[Federal Register Volume 61, Number 236 (Friday, December 6, 1996)]
[Notices]
[Pages 64669-64676]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-31094]
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DEPARTMENT OF COMMERCE
[C-533-063]
Certain Iron-Metal Castings From India: Preliminary Results of
Countervailing Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
[[Page 64670]]
ACTION: Notice of preliminary results of countervailing duty
administrative review.
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SUMMARY: The Department of Commerce (``the Department'') is conducting
an administrative review of the countervailing duty order on certain
iron-metal castings from India. For information on the net subsidy 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: December 6, 1996.
FOR FURTHER INFORMATION CONTACT:
Christopher Cassel or Lorenza Olivas, Office of CVD/AD Enforcement VI,
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 published in the Federal
Register (45 FR 50739) the countervailing duty order on certain iron-
metal castings from India. On October 5,1995, the Department published
a notice of ``Opportunity to Request Administrative Review'' (60 FR
52149) of this countervailing duty order. We received a timely request
for review, and we initiated the review, covering the period January 1,
1994, through December 31, 1994, on November 16, 1995 (60 FR 57573).
In accordance with section 355.22(a) of the Department's Interim
Regulations, this review covers only those producers or exporters of
the subject merchandise for which a review was specifically requested.
See Antidumping and Countervailing Duties: Interim Regulations: Request
for Comments, 60 FR 25130 (May 11, 1995) (``Interim Regulations''). The
producers/exporters of the subject merchandise for which the review was
requested are:
Calcutta Ferrous Kajaria Iron Casting RSI Limited
Pvt. Ltd.
Carnation Enterprise Kejriwal Iron & Steel Seramapore Industries
Pvt. Ltd Works Pvt. Ltd
Commex Corporation Nandikeshwari Iron Shree Rama Enterprise
Foundry Pvt. Ltd
Crescent Foundry Co. Orissa Metal Industries Shree Uma Foundries
Pvt. Ltd
Delta Enterprises R.B. Agarwalla & Siko Exports
Company Pvt. Ltd
Dinesh Brothers R.B. Agarwalla & Co Super Iron Foundry
Uma Iron & Steel Victory Casting Ltd
Delta Enterprises, Orissa Metal Industries, R.B. Agarwalla & Co. Pvt.
Ltd., Shree Uma Foundries and Uma Iron & Steel did not export the
subject merchandise during the period of review (``POR''). Therefore,
these companies have not been assigned an individual company rate for
this administrative review. This review covers nineteen programs.
On May 29, 1996, we extended the period for completion of the
preliminary and final results pursuant to section 751(a)(3) of the
Tariff Act of 1930, as amended. See Certain Iron-Metal Castings From
India; Extension of Time Limit for Countervailing Duty Administrative
Review, 61 FR 26879. As explained in the memoranda from the Assistant
Secretary for Import Administration to the File, dated November 22,
1995, and January 11, 1996 (on file in the public file of the Central
Records Unit, Room B-099 of the Department of Commerce), all deadlines
were further extended to take into account the partial shutdowns of the
Federal Government from November 15 through November 21, 1995, and
December 15, 1995, through January 6, 1996. Therefore, the deadline for
these preliminary results is no later than November 27, 1996, and the
deadline for the final results of this review is no later than 180 days
from the date on which these preliminary results are published in the
Federal Register.
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. References to the
Countervailing Duties; Notice of Proposed Rulemaking and Request for
Public Comments, 54 FR 23366 (May 31, 1989) (``Proposed Regulations''),
are provided solely for further explanation of the Department's
countervailing duty practice. Although the Department has withdrawn the
particular rulemaking proceeding pursuant to which the Proposed
Regulations were issued, the subject matter of these regulations is
being considered in connection with an ongoing rulemaking proceeding
which, among other things, is intended to conform the Department's
regulations to the URAA. See Advance Notice of Proposed Rulemaking and
Request for Public Comments, 50 FR 80 (January 3, 1995); Antidumping
Duties; Countervailing Duties: Notice of Proposed Rulemaking and
Request for Public Comments, 61 FR 7308 (February 27, 1996).
Scope of the Review
Imports covered by the 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 (``HTS'') item numbers 7325.10.0010 and 7325.10.0050. The HTS
item numbers are provided for convenience and Customs purposes. The
written description remains dispositive.
Verification
As provided in section 782(i) of the Act, we verified information
submitted by the Government of India and certain producers/exporters of
the subject merchandise. We followed standard verification procedures,
including meeting with government and company officials and examination
of relevant accounting and financial records and other original source
documents. Our verification results are outlined 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).
Analysis of Programs
I. Programs Conferring Subsidies
A. Programs Previously Determined To Confer Subsidies
1. Pre-Shipment Export Financing
The Reserve Bank of India (``RBI''), through commercial banks,
provides pre-shipment financing, or ``packing credits,'' to exporters.
Upon presentation of a confirmed export order or letter of credit,
companies may
[[Page 64671]]
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 the 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.
During the POR, the rate of interest charged on pre-shipment export
loans was 13.0 percent. For packing credits not repaid within 180 days,
banks could charge interest at 15.0 percent for the number of days the
loan was overdue. Exporters lose the concessional interest rates if the
loan is not repaid within 270 days. If that occurred, banks could
charge interest at 15.0 percent plus two (2.0) percent penalty interest
for the duration of the loan. From October 18, 1994, banks could charge
commercial interest rates on pre-shipment loans not repaid within 270
days. These rates are based on the prime lending rate (``PLR''), and
ranged from 15.0 percent to 22.0 percent, depending on a company's
credit rating. The non-concessional interest rate for export financing
is designated as ``export credit not otherwise specified'' and is
published in the RBI's Annual Report. This rate has been synchronized
with the normal lending rate as applicable to domestic financing in
India. Interest charges under this program must be liquidated with
export proceeds. If the interest is paid with sources other than
foreign currency export proceeds, the interest element of the loan will
not be treated as export credit, and will be charged at rates
applicable to domestic credit.
The Department found this program to be an export subsidy, and thus
countervailable, in prior administrative reviews of this order, because
receipt of pre-shipment export financing was contingent upon export
performance and the interest rates were preferential. See, e.g., Final
Results of Countervailing Duty Administrative Review: Certain Iron-
Metal Castings From India, 56 FR 41658 (August 22, 1991); Final Results
of Countervailing Duty Administrative Review: Certain Iron-Metal
Castings From India, 56 FR 52515 (October 21, 1991) (``1987 and 1988
Indian Castings Final Results''), and Certain Iron-Metal Castings From
India; Final Results of Countervailing Duty Administrative Review,
being simultaneously published with this notice (``1993 Indian Casings
Final Results'').
In prior administrative reviews of this order, the Department used
the small-scale industry (``SSI'') short-term interest rate published
in the RBI's Annual Report as its benchmark to measure the benefit
under the pre-shipment export financing scheme. See, e.g., 1988 Indian
Castings Final Results, 56 FR 52515, and 1993 Indian Castings Final
Results. However, during this administrative review we received
allegations that castings exporters may benefit from programs
administered by the Small Industries Development Bank of India
(``SIDBI''). These allegations led us to reexamine the SSI interest
rate. At verification, we learned that producers/exporters of the
subject merchandise would not finance their domestic operations at the
SSI interest rate. Therefore, we now determine that the SSI interest
rate is no longer an appropriate ``comparable'' short-term benchmark,
in accordance with section 771(5)(E)(ii) of the Act.
As we explained in our November 21, 1996, Decision Memorandum on
Appropriate Benchmark for Preferential Short-Term Financing, we have
determined that the appropriate comparable short-term benchmark is the
``Cash Credit'' interest rate reported by the Government of India
(``GOI'') in its March 13, 1996, questionnaire response. According to
GOI and Bank officials, the ``cash credit'' interest rate is for
domestic working capital finance, comparable to pre- and post-shipment
export working capital finance. See Verification of the Government of
India Questionnaire Responses at 4-6 (November 19, 1996) (``GOI
Verification Report'') (public version, on file in the public file of
the Central Records Unit, Room B-099 of the Department of Commerce).
During the POR, this rate was 16.5 percent. We compared this benchmark
to the interest rate charged on pre-shipment rupee loans and found that
for loans granted under this program, the interest rate charged was
lower than the ``cash credit'' benchmark. Accordingly, this program
continues to be countervailable because the interest rate on these
loans is less than what a company would have to pay on a comparable
short-term loan. See section 771(5)(E)(ii) of the Act.
Eleven of the fifteen respondent companies used pre-shipment export
loans for shipments of subject castings to the United States during the
POR. To calculate the benefit from the pre-shipment loans to these
eleven companies, we compared the actual interest paid on these loans
with the amount of interest that would have been paid using the
benchmark interest rate of 16.5 percent. Where the benchmark rate
exceeded the program rate, the difference between those amounts is the
benefit. If a company was able to segregate pre-shipment financing
applicable to subject merchandise exported to the United States, we
divided the benefit derived from only those loans by total exports of
subject merchandise to the United States. If a firm was unable to
segregate pre-shipment financing, we divided the benefit from all pre-
shipment loans by total exports. On this basis, we preliminarily
determine the net subsidy from this program for the producers/exporters
of the subject merchandise to be as follows:
------------------------------------------------------------------------
Net
subsidy
Net subsidies--producer/exporter rate
(percent)
------------------------------------------------------------------------
Calcutta Ferrous............................................ 0.12
Carnation Enterprise Pvt. Ltd............................... 0.24
Commex Corporation.......................................... 0.03
Crescent Foundry Co. Pvt. Ltd............................... 0.04
Dinesh Brothers............................................. 0.57
Kajaria Iron Castings Pvt. Ltd.............................. 0.40
Kejriwal Iron & Steel Works................................. 0.00
Nandikeshwari Iron Foundry Pvt. Ltd......................... 0.24
R.B. Agarwalla & Company.................................... 0.03
RSI Limited................................................. 0.59
Seramapore Industries Pvt. Ltd.............................. 0.04
Shree Rama Enterprise....................................... 0.00
Siko Exports................................................ 0.00
Super Iron Foundry.......................................... 0.25
Victory Castings Ltd........................................ 0.25
------------------------------------------------------------------------
2. Pre-Shipment Credit in Foreign Currency (``PCFC'')
On November 8, 1993, the GOI introduced a modified pre-shipment
financing scheme, Pre-Shipment Credit in Foreign Currency, to help
exporters obtain additional export credit at internationally
competitive interest rates. Under this scheme, commercial banks may
extend PCFC loans in all convertible currencies for a period up to 180
days on the basis of a firm's export order or irrevocable letter of
credit. Because the bank's investment is denominated in foreign
currency, this financing is properly viewed as foreign currency
denominated financing. Accordingly, Indian commercial banks may draw
upon foreign exchange balances in Exchange Earners' Foreign Currency
Accounts, and Resident and Non-Resident Foreign Currency Accounts as a
source of funds. Commercial banks may also raise lines of credit
abroad. Under RBI regulations,
[[Page 64672]]
however, commercial banks may not pay more than one (1.0) percent over
the six month London Interbank Offering Rate (``LIBOR'') on overseas
lines of credit.
The interest rate charged by commercial banks on PCFC loans is
linked to LIBOR, and, as per RBI regulations, may not exceed two (2.0)
percent over LIBOR. See GOI Verification Report, Exhibit 6 at 11 and
18. Because LIBOR varies on a daily basis, the actual interest rate on
a PCFC loan may, therefore, vary depending on when the loan was taken
out. Interest on PCFC loans is paid on the foreign currency amount of
the loan. Banks may extend the credit period beyond 180 days and charge
additional interest of two (2.0) percent above the rate charged for the
initial 180 day period. If export has not taken place within 360 days,
or if the export order is canceled, banks may liquidate the loan by
selling the equivalent amount of foreign currency (principal plus
interest) at the selling foreign exchange rate prevailing on the day of
liquidation. The interest recovered on the liquidated loan will be
charged on the rupee equivalent of the principal amount at the rate of
``Export Credit Not Otherwise Specified,'' plus a penalty rate of two
(2.0) percent. Until October 17, 1994, this rate was set by the RBI at
15.0 percent (not including the penalty). Thereafter, commercial banks,
were free to determine the rate. As of May 18, 1994, Indian commercial
banks could also extend PCFC loans under a line of credit, or ``running
account facility,'' similar to the line of credit under the pre-
shipment rupee financing scheme described above.
Receipt of PCFC loans is contingent upon export performance.
Therefore, we determine that this program constitutes an export
subsidy, in accordance with section 771(5A)(B) of the Act, to the
extent that the interest rate on these loans is less than what a
company would have to pay on a comparable commercial short-term loan.
Because PCFC loans are denominated in foreign currency, our normal
practice would be to use a foreign currency benchmark, which would be
the interest rate on alternative foreign-indexed loans in India.
However, we have not been able to find such a benchmark, and have,
therefore, used as a benchmark the rupee-denominated benchmark interest
rate, adjusted to take into account the ``expected'' movements in the
rupee/dollar exchange rate. (PCFC loans taken out by castings exporters
were dollar-denominated.) We did this by comparing the spot rate on the
day the PCFC loan was taken out with the six-month forward exchange
rates. Because we had only limited data on forward rates, we could not
match the forward rates with the period covered by the loan terms. We
therefore used the forward exchange rate that most closely matched the
loan period. We compared the adjusted benchmark to the interest rate
charged on PCFC loans and found that for loans granted under this
program the interest rate charged was lower than the benchmark.
Therefore, in accordance with section 771(5)(E)(ii) of the Act, we
determine that this program confers countervailable benefits.
One of the fifteen respondent companies used PCFC financing for
shipments of subject castings to the United States during the POR. To
calculate the benefit from the PCFC loans to this company, we compared
the actual interest paid on these loans with the amount of interest
that would have been paid using the adjusted benchmark interest. If the
benchmark rate exceeded the program rate, the difference between those
amounts is the benefit. Because the company was unable to segregate
PCFC financing applicable to subject merchandise exported to the United
States, we divided the benefit from all PCFC loans by total exports. On
this basis, we preliminarily determine the net subsidy from this
program to be 0.45 percent for Calcutta Ferrous and 0.00 percent for
all other producers/exporters of the subject merchandise.
3. 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 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. In general, post-shipment loans are
granted for a period of up to 90 days. The interest rate charged on
these loans was 13.0 percent during the POR. For loans not repaid
within the negotiated number of days (90 days maximum), banks must
charge interest at 15.0 percent for the number of days the loan was
overdue. If the loan is not repaid within 180 days, exporters lose the
concessional interest rates on this financing, and interest is charged
at 20.0 percent for the duration of the loan. As of October 18, 1994,
banks could charge commercial interest rates on post-shipment loans not
repaid within 180 days. These rates are based on the PLR, and ranged
from 15.0 percent to 22.0 percent during 1994.
In the 1993 Indian Castings Final Results, the Department found
this program to be an export subsidy, because receipt of the post-
shipment financing was contingent upon export performance. The
Department also found that the program conferred countervailable
benefits, because the interest rates were preferential. For reasons
stated in the prior section for pre-shipment financing above, we are
using the ``cash credit'' interest rate as our benchmark. Because loans
under this program are discounted, and the effective rate paid by
exporters on these loans is a discounted rate, we calculated from the
``cash credit'' benchmark a discount rate of 14.16 percent for the POR.
We compared this benchmark to the interest rate charged on post-
shipment loans and found that the program interest rate charged was
lower than the benchmark. Therefore, in accordance with section
771(5)(E)(ii) of the Act, this program continues to be countervailable,
because the interest rate on these loans is less than what a company
would have to pay on a comparable commercial short-term loan.
During the POR, two of the fifteen respondent companies made
payments on post-shipment loans for shipments of subject castings to
the United States. to calculate the benefit from these preferential
loans we followed the same short-term loan methodology discussed above
for pre-shipment financing. Because the company was unable to segregate
post-shipment financing applicable to subject merchandise exported to
the United States, we divided the benefit from all post-shipment loans
by total exports. On this basis, we preliminarily determine the net
subsidy from this program to be 0.03 percent for Dinesh Brothers Pvt.
Ltd, 0.02 percent for Super Iron Foundry and 0.00 percent for all other
producers/exporters of the subject merchandise.
4. Post-Shipment Export Credit in Foreign Currency (``PSCFC'')
On January 1, 1992, the GOI introduced a modified post-shipment
financing scheme, i.e., post-shipment export credit in foreign
currency. Under this modified scheme, exporters may discount foreign
currency export bill at foreign currency interest rates linked to
LIBOR. Loans under this financing scheme are not provided to the
exporter in the foreign currency, but the post-shipment credit
liability of the exporter is denominated in foreign currency, which is
then liquidated with export proceeds in foreign currency. PSCFC loans
are normally granted for a period of up to 180 days and the interest
rate is fixed and announced by the RBI. See GOI Verification Report at
2-3 and Exhibit 6. The interest amount,
[[Page 64673]]
calculated at the applicable foreign currency interest rate, is
deducted from the total amount of the bill, and the exporter's account
is credited for the rupee equivalent of the net foreign currency
amount. During the POR, the interest rate for PSCFC loans was 6.5
percent for the negotiated term of the loan (up to 180 days). Interest
for overdue loans was charged at 8.5 percent. If the loan is not repaid
within 30 days beyond the negotiated due date, the loan is converted
into rupee credit, and interest is charged at a commercial interest
rate over the entire loan period. During the POR, non-export related
short-term commercial interest rates in India ranged from 15.0 to 22.0
percent. Where the overseas customer defaults and the export bill
cannot be liquidated with export proceeds, the exporter must repay the
rupee equivalent of the bill at the exchange rate prevailing on the day
of liquidation by the bank.
In the 1993 Indian Castings Final Results, the Department found
this program to be an export subsidy, and thus countervailable, because
receipt of PSCFC loans was contingent upon export performance, and the
interest rates were preferential. We also stated in the 1993
administrative review that where loans were denominated in foreign
currency, such as PSCFC, our normal practice would be to use a foreign
currency benchmark to determine whether the loans are preferential.
Because we were unable to locate an interest rate for alternative
foreign currency-indexed loans in India, we adjusted the rupee-
denominated SSI benchmark interest rate, taking into account movements
in the rupee-dollar exchange rate over the term of the loan (all PSCFC
loans by castings exporters were dollar-denominated). However, during
this administrative review we obtained additional information
concerning the operation of the PSCFC program which has led us to
modify this approach.
Under the PSCFC program, companies can elect to have export bills
converted into rupees using either the spot rate of exchange or the
forward rate of exchange. If the spot rate of exchange is used, and the
bank (holding the bill) realizes and exchange rate gain due to exchange
rate movements up to the date the bill comes due, the bank must, by
law, transfer this gain to the exporter. On the other hand, if the bank
suffers an exchange rate loss, exporters, by law, must cover that loss.
See GOI Verification Report at 5, and Memorandum Re: Meeting with Bank
of America Officials at 3 (November 21, 1996) (public document, on file
in the public file of the Central Records Unit, Room B-099 of the
Department of Commerce). Thus, the bank, in effect, faces an exchanges
rate that is fixed over the ``life of the bill.'' Under such
circumstances, where the rupee value of the bill--from the bank's
standpoint--is, in fact, fixed at the time of discount, the rate of
discount measured in either dollars or rupees is the same. Therefore,
the PSCFC discount rate can be viewed equivalently as either a dollar-
denominated rate or a rupee-denominated rate. If viewed as a dollar-
denominated rate, no exchange rate adjustment to the rupee-denominated
benchmark is warranted, because the banks face no exchange rate risks
in holding the bills. Thus, however the PSCFC discount rate is viewed,
a rupee-benchmark is appropriate for benefit calculation purposes where
the exporter opts to convert his bills using the spot rate of exchange.
Where the exporter opts, instead, to convert bills using the
forward rate of exchange, the PSCFC discount rate is properly viewed as
dollar-denominated, but a downward adjustment to this rate is warranted
due to the forward premium that attached to the dollar throughout the
POR. Use of the forward rate transferred this premium to the exporter,
increasing the rupees (and dollar-equivalent) the bank pays the
exporter at the time of discount. Since the face value (in dollars) of
the bill remains fixed, this increase in the dollar-equivalent paid to
the exporter effectively reduces the discount rate charged by the bank.
Because we attempt to compare effective interest rates to effective
interest rates, it was necessary to adjust the interest rate for
exporters that opted to convert their bills at the forward rate of
exchange. Accordingly, the Department used a dollar-denominated
benchmark rate and reduced the PSCFC discount rate by the forward
premium rate prevailing at the time of discount. Because we had only
limited data on forward rates, we could not match exactly forward rates
with bill specific discount periods. Therefore, we have used forward
rates that most closely matched the discounting period.
For reasons stated in the pre-shipment financing section above, we
are using the ``cash credit'' interest rate as our benchmark for PSCFC
loans. Because loans under this program are discounted, and the
effective rate paid by exporters on these loans is a discounted rate,
we derived a benchmark discount rate of 14.16 percent for the POR.
However, as stated above, where exporters converted their bills at the
forward rate of exchange, we adjusted the rupee-denominated discount
benchmark by expected movements in the exchange rate over the term of
the loan. We compared this benchmark discount rate to the interest rate
charged on PSCFC loans and found that the program interest rate charged
was lower than the benchmark. Therefore, in accordance with section
771(5)(E)(ii) of the Act, this program continues to confer
countervailable benefits, because the interest rates on these loans are
less than what a company would have to pay on a comparable commercial
short-term loan.
During the POR, thirteen of the fifteen respondent companies made
payments on PSCFC loans for shipments of subject castings to the United
States. 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 or exports of the
subject merchandise to the United States, depending on whether the
company was able to tie each loan to individual destinations. On this
basis, we preliminarily determine the net subsidy from this program to
be as follows:
------------------------------------------------------------------------
Net
subsidy
Net subsidies--producer/exporter rate
(percent)
------------------------------------------------------------------------
Calcutta Ferrous............................................ 1.91
Carnation Enterprise Pvt. Ltd............................... 0.14
Commex Corporation.......................................... 0.91
Crescent Foundry Co. Pvt. Ltd............................... 0.59
Dinesh Brothers............................................. 1.45
Kajaria iron Castings Pvt. Ltd.............................. 3.54
Kejriwal Iron & Steel Works................................. 0.10
Nandikeshwari Iron Foundry Pvt. Ltd......................... 2.74
R.B. Agarwalla & Company.................................... 0.67
RSI Limited................................................. 2.21
Seramapore Industries Pvt. Ltd.............................. 2.15
Shree Rama Enterprise....................................... 0.00
Siko Exports................................................ 2.23
Super Iron Foundry.......................................... 0.00
Victory Castings Ltd........................................ 1.77
------------------------------------------------------------------------
5. Income Tax Deductions Under Section 80HHC
Under section 80HHC of the Income Tax Act, the GOI allows exporters
to deduct profits derived from the export of goods and merchandise from
taxable income. In the 1988 Indian Castings Final Results, the
Department found this program to be an export subsidy, and thus
countervailable, because receipt of benefits was contingent upon export
performance. No new information or evidence of changed circumstances
has been submitted in this proceeding to warrant reconsideration of
this finding. Therefore, in accordance with section 772(5A)(B) of the
Act, we continue to find that this program constitutes an export
subsidy, and that financial
[[Page 64674]]
contributions in the form of tax revenue not collected, are
countervailable.
To calculate the benefit to each company, we subtracted the total
amount of income tax the company actually paid during the review period
from the amount of tax the company would have paid during the review
period had it not claimed any deductions under section 80HHC. We then
divided this difference by the value of the company's total exports. On
this basis, we preliminarily determine the net subsidy from this
program to be as follows:
------------------------------------------------------------------------
New subsidy
Net subsidies--producer/exporter rate
(percent)
------------------------------------------------------------------------
Calcutta Ferrous.......................................... 3.19
Carnation Enterprise Pvt. Ltd............................. 2.15
Commex Corporation........................................ 0.45
Crescent Foundry Co. Pvt. Ltd............................. 7.52
Dinesh Brothers........................................... 0.00
Kajaria iron Castings Pvt. Ltd............................ 11.64
Kejriwal Iron & Steel Works............................... 15.04
Nandikeshwari Iron Foundry Pvt. Ltd....................... 0.28
R.B. Agarwalla & Company.................................. 3.86
RSI Limited............................................... 4.89
Seramapore Industries Pvt. Ltd............................ 7.02
Shree Rama Enterprise..................................... 13.09
Siko Exports.............................................. 2.28
Super Iron Foundry........................................ 0.05
Victory Castings Ltd...................................... 0.00
------------------------------------------------------------------------
6. Import Mechanisms (Sale of Licenses)
The GOI allows companies to transfer certain types of import
licenses to other companies in India. During the POR, producers/
exporters of subject castings sold Special Import Licenses. In prior
administrative reviews of this order, the Department found this program
to be an export subsidy, and thus countervailable, because companies
received these licenses based on their status as exporters. See, e.g.,
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 section
771(5A)(B) of the Act, we continue to find that this program
constitutes an export subsidy, and that financial contributions in the
form of the revenue earned on the sale of licenses, are
countervailable.
Because the sale of Special Import Licenses could not be tied to
specific shipments, we calculated the subsidies by dividing the total
amount of proceeds a company received from sales of these licenses by
the total value of its exports of all products to all markets. We
preliminarily determine the net subsidy from the sale of Special
Licenses to be as follows:
------------------------------------------------------------------------
Net
subsidy
Net subsidies--producer/exporter rate
(percent)
------------------------------------------------------------------------
Calcutta Ferrous............................................ 0.00
Carnation Enterprise Pvt. Ltd............................... 0.00
Commex Corporation.......................................... 0.00
Crescent Foundry Co. Pvt. Ltd............................... 0.00
Dinesh Brothers............................................. 0.00
Kajaria Iron Castings Pvt. Ltd.............................. 0.24
Kejriwal Iron & Steel Works................................. 0.06
Nandikeshwari Iron Foundry Pvt. Ltd......................... 0.00
R.B. Agarwalla & Company.................................... 0.00
RSI Limited................................................. 0.00
Seramapore Industries Pvt. Ltd.............................. 0.15
Shree Rama Enterprise....................................... 0.00
Siko Exports................................................ 0.00
Super Iron Foundry.......................................... 0.00
Victory Castings Ltd........................................ 0.00
------------------------------------------------------------------------
7. Exemption of Export Credit From Interest Taxes
Indian commercial banks are required to pay a three percent tax on
all interest accrued from borrowers. This tax is passed on to borrowers
in its entirety. As of April 1, 1993, the GOI exempted form the
interest tax all interest accruing or arising to any commercial bank on
loans and advances made to any exporter as export credit. In the 1993
Indian Castings Final Results, we determined that this exemption is an
export subsidy, and thus countervailable, because only interest
accruing or arising on loans and advances made to exporters in the form
of export credit is exempt from the interest tax. No new information or
evidence of changed circumstances has been submitted in this proceeding
to warrant reconsideration of this finding. Therefore, in accordance
with section 771(5A)(B) of the Act, we continue to find that this
program constitutes an export subsidy, and that financial
contributions, in the form of tax revenue not collected, are
countervailable.
During the POR, fourteen of the fifteen respondent companies made
interest payments on export related loans, through the pre- and post-
shipment financing schemes, and, thus, were exempted from the interest
tax under this export program. To calculate the benefit to each
company, we first determined the total amount of interest paid by each
producer/exporter of subject castings during the POR by adding all
interest payments made on pre- and post-shipment loans. Next, we
multiplied this amount by three percent, the amount of tax that the
interest would have been subject to without the exemption. We then
divided the benefit by the value of the company's total exports or
exports of subject merchandise to the United States, depending on
whether the export financing was on total exports or only exports of
subject casting to the United States. On this basis, we preliminarily
determine the net subsidy from this program to be as follows:
------------------------------------------------------------------------
Net
subsidy
Net subsides--producer/exporter rate
(percent)
------------------------------------------------------------------------
Calcutta Ferrous............................................ 0.09
Carnation Enterprise Pvt. Ltd............................... 0.03
Commex Corporation.......................................... 0.03
Crescent Foundry Co. Pvt. Ltd............................... 0.02
Dinesh Brothers............................................. 0.16
Kajaria Iron Castings Pvt. Ltd.............................. 0.24
Kejriwal Iron & Steel Works................................. 0.00
Nandikeshwari Iron Foundry Pvt. Ltd......................... 0.15
R.B. Agarwalla & Company.................................... 0.02
RSI Limited................................................. 0.12
Seramapore Industries Pvt. Ltd.............................. 0.06
Shree Rama Enterprise....................................... 0.00
Siko Exports................................................ 0.13
Super Iron Foundry.......................................... 0.07
Victory Castings Ltd........................................ 0.08
------------------------------------------------------------------------
B. Other Program Preliminarily Determined To Confer Subsidies Payment
of Premium Against Advance Licenses
The Advance License scheme allows exporters to import raw materials
used in the production of an exported product duty free. During the
1993 administrative review, we found that exporters could pay for goods
imported under an Advance License at two exchange rates under the
Liberalized Exchange Rate Management System (``LERMS''). The LERMS was
in effect from March 1, 1992 through February 28, 1993. Under the
LERMS, the GOI maintained a dual exchange rate system where all foreign
currency export proceeds were remitted at two exchange rates: Forty
percent of the export value was exchanged at the official RBI rate and
sixty percent at the (higher) market-determined rate. Purchases of most
imports were made at the market exchange rate. This applied to both
exporters and non-exporters. Exporters holding Advance Licenses under
the Duty Exemption Scheme, however, could purchase imports at the dual
exchange rates. Because forty percent of the value of the imported
goods was exchanged at the lower official exchange rate, the net cost
of these goods to the exporter was lowered. Advance Licenses are issued
to companies based on their status as exporters. Therefore, in the 1993
review, we determined that provisions allowing exporters to import
goods at exchange rates more favorable than those available to non-
exporters
[[Page 64675]]
was an export subsidy, and thus countervailable. See 1993 Indian
Castings Final Results. We verified that the LERMS was terminate
effective February 28, 1993.
During the POR, however, exporters could obtain a premium from the
GOI equal to eight (8.0) percent of the value of their unutilized
Advance Licenses. The purpose of the premium is to compensate exporters
for ``losses'' incurred due to the equalization of exchange rates in
March 1993. To qualify for this premium, companies must have exported
goods prior to March 1993 and realized export proceeds at the 60/40
ratio. These companies must also have experienced delays in the
delivery of imported raw material inputs under an Advance License for
the exports. To fulfill the export obligation, these companies had to
use domestically-soured inputs. Under the Advance License scheme,
exporters then may obtain special permission from licensing authorities
to dispose of the raw material inputs that were imported duty free in
their own production or by transferring them to another company. If the
goods are transferred for use in domestically sold goods, the imported
goods will subject to duty. In either case, the exporter must show that
the export obligation has been met for which the company imported duty
free raw materials. However, because the exchange rates were equalized,
the exporters would now have to pay for the Advance License imports at
the full market exchange rate. Thus, the eight percent premium is
designed to compensate the exporter for the fact that export proceeds
were realized at lower exchange rates, while the raw material imports
intended for use in the exported goods were paid for at higher exchange
rates.
Receipt of the premium is limited to companies that imported raw
materials under an Advance License. Because Advance Licenses are issued
to companies based on their status as exporters, we determine that
receipt of this compensation is an export subsidy, and thus
countervailable. See section 771(5A)(B) of the Act. During the POR,
only Dinesh Brothers Pvt. Ltd. received the premium against Advance
Licenses. We calculated the benefit to Dinesh by dividing the amount of
the compensation by the value of the company's total exports during
1994. On this basis, we preliminarily determine the net subsidy from
this program to be 3.65 percent ad valorem for Dinesh Brothers and 0.00
percent for all other companies.
II. 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 period of review:
1. Market Development Assistance (MDA).
2. Rediscounting of Export Bills Abroad.
3. International Price Reimbursement Scheme (IPRS).
4. Cash Compensatory Support Program (CCS).
5. Programs Operated by the Small Industries Development Bank of
India (SIDBI).
6. Export Promotion Replenishment Scheme (EPRS) (IPRS Replacement).
7. Export Promotion Capital Goods Scheme.
8. Benefits for Export Oriented Units and Export Processing Zones.
9. Special Imprest Licenses.
10. Special Benefits.
11. Duty Drawback on Excise Taxes.
Preliminary Results of Review
In accordance with section 355.22(c)(4)(ii) of the Department's
Interim Regulations, we calculated an individual subsidy rate for each
producer/exporter subject to this administrative review. For the period
January 1, 1994 through December 31, 1994, we preliminarily determine
the net subsidy for the reviewed companies to be as follows:
------------------------------------------------------------------------
Net
subsidy
Net subsidies--producer/exporter rate
(percent)
------------------------------------------------------------------------
Calcutta Ferrous............................................ 5.77
Carnation Enterprise Pvt. Ltd............................... 2.56
Commex Corporation.......................................... 1.42
Crescent Foundry Co. Pvt. Ltd............................... 8.16
Dinesh Brothers............................................. 5.85
Kajaria Iron Castings Pvt. Ltd.............................. 16.06
Kejriwal Iron & Steel Works................................. 15.21
Nandikeshwari Iron Foundry Pvt. Ltd......................... 3.40
R.B. Agarwalla & Company Pvt. Ltd........................... 4.59
RSI Limited................................................. 7.82
Seramapore Industries Pvt. Ltd.............................. 9.43
Shree Rama Enterprise....................................... 13.90
Siko Exports................................................ 4.65
Super Iron Foundry.......................................... 0.39
Victory Castings Ltd........................................ 2.10
------------------------------------------------------------------------
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. As provided for in the Act, any rate less than 0.5 percent
ad valorem in an administrative review is de minimis. Accordingly, for
those exporters with de minimis rates, no countervailing duties will be
assessed or cash deposits required.
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
Sec. 355.22(a) of the Interim Regulations. Pursuant to 19 CFR
355.22(g), 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), the antidumping regulation on automatic assessment, which is
identical to 19 CFR 355.33(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 are those established in the most recently completed
administrative proceeding. 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, 1994 through December 31, 1994, the assessment rates
applicable to all non-reviewed companies covered
[[Page 64676]]
by this order are the cash deposit rates in effect at the time of
entry.
Public Comment
Parties to the proceeding may request disclosure of the calculation
methodology and interested parties may request a hearing not later than
10 days after the date of publication of this notice. Interested
parties may submit written arguments in case briefs on these
preliminary results within 30 days of the date of publication. Rebuttal
briefs, limited to arguments raised in case briefs, may be submitted
seven days after the time limit for filing the case brief. 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 seven days after the
scheduled date for submission of rebuttal briefs. Copies of case briefs
and rebuttal briefs must be served on interested parties in accordance
with 19 CFR 355.38.
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 355.38, 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 in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)).
Dated: November 27, 1996.
Robert S. LaRussa,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-31094 Filed 12-5-96; 8:45 am]
BILLING CODE 3510-D5-M