[Federal Register Volume 64, Number 74 (Monday, April 19, 1999)]
[Notices]
[Pages 19125-19134]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-9761]
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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
[[Page 19126]]
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).
[[Page 19128]]
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
[[Page 19129]]
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