Final Negative Countervailing Duty Determination: Elastic Rubber Tape From India

DEPARTMENT OF COMMERCE

International Trade Administration

[C-533-816]

Final Negative Countervailing Duty Determination: Elastic Rubber

Tape From India

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: April 19, 1999.

FOR FURTHER INFORMATION CONTACT: Vincent Kane or Suresh Maniam, Office

I, AD/CVD Enforcement, Import Administration, U.S. Department of

Commerce, Room 3099, 14th Street and Constitution Avenue, N.W.,

Washington, D.C. 20230; telephone (202) 482-2815 or 482-0176,

respectively.

Final Determination

The Department of Commerce (``the Department'') determines that

countervailable subsidies are being provided to Garware Elastomerics

Ltd. and that these subsidies are de minimis.

Petitioners

The petition in this investigation was filed by Fulflex, Inc.,

Elastomer Technologies Group, Inc., and RM Engineered Products, Inc.

(``petitioners'').

Respondents

The respondents in this investigation are Garware Elastomerics Ltd.

(``GEL''), its affiliate, and the Government of India (``GOI'').

Case History

Since our preliminary determination on December 7, 1998 (63 FR

67457), the following events have occurred: On January 11, 1999,

January 13, 1999, February 8, 1999, and February 12, 1999, we issued

supplemental questionnaires to respondents. We received responses to

these questionnaires prior to verification. On January 8, 1999, we

aligned the date of our final determination with the date of the final

determination in the companion antidumping duty investigation of

elastic rubber tape from India (63 FR 4973). We conducted a

verification in India of the questionnaire responses received from the

Government of India, Garware Elastomeric Ltd., (GEL) and one of GEL's

affiliates from February 21 through March 6, 1999. Petitioners filed a

case brief on March 24, 1999. Respondents filed a rebuttal brief on

March 26, 1999.

Period of Investigation

The period for which we are measuring subsidies (``the POI'') is

GEL's 1997 fiscal year from April 1, 1997 through March 31, 1998.

Scope of Investigation

For purposes of this investigation, the product covered is elastic

rubber tape. Elastic rubber tape is defined as vulcanized, non-cellular

rubber strips, of either natural or synthetic rubber, 0.006 inches to

0.100 inches (0.15 mm to 2.54 mm) in thickness, and \1/8\ inches to

1\5/8\ inches (3 mm to 42 mm) in width. Such product is generally used

in swim wear and underwear.

The merchandise subject to this investigation is classified in the

Harmonized Tariff Schedule of the United States (``HTSUS'') at

subheading 4008.21.00. Although the HTSUS subheading is provided for

convenience and customs purposes, the written description of the

merchandise under investigation is dispositive.

The Applicable Statute

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 investigation in

accordance with section 701 of the Act.

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 October 15, 1998, the ITC published its

preliminary determination finding 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 of the subject

merchandise from India (see 63 FR 55407 (October 15, 1998)).

De Minimis Threshold for Least Developed Countries

Section 705(3) of the Act requires the Department to disregard de

minimis subsidies in making countervailing duty determinations. The

Agreement on Subsidies and Countervailing Measures extends special and

differential treatment to developing and least-developed members of the

World Trade Organization, inter alia, by raising the de minimis level

for these members. Normally, de minimis is defined as a

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subsidy of one percent or less ad valorem. In the case of least

developed countries the de minimis standard is three percent or less.

(See section 703(b)(4)(C) of the Act.)

Because India is considered a least developed country, it is

entitled to the three percent de minimis test. (See Developing and

Least-Developed Country Designations under the Countervailing Duty Law

(63 FR 29945, 29946 (June 2, 1998)).

Subsidies Valuation Information

Benchmarks for Short-term Loans: GEL received an exemption from

customs duties on certain capital goods under the Export Promotion

Capital Goods Scheme contingent on its export performance over a five-

year period. We are treating the contingent liability arising from the

exemption as a series of short-term, zero rate loans that were taken

out in the year prior to the POI. Our benchmark for these loans is an

average of the short-term loan rates reported by the State Bank of

India for the year prior to the POI. See the Reserve Bank of India's

Report on Currency and Finance (1997-98, Statement 70). We find this

rate to be representative of short-term commercial interest rates in

effect prior to the POI.

As explained below in the Affiliated Parties section, we found GEL

to be related to an affiliated company. In addition, as explained below

in the Financial Transaction Between GEL and Its Related Company

section, we found that GEL received short-term loans from its

affiliate. To determine whether loans received from its affiliate prior

to the POI were on commercial terms, we used the State Bank of India's

short-term advance rate (described above) as our benchmark rate. For

the loans received from its affiliate during the POI, most did not have

interest payments due during the POI. Therefore, GEL would not receive

any benefit from these loans during the POI. For those loans received

from its affiliate during the POI which also had payments due during

the POI, we have used as our benchmark the average interest rate on

several short-term lines of credit received by GEL from commercial

banks.

Affiliated Parties

In accordance with section 771(33) of the Act, the Department

considers the following persons to be affiliated or affiliated persons:

(1) members of a family; (2) any officer or director of an organization

and such organization; (3) partners; (4) employer and employee; (5) any

person directly or indirectly owning, controlling, or holding with

power to vote, five percent or more of the outstanding voting stock or

shares of any organization and such organization; (6) two or more

persons directly or indirectly controlling, controlled by, or under

common control with, any person; and (7) any person who controls any

other person and such other person.

In cases where a company under investigation is affiliated with

another company, the Department's questionnaire directs the affiliated

company to respond to our countervailing duty questionnaire, if: (1)

that company produces the subject merchandise or (2) that company is

``related'' to the company under investigation, and there are financial

transactions between the two companies. Normally, we consider companies

to be ``related,'' if they prepare consolidated financial statements or

if one of the companies has at least 20 percent ownership in the other.

See Final Affirmative Countervailing Duty Determination: Certain Pasta

(``Pasta'') from Italy, 61 FR 30288, 30290 (June 14, 1996). If the

related company has financial transactions with the company under

investigation that are not on commercial terms and the related company

is found to have benefitted from subsidies during the POI, the

Department may determine that there has been a transfer of subsidies

from the related company to the company originally under investigation.

In this case, based on proprietary information in GEL's November 9,

1998 questionnaire response and its November 16, 1998 supplementary

questionnaire response (SQR), we determine that GEL is related to its

affiliate. In addition, GEL reported, and we verified, that financial

transactions have taken place between the two companies. (See March 31,

1999 Memorandum to the File on our reasons for determining the related

company to be related.) As described below, our review of these various

transactions leads us to conclude that certain of the financial

transactions resulted in a transfer of subsidies from the related

company to GEL.

Financial Transactions Between GEL and Its Related Company

During GEL's start-up in 1995, the related company supplied certain

machinery and equipment and technical advice to GEL. In addition, the

related company provided loans and loan guarantees to GEL and, on

limited occasions, certain inputs to production. As explained below, we

determine that the transactions between GEL and its related company

involving loan guarantees and the provision of supplies were on

commercial terms. However, the short-term loans provided to GEL by its

related company are not on commercial terms. Nor are the financing

arrangements for the machinery and technical advice provided to GEL by

its related company.

Respondents argue that the financial transactions (short-term

loans, loan guarantees, provision of machinery and supplies, and

provision of technical advice) between GEL and its related company were

consistent with commercial considerations. In support of this argument,

they claim that the stock structure of GEL's related company requires

that the transactions be made on commercial terms. The transfer of

subsidies to GEL through non-commercial transactions would deplete the

related company's assets and would be contrary to its shareholders'

interests. They conclude that because these transactions were made on

commercial terms, the Department has no basis on which to transfer any

of the subsidies received by GEL's related company to GEL.

While we recognize that a company generally acts in the best

interests of its stockholders, we cannot disregard evidence to the

contrary in specific instances. As explained below, we found the short-

term loans and the financing arrangements for the machinery and

technical advice which GEL received from its related company were not

on commercial terms. Hence, it is appropriate to allocate a portion of

these subsidies received by GEL's affiliate to GEL.

Short-Term Loans to GEL From Its Related Company

GEL received short-term loans from its related company both prior

to and during the POI. To determine whether GEL's loans received prior

to the POI were on commercial terms, we first compared the interest

rate on these loans to the benchmark rate. This comparison revealed

that the interest rate on the loans from the related party was higher

than the benchmark rate. We used the Bank of India rates as our

benchmark for loans received prior to the POI because we did not have

information on any short-term commercial loans which GEL may have

received prior to the POI. Respondents assert that the loans GEL

obtained from its related company during the POI were provided at

above-market rates to take into account possible delays in payment of

interest during the start-up period.

In fact, the Department verified that the rate charged by the

related company to GEL was greater than the 13.3 percent rate for

commercial loans in 1997-98 as

[[Page 19127]]

reported by the Reserve Bank of India. However, even though GEL's rate

for pre-POI loans was higher than the benchmark rate, the terms of

payment on the loans provided prior to the POI were more favorable than

commercial terms. Specifically, GEL was required to (and has) repaid

the principal on these loans. However, it has not paid interest on

these loans and is not required to do so until after its start-up

period concludes. Although deferral of interest is not inconsistent

with commercial terms in itself, it is inconsistent when the borrower

is not required to pay interest on the deferred interest. In such a

situation, the borrower is essentially receiving a zero-interest loan

in the amount of the interest that is being deferred. Consequently, we

determine that GEL has received loans from its related company on terms

inconsistent with commercial considerations. An examination of the loan

contract does not support respondents' assertion that the interest rate

accounts for delayed interest payments.

For the loans received during the POI, we have used a different

benchmark interest rate. In selecting a benchmark for short-term

government loan, our preference is to use the interest rate on short-

term loans received by the company from a commercial bank as our

benchmark. GEL received short-term lines of credit from commercial

banks during the POI. Therefore, we have used the average of the

interest rate on these lines of credit as our benchmark for loans

received by GEL from its related company during the POI.

Therefore, for loans received from the related company during the

POI which had payments due during the POI, we compared the interest

rate charged by the related company to the benchmark rate. Based on

this comparison, we determine the interest rate paid by GEL was less

than the benchmark and, hence, that these loans were not on commercial

terms.

Provision of Machinery

GEL's related company manufactured and sold certain machinery to

GEL during its start-up period. The related company calculated the

sales price based on the cost of design, materials, fabrication,

assembly and profit in an amount equal to the related company's profit

ratio from the prior fiscal year. The costs of producing the machinery

and the profit amount were audited by an outside accountant and the

sales prices were certified by the accountant to be the assessable

value of the machinery. The GOI requires an outside audit of financial

transactions between related companies because such sales are subject

to the excise tax and a sales tax. At verification, we found that the

related company actually charged GEL the prices certified by the

outside accountant.

We consider the related company's method for setting the sales

prices to be a reasonable method of determining a commercial price.

However, GEL has not paid its related company for the machinery and

will not be required to do so until after its start-up period has

concluded. In fact, it appears that GEL will not be required to pay for

the machinery until it has sufficient cash flow to do so. Moreover,

although GEL is required to pay interest on this debt, which has

already been outstanding for a considerable period, it has not done so,

nor does it appear that GEL is required to pay interest on the

outstanding interest.

Because of the length of time that this debt has been outstanding,

the open-ended terms of the debt, and the fact that GEL is not

currently paying interest on it, we determine that the financing for

GEL's purchases of machinery from its related company is not on

commercial terms.

Provision of Technical Advice

GEL also received technical advice from its related company's

engineers during its start-up period. The related company invoiced GEL

for this technical advice based on the related company's appraisal of

the cost of providing the technical advice required for each particular

project plus an amount for profit and taxes. As with the purchases of

machinery from the related company, an outside engineer certified these

costs for excise tax and sales tax purposes. At verification, we found

that GEL's related company actually charged GEL the prices certified by

the outside engineer.

Petitioners assert that the technical advice from GEL's related

company was provided at below market rates. They cite a 1996 Price

Waterhouse report which states that the GOI requires accountants and

engineers to certify transfer prices between related companies to

prevent companies from overstating their costs on sales to related

companies as a means of reducing the net profit to be reported for

income tax purposes. (See Petitioners' February 2, 1999 submission,

Exhibit 1.)

At verification, we found that the prices charged to GEL by its

related company for technical advice were certified by an outside

engineer as the correct assessable value for excise tax purposes. Our

review of the engineer's certification of the related company's price

for technical advice and our review of the related company's costs of

providing the advice and profit confirmed that the related company's

method of establishing a price was a reasonable one.

We consider the related company's method for setting the sales

prices to be a reasonable method of determining a commercial price.

However, GEL has not paid its related company for the technical advice

and will not be required to do so until after its start-up period has

concluded. In fact, it appears then that GEL will not be required to

pay for the technical advice until it has sufficient cash flow to do

so. Moreover, although GEL is required to pay interest on this debt,

which has already been outstanding for a considerable period, it has

not done so, nor does it appear that GEL is required to pay interest on

the outstanding interest.

Because of the length of time that this debt has been outstanding,

the open-ended terms of the debt, and the fact that GEL is not

currently paying interest on it, we determine that the financing for

GEL's purchases of technical advice from its related company is not on

commercial terms.

Loan Guarantees

GEL's related company guaranteed several of GEL's medium-term loans

and charged no fee for the guarantees. During verification, we

discussed loan guarantee practices with an official from the UTI Bank

Ltd., a commercial bank in New Delhi. The official indicated that it is

not uncommon for a parent company to guarantee a loan received by a

subsidiary or for a company to guarantee a loan to a related company.

The official also said that it was also not uncommon for the guarantor

in these cases not to charge a fee for the loan guarantee. Based on

these discussions, we determine that the loan guarantees received by

GEL from its related company are consistent with commercial

considerations.

Petitioners claim that the related company's guarantee of GEL's

loans without charging a guarantee fee is inconsistent with commercial

considerations.

We disagree. As explained above, we confirmed at verification that

such a practice is not uncommon in India. Therefore, we find the

related company's provision of guarantees to GEL free of any fees

consistent with commercial considerations. (See section 351.506(a)(2)

of Countervailing Duties; Final Rule (63 FR 65348, November 25, 1998)

(Countervailing Duty Regulations) (although not in effect for this

investigation).

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Provision of Supplies

GEL purchased diesel fuel and other supplies from its related

company during the POI and paid an amount for these supplies equivalent

to the related company's cost of acquiring them. GEL purchased these

supplies through its related company as a convenience. At verification,

we found that the prices paid by GEL's related company for the

supplies, as reflected on its purchase invoices, were the prices which

the related company charged GEL for the supplies.

Based on our review of the purchase invoices, we determine that the

sales were at arm's length and that the prices were market prices for

the supplies in question. We found no evidence at verification

indicating that GEL could not have purchased the supplies at the same

price as its related company. Therefore, we determine that GEL's

purchases of supplies from its related company were made on commercial

terms.

Petitioners claim that the price for supplies was not a market

price because it did not include a mark-up for general, selling and

administrative expenses incurred by GEL's affiliate in purchasing

supplies. For this reason, GEL's purchases of supplies were not made on

commercial terms.

GEL paid market prices for the supplies provided by its affiliate

and could have purchased these supplies at the same market prices on

its own. Therefore, we find that the fact that GEL was not required to

pay a price which included a share of the affiliate's general, selling

and administrative expenses does not make the price which it did pay to

be on terms inconsistent with commercial considerations. It is not

uncommon for affiliates to provide services such as this without

charging an additional fee.

Subsidies Received by GEL's Related Company

On January 11, 1999, we issued a countervailing duty questionnaire

to the affiliated company. On January 16, 1999, we received a response

from the affiliated company indicating that all of the programs that it

used during the POI were tied to its production and not to the subject

merchandise.

At verification, we examined documentation regarding each of the

programs that GEL's related company had used during the POI. With the

exception of the Income Tax Exemption Scheme, we determine that

benefits under the programs used by GEL's related company, which does

not produce subject merchandise, were tied to the products produced and

sold by the related company. (Our bases for finding these benefits tied

to non-subject merchandise are discussed more fully below.) Because we

find the programs used by GEL's related company, with the exception of

the Income Tax Exemption Scheme, to be tied to the production and sale

of non-subject merchandise, we determine that they confer a benefit

only on those products and do not benefit the production or sale of the

subject merchandise.

1. Export Promotion Capital Goods Scheme

The Export Promotion Capital Goods Scheme provides for duty

reductions or exemptions and an exemption from the excise tax on

imports of capital equipment. At verification, the applications,

approvals and licenses for this scheme clearly showed that the

machinery imported under the scheme was for the production of

merchandise produced by GEL's related company. On each of these

documents, the products to be produced with the imported machinery were

specifically named. The products that had to be exported to satisfy the

related company's export obligation under the license were also

specifically named on the license. These products were the related

company's products, not subject merchandise. In addition, from our

observation at verification of GEL's machinery for producing ERT and

from our review of machinery imports by GEL's related company, it was

clear that the machinery imported by GEL's related company was not the

machinery we observed in GEL's plant.

2. Export Oriented Unit (Duty-Free Import of Inputs)

The application, approvals and licenses to obtain this benefit

clearly showed that the inputs imported duty-free were inputs to be

used in the production of the related company's products. On these

documents, the inputs that may be entered duty free are specifically

stated. These inputs are inputs used to produce the related company's

products and could not be used to produce subject merchandise. Further,

the finished products to be produced from these inputs are also clearly

stated on these documents. Our review of importations made under the

scheme confirmed that the imported inputs were inputs to the related

company's products and could not have been used to produce the subject

merchandise. Therefore, we find that benefits from this scheme are tied

to non-subject merchandise.

3. Pre-Shipment Export Financing

The loan applications and accompanying list of purchase orders from

the related company's customers in foreign markets which served as the

basis for the loans plainly showed that the products being ordered were

the related company's own products.

4. Post-Shipment Export Financing

The loan applications and attached invoices clearly showed that the

financing was to enable GEL's related company to extend credit on sales

of its products to customers in foreign markets.

5. Duty Drawback of Excise Taxes

The applications, approvals and licenses of GEL's related company

clearly showed that the inputs for which duty drawback was claimed were

inputs to be used in the production of the related company's products.

Our review of importations made under the scheme confirmed that the

imported inputs were inputs to the related company's products and could

not have been used to produce the subject merchandise.

6. Exemption From the Tax on Interest on Export Credits

During the POI, GEL's related company was not required to pay the

interest tax on export credits. GEL's related company received export

credits under the Pre-Shipment and Post-Shipment Export Financing

programs discussed above. As explained above, these loan programs were

tied to the production and sale of GEL's related company's products.

Because the interest tax exemption was granted with respect to interest

on loans found to be tied to GEL's related company's products, the

benefit from the interest tax exemption is also tied to those products.

7. Special Benefits for Trading Houses and Super Star Trading Houses

Although GEL's related company had trading house status during the

POI, it did not use its special import license to import restricted

merchandise nor did it sell this license during the POI. Because GEL's

related company did not benefit from this license during the POI, it

was not necessary to determine whether benefits to companies with

Trading Houses and Superstar Trading House status are tied to the

products produced and sold by these companies.

8. Income Tax Exemption Scheme

During the POI, GEL's related company received benefits under

section 80HHC of the Income Tax Exemption Scheme, which provides an

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income tax exemption for the profits earned on export sales.

Respondents argue that the Department verified that section 80HHC

benefits are tied to the production and export of non-subject

merchandise. Because section 80HHC provides income tax exemptions to

companies based on their total export profits, without regard to the

products which earned the profits, we determine that 80HHC benefits are

untied export subsidies. See Certain Hot-Rolled Lead and Bismuth Carbon

Steel Products from the United Kingdom: Final Results of Countervailing

Duty Administrative Review, 62 FR 53306, 13-16 (October 14, 1998);

Final Affirmative Countervailing Duty Determination: Certain Pasta from

Turkey, 61 FR 30366, 70 (June 14, 1996); Final Negative Countervailing

Duty Determination: Silicon Metal from Brazil, 56 FR 26988 (June 21,

1991).

We normally attribute a subsidy received by a company to the

products produced by that company. However, as discussed above, untied

subsidies received by one company may be allocated to a related

company, if the company receiving the subsidies transfers them to the

company producing the subject merchandise. In GEL's case, as discussed

above, its related company provided loans and financing for machinery

and technical advice on non-commercial terms. These non-commercial

transactions indicate that a portion of the untied subsidies received

by GEL's related company should be allocated to GEL.

To determine the portion attributable to GEL, we first calculated

the benefit received by GEL's related party under the Income Tax

Exemption Scheme. We then calculated GEL's share by multiplying the

total benefit by GEL's share of the total sales of both companies. We

used this method to determine GEL's share because, although this is an

export subsidy to GEL's related company, it should not be considered an

export subsidy to GEL for allocation purposes. This is because it was

not GEL's exports that gave rise to the portion of the benefit which

GEL received but, rather, the short-term loans it received from its

affiliate on terms inconsistent with commercial considerations. Since

the portion of the subsidy transferred to GEL is untied, and the

benefit to GEL is calculated using GEL's total sales, we have used

total sales of the two companies as the basis for calculating the share

to be allocated to each company. For the countervailable subsidy to

GEL, see section below on the Transfer of Income Tax Exemption Scheme

Benefits to GEL.

Programs Determined To Be Countervailable

With regard to GEL, based on the information provided in the

responses and the results of verification, we find the following

programs to be countervailable:

A. Export Promotion Capital Goods Scheme

The Export Promotion Capital Goods Scheme (EPCGS) provides for a

reduction or exemption of customs duties and an exemption from excise

taxes on imports of capital goods. A reduction of customs duties and an

exemption from excise taxes are provided under the Concessional EPCGS.

Under this scheme, producers may import capital goods at reduced rates

of duty and must undertake to earn convertible foreign exchange equal

to four times the value of the capital goods within a period of five

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 interest on the amount of the

payment. (See the section below on the Excise Tax Exemption under the

EPCGS for our treatment of this tax exemption.)

In 1995, GEL received a license under the Concessional EPCGS to

import certain machinery to be used in the production of ERT. GEL met

the portion of its export undertaking applicable to the POI and has not

had to pay duty or interest on the duty reduction which it received

under the EPCGS.

The customs duty reduction under the EPCGS represents revenue

foregone by the GOI and confers a benefit on GEL. In addition, the duty

reduction benefit is specific because its receipt was contingent upon

anticipated export performance. Therefore, we determine that duty

reduction under the EPCGS is a countervailable subsidy within the

meaning of section 771(5) of the Act.

Petitioners claim that GEL did not receive a benefit from the duty

exemption under the EPCGS until GEL satisfied its export obligation as

required by the scheme. Petitioners state that because GEL's exports

during the POI served to satisfy this export obligation, GEL realized

the entire duty exemption during the POI. Petitioners also claim that

the benefit cannot be allocated to the period before GEL began

commercial production because allocating a benefit to a pre-production

period would create a loophole in the countervailing duty law because

the subsidy could not be countervailed during a period when nothing was

exported.

Respondents claim that it is the Department's established practice

to expense customs duty exemptions in the year of receipt. Respondents

cite Porcelain-on-Steel Cookingware from Mexico: Final Results of

Countervailing Duty Administrative Review (57 FR 562, 564; January 7,

1992) (Cookingware from Mexico), as a case in which the Department

rejected the Government of Mexico's claim that the benefit of an import

duty exemption on machinery should be allocated over the useful life of

the machinery. Respondents assert that in this case, the Department

should follow its usual practice and expense the benefit in the year of

receipt.

GEL may be obligated to pay the duties on its imported capital

equipment in each year or in any given year during the five-year period

following importation. Thus, we find that the waived duties are

properly viewed as a contingent liability loan because GEL has the use

of funds from the waived duties interest free for a five-year period,

assuming it meets its export obligation. Where a government provides a

long-term, interest free loan and the obligation for its repayment is

contingent upon subsequent events, our practice is to treat any balance

on the loan outstanding during a year as an interest-free short-term

loan (in the amount of the duty waived) that is rolled over each year.

(See Final Negative Countervailing Duty Determination: Fresh Atlantic

Salmon from Chile, 63 FR 31437, 42-43 (June 1998); see also section

351.505(d)(1) of the Countervailing Duty Regulations. Although GEL met

the portion of its export obligation applicable to the POI, we cannot

be certain at this point that it will continue to do so in the future.

Therefore, we have considered the full amount of the customs duty

reduction to be an interest free loan that was outstanding during the

POI.

In Cookingware from Mexico, although exporters were subject to

forfeiting a portion of benefits if they sold production domestically,

receipt of the benefits was not dependent upon exporting a specified

amount, the duty exemption received by the company was not contingent

on the company's meeting an export obligation for a number of years,

nor did it require that duty be paid if the company failed to meet the

export obligation. Therefore, the Department did not treat the duty

exemption as a contingent liability but countervailed the full amount

of the exemption in the POR. As described above, however, the duty

exemption under the EPCGS, is contingent on a company's meeting a

specific export obligation for a period of five years.

[[Page 19130]]

Therefore, we properly countervailed it as a short-term interest-free

loan, which is rolled over for a period of five years.

Because we consider the loans to be rolled over from year to year,

we used a short-term interest rate as our benchmark for measuring the

subsidy. We calculated the benefit as the difference in the interest

that GEL paid on the zero-rate loan received as a result of the duty

reduction under the EPCGS and the interest GEL would have paid at the

benchmark rate. We divided this benefit by GEL's total exports of all

products because the capital equipment imported under the Concessional

EPCGS was used in the production of all of GEL's products. On this

basis, we calculated a subsidy of 1.53 percent ad valorem.

B. Transfer of Income Tax Exemption Scheme Benefits to GEL

As discussed above, GEL's related company received an income tax

exemption under section 80HHC of the Income Tax Exemption Scheme on

profits from exports during the POI. The 80HHC exemption received by

GEL's related company represents revenue foregone by the GOI. In

addition, the exemption is specific within the meaning of section

771(5A)(B) of the Act because it is contingent on export performance.

Therefore, we determine that the 80HHC exemption received by GEL's

related company during the POI is a countervailable subsidy within the

meaning of section 771(5) of the Act.

As explained above in the Income Tax Exemption Scheme section, the

benefit of the 80HHC exemption is attributable to both GEL and its

related company. Accordingly, we have calculated the subsidy for ERT by

dividing the amount of the income tax savings from the 80HHC

attributable to GEL by GEL's total sales of all products. On this

basis, we calculated a subsidy of 0.18 percent ad valorem for GEL

during the POI.

Programs Determined To Be Not Countervailable

A. Exemption From Excise Tax on Imports of Capital Goods

In addition to providing for a reduction or exemption of customs

duties, the EPCGS also provides for an exemption from excise duties on

imports of capital goods. In its February 16, 1999 response, GEL

reported that its benefit under the EPCGS was the sum of the customs

duty reduction and the excise duty exemption. However, at verification,

GEL officials claimed that the excise duty exemption was not a benefit

because had GEL not received the exemption but instead paid the excise

duty, it would then have received excise credits in the amount of the

excise duty payment. Specifically, when GEL purchases inputs or capital

goods in the domestic market or in foreign markets (other than under

the EPCGS), GEL pays the excise duty or tax. When GEL sells finished

products in the domestic market, it collects the excise tax from its

customers and remits it to the GOI. In computing the amount of excise

tax it must remit to the GOI, GEL gets a credit for the amount of

excise taxes it paid on its purchases of inputs and capital goods. In

this way, manufacturers are ultimately not burdened by the excise tax.

It is essentially a tax on the consumer.

Petitioners claim the Department should not offset the benefit of

the excise tax exemption on imports of capital equipment under the

EPCGS because respondents did not claim this offset until verification.

In addition, petitioners state that the Department's practice precludes

consideration of the secondary tax effect on the subsidy provided by

the EPCGS.

Respondents claim that at verification, GEL provided information

that demonstrates that the excise duty exemption should not be

considered a subsidy because payment of the tax results in a credit

that can be used against excise taxes owed. In Ball Bearings and Parts

Thereof from Thailand: Final Results of Countervailing Administrative

Review (60 FR 52371, 52373; October 6, 1995) (Bearings from Thailand--

Final), the Department stated that under the VAT system, companies

receive credit for the VAT paid on the purchase of inputs and, as a

result, no VAT is effectively paid by companies on these purchases.

Therefore, the exemption from the VAT was found not to be a

countervailable subsidy.

We do not view the excise tax as a prior stage cumulative tax (see

item (h) of the Illustrative List of Export Subsidies, Annex I of the

Agreement on Subsidies and Countervailing Measures (Illustrative List).

The excise tax, like a value added tax, is treated as being passed on

to the consumer. (See Ball Bearings and Parts Thereof from Thailand:

Preliminary Results of a Countervailing Duty Administrative Review, 60

FR 42532 (August 16, 1995)) (Bearings from Thailand--Preliminary).

Indian Companies pay the excise tax on purchases of inputs and capital

goods and collect it on sales of finished goods. When a company pays

the tax it enters a tax credit in its excise tax book. When a company

sells finished goods it enters a debit in its excise tax book.

Periodically, the company remits in cash any excess excise tax debits

over credits to the GOI and receives a rebate for any excess of tax

credits over debits. Therefore, because GEL does not ultimately bear

the excise tax, we determine that the exemption from the excise tax

under EPCGS is not a countervailable benefit.

B. Drawback of Customs Duties

In the preliminary determination of the companion antidumping duty

investigation, the Department found that respondents had not provided

sufficient information to demonstrate that drawback was tied to import

duties paid and should, therefore, be added to U.S price. (Preliminary

Affirmative Determination of Sales at Less Than Fair Value and

Preliminary Determination of Critical Circumstances: Elastic Rubber

Tape from India (64 FR 5025, 5028; February 2, 1999) (Preliminary Anti-

Dumping Determination). On the basis of this finding, petitioners

allege that GEL received impermissible drawback and claim that the

Department should include this program in its countervailing duty

investigation.

Under this program, exporters may file a drawback claim after the

exportation of finished goods to recover import duties paid on imported

inputs used to produce the export goods. Exporters may claim drawback

at the all-industry rate or the brand rate. The all-industry rate is an

average rate calculated for a product or group of products. The brand-

rates are applicable to products of specified description and technical

characteristics, which are exported by specific exporters, and permit

reimbursement of actual duties paid. Companies may use the all-industry

rate or apply for the brand rate and supply the documentation necessary

to establish the brand rate.

In 1997, GEL filed an application for a brand-rate to be used in

calculating the drawback on export shipments of ERT for inputs imported

prior to the POI. At verification, we examined GEL's drawback

application. The application included copies of the import entries on

which the drawback was based, which showed payment of customs duties on

the imported inputs, a bill of materials showing the quantity of each

input used by GEL to produce one metric ton of ERT, the duty per

kilogram of each input, and the duty borne by each input per metric ton

of ERT. The quantities were certified by company officials and by an

outside accountant.

An officer from a regional office of the Central Board of Excise

and Customs (CBEC) audited GEL's application. As a result of the audit,

the quantity of ERT on which GEL could claim drawback

[[Page 19131]]

was reduced because the quantity of inputs imported by GEL was

sufficient for the production of only this reduced quantity. In

addition, the drawback rate was adjusted downward slightly to take into

account waste.

At verification, we were unable to review the audit of GEL's

application because GOI officials indicated that it had been archived.

Instead, we reviewed two recent audits of brand rate drawback

applications from other companies producing products other than ERT to

determine how the GOI audited these applications. Each of the audits

appeared thorough, took several days to complete, and were described in

detail in a lengthy audit report. The quantities of inputs necessary to

produce a given quantity of each of these companies' outputs was

checked by the CBEC officer against each company's actual stock

issuance records and batch production cards.

The drawback of customs duties paid on inputs, which are consumed

in the production of goods for export, is a permissible rebate and not

countervailable provided it is not excessive. (See Item (i) of the

Illustrative List: See Ball Bearing from Thailand--Final). Based on our

review of GEL's application for brand rate drawback and the GOI's

procedures for auditing such claims, we determine that GEL's adjusted

brand rate of drawback provides a non-excessive rebate of customs

duties paid on imported inputs, i.e., the duty rebates which GEL

received on exports of its finished products did not exceed the duty

paid on the imported inputs. Therefore, we determine that the drawback

received by GEL under the brand rate of drawback is not

countervailable.

Because GEL submitted a published input/output norm with its

drawback application, petitioners claim that GEL's drawback claim was

based on standard input/output norms rather than on the quantities of

inputs GEL actually used to produce a unit of ERT. Therefore, they

assert, drawback paid on these inputs is based on an estimate of the

duties paid rather than on actual duties. Petitioners also claim that

based on this standard norm, GEL's exports qualify for drawback whether

the ERT is produced from imported or domestic inputs.

GEL is the only producer of ERT in India. The bill of materials

listing the quantities of each input needed to produce a unit of ERT

was based on GEL's own production experience. (See the March 19, 1999,

verification report on GEL, Exhibit 35 at page 3). At verification, we

found that auditors from the regional offices of CBEC audit the

applications of companies applying for brand-rate drawback. We also

found that they audited the input/output ratios based on companies'

actual usage as reflected on inventory and production records. The

reason that the GOI publishes norms is so they can be disseminated to

customs offices throughout the country.

We disagree with petitioners' claim that GEL may receive drawback

even if it uses domestic inputs. At verification we found that GEL had

applied to receive drawback on a certain quantity of ERT exports. The

GOI reduced this quantity to correspond to the quantity GEL was able to

produce based on the quantities of inputs it had imported. In addition,

GEL was required to include with its application copies of the import

entries of each of the imported inputs indicating that duties had been

paid on these inputs. Thus, it is clear that GEL's inputs were imported

inputs and not domestic ones.

C. Advance Licenses

The Advance Licenses Program allows for the duty-free importation

of inputs to be incorporated into finished products for export.

Companies importing under advance licenses are obligated to export the

products produced using the duty-free imports. GEL received an advance

license late in 1997. With this license, GEL was authorized to import

duty free a given quantity of the raw materials needed to produce ERT

and was obligated to export the ERT produced with these inputs. The

quantity to be exported was also specified on the license.

In Certain Iron-Metal Castings from India: Final Results of

Countervailing Duty Administrative Review (62 FR 32297, 32306; June 13,

1997) (1995 Castings Final), the Department found the advance license

system to accomplish what a drawback system is intended to accomplish,

i.e., to allow finished products produced with imported inputs to be

exported free of the import duties assessed on the imported inputs. In

the 1995 Castings Final, 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 was not a countervailable subsidy.

GEL's advance license allows for the duty-free importation of the

inputs needed to produce ERT. We verified that GEL did not transfer

this license but used it to import inputs that were subsequently used

in the production of ERT. At verification, we reviewed customs entries

of imported inputs, entries in GEL's inward shipping register, entries

in GEL's stock receipt and issuance register and in GEL's batch

production card to confirm that imported inputs were used by GEL to

produce ERT. From our examination of the import entries and these

inventory control records, it was clear that GEL used the imported

inputs to produce ERT. It was also clear from our review of export

entries that GEL was exporting the ERT produced from the imported

inputs thereby satisfying its export obligation under the license.

Because GEL used the duty-free imported inputs to produce ERT which was

subsequently exported, we do not consider the Advance License program

to be countervailable.

Petitioners argue that the advance license is based on standard

input/output norms rather than on a producer's actual input/output

experience and, therefore, under the Department's practice,

countervailable. Further, petitioners indicate that under the Advance

License Scheme, inputs are merely assumed to be imported.

Citing Iron Metal Castings from India, respondents argue that

Advance Licenses were found not to be countervailable because the

Advance License Scheme is a drawback scheme which provides duty rebates

commensurate with the duties paid on imported inputs used to produce

the exported product.

We agree with respondents that the Advance License Program has been

found not countervailable in the past because under this program the

drawback of import duties was not excessive. See 1995 Castings Final.

Despite petitioners' assertions, the Advance License is not based on

standard input/output norms. GEL's Advance License specified the

quantity of inputs permitted to be imported under the license and the

quantity of finished goods to be exported. As explained above, in the

section of this notice on Duty Drawback on Exports, we found at

verification that the bill of materials (input/output formula) which

GEL used was based on its actual experience not a standard norm. This

input output/formula was also used to determine GEL's obligation under

the Advance License. Therefore, we find that GEL used actual production

experience rather than a standard norm for purposes of the Advance

License Scheme. Also, under the Advance License Scheme, inputs are not

merely assumed to be imported, but must be demonstrated to be imported

on the basis of evidence of importations of the inputs required to

produce the export product.

[[Page 19132]]

Programs Determined Not To Be Used

Based upon the information provided in the responses and our

verification, we determine that GEL did not apply for or receive

benefits under the following programs during the POI:

A. Passbook Scheme/Duty Entitlement Passbook Scheme.

B. Export Processing Zones/Export Oriented Units Programs.

C. Income Tax Exemption Scheme.

D. Pre-Shipment Export Financing.

E. Post-Shipment Export Financing.

F. Import Mechanism (Sale of Import Licenses).

G. Exemption of the Interest Tax on Export Credits.

H. Re-discounting of Export Bills Abroad.

I. Programs Operated by the Small Industries Development Bank of

India.

J. Special Imprest Licenses.

K. Market Development Assistance.

L. Special Benefits to Export Houses, Trading Houses and Super Star

Trading Houses.

M. Duty Drawback on Excise Taxes.

N. Pre-Shipment Export Financing in Foreign Currency.

Programs Determined Not To Exist

Based on information provided by the GOI and the results of

verification, we determine that the following program does not exist:

Preferential Freight Rates.

Interested Party Comments

Comment 1: Use of Facts Available

Petitioners argue that GEL's related company did not properly

respond to the Department's questionnaire. Therefore, if the Department

determines that any of the financial transactions between the two

parties were made on terms inconsistent with commercial considerations,

the Department should apply adverse facts available. Petitioners claim

that in its January 11, 1999 questionnaire to GEL's related company,

the Department informed GEL's related company that it must either

respond to the questionnaire by February 11, 1999, or risk facts

available being used if it determined that the transactions between the

two companies were not on commercial terms. GEL, on behalf of its

related company, responded late to the Department on February 16, 1999.

In this late submission, petitioners argue that GEL listed the programs

used by its related company rather than providing a full description,

and merely stated that all of the benefits received were directly tied

to non-subject merchandise. In addition, petitioners argue that GEL's

related company failed to certify the submission.

Petitioners assert that GEL has falsely certified its responses by

simply asserting that the financial transactions with its related

company were made on commercial terms and subsequently not responding

to the Department's questionnaire. If GEL and its related company had

been more forthright in their initial responses, petitioners claim they

would have been able to comment fully on the issues and the Department

would have been able to issue supplemental questionnaires more readily.

Because of these failures, facts available is warranted.

Petitioners assert that at a minimum, the Department should apply

facts available to the related company's use of the EPCGS program

because GEL never completely answered the Department's questions

regarding this program. As such, it is unclear whether the related

company benefitted from this program. Petitioners argue that the

Department should make adverse inferences regarding certain

transactions between GEL and its related company and find that benefits

transferred to GEL from the affiliate's use of the EPCGS.

Respondents assert that petitioners' request that the Department

apply facts available to GEL is unfounded. They state that they have

cooperated fully in this investigation by responding to all of the

Department's requests for information and cooperating fully during

verification.

Regarding petitioners' claim that GEL failed to accurately respond

to the Department's September 18, 1998 questions regarding the EPCGS

program, respondents assert that their responses were accurate and

complete. Respondents argue that GEL responded that it did not use or

benefit from the EPCGS program during the POI based on the Department's

previous treatment of such programs as benefitting companies at the

time the duty on imports was actually paid. Because GEL received

benefits from this program outside of the POI, it did not report the

benefits. However, respondents point out that they did provide the

information once the Department informed the company of its possible

change in methodology.

Respondents also argue that GEL should not be penalized for

petitioners' failure to include the Drawback of Customs Duties program

and Advance License Scheme in their petition. Because these programs

have been previously found not countervailable by the Department,

respondents claim that petitioners are required to provide new evidence

to suggest that the Department's prior decisions were incorrect or that

the programs are otherwise countervailable. Petitioners provided no

such evidence.

Furthermore, according to respondents, GEL's related company should

not be penalized for not providing a separate response to the

Department's questionnaire. Because the related company believed its

financial transactions with GEL were made on commercial terms and all

of the programs it used were tied to the production and export of non-

subject merchandise, it was unnecessary for it to respond on its own.

Respondents point out that they filed a certificate of accuracy on

March 4, 1999, regarding its February 16, 1999 response.

DOC Position

We disagree with petitioners' claim that GEL's related company did

not respond adequately to our countervailing duty questionnaire and

that its response was not filed on time. Based on the evidence,

pursuant to section 776(a) of the Act, we find that facts available are

unwarranted because respondents did not (1) withhold information, (2)

did not fail to provide information by the due dates required in the

form and manner requested or (3) did not significantly impede the

investigation. The February 16, 1999 questionnaire response of GEL's

related company was filed timely. The original due date for this

response was extended from February 11, 1999 to February 16, 1999, by

the case analyst in a telephone conversation with respondents. Thus,

although petitioners were not notified of the extension as they should

have been, respondents were timely in their submission.

Although respondents did not initially file a certification of

accuracy with the related company's questionnaire response, they did

file one on March 6, 1999. We do not find this delayed certification,

in and of itself, grounds for applying fact available under section

776(a) of the Act. Moreover, the related company's response, which was

filed as an exhibit to GEL's February 16, 1999 SQR, did contain a

certificate (in proper form) of accuracy from GEL. Moreover, both GEL

and the related company responded to our questionnaires and were fully

cooperative at verification. Furthermore, at verification, we were able

to confirm the accuracy of their responses. Therefore, we find no basis

for using facts available in this case.

We also disagree with petitioners' assertion that GEL falsely

certified its responses by simply asserting that the financial

transactions with its related company were on terms consistent with

[[Page 19133]]

commercial considerations. Although GEL maintained that it had no

commercially inconsistent transactions, as defined in the

questionnaire, with related companies in its questionnaire response,

GEL did inform the Department of financial transactions it had with its

related company by briefly listing them in its response and thereafter

supplied the Department with additional information as requested, which

we later verified. Because GEL was forthright in its response regarding

these transactions, we see no grounds for applying facts available in

this circumstance.

Petitioners are mistaken in stating that capital goods which GEL's

related company transferred to GEL were imported under the EPCGS. At

verification, we confirmed that all of the capital goods imported under

the EPCGS by the related company were tied to the production of the

related company's products. The capital goods in question were

identified in Attachment 3 of GEL's December 23, 1998 questionnaire

response. As we confirmed at verification, these capital goods could

not be used in producing the related company's merchandise but were

produced by GEL's related company for GEL and sold to GEL at market

prices. These capital goods were not imported under the EPCGS. (See the

March 16, 1999 verification report on GEL's related company at page 9.)

We agree with respondents' claim that they should not be penalized

for failure to include the Drawback of Customs Duties and the Advance

License schemes in their response. Because the petition did not allege

that respondent benefitted from Drawback of Customs Duties and the

Advance License schemes, the original questionnaire did not include

questions about the Advance License or the Drawback of Customs Duties.

The subject of drawback arose only after the preliminary determination

in the antidumping investigation where the Department disallowed

respondents' claim that drawback be added to the U.S. price. (See

Preliminary Anti-dumping Determination). It was not until after the

preliminary determination in this investigation that petitioners

alleged these programs. Because their allegation was timely, however,

we then sent a supplementary questionnaire to respondent with regard to

this scheme. In an SQR dated February 16, 1999, GEL reported that it

had imported natural rubber under the Advance License Scheme to be used

in the production of elastic rubber tape for export. At verification,

as described above, we reviewed this scheme fully. Therefore, we

conclude that the information provided by respondents on these programs

was adequate and that use of facts available is not warranted.

We also agree with respondents' claim that GEL's related company

should not be penalized for not providing a separate questionnaire

response. As required under section 782(e) of the Act, the Department

cannot decline to consider information necessary to the determination

even though it may not meet all of the requirements established

provided that the information is submitted by the deadline, can be

verified, is not so incomplete that it cannot be used, and the

interested party has demonstrated that it has acted to the best of its

ability. As described above, because GEL and its affiliate answered our

questionnaire and supplemental responses in a timely fashion, and the

information was verified and usable, we find that GEL and its affiliate

acted to the best of their ability. Therefore, facts available are

unwarranted. Pursuant to section 776(a) of the Act, even though GEL did

not provide a full description of the programs its related company

benefitted from during the POI, GEL did provide sufficient timely

information. This permitted us to verify fully whether any of the

benefits received by GEL's related company were tied to its products

and not transferred to GEL. Therefore, we find that GEL's related

company responded sufficiently and we find no basis for using facts

available in this determination.

Comment 2: Excise Rebates

Petitioners argue that the Department should countervail the excise

rebates reported in GEL's 1997/98 financial statements. They assert

that because GEL failed to provide a copy of its financial statements

for the POI in a timely manner, the Department was unable to fully

investigate whether the line item entitled ``Other Income'' from

``Excise Rebate Received Export'' constitutes a countervailable

subsidy. Therefore, the Department should apply facts available and

countervail these rebates.

DOC Position

We disagree with petitioners since we received GEL's financial

statements in sufficient time to review them prior to verification. At

verification, we confirmed that the excise rebates referred to in the

financial statements were, in fact, permissible rebates of the excise

tax, as discussed above in the Exemption from Excise Tax under the

EPCGS section of this notice.

Comment 3: Income Tax Exemption Scheme

Respondents argue that the Income Tax Exemption Scheme (``ITES'')

is tied to the production of the related company's products such that

the benefits earned under a tax deduction from ITES could be attributed

to a related company. Respondents cite to section 351.525(b)(5) of the

countervailing duty regulations saying that ``subsidies tied to the

production, sale, or export of a particular product will be attributed

only to that product.'' Respondents also state that in cross-ownership

situations, only untied subsidies may be allocated to a subsidiary.

Final Affirmative Countervailing Duty Determination: Steel Wire Rod

from Canada, 62 FR 54972, 54981 (Oct. 22, 1997). Respondents further

point to Final Negative Countervailing Duty Determination and Final

Negative Critical Circumstances Determination: Certain Laminated

Hardwood Trailer Flooring (LHF) from Canada, 62 FR 5201, 5202 (February

4, 1997) to state the fact that even when the Department treats several

companies as one, it will not countervail a subsidy that was received

for non-subject merchandise. Finally, respondents argue that because of

the Department's position on fungibility of money, the Department would

refuse ``to trace the use of specific funds to determine whether the

funds were used for their stated purpose.''

DOC Position

It is the Department's consistent and long-standing practice to

attribute the benefit from an export subsidy that is not tied to a

particular product or market to all export sales. See e.g., Certain

Iron-Metal Castings From India; Final Results and Partial Rescission of

Countervailing Duty Administrative Review; 63 FR 64050, 055 (Nov. 18,

1998); Final Affirmative Countervailing Duty Determination: Certain

Pasta from Turkey, 61 FR 30366, 30370 (June 1996). Where, as here, the

tax exemption applies to all export profits, we find that it is not

tied to a particular product or market and therefore is an untied

export subsidy. See Silicon Metal From Brazil (tax exemption from

profits of export sales a subsidy to all exports).

We disagree with respondents that all subsidies received by GEL's

affiliate were tied to the production and sale of products produced by

GEL's affiliate. As described above, although six of the seven programs

investigated were tied to the particular products produced by GEL's

affiliate, we find the ITES, which

[[Page 19134]]

exempts all of a firm's export profits from the income tax, is not tied

to a particular product.

In determining whether a benefit is or is not tied, we examine

whether the company's application, the government's approval notice,

and the benefits disbursal documents specify the product or products

that qualify to receive the benefit. If the production and sale of a

particular product is specified on these documents, we generally regard

the benefit as tied to that product. In the case of this scheme, we saw

no evidence at verification of the application or approval forms for

receipt of the benefit because the benefit was claimed directly on the

income tax return.

As discussed elsewhere in this notice, because there were

transactions between GEL and its affiliate, which we find were not on

market terms, we find both companies have benefitted from this subsidy.

Respondents do not dispute that it is the Department's practice to

allocate subsidies in between related parties where the subsidies are

untied nor the Department's authority in this regard. See e.g., Certain

Hot-Rolled Lead and Bismuth Carbon Steel Products From the United

Kingdom; Final Results of Countervailing Duty Administrative Review, 62

FR 53306, 3313-16 (Oct. 1998); Final Negative Countervailing Duty

Determination: Certain Laminated Hardwood Trailer Flooring From Canada,

62 FR 5201, 02 (Feb. 1997); Final Affirmative Countervailing Duty

Determination: Steel Wire Rod From Canada, 62 FR 54972 (Oct. 1997).

Rather, respondents agree that our practice of allocating only untied

subsidies between two companies is consistent with the Department's

basic principle of tying.

Respondents rely upon the Department's new regulations for the

proposition that export subsidies are tied subsidies which may be

attributed only to products exported by the company directly receiving

the subsidy. While we note that these regulations are not in effect for

this investigation, there is nothing in our view, as discussed above,

of how to treat export subsidies that is contradicted by our new

regulations. See 19 CFR 351.525(b)(2). In addition, respondents

themselves acknowledge that under our new regulations we have codified

our practice of allocating untied subsidies between related companies

(i.e., companies with cross-ownership) in a circumstance where one

company is not producing subject merchandise. See 19 CFR

351.525(b)(6)(v).

Verification

In accordance with section 782(i) of the Act, we verified the

information used in making our final determination. We followed our

standard verification procedures, including meeting with government

officials and examination of relevant government records and original

source documents. Our verification results are outlined in detail in

the public versions of the verification reports, which are on file in

the Central Records Unit (Room B-099 of the Main Commerce Building).

Summary

In accordance with section 705(a)(3) of the Act, we determine that

the total estimated net countervailable subsidy rate is 1.71 percent ad

valorem which is de minimis. Therefore, we determine that no

countervailable subsidies are being provided to the production or

exportation of elastic rubber tape from India. Pursuant to section

705(c)(2) of the Act, this investigation will be terminated upon

publication of the final negative determination in the Federal

Register.

ITC Notification

In accordance with section 705(d) of the Act, we will notify the

ITC of our determination.

Return or Destruction of Proprietary Information

This notice serves as the only reminder to parties subject to

Administrative Protective Order (``APO'') of their responsibility

concerning the return or destruction of proprietary information

disclosed under APO in accordance with 19 CFR 355.34(d). Failure to

comply is a violation of the APO.

This determination is issued and published pursuant to section

705(d) and 777(i) of the Act.

Dated: April 12, 1999.

Richard W. Moreland,

Acting Assistant Secretary for Import Administration.

[FR Doc. 99-9761 Filed 4-16-99; 8:45 am]

BILLING CODE 3510-DS-P