07

Uma Iron & Steel Company................................. 0.06

Victory Castings Ltd..................................... 0.12

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

D. 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 merchandise from taxable

income. In prior administrative reviews of this order, the Department

has found this program to be an export subsidy, and thus

countervailable, because receipt of the benefit is contingent upon

export performance. See, e.g., 1994 and 1996 Indian Castings Final

Results at 62 FR 32298 and 63 FR 64051, respectively. No new

information or evidence of changed circumstances has been submitted in

this proceeding to warrant reconsideration of this finding. Therefore,

in accordance with sections 771(5)(D) and (E) of the Act, we continue

to find this program countervailable because it results in a financial

contribution by the government in the form of tax revenue not collected

which also constitutes the benefit. Moreover, because receipt of the

tax deduction is contingent upon export performance, we continue to

find the program to be an export subsidy under section 771(5A)(B) of

the Act.

In its questionnaire responses, Kiswok Industries (P) Ltd (Kiswok

Industries) stated that its profit rate on export sales of subject

castings is lower than the profit rate the company realizes on the

export sales of other castings. The company submitted audited

derivations of its profit rate for exports of subject castings in 1997,

and its profit rate for exports of other castings for the same year.

The company then calculated that portion of the 80HHC tax deduction

which was applicable to export profit earned on subject castings.

In prior reviews of this order, the Department has found the

section 80HHC tax deduction program to be an ``untied'' export subsidy

program. The benefits provided under this program are not tied to the

production or sale of a particular product or products. It is the

Department's consistent and long-standing practice to attribute a

benefit from an export subsidy that is not tied to a particular product

or market to all products exported by the company. See, e.g., Final

Affirmative Countervailing Duty Determination: Certain Pasta from

Turkey, 61 FR 30366, 30370, (June 14, 1996). Therefore, to calculate

the benefit Kiswok Industries received under the section 80HHC program,

we have not made any adjustments to our standard allocation

methodology.

To calculate the benefit each company received under section 80HHC,

we subtracted the total amount of income tax the company actually paid

during the review period from the amount of tax the company otherwise

would have paid had it not claimed a deduction under section 80HHC. We

then divided this difference by the f.o.b. value of the company's total

exports.

For those companies which used section 80HHC during the POR, we

preliminarily determine the net countervailable subsidies from this

program to be as follows:

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

Ad valorem

Producers/exporters which used the program during the POR rates

(percentages)

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

Bengal Export Corporation................................ 8.07

Calcutta Ferrous Ltd..................................... 1.66

Carnation Industries Ltd................................. 0.33

Commex Corporation....................................... 2.45

Crescent Foundry Co. Pvt. Ltd............................ 0.71

Dinesh Brothers (Pvt.) Ltd............................... 0.74

Ganapati Suppliers Pvt. Ltd.............................. 4.40

Kajaria Iron Castings Ltd................................ 0.70

Kiswok Industries Pvt. Ltd............................... 14.90

[[Page 61596]]

Nandikeshwari Iron Foundry Pvt. Ltd...................... 1.77

R.B. Agarwalla & Company................................. 3.10

RSI Limited.............................................. 0.10

Serampore Industries Pvt. Ltd............................ 0.54

Super Iron Foundry....................................... 1.08

Uma Iron & Steel Company................................. 1.81

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

E. Import Mechanism (Sale of Licenses)

The GOI allows companies to transfer certain types of import

licenses to other companies in India. In prior administrative reviews

of this order, the Department has found the sale of these licenses to

be an export subsidy, and thus countervailable, because companies

receive these licenses based on their status as exporters. See, e.g.,

1996 Indian Castings Final Results at 64051. No new information or

evidence of changed circumstances has been submitted in this proceeding

to warrant reconsideration of this finding. Therefore, in accordance

with sections 771(5)(D) and (E) of the Act, we continue to find this

program countervailable because it results in a financial contribution

by the government and provides a benefit in the amount of revenue

received on the sale of the license. Moreover, because receipt of the

license is contingent upon export performance, we continue to find the

program to be an export subsidy under section 771(5A)(B) of the Act.

During the POR, two of the respondent companies sold Special Import

Licenses. Special Import Licenses are issued to exporters classified as

export houses, trading houses, and star trading houses by the Ministry

of Commerce. Special Import Licenses are effective for a period of 12

months and are issued at a certain percentage of f.o.b. value of

exports. Because the sale of the Special Import Licenses were not tied

to specific shipments, we calculated the net subsidy rates by dividing

the total amount of proceeds each company received from the sale of the

licenses by the total f.o.b. value of its exports of all products to

all markets. We preliminarily determine the net countervailable

subsidies from the sale of the Special Import Licenses to be as

follows:

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

Ad valorem

Producers/exporters which used the program during the POR rates

(percentages)

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

Kajara Iron Castings Ltd................................. 0.16

Serampore Industries Pvt. Ltd............................ 0.47

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

F. Passbook Scheme

On April 1, 1996, the GOI introduced the Passbook Scheme which

provided exporters with credits that could be used to pay the

countervailing and custom duties levied on imported products. The

Passbook Scheme was available to certain categories of exporters, i.e.,

those manufacturer and merchant exporters which were granted the status

of export house, trading house, star trading house, or super star

trading house. Upon the export of finished goods, which were produced

with indigenous raw materials, and not imported materials, the exporter

was eligible to claim credits which could be used to pay customs duties

on subsequent imports. The passbook scheme was only applicable for

those exported products for which standard input/output norms had been

fixed. The standard input/output norms set out quantities of imported

raw materials needed to produce one unit of finished output. The credit

in the passbook scheme was calculated on the basis of input/output

norms for the deemed input content of the exported product. The Indian

Customs Authority (ICA) determined the basic customs duty payable

against the input as if it had been imported and not sourced from the

domestic market. A company's passbook account was then credited for the

amount equivalent to the basic customs duty payable on such deemed

imports. The company could then utilize the credits in its passbook

account to pay the countervailing and customs duty levied on imported

goods. Any good which was not included in the Negative List of Imports

could be imported under the Passbook Scheme. Payment of the duties was

made through a debit entry in the company's passbook account by the

ICA.

The GOI reported, and we verified, that it was not mandatory for

the passbook holder to consume the goods, imported with passbook

credits, in the production of exported products. There was no relation

between the imported goods and the production of the exporter and no

relation between the standard input/output norms of the export product

and the goods being imported with passbook credits. The norms were

simply used to calculate the credits. A company could not transfer or

sell passbook credits received, but the goods imported with passbook

credits could be transferred or sold in the domestic market. See

Memorandum to David Mueller: Verification of the Questionnaire

Responses Submitted by the Government of India, (September 9, 1999), at

page 3-4, (public document on file in CRU) (GOI Verification Report).

The Passbook Scheme was terminated effective April 1, 1997, with

the introduction of the Duty Entitlement Passbook Scheme (see ``Duty

Entitlement Passbook Scheme'' section below) . Exports made on or

before March 31, 1997, were eligible for passbook credits. The last day

a company could apply for passbook credits was December 31, 1997. A

company had until June 30, 1999, to use the passbook credits to pay

import duties.

The Illustrative List of Export Subsidies, incorporated as Annex I

of the Subsidies Agreement, under item (i) specifies that the remission

or drawback of import charges in excess of those levied on imported

inputs that are consumed in the production of the exported product

constitutes an export subsidy. The SAA states that, though the

Illustrative List has no direct application to the CVD portion of the

Subsidies Agreement, the Department will adhere to the List, except

where it is inconsistent with the principles set forth in the Act. See

SAA at 928. Therefore, to determine whether inputs are consumed in the

production process, the Department establishes whether the government

of the exporting country has in place a system to confirm which inputs

are consumed in the production process of the exported product. With

respect to the Passbook Scheme, no such system existed. The credits

granted to passbook holders were calculated on the basis of standard

input/output norms independently of whether the inputs were imported,

whether duty was paid on them, or whether the inputs were actually used

for export production. Moreover, the passbook holder was under no

obligation to either import the inputs used to produce the exported

product against which the credits were received or consume the imported

goods in the production of exported goods. Under the Passbook Scheme,

upon the export of a finished product, a exporter was simply granted an

amount of credit based on the amount of customs duty which would have

been paid on the input materials had they been imported.

Based on these facts, in accordance with sections 771 (5)(D), (E),

and (5A)(B) of the Act, we preliminarily determine that the Passbook

Scheme is a countervailable export subsidy. Within the meaning of

section 771(5)(D) of the Act, a financial contribution was provided by

the government in the form of customs duty revenue forgone. The amount

of customs duty which should have been paid by the company to

[[Page 61597]]

import the goods constitutes the benefit under section 771(5)(E) of the

Act. Because receipt of the passbook credits was contingent upon export

performance, we preliminarily find the program to be an export subsidy

under section 771(5A)(B) of the Act. During the POR, Calcutta Ferrous

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

Nandikeshwari Iron Foundry Pvt. Ltd. used passbook credits to import

goods duty free.

To calculate the benefit conferred by this program, we summed the

amount of passbook credits each respondent company used during the POR

to pay the customs duty on goods imported. We then divided the benefit

by each company's f.o.b. value of total exports for 1997. On this

basis, we preliminarily determine the net countervailable subsidies

from the Passbook Scheme to be as follows:

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

Ad valorem

Producers/exporters which used the program during the POR rates

(percentages)

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

Calcutta Ferrous Ltd..................................... 7.27

Kajaria Iron Castings Ltd................................ 3.60

Nandikeshwari Iron Foundry Pvt. Ltd...................... 9.82

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

G. Duty Entitlement Passbook Scheme

The Duty Entitlement Passbook Scheme (DEPB) was introduced on April

1, 1997, to replace the Passbook Scheme. Like the Passbook Scheme,

receipt of DEPB credits is contingent upon export performance. The DEPB

provides credits to passbook holders either on a pre-export or post-

export basis. All merchant and manufacturing export units are eligible

for DEPB credits. A company which exported during a three-year period

prior to submitting an DEPB application is eligible for pre-export

credits. DEPB on a pre-export basis assists an exporter in obtaining

import materials required for the production of an exported good. DEPB

on a post-export basis is virtually identical to the Passbook Scheme.

Post-export credits, which are granted against exports already made,

are allowed at a percentage of f.o.b. value of exports which is

announced by the Ministry of Commerce. The DEPB percentage rates are

determined on the basis of the standard input/output norms table, which

sets forth the average amount of inputs required for the manufacture of

one unit of finished product. The percentage of f.o.b. value at which

castings exporters can claim DEPB credits is 6.0 percent. During the

POR, those castings exporters which used the program received DEPB

credits on a post-export basis. To calculate a castings exporter's DEPB

credits on a post-export basis, the GOI simply multiplies the company's

total f.o.b. value of exports by 6.0 percent. The company's passbook

account is then credited in an amount equivalent to 6.0 percent of its

total f.o.b. value of exports. DEPB credits, received on a post-export

basis, are valid for a period of 12 months and can be used to pay the

import duties on any good (i.e., raw material or capital good), except

those included on the Negative List of Imports. The goods imported with

DEPB credits can either be incorporated in the production of a domestic

or export good, or directly sold on the domestic market. Similarly,

DEPB credits earned on a post-export basis can be sold in the form of a

license on the domestic market. During the POR, no respondent used DEPB

credits to import goods, but three castings exporters sold DEPB

licenses.

Like the Passbook Scheme, we preliminarily find that DEPB on a

post-export basis is not a permitted drawback or substitution drawback

scheme. The GOI does not have in place a system or procedure to confirm

whether the imported inputs are consumed in the production of an

exported product. When a company exports goods, it is granted DEPB

credits which can be used without restriction. With DEPB credits earned

on a post-export basis, a company has the option of using the credits

to: (1) import goods for domestic or export production, (2) import

goods for domestic sale, or (3) sell the credits in the form of a

license to another company.

Therefore, in accordance with sections 771(5)(D), (E), and (5A)(B)

of the Act, we preliminarily determine that DEPB on a post-export basis

is a countervailable export subsidy. Within the meaning of section 771

(5)(D) and (E) of the Act, a financial contribution is provided and the

amount of revenue received on the sale of the DEPB license constitutes

the benefit. Moreover, because receipt of the subsidy is contingent

upon export performance, we preliminarily find the program to be an

export subsidy under section 771(5A)(B) of the Act. During the POR,

Dinesh Brothers (Pvt.) Ltd., Nandikeshwari Iron Foundry Pvt. Ltd., and

Victory Castings sold DEPB credits on the domestic market.

To calculate the benefit conferred by this program, we summed the

revenue each company received from the sale of the DEPB post-export

credits. If the DEPB credits were received on the basis of exports of

subject merchandise to the United States, then we divided the benefit

by the company's f.o.b. value of export of subject merchandise to the

United States for 1997. For DEPB credits received on the basis of all

exports, we divided the benefit by the company's f.o.b. value of total

exports for 1997. On this basis, we preliminarily determine the net

countervailable subsidies from DEPB on a post-export basis to be as

follows:

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

Ad valorem

Producers/exporters which used the program during the POR rates

(percentages)

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

Dinesh Brothers (Pvt.) Ltd............................... 0.11

Nandikeshwari Iron Foundry Pvt. Ltd...................... 1.46

Victory Castings Ltd..................................... 1.06

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

II. Programs Preliminarily Determined Not To Be Countervailable

A. Long-Term Financing From ``All-India Development Banks''

In their ``Additional Subsidy Allegations'' submission of November

6, 1998, petitioners allege that the GOI is providing long-term, low-

interest financing to certain Indian producers/exporters through a

number of All-India Development Banks. The All-India Development Banks

include the following financial institutions: Industrial Development

Bank of India (IDBI), Industrial Investment Bank of India (IIBI),

Industrial Credit and Investment Corporation of India, Industrial

Financial Corporation of India, and Life Insurance Corporation (LIC).

In their submission, petitioners allege that these financial

institutions, which are either wholly- or majority-owned by the GOI,

are ``non-conventional'' and ``non-commercial'' in nature. They contend

that financial assistance provided by the All-India Development Banks

is export-related and, therefore, specific.

In its questionnaire responses, the GOI reported and we verified

that the All-India Development Banks function as the principal

financial institutions for promoting and developing industries. These

credit agencies assist and promote industrial development,

reconstruction and revival, and undertake the rehabilitation of medium-

and large-sized industrial units by providing assistance and operating

schemes. Financial assistance is provided under a number of schemes,

such as: project finance, equipment finance, asset credit, corporate

loan, working capital loan, and equipment lease. With respect to the

project finance scheme, the program under which two respondent

companies received loans, the financial institutions provide long-and

medium-term credits to promoters/

[[Page 61598]]

entrepreneurs who want to construct new industrial units, expand

existing units, and rehabilitate sick units in India. Any company, a

domestic producer or exporting unit, in any industrial sector can

receive a term loan under the project finance scheme provided that the

borrower is creditworthy and the proposed project is financially and

commercially viable. Receipt of a loan is not contingent upon

exportation.

When deciding whether to grant a loan, the financial institutions

examine the following financial indicators of the company: debt-to-

equity ratio, debt services coverage ratio, gross profit, operating

profit, break-even ratio, internal rate of return, and cost of capital.

In addition, the financial institutions request data regarding a

borrower's sales information, which does include export data, market

opportunities (both domestic and international), and domestic and

international competition. This information is collected so the banks

can assess the commercial viability of the promoters' project and the

borrowers' financial health and thus, ability to repay the loan. See

GOI Verification Report at 5.

During the POR, Kajaria Iron Castings had outstanding project

finance term loans from the IDBI, IIBI, and LIC, and Kiswok Industries

had outstanding a project finance term loan from the IDBI. At

verification, we meet with IDBI, IIBI, and LIC bank officials to

discuss the number and types of companies to which the financial

institutions have extended long-term loans under the project finance

scheme over the period 1993 through 1997, in particular exporters and

the basic metals sector. The officials stated that the banks do not

maintain databases which indicate the number of loans and loan amounts

granted specifically to exporters; however, their lending patterns to

industrial borrowers are presented in their annual reports.

At verification, we reviewed the banks' annual reports which

discuss industry-wide term loan assistance provided from fiscal year

1993-1994 through fiscal year 1997-1998. See GOI Verification Report at

Exhibit 2. We noted that the institutions extended loans to a wide and

diverse range of industries, including: food manufacturing, cotton

textiles, paper and paper products, rubber products, chemical and

pharmaceutical, fertilizers, cement, basic metals which includes iron,

steel, and non-ferrous metals, metal products, machinery (other than

electrical), electrical machinery/equipment, transport equipment,

electricity generation, services including hotels, and others. The

officials explained that the institutions lend long-term loans to a

wide range of industries because the institutions' exposure to any one

industry cannot exceed 15 percent of the total loan amount granted in a

fiscal year.

We analyzed whether the financial assistance provided by the All-

India Development Banks is export-related. Based on the fact that a

company, whether a domestic producer or exporting unit, can receive a

long-term loan from the All-India Development Banks and that the

financing is not contingent upon export performance, we preliminarily

determine that financing provided by the IDBI, IIBI, and LIC is not an

export subsidy under section 771(5A)(B) of the Act.

We also analyzed whether the long-term financing provided by the

All-India Development Banks is specific in law (de jure specificity),

or in fact (de facto specificity), within the meaning of section

771(5A)(D)(i) and (iii) of the Act. See also SAA, H. Doc. No. 316, Vol.

1, 103d Cong. 2d Sess. 932 (1994). First, we examined the respective

banking acts for the IDBI, IIBI, and LIC. We noted that the banking act

for each financial institution did not, in any way, limit the

industries or companies to which the institutions can provide financial

assistance or instruct the institutions to provide financial assistance

to exporting units. We also examined the specifications for receipt of

a term loan under the project finance scheme. We noted that any

industrial concern is eligible for assistance. An industrial concern is

defined as any concern engaged, or to be engaged in, a number of areas,

including, but not limited to:

(i) The manufacture, preservation or processing of goods; (ii)

shipping; (iii) mining including development of mines; (iv) the hotel

industry; (v) the transport of passengers of goods by road or by water

or air; (vi) the generation, storage, or distribution of electricity of

any other form or energy; (vii) providing medical, health, or other

allied services, etc. See The Industrial Development Bank of India Act,

1964, and the Industrial Reconstruction Bank of India Act, 1984, for a

complete description of an industrial concern, submitted as Annexure II

and Annexure III, respectively, in the GOI's June 22, 1999 response.

Based on our analysis, we preliminarily determine that long-term loans

provided by the IDBI, IIBI, and LIC are not de jure specific under

section 771(5A)(D)(i) of the Act.

We then examined data on the distribution of long-term loans under

the project finance scheme by the financial institutions to determine

whether the provision of the loans meet the criteria for de facto

specificity under section 771(5A)(D)(iii) of the Act. We found that

term loans provided under the project finance scheme were distributed

to a large number of companies in a wide variety of industries. The

basic metals sector did not receive a disproportionate amount of the

loans provided by the financial institutions. We also found that the

GOI did not exercise any discretion over the financial institutions

with respect to their lending decisions. Based on these facts, we

preliminarily determine that long-term loans provided by the IDBI,

IIBI, and LIC are not de facto specific under section 771(5A)(D)(iii)

of the Act. Therefore, based on our analysis, we preliminarily

determine that long-term financial assistance provided by the All-India

Development Banks is not countervailable.

B. Long-Term Loan From the West Bengal Industrial Finance Corporation

Petitioners allege that the regional government of West Bengal is

providing various subsidies to companies located in the region through

such development policies as the West Bengal Incentive Scheme (see

``West Bengal Incentive Scheme'' section below) and agencies such as

the West Bengal Industrial Development Corporation and West Bengal

Financial Corporation (WBFC). With respect to this review, petitioners

requested the Department to examine the long-term loan which Victory

Iron Works received from the WBFC.

In 1996, Victory Iron Works received a long-term loan from the WBFC

under the equipment refinance scheme (ERS) for upgrading machinery and

for pollution and quality control equipment. At verification, we met

with officials of the WBFC to discuss the nature and purpose of the

state institution. We learned that the objective of the WBFC, like

other state corporations, is to promote the industrial development of

the region, in particular by providing financing to companies. They

stated that the WBFC provides assistance to all small- and medium-sized

manufacturing units in West Bengal in the form of term loans, working

capital term loans, and consultancy, guidance, and counseling for

preparation of project reports, market surveys, etc. To receive a loan

under the ERS, a company must satisfy the following criteria: (1) The

company must have been in operation for at least four years prior to

the application date.

[[Page 61599]]

(2) The company must have earned a profit (declared dividends) in the

two fiscal years prior to the application date. (3) The company must

not have defaulted with a financial institution during its existence.

(4) The financial assistance sought must be used for the purchase of

machinery and equipment (i.e., loans under the ERS are provided for

specific purchases). (5) The company's promoters must be able to

contribute 25 percent of the total project's cost. (6) The project for

which financing is sought must be commercially and economically viable.

See Memorandum to David Mueller: Verification of the Questionnaire

Responses Submitted by the Regional Government of West Bengal,

(September 9, 1999), at 5-6, (public version is on file in the CRU) (WB

Verification Report).

At verification, we also discussed the number and types of

companies to which the WBFC lends funds under the equipment refinance

scheme. The officials provided data regarding the WBFC's lending

pattern under the ERS for the years 1996-97, 1997-98, and 1998-99. See

WB Verification Report at Exhibit 10. We noted that, in granting the

term loans, the WBFC did not give preference to any particular

industrial sector or extend disportionate financing to companies

located in the backward regions of West Bengal. The WBFC provides

financing to a wide range of industries, including, but not limited to:

chemicals, basic metals, engineering, food processing, metal products,

paper & paper products, printing and packaging, rubber,

pharmaceuticals, services, and textiles.

We analyzed whether the long-term financing provided by the WBFC is

specific in law (de jure specificity), or in fact (de facto

specificity), within the meaning of section 771(5A)(D)(i) and (iii) of

the Act. See also SAA, H. Doc. No. 316, Vol. 1, 103d Cong. 2d Sess. 932

(1994). We examined a profile of the WBFC, which was submitted as

Annexure WB-III of the GOI's June 22, 1999 response. We noted that the

WBFC provides financial assistance to new and existing industrial units

in the small and medium sectors, which intend to expand, modernize,

diversify, and upgrade their activities. We also examined the

specifications for receipt of a term loan under the equipment refinance

scheme. We noted that any small- or medium-sized concern is eligible

for assistance provided the unit meets the criteria outlined above.

Based on our analysis, we preliminarily determine that term loans

provided by the WBFC are not de jure specific under section

771(5A)(D)(i) of the Act.

We then examined data on the distribution of term loans under the

equipment refinance scheme to determine whether the provision of the

loans meet the criteria for de facto specificity under section

771(5A)(D)(iii) of the Act. We found that term loans provided under the

scheme were distributed to a large number of companies in a wide

variety of industries located across West Bengal. The basic metals

sector did not receive a disproportionate amount of the loans provided

by the institution. We also found that neither the regional government

of West Bengal nor the GOI exercised any discretion over the WBFC with

respect to its lending decisions. Based on these facts, we

preliminarily determine that term loans provided by the WBFC are not de

facto specific under section 771(5A)(D)(iii) of the Act. Therefore, we

preliminarily determine that term loan assistance provided by the WBFC

is not countervailable.

C. Leasing of Land From the Regional Government of West Bengal

Petitioners allege that the regional government of West Bengal

through the West Bengal Incentive Scheme of 1993, and the West Bengal

Industrial Development Corporation (WBIDC), is providing subsidies to

manufacturers and/or exporters of the subject merchandise. In their

``Additional Subsidy Allegations'' submission of November 6, 1998,

petitioners noted that Kajaria Iron Castings acquired land from the

government of West Bengal for the construction of a pig iron plant and

requested the Department to examine the land purchase. In its June 4,

1999 questionnaire response, Kajaria Iron Castings reported that the

company has not purchased land under the West Bengal Incentive Scheme

of 1993, or from the WBIDC. Rather, the company is leasing industrial

land in Durgapur from the Asansol Durgapur Development Authority

(ADDA), an agency of the regional government of West Bengal.

According to section 771(5)(E)(iv) of the Act, the adequacy of

remuneration with respect to a government's provision of a good or

service ``shall be determined in relation to prevailing market

conditions for the good or service being provided or the goods being

purchased in the country which is subject to the investigation or

review. Prevailing market conditions include price, quality,

availability, marketability, transportation, and other conditions of

purchase or sale.'' Particular problems can arise in applying this

standard when the government is the sole or predominant supplier of the

good or service in the country or within the area where the respondent

is located. In these situations, there may be no alternative market

prices available in the country (e.g., private prices, competitively-

bid prices, import prices, or other types of market reference prices).

Hence, it becomes necessary to examine other options for determining

whether the good has been provided for less than adequate remuneration.

This consideration of other options does not indicate a departure from

our preference for relying on market conditions in the relevant

country, specifically market prices, when determining whether a good or

service is being provided at a price which reflects adequate

remuneration.

With respect to the leasing of land, some of the possible factors

we can consider are whether the government has covered its costs,

whether it has earned a reasonable rate of return in setting its rates,

and whether it applied market principles in determining its prices. See

Final Affirmative Countervailing Duty Determination: Steel Wire Rod

From Germany, 62 FR 54990, 54994 (October 22, 1997). In the instant

case, we attempted to obtain information on the market prices for

leasing of industrial land in West Bengal through independent research

and a private land broker in India. However, we have found no

alternative market reference prices to use in determining whether the

government is leasing the land for less than adequate remuneration. As

such, we have examined whether the government's price was determined

according to the same market factors that a private lessor would use in

determining whether to lease land to a company. During the verification

of this review, we met with officials of the ADDA to discuss the

development authority's leasing of industrial land in West Bengal. See

Memorandum to David Mueller: Verification of the Questionnaire

Responses Submitted by the Asansol Durgapur Development Authority,

(September 9, 1999), (public document on file in the CRU).

In December 1995, Kajaria entered into a lease agreement with the

ADDA to lease 132 acres of industrial land in Durgapur for the

construction of a pig iron plant. The ADDA presently manages 60,000

acres of land. Of the total land acreage only 600 acres are being used

for industrial purposes. The majority of the land being leased by the

ADDA is residential land. The ADDA is currently leasing industrial land

to approximately 120 small-scale companies.

[[Page 61600]]

The lease rates for industrial land in West Bengal are established

by the ADDA. The ADDA takes into consideration the following factors to

determine the price per acre of industrial land: (1) The cost of

acquiring the land; (2) the cost of constructing needed infrastructure

on the land (e.g., building roads, drainage facilities, electricity

transformers); (3) the cost of filling the land; and (4) the

authority's cost of capital. Because the topography, location, and

types of infrastructure built on various tracks of land differ, the

price per acre land, classified as either ``high land'' or ``low land''

by the ADDA, may vary. However, the factors examined by the ADDA to

determine the leasing prices paid by all companies across West Bengal

are uniform. The ADDA's prices per acre of land are set prices which

are non-negotiable. The ADDA's price per acre of land does not vary

with respect to the type of industry or company leasing the land. The

ADDA advertizes in national and local newspapers the industrial land

which is available for lease and the price per acre of high and low

land. With this information a prospective lessee can compare the

leasing prices of the ADDA to the price of land being sold by private

land owners.

The ADDA uses a standard agreement to lease industrial land to all

companies in West Bengal. All companies which lease land from the ADDA

must pay 50 percent of the total lease amount up-front to execute the

lease agreement (the amount was 30 percent in 1995). After the lease

agreement is executed a company then makes annual installment payments.

The number of payments a company must make is outlined in the lease

agreement. All companies must also make a yearly rent payment of 10

rupees per acre of land.

At verification, we found that a large number of companies are

currently leasing industrial land from the ADDA. These enterprises

represent a wide variety of industries, e.g., auto parts, ceramics,

chemicals, electronic switches, engineering parts, fertilizers, glass,

paints and polishes, pig iron, and tire retreading. The ADDA does not

extend special leasing provisions or show a pricing preference to any

particular industry or industries. We also ascertained that Kajaria

Iron Castings is paying a standard lease rate which the ADDA charges

all companies leasing land in West Bengal. The price per acre of

industrial land is set in reference to market factors. Therefore, based

on these facts, we preliminarily determine that Kajaria Iron Castings'

lease rate is not countervailable.

III. Programs Preliminarily Found Not To Be Used

We examined the following programs and preliminarily find that the

producers/exporters of the subject merchandise did not apply for or

receive benefits under these programs during the POR:

A. West Bengal Incentive Scheme 1993

Petitioners allege in their ``Additional Subsidy Allegations''

submission of November 6, 1998, that the West Bengal Incentive Scheme

1993 (Scheme 1993), a regional development policy, provides various

benefits including a waiver of electricity duty, a state capital

investment subsidy, a development subsidy, and sales tax deferments.

They claim that both new and expanding industrial projects can receive

benefits under the scheme. Petitioners assert that assistance provided

under Scheme 1993 is specific insofar as it is provided in inverse

proportion to the development level of areas within West Bengal.

The regional government of West Bengal reported that Scheme 1993

was introduced by the WBIDC on April 1, 1993. Though the program was

terminated effective March 31, 1999, assistance is still being provided

under the scheme. The objective of Scheme 1993 is to assist in the

growth of medium- and large-scale industries, the tourism industry, the

expansion of existing units, and revival of sick units in the state of

West Bengal through the provision of incentives. All industrial

projects which receive an industrial license, registration certificate,

and term loans from a financial institution are eligible to receive

benefits under Scheme 1993. The program offers various incentives and

tax concessions to entrepreneurs and industrial units to assist them in

the construction of new units or expansion of existing units, and the

building of infrastructure in the backward areas of West Bengal. The

amount of financial assistance an industrial unit is eligible to

receive is determined by its location in West Bengal. The regional

government reported that West Bengal is divided into four groups: Group

A (i.e., Calcutta) is classified as developed while Groups B through D

are categorized as less developed, with Group D deemed the most

backward. Industrial units located in the more backward areas receive

greater monetary assistance than those units located in the more

developed areas. For example, financial assistance provided in the form

of a state capital investment subsidy is as follows: Eligible units in

Group B are entitled to receive a subsidy at the rate of 15 percent of

the fixed capital investment made in the approved project or Rs. 15

lakh, whichever is less. Eligible units in Group C are entitled to

receive a subsidy at the rate of 20 percent of the fixed capital

investment made in the approved project or Rs. 20 lakh, whichever is

less. Eligible units in Group D are entitled to receive a subsidy at

the rate of 20 percent of the fixed capital investment made in the

approved project or Rs. 30 lakh, whichever is less.

In its responses, the regional government reported that both

Carnation Industries Ltd. (Carnation Industries) and Kajaria Iron

Castings received state capital investment subsidies under Scheme 1993

(see ``State Capital Investment Subsidy,'' section below). Kajaria Iron

Castings also received a bridge loan (see ``Program Preliminarily Found

To Be De Minimis--Bridge Loan'' section below).

1. State Capital Investment Subsidy

The regional government reported that state capital investment

subsidies are provided by the WBIDC to industrial units as an incentive

for the construction of new industries in the backward areas of West

Bengal, where infrastructure is poor and industrialization is weak. The

amount of cash payment a company is entitled to receive is based on the

total capital investment cost and location of the project (see, ``West

Bengal Incentive Scheme 1993'' section above). Of the total sanctioned

grant amount, 85 percent may be disbursed in two or three installments,

as funds are available, before the start of commercial production. The

balance of the grant amount is disbursed after the commencement of

production.

In their questionnaire responses, Carnation Industries and Kajaria

Iron Castings reported that they applied for and received state capital

investment subsidies from the WBIDC. In November 1996, Carnation

Industries was approved for a grant in connection with the construction

of a new ductile iron plant in Uluberia, which is located in Group B.

The company took receipt of the first disbursement of the subsidy in

November 1997. The second disbursement of the subsidy occurred in 1998.

The company reported that the following criteria had to be satisfied

for receipt of the subsidy: (1) Receipt of a registration certificate

from the Directorate of Industry of the State Government; (2)

submission of detailed feasibility and project report; and (3) approval

of the project and receipt of financial assistance from a commercial

bank.

[[Page 61601]]

At verification, we examined Carnation Industries' application for

incentives under Scheme 1993 and the corresponding eligibility

certification. We confirmed that Carnation Industries applied for and

received a grant for the construction of a spheroidal graphite and

malleable cast iron castings facility (i.e., ductile iron plant). See

Memorandum to David Mueller: Verification of the Questionnaire

Responses Submitted by Carnation Industries Ltd., (September 9, 1999),

at 1-3 (public version on file in the CRU) (Carnation Verification

Report). During verification, we discussed with WBIDC officials

whether, at the point of bestowal, a state capital investment subsidy

is tied to the production of a particular product or tied to a

particular production facility. We learned that a state capital

investment subsidy is tied to the production of that product/facility

for which the company applied for an eligibility certificate. See WB

Verification Report at 4.

In regard to Carnation Industries, the company applied for

incentives under Scheme 1993 specifically for the manufacture of

spheroidal graphite CI castings and malleable cast iron at its Uluberia

facility. All assistance Carnation receives under the scheme is for the

manufacture of spheroidal graphite CI castings and malleable cast iron

at its Uluberia facility. The WBIDC officials stated, at verification,

that each company which receives assistance must submit a progress

report on their facility which describes the types of products being

produced. See Id.

The scope of this order covers gray iron castings and not ductile

iron castings, the goods produced at the Uluberia facility. At the

point of bestowal, the grant was connected to the production of ductile

iron castings, which is non-subject merchandise. Based on these facts,

we preliminarily determine that the state capital investment subsidy

which Carnation Industries received provides no benefits to the

production and exportation of the subject merchandise, and therefore,

the program was not used.

With respect to Kajaria Iron Castings, the company was approved for

a state capital investment subsidy in December 1995, for the

construction of a pig iron plant in Durgapur (Group C). The first

disbursement of the subsidy was received in 1998, which is outside the

period of this review.

B. Market Development Assistance (MDA)

C. Rediscounting of Export Bills Abroad (EBR)

D. International Price Reimbursement Scheme (IPRS)

E. Cash Compensatory Support Program (CCS)

F. Programs Operated by the Small Industries Development Bank of India

(SIDBI)

G. Export Promotion Replenishment Scheme (EPRS) (IPRS Replacement)

H. Export Promotion Capital Goods Scheme

I. Benefits for Export Oriented Units and Export Processing Zones

J. Special Imprest Licenses

K. Special Benefits

L. Duty Drawback on Excise Taxes

M. Payment of Premium Against Advance Licenses

N. Pre-Shipment Export Financing in Foreign Currency (PCFC)

O. Subsidies Provided by the State of Orissa

P. Advance Licenses

IV. Program Preliminarily Found To Be De Minimis

Bridge Loan

The WBIDC provides bridge loans to entrepreneurs who are granted

state capital investment subsidies under the West Bengal Incentive

Scheme to bridge the time lag between the approval of the grant and the

disbursement of the money. If the WBIDC anticipates a late disbursement

of the grant, the agency encourages companies encountering financial

difficulties to apply for a bridge loan. Not all companies awaiting a

state capital investment subsidy are eligible to receive a bridge loan.

To receive a bridge loan, a company must be financially solvent and be

promoting a commercially viable project. A company which receives a

bridge loan must use the funds for the advancement of the project. See

WB Verification Report, at 2-3.

The loans are provided against the grant receivable and are repaid

when the grant is disbursed. Only those companies which have been

approved for a grant are eligible to receive a bridge loan. At

verification, we learned that the WBIDC charges a fixed interest rate

of 20.0 percent against a bridge loan. However, if a company makes

timely interest payments, then the interest rate is reduced to 16.0

percent. Typically, bridge loans are short-term loans which are

extended for a period up to the date of disbursement of the grant. See

Id.

Because receipt of the its grant was delayed, Kajaria Iron Castings

applied for a short-term bridge loan with the WBIDC in September 1997.

Kajaria Iron Castings took receipt of the loan in 1997, and made an

interest payment during the POR. See Memorandum to David Mueller:

Verification of the Questionnaire Responses Submitted by Kajaria Iron

Castings Ltd., (September 9, 1999), at 4-5 (public version on file in

the CRU) (Kajaria Verification Report).

As discussed in the ``Pre-Shipment Export Finance'' section above,

the short-term benchmark interest rate for the POR is 16.31 percent. To

determine the benefit provided by the loan, we compared the cash credit

benchmark rate to the interest rate charged on the bridge loan. We

found that the interest paid on the bridge loan was less than the

interest the company would have paid on a comparable short-term

commercial loan. We calculated that the bridge loan provided a benefit

of less than 0.005 percent ad valorem during the POR. Because the

benefit provided by the bridge loan is less than 0.005 percent ad

valorem and has no affect on the net countervailable subsidy rate for

Kajaria Iron Castings, we preliminarily determine that it is not

necessary, at this time, to analyze whether bridge loans provided under

the West Bengal Incentive Scheme are specific. See Final Results of

Countervailing Duty Administrative Review: Certain Hot-Rolled Lead and

Bismuth Carbon Steel Products From the United Kingdom, 63 FR 18367,

18370 (April 15, 1998).

V. Programs Preliminarily Found Not To Exist

A. State Value-Added Tax ``Set-Off'' Program

The GOI reported in its February 1, 1999 questionnaire response

that a state value-added tax ``set-off'' program does not yet exist.

They reported that the state value-added tax scheme is only a concept

at this time and has not yet been implemented.

B. Interest Rate Surcharge Exemption

In its February 1, 1999 questionnaire response, the GOI stated that

the RBI introduced an interest rate surcharge on import finance in

October 1995. The surcharge was 15.0 percent over the cash credit rate

and was exempt on packing credit provided for exports. The GOI further

reported that the interest rate surcharge was withdrawn effective July

24, 1996. In its July 14, 1999 response, the GOI submitted official

documentation of the RBI, which announced the termination of the

interest rate surcharge.

Preliminary Results of Review

In accordance with section 777A(e)(1) of the Act, we calculated an

individual ad valorem subsidy rate for each producer/exporter subject

to this administrative review. For the period January 1, 1997 through

December 31, 1997, we preliminarily determine the

[[Page 61602]]

net countervailable subsidy rates for the reviewed companies to be as

follows:

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

Ad valorem

Producers/exporters rates

(percentages)

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

Bengal Export Corporation................................ 8.35

Calcutta Ferrous Ltd..................................... 9.28

Calcutta Iron Foundry.................................... 0.42

Carnation Industries Ltd................................. 0.72

Commex Corporation....................................... 2.71

Crescent Foundry Co. Pvt. Ltd............................ 0.84

Delta Corporation Ltd.................................... 27.65

Dinesh Brothers (Pvt.) Ltd............................... 1.71

Ganapati Suppliers Pvt. Ltd.............................. 5.17

Kajaria Iron Castings Ltd................................ 5.19

Kiswok Industries Pvt. Ltd............................... 14.90

Nandikeshwari Iron Foundry Pvt. Ltd...................... 13.72

Rangilal & Sons.......................................... 0.00

R.B. Agarwalla & Company................................. 3.56

RSI Limited.............................................. 0.90

Seramapore Industries Pvt. Ltd........................... 1.51

SSL Exports.............................................. 27.65

Super Iron Foundry....................................... 1.08

Thames Engineering....................................... 27.65

Trident International.................................... 27.65

Uma Iron & Steel Company................................. 2.10

Victory Castings Ltd..................................... 1.88

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

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

preliminary results, the Department intends to instruct the U.S.

Customs Service (Customs) to assess countervailing duties as indicated

above. The Department also intends to instruct Customs to collect cash

deposits of estimated countervailing duties as indicated above of the

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

reviewed companies, entered, or withdrawn from warehouse, for

consumption on or after the date of publication of the final results of

this review.

Because the URAA replaced the general rule in favor of a country-

wide rate with a general rule in favor of individual rates for

investigated and reviewed companies, the procedures for establishing

countervailing duty rates, including those for non-reviewed companies,

are now essentially the same as those in antidumping cases, except as

provided for in section 777A(e)(2)(B) of the Act. The requested review

will normally cover only those companies specifically named. See 19 CFR

351.213(b). Pursuant to 19 CFR 351.212(c), for all companies for which

a review was not requested, duties must be assessed at the cash deposit

rate, and cash deposits must continue to be collected, at the rate

previously ordered. As such, the countervailing duty cash deposit rate

applicable to a company can no longer change, except pursuant to a

request for a review of that company. See Federal-Mogul Corporation and

the Torrington Company v. United States, 822 F.Supp. 782 (CIT 1993) and

Floral Trade Council v. United States, 822 F.Supp. 766 (CIT 1993)

(interpreting 19 CFR 353.22(e) (now 19 CFR 351.212(c)), the antidumping

regulation on automatic assessment, which is identical to 19 CFR

section 355.22(g)). Therefore, the cash deposit rates for all

companies, except those covered by this review, will be unchanged by

the results of this review.

We will instruct Customs to continue to collect cash deposits for

non-reviewed companies at the most recent company-specific or country-

wide rate applicable to the company. Accordingly, the cash deposit

rates that will be applied to non-reviewed companies covered by this

order will be the rate for that company established in the most

recently completed administrative proceeding conducted under the URAA.

See 1996 Indian Castings Final Results. If such a review has not been

conducted, the rate established in the most recently completed

administrative proceeding pursuant to the statutory provisions that

were in effect prior to the URAA amendments is applicable. See 1993

Indian Castings Final Results. These rates shall apply to all non-

reviewed companies until a review of a company assigned these rates is

requested. In addition, for the period January 1, 1997 through December

31, 1997, the assessment rates applicable to all non-reviewed companies

covered by this order are the cash deposit rates in effect at the time

of entry.

Public Comment

Pursuant to 19 CFR 351.224(b), the Department will disclose to the

parties of this proceeding within five days after the date of

publication of this notice, the calculations performed in this review.

Interested parties may request a hearing not later than 30 days after

the date of publication of this notice. Pursuant to 19 CFR 309,

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

five days after the time limit for filing the case brief. Parties who

submit argument in this proceeding are requested to submit with the

argument (1) A statement of the issue and (2) a brief summary of the

argument. Any hearing, if requested, will be held two 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 351.303(f).

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, under 19 CFR 351.309(c)(ii), are due. 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

brief or at a hearing.

This administrative review and notice are issued and published in

accordance with section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)), 19

CFR 351.213.

Dated: November 1, 1999.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 99-29204 Filed 11-10-99; 8:45 am]

BILLING CODE 3510-DS-P