[Federal Register Volume 71, Number 152 (Tuesday, August 8, 2006)]
[Notices]
[Pages 45037-45044]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-12813]
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DEPARTMENT OF COMMERCE
International Trade Administration
(C-533-825)
Notice of Preliminary Results and Rescission, in Part, of
Countervailing Duty Administrative Review: Polyethylene Terephthalate
Film, Sheet, and Strip from India
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
SUMMARY: The Department of Commerce (the Department) is conducting an
administrative review of the countervailing duty order on polyethylene
terephthalate (PET) film from India for the period January 1, 2004
through December 31, 2004. We preliminarily determine that subsidies
are being provided on the production and export of PET film from India.
See the ``Preliminary Results of Administrative Review'' section,
below. If the final results remain the same as the preliminary results
of this review, we will instruct U.S. Customs and Border Protection
(CBP) to assess countervailing duties. Interested parties are invited
to comment on the preliminary results of this administrative review.
See the ``Public Comment'' section of this notice. In addition, we are
rescinding this review with respect to Garware Polyester Limited
(Garware). See the ``Partial Rescission of Review'' section, below.
EFFECTIVE DATE: August 8, 2006
FOR FURTHER INFORMATION CONTACT: Elfi Blum, Nicholas Czajkowski, or
Toni Page, AD/CVD Operations, Office 6, Import Administration,
International Trade Administration, U.S. Department of Commerce, 14th
Street and Constitution Avenue, NW, Washington, DC 20230; telephone:
(202) 482-0197, (202) 482-1395, or (202) 482-1398, respectively.
SUPPLEMENTARY INFORMATION:
Background
On July 1, 2002, the Department published in the Federal Register
the countervailing duty (CVD) order on PET film from India. See
Countervailing Duty Order: Polyethylene Terephthalate Film, Sheet and
Strip (PET Film) from India, 67 FR 44179 (July 1, 2002) (PET Film
Order). On July 1, 2005, the Department published in the Federal
Register a notice of opportunity to request an administrative review of
this order. See Antidumping or Countervailing Duty Order, Finding, or
Suspended Investigation; Opportunity to Request Administrative Review,
70 FR 38099 (July 1, 2005). On July 27, 2005, MTZ Polyfilms, Ltd.
(MTZ), and on July 29, 2005, Jindal Poly Films Limited of India
(Jindal), formerly named Jindal Polyester Limited, Indian producers and
exporters of subject merchandise, requested that the Department conduct
an administrative review of the CVD order on PET film from India with
respect to their exports to the United States. On July 29, 2005, Dupont
Teijin Films, Mitsubishi Polyester Film of America, and Toray Plastics
(America), (collectively, petitioners), requested that the Department
conduct an administrative review of the CVD order on PET film from
India with respect to Jindal and Polyplex Corporation Ltd. (Polyplex)
(collectively, respondents). Also, on August 1, 2005, Garware requested
that the Department conduct an administrative review of the CVD order
on PET film from India with respect to its exports to the United
States.
On August 19, 2005, MTZ withdrew its request for review of the CVD
order of PET film from India. See Memorandum to File through Howard
Smith from Drew Jackson: ``Withdrawal of Countervailing Duty
Administrative Review Request'' (August 23, 2005) (on file in the
Central Records Unit (CRU), room B-099 of the main Commerce building).
Since this company was the sole requestor for an administrative review,
and since its withdrawal occurred prior to the date of initiation, we
did not include this company in the initiation of the administrative
review. On August 29, 2005, the Department initiated an administrative
review of the CVD order on PET film from India covering Jindal,
Garware, and Polyplex, for the period January 1, 2004 through December
31, 2004. See Initiation of Antidumping and Countervailing Duty
Administrative Reviews and Requests for Revocation in Part, 70 FR 51009
(August 29, 2005).
The Department issued questionnaires to the Government of India
(GOI) and all three respondents. On September 14, 2005, pursuant to 19
CFR Sec. 351.213(d)(1), Garware timely withdrew its request for an
administrative review of the CVD order on PET film from India. Because
no other party requested an administrative review of this respondent,
the Department is rescinding its review with respect to Garware. See
the ``Partial Rescission of Review'' section below.
On September 29, 2005, the GOI submitted its questionnaire
response. Jindal and Polyplex submitted their questionnaire responses
on October 3, 2005 and October 4, 2005, respectively. The Department
issued its first supplemental questionnaires to Jindal and Polyplex on
November 4, 2005 and November 7, 2005, respectively. On November 28,
2005, both Jindal and Polyplex submitted their first supplemental
responses. On February 21, 2006, the Department extended the
preliminary results until July 31, 2006. See Extension of Time Limit
for the Preliminary Results of Administrative Review: Polyethylene
Terephthalate (PET) Film from India, 71 FR 8840 (February 21, 2006). On
April 14, 2006, the Department issued a second supplemental
questionnaire to Jindal and Polyplex, and its first supplemental
questionnaire to the GOI. The GOI submitted its response to the
supplemental questionnaire on April 28, 2006, and Jindal and Polyplex
[[Page 45038]]
responded on May 8, 2006. On June 20, 2006, the Department issued a
second supplemental questionnaire to the GOI, and third supplemental
questionnaires to Jindal and Polyplex. The GOI submitted its response
on June 27, 2006, and Jindal and Polyplex responded on July 5, 2006.
Also, on July 5, 2006, the Department issued its third supplemental
questionnaire to the GOI, to which the GOI submitted its response on
July 12, 2006.
Verification
As provided in section 782(i)(3) of the Tariff Act of 1930, as
amended (the Act), we intend to conduct verification of the GOI,
Jindal, and Polyplex questionnaire responses following the issuance of
the preliminary results.
Scope of the Order
For purposes of the order, the products covered are all gauges of
raw, pretreated, or primed Polyethylene Terephthalate Film, Sheet and
Strip, whether extruded or coextruded. Excluded are metallized films
and other finished films that have had at least one of their surfaces
modified by the application of a performance-enhancing resinous or
inorganic layer of more than 0.00001 inches thick. Imports of PET film
are classifiable in the Harmonized Tariff Schedule of the United States
(HTSUS) under item number 3920.62.00. HTSUS subheadings are provided
for convenience and customs purposes. The written description of the
scope of this proceeding is dispositive.
Partial Rescission of Review
As provided in 19 CFR Sec. 351.213(d)(1), ``the Secretary will
rescind an administrative review under this section, in whole or in
part, if a party that requested a review withdraws the request within
90 days of the date of publication of notice of initiation of the
requested review.'' Garware withdrew its review request within 90 days
of the date of publication of the notice of initiation of the instant
administrative review. Because no other interested parties requested an
administrative review of Garware, the Department is rescinding the
instant administrative review of this company.
Subsidies Valuation Information
Allocation Period
Under 19 CFR Sec. 351.524(d)(2)(i), we will presume the allocation
period for non-recurring subsidies to be the average useful life (AUL)
prescribed by the Internal Revenue Service (IRS) for renewable physical
assets of the industry under consideration (as listed in the IRS's 1977
Class Life Asset Depreciation Range System, and as updated by the
Department of the Treasury). This presumption will apply unless a party
claims and establishes that these tables do not reasonably reflect the
AUL of the renewable physical assets of the company or industry under
investigation. Specifically, the party must establish that the
difference between the AUL from the tables and the company-specific AUL
or country-wide AUL for the industry under investigation is
significant, pursuant to 19 CFR Sec. 351.524(d)(2)(ii). For assets
used to manufacture plastic film, such as PET film, the IRS tables
prescribe an AUL of 9.5 years.
In the investigative segment of this proceeding, the Department
determined that Polyplex had rebutted the presumption and applied a
company-specific AUL of 18 years for Polyplex. See Final Affirmative
Countervailing Duty Determination: Polyethylene Terephthalate Film,
Sheet, and Strip (PET Film), 67 FR 34905 (May 16, 2002) (PET Film Final
Determination). In the previous review, the Department determined that
Jindal had rebutted the presumption and applied a company-specific AUL
of 17 years for Jindal. See Final Results of Countervailing Duty
Administrative Review: Polyethylene Terephthalate Film, Sheet, and
Strip from India, 69 FR 51063 (August 17, 2004) (First PET Film Review
- Final Results). Because there is no new evidence on the record that
would cause the Department to reconsider this decision in this review,
the Department has preliminarily determined to continue to use an AUL
of 17 years for Jindal and 18 years for Polyplex in allocating non-
recurring subsidies.
Benchmark Interest Rates and Discount Rates
For programs requiring the application of a benchmark interest
rate, 19 CFR Sec. 351.505(a)(1) states a preference for using an
interest rate that the company could have obtained on a comparable loan
in the commercial market. Also, 19 CFR Sec. 351.505(a)(3)(i)
stipulates that when selecting a comparable commercial loan that the
recipient ``could actually obtain on the market'' the Department will
normally rely on actual short-term and long-term loans obtained by the
firm. However, when there are no comparable commercial loans, the
Department may use a national average interest rate, pursuant to 19 CFR
Sec. 351.505(a)(3)(ii).
In addition, 19 CFR Sec. 351.505(a)(2)(ii) states that the
Department will not consider a loan provided by a government-owned
special purpose bank for purposes of calculating benchmark rates. The
Department has previously determined that the Industrial Development
Bank of India (IDBI) is a government-owned special purpose bank. See
First PET Film Review - Final Results and the accompanying Issues and
Decision Memorandum (Issues Memorandum - First Review), at 15-16. As
such, the Department did not use loans from the IDBI reported by Jindal
and Polyplex in its 2004 benchmark calculations.
Pursuant to 19 CFR Sec. 351.505(a)(2)(iv), if a program under
review is a government-provided, short-term loan, the preference would
be to use an annual average of the interest rates on comparable
commercial loans during the year in which the government-provided loan
was taken out, weighted by the principal amount of each loan. For this
review, the Department required both dollar-denominated and rupee-
denominated short-term loan benchmark rates to determine benefits
received under the Pre-Shipment Export Financing and Post-Shipment
Export Financing programs.
Both Jindal and Polyplex have provided information on rupee-
denominated short-term commercial loans outstanding during the period
of review (POR). Jindal provided the following rupee-denominated short-
term commercial loans: Inland Bill Discounting (IBD); Working Capital
Development Loans (WCDL); Cash Credit (CC); and Other Short-Term Loans.
Polyplex provided the following rupee-denominated short-term commercial
loans: IBD; WCDL; CC; Commercial Paper Loans; and Other Short-Term
Loans.
In previous reviews of this case, the Department has determined
that IBD loans are more comparable to pre-shipment and post-shipment
export financing loans than other types of rupee-denominated short-term
loans. See Preliminary Results and Rescission in Part of Countervailing
Duty Administrative Review: Polyethylene Terephthalate Film, Sheet, and
Strip from India, 70 FR 46483, 46485 (August 10, 2005) (Second PET Film
Review - Preliminary Results) (unchanged in the final results); and
Issues Memorandum - First Review at 10. There is no new information or
evidence of changed circumstances which would warrant reconsidering
this finding. Therefore, for these preliminary results, we continue to
use IBD loans as the basis for the short-term rupee-denominated
benchmark for all applicable programs for both Jindal and Polyplex.
[[Page 45039]]
Polyplex provided information on US dollar-denominated WCDL
received during the POR to use as the basis for US dollar-denominated
short-term benchmark rates. The Department, therefore, has calculated
Polyplex's US dollar-denominated short-term benchmark rates based on
its US dollar-denominated WCDLs.
Jindal did not have any US dollar-denominated short-term loans
during the POR. Therefore, in accordance with 19 CFR Sec.
351.505(a)(3)(ii), the Department used a national average dollar-
denominated short-term interest rate, as reported in the International
Monetary Fund's publication International Financial Statistics (IMF
Statistics) for Jindal.
For those programs requiring a rupee-denominated discount rate or
the application of a rupee-denominated long-term benchmark rate, we
used, where available, company-specific, weighted-average interest
rates on comparable commercial long-term, rupee-denominated loans. For
this review, the Department required benchmarks to determine benefits
received under the Export Promotion Capital Goods Scheme (EPCGS) and
Export Oriented Units (EOU) programs. Respondents did not have
comparable commercial long-term rupee-denominated loans for all
required years; therefore, for those years for which we did not have
company-specific information, we relied on comparable long-term rupee-
denominated benchmark interest rates from the immediately preceding
year as directed by 19 CFR Sec. 351.505(a)(2)(iii). When there were no
comparable long-term, rupee-denominated loans from commercial banks
during either the year under consideration or the preceding year, we
used national average interest rates, pursuant to 19 CFR Sec.
351.505(a)(3)(ii), from the IMF Statistics.
Programs Preliminarily Determined to be Countervailable
1. Pre-Shipment and Post-Shipment Export Financing
The Reserve Bank of India (RBI), through commercial banks, provides
short-term pre-shipment financing, or ``packing credits,'' to
exporters. Upon presentation of a confirmed export order or letter of
credit to a bank, companies may receive pre-shipment loans for working
capital purposes (i.e., purchasing raw materials, warehousing, packing,
transportation, etc.) for merchandise destined for exportation.
Companies may also establish pre-shipment credit lines upon which they
draw as needed. Limits on credit lines are established by commercial
banks and are based on a company's creditworthiness and past export
performance. Credit lines may be denominated either in Indian rupees or
in a foreign currency. Commercial banks extending export credit to
Indian companies must, by law, charge interest at rates determined by
the RBI.
Post-shipment export financing consists of loans in the form of
discounted trade bills or advances by commercial banks. Exporters
qualify for this program by presenting their export documents to the
lending bank. The credit covers the period from the date of shipment of
the goods to the date of realization of the proceeds from the sale to
the overseas customer. Under the Foreign Exchange Management Act of
1999, exporters are required to realize proceeds from their export
sales within 180 days of shipment. Post-shipment financing is,
therefore, a working capital program used to finance export
receivables. In general, post-shipment loans are granted for a period
of no more than 180 days.
In the investigation, the Department determined that the pre-
shipment and post-shipment export financing programs conferred
countervailable subsidies on the subject merchandise because: (1) The
provision of the export financing constitutes a financial contribution
pursuant to section 771(5)(D)(i) of the Act as a direct transfer of
funds in the form of loans; (2) the provision of the export financing
confers benefits on the respondents under section 771(5)(E)(ii) of the
Act in as much as the interest rates given under these programs are
lower than commercially available interest rates; and (3) these
programs are specific under section 771(5A)(B) of the Act because they
are contingent upon export performance. See Final Affirmative
Countervailing Duty Determination: Polyethylene Terephthalate Film,
Sheet, and Strip (PET Film), 67 FR 34905 (May 16, 2002) (PET Film Final
Determination) and accompanying Issues and Decision Memorandum, at
``Pre-Shipment and Post-Shipment Financing'' (PET Film Final
Determination - Decision Memorandum). There is no new information or
evidence of changed circumstances which would warrant reconsidering
this finding. Therefore, for these preliminary results, we continue to
find this program countervailable.
The benefit conferred by the pre-shipment and post-shipment loans
is the difference between the amount of interest the company paid on
the government loan and the amount of interest it would have paid on a
comparable commercial loan (i.e., the short-term benchmark). Because
pre-shipment loans are tied to a company's exports rather than exports
of subject merchandise, we calculated the subsidy rate for these loans
by dividing the total benefit by the value of each respondent's total
exports during the POR. Because post-shipment loans are tied to
specific shipments of a particular product to a particular country, we
divided the total benefit from post-shipment loans tied to exports of
subject merchandise to the United States by the value of total exports
of subject merchandise to the United States during the POR. See 19 CFR
Sec. 351.525(b)(4). On this basis, we preliminarily determine the net
countervailable subsidy from pre-shipment export financing to be 0.02
percent ad valorem for Jindal, and 0.30 percent ad valorem for
Polyplex. We also preliminarily determine the net countervailable
subsidy provided to Jindal from post-shipment export financing to be
0.05 percent ad valorem. Polyplex did not receive any benefits under
the post-shipment export financing program during the POR.
2. Advance License Program (ALP)
Under the ALP, exporters may import, duty free, specified
quantities of materials required to manufacture products that are
subsequently exported. The exporting companies, however, remain
contingently liable for the unpaid duties until they have fulfilled
their export requirement. The quantities of imported materials and
exported finished products are linked through standard input-output
norms (SIONs) established by the GOI. During the POR, Jindal and
Polyplex used advance licenses to import certain materials duty free.
The Department previously found the 1997-2003 Export/Import
Guidelines underlying the ALP to be not countervailable. See PET Film
Final Determination. However, in the last administrative review, the
Department examined the 2002-2007 Export/Import Policy Guidelines
underlying the ALP and found the program to be countervailable because
the GOI does not have in place and does not apply a system that is
reasonable and effective for the purposes intended, in accordance with
19 CFR Sec. 351.519(a)(4). See Final Results of Countervailing Duty
Administrative Review: Polyethylene Terephthalate Film, Sheet, and
Strip from India, 71 FR 7534 (February 13, 2006) (Second PET Film
Review - Final Results), and accompanying Issues and Decision
Memorandum (Issues
[[Page 45040]]
Memorandum - Second Review). In that review, the Department found that
the ALP confers a countervailable subsidy because: (1) A financial
contribution, as defined under section 771(5)(D)(ii) of the Act, is
provided under the program, as the GOI provides the respondents with an
exemption of import duties; (2) the GOI does not have in place and does
not apply a system that is reasonable and effective for the purposes
intended in accordance with 19 CFR Sec. 351.519(a)(4), to confirm
which inputs, and in what amounts, are consumed in the production of
the exported products; thus, the entire amount of import duty exemption
earned by the respondent constitutes a benefit under section 771(5)(E)
of the Act; and (3) this program is contingent upon exportation and,
therefore, is specific under section 771(5A)(B) of the Act. See Issues
Memorandum - Second Review, at 3-5. There is no new information or
evidence of changed circumstances which would warrant reconsidering
this finding. Therefore, for these preliminary results, we continue to
find this program countervailable.
Pursuant to 19 CFR Sec. 351.524(c), exemptions of import duties on
imports consumed in production normally provide a recurring benefit.
Under this program, for 2004, Jindal and Polyplex did not have to pay
certain import duties for inputs that were used in the production of
merchandise. Thus, we treated the benefit provided under the ALP as a
recurring benefit. To calculate the subsidy, we first determined the
total value of duties exempted during the POR for each company. From
this amount, we subtracted the required application fees paid for each
license during the POR as an allowable offset to the actual amount in
accordance with section 771(6) of the Act (in order to receive the
benefits of the ALP, companies must pay application fees). We then
divided the resulting net benefit by the company's value of total
export sales. We did not include either respondents' ``deemed exports''
sales (i.e., sales of goods which do not leave the country) as part of
their total value of export sales for this or any program. We will
examine the issue of ``deemed exports'' further at verification and
invite parties to comment on this issue in their briefs. On this basis,
we preliminarily determine the net countervailable subsidy provided
under the ALP to be 5.33 ad valorem for Jindal and 2.07 percent ad
valorem for Polyplex.
3. Export Promotion Capital Goods Scheme (EPCGS)
The EPCGS provides for a reduction or exemption of customs duties
and excise taxes on imports of capital goods used in the production of
exported products. Under this program, producers pay reduced duty rates
on imported capital equipment by committing to earn convertible foreign
currency equal to four to five times the value of the capital goods
within a period of eight years. Once a company has met its export
obligation, the GOI will formally waive the duties on the imported
goods. If a company fails to meet the export obligation, the company is
subject to payment of all or part of the duty reduction, depending on
the extent of the export shortfall, plus penalty interest.
In the investigation, the Department determined that import duty
reductions provided under the EPCGS are a countervailable export
subsidy because the scheme: (1) Provides a financial contribution
pursuant to section 771(5)(D)(ii) of the Act in the form of revenue
foregone; and (2) provides a benefit under section 771(5)(E) of the Act
in the amount of the revenue foregone. Because this program is
contingent upon export performance, it is specific under section
771(5A)(B) of the Act. See PET Film Final Determination - Decision
Memorandum, at 7-8. There is no new information or evidence of changed
circumstances which would warrant reconsidering this finding.
Therefore, for these preliminary results, we continue to find this
program countervailable.
These import duty exemptions were provided for the purchase of
capital equipment. The preamble to our regulations states that if a
government provides an import duty exemption tied to major equipment
purchases, ``it may be reasonable to conclude that, because these duty
exemptions are tied to capital assets, the benefits from such duty
exemptions should be considered non-recurring.'' See Countervailing
Duties; Final Rule, 63 FR 65348, 65393 (November 25, 1998).
Accordingly, we are treating these exemptions as non-recurring benefits
in accordance with 19 CFR 351.524(c)(2)(iii).
Jindal and Polyplex reported that they imported capital goods under
the EPCGS in the years prior to and during the POR. Jindal received
various EPCGS licenses, which were for the production of: (1) Both
subject merchandise and non-subject merchandise; or (2) non-subject
merchandise. Polyplex received EPCGS licenses which indicated that it
was allowed to import capital goods for the production of: (1) subject
merchandise; (2) both subject merchandise and non-subject merchandise;
or (3) non-subject merchandise. Based on the information and
documentation submitted by Jindal and Polyplex, we cannot determine
that their respective EPCGS licenses are tied to the production of a
particular product within the meaning of 19 CFR Sec. 351.525(b)(5). As
such, we find that each company's respective EPCGS licenses benefit all
of the company's exports.
Polyplex met the export requirements for certain EPCGS licenses
prior to December 31, 2004 and the GOI has formally waived the relevant
import duties. For some of its licenses, however, Polyplex has not yet
met its export obligation as required under the program. Jindal has not
yet met its export obligation for any of its imports of capital goods
under the program. Therefore, although Jindal and Polyplex have
received a deferral from paying import duties when the capital goods
were imported, the final waiver on the obligation to pay the duties has
not yet been granted for many of these imports.
For Polyplex's imports for which the GOI has formally waived the
duties, we treat the full amount of the waived duty as a grant received
in the year in which the GOI officially granted the waiver. To
calculate the benefit received from the GOI's formal waiver of import
duties on Polyplex's capital equipment imports where its export
obligation was met prior to December 31, 2004, we considered the total
amount of duties waived (net of required application fees) to be the
benefit. Further, consistent with the approach followed in the
investigation, we determine the year of receipt of the benefit to be
the year in which the GOI formally waived Polyplex's outstanding import
duties. See PET Film Final Determination-Decision Memorandum, at
Comment 5. Next, we performed the ``0.5 percent test,'' as prescribed
under 19 CFR Sec. 351.524(b)(2), for each year in which the GOI
granted Polyplex an import duty waiver. Those waivers with values in
excess of 0.5 percent of Polyplex's total export sales in the year in
which the waivers were granted were allocated using Polyplex's company-
specific AUL, while waivers with values less than 0.5 percent of
Polyplex's total export sales were expensed in the year of receipt. See
``Allocation Period'' section, above.
As noted above, import duty reductions that Jindal and Polyplex
received on the imports of capital equipment for which they have not
yet met export obligations may have to be
[[Page 45041]]
repaid to the GOI if the obligations under the licenses are not met.
Consistent with our practice and prior determinations, we will treat
the unpaid import duty liability as an interest-free loan. See 19 CFR
Sec. 351.505(d)(1); and PET Film Final Determination-Decision
Memorandum, at ``EPCGS''; see also Final Affirmative Countervailing
Duty Determination: Bottle-Grade Polyethylene Terephthalate (PET) Resin
From India, 70 FR 13460 (March 21, 2005) (Final - Indian PET Resin).
The amount of the unpaid duty liabilities to be treated as an
interest-free loan is the amount of the import duty reduction or
exemption for which the respondent applied, but, as of the end of the
POR, had not been finally waived by the GOI. Accordingly, we find the
benefit to be the interest that Jindal and Polyplex would have paid
during the POR had they borrowed the full amount of the duty reduction
or exemption at the time of importation. See Second PET Film Review -
Preliminary Results, 70 FR at 46488 (unchanged in the final results);
see also (Final - Indian PET Resin).
As stated above, under the EPCGS program, the time period for
fulfilling the export commitment expires eight years after importation
of the capital good. Consequently, the date of expiration of the time
period to fulfill the export commitment occurs at a point in time more
than one year after the date of importation of the capital goods.
Pursuant to 19 CFR Sec. 351.505(d)(1), the benchmark for measuring the
benefit is a long-term interest rate because the event upon which
repayment of the duties depends (i.e., the date of expiration of the
time period to fulfill the export commitment) occurs at a point in time
that is more than one year after the date of importation of the capital
goods (i.e., under the EPCGS program, the time period for fulfilling
the export commitment is more than one year after importation of the
capital good). As the benchmark interest rate, we used the weighted-
average interest rate from all comparable commercial long-term, rupee-
denominated loans for the year in which the capital good was imported.
See the ``Benchmarks for Loans and Discount Rate'' section above for a
discussion of the applicable benchmark.
The benefit received under the EPCGS is the total amount of: (1)
the benefit attributable to the POR from the formally waived duties for
imports of capital equipment for which respondents met export
requirements by December 31, 2004, and/or (2) interest due on the
contingent liability loans for imports of capital equipment that have
not met export requirements. To calculate the benefit from the waived
duties for Polyplex, we took the total amount of the waived duties in
each year and treated each year's waived amount as a non-recurring
grant. We applied the grant methodology set forth in 19 CFR Sec.
351.524(d), using the discount rates discussed in the ``Benchmark
Interest Rates and Discount Rates'' section above to determine the
benefit amounts attributable to the POR.
To calculate the benefit from the contingent liability loans for
both Jindal and Polyplex, we multiplied the total amount of unpaid
duties under each license by the long-term benchmark interest rate for
the year in which the license was approved. We then summed these
amounts to determine the total benefit for each company.
For Jindal, we divided the benefit from the contingent liability
loans under the EPGCS by Jindal's total exports to determine a subsidy
of 2.85 percent ad valorem. For Polyplex, we summed the benefits
attributable to the POR from the duty waivers under the EPGCS with the
benefits from the contingent liability loans and divided that total by
Polyplex's total exports to determine a subsidy of 4.29 percent ad
valorem.
4. Income Tax Exemption Scheme 80HHC (80HHC)
Under section 80HHC of the Income Tax Act, the GOI allows exporters
to exclude profits derived from export sales from their taxable income.
In prior proceedings, the Department found this program to be a
countervailable export subsidy, because it is contingent upon export
performance and, therefore, specific in accordance with section
771(5A)(B) of the Act. Pursuant to section 771(5)(D)(ii) of the Act,
the GOI provides a financial contribution in the form of tax revenue
not collected. Finally, a benefit is conferred in the amount of the tax
savings in accordance with section 771(5)(E) of the Act. See Second PET
Film Review - Preliminary Results, 46488 (unchanged in the final
results).
To calculate the benefit under this program, we first calculated
the total amount of income tax each company would have paid during the
POR had it not claimed a tax deduction under section 80HHC and
subtracted from this amount the income taxes actually paid during the
POR. We then divided this benefit by each company's total export sales
consistent with 19 CFRSec. 351.525(b)(2). On this basis, we
preliminarily determine the net countervailable subsidy under section
80HHC to be 0.28 percent ad valorem for Jindal and 1.60 percent ad
valorem for Polyplex.
The GOI, Jindal, and Polyplex have argued that the 80HHC exemption
was phased out effective March 31, 2004, and have provided
documentation to support their claim. See Government of India's
Questionnaire Response, at Exhibit 10 (September 29, 2005); Jindal's
Questionnaire Response, at Exhibit 24a (October 3, 2005); and
Polyplex's Questionnaire Response, at Exhibit 23 (October 3, 2005).
According to these submissions, the 80HHC program ended March 31, 2004.
As a result, Jindal and Polyplex only claimed deductions of profits
derived from exported goods through March 31, 2004 in computing their
total taxable income during the POR. Due to the phase out of the 80HHC
program, both Jindal and Polyplex have requested that the Department
determine that the elimination of this deduction constitutes a program-
wide change under 19 CFR Sec. 351.526. In the Finance Act of 2000, the
GOI amended the Income Tax Act of 1961, stating that the 80HHC
exemption would be phased out on April 1, 2004. In addition, Jindal and
Polyplex submitted their October 31, 2005 tax returns (which cover the
tax year April 1, 2004 through March 31, 2005) in which neither company
claimed an 80HHC exemption. After analyzing the documentation on the
record, the Department preliminarily determines that there has been a
program-wide change with respect to the 80HHC Tax Exemption Scheme. If
we find in the final results of review that this program was terminated
in accordance with the provisions of 19 CFR Sec. 351.526, we will
include these subsidies in the assessment rate but exclude them from
the cash deposit rate.
5. Capital Subsidy
Polyplex received a capital infusion in 1989 from the GOI. This
subsidy was discovered at verification during the investigation. See
PET Film Final Determination-Decision Memorandum, at ``Capital
Subsidy.'' The Department determined at that time that there was
insufficient time to establish whether the program was specific under
section 771(5A)(D) of the Act. Thus, the Department stated its
intention to re-examine the program in a future administrative review
pursuant to 19 CFR Sec. 351.311(c)(2). Id. Based on the information
obtained during the verification in the investigation, the Department
determined that a financial contribution was provided by the GOI,
pursuant to section 771(5)(D)(i) of the Act, and a benefit, in the
amount of the capital subsidy, was received by
[[Page 45042]]
Polyplex under section 771(5)(E) of the Act.
In all previous administrative reviews, the Department has sent
questionnaires to the GOI, and Polyplex, seeking information that would
allow it to determine whether the capital subsidy program is specific
under section 771(5A) of the Act. Neither the GOI nor Polyplex was able
to provide any information regarding the subsidy. As facts available,
the Department determined that the subsidy was specific. See Second PET
Film Review - Preliminary Results, at 46489 (unchanged in the final
results).
In the current review, the Department again sent questionnaires to
the GOI and Polyplex, seeking information that would allow it to
determine whether the program is specific under section 771(5A) of the
Act. As in the previous reviews, Polyplex and the GOI reported that
they were unable to provide any information regarding the specificity
of this program due to the considerable amount of time that has elapsed
since the provision of the subsidy. There is no new information or
evidence of changed circumstances which would warrant reconsidering
this finding. Therefore, for these preliminary results, we continue to
find, as facts available, that the subsidy is specific under section
771(5A)(A) of the Act.
Because the benefit was provided through a capital grant, pursuant
to 19 CFR Sec. 351.524(c), the Department finds it to be non-
recurring. Thus, in calculating the subsidy for this program, we
performed the ``0.5 percent test,'' as prescribed under 19 CFR Sec.
351.524(b)(2). Because the grant exceeded 0.5 percent of Polyplex's
total sales in 1989, the year in which the capital grant was received,
the benefits were allocated over 18 years, the company-specific AUL. In
allocating this capital grant, we used the Department's standard
allocation methodology for non-recurring subsidies under 19 CFR Sec.
351.524(d). To calculate the net subsidy to Polyplex from this capital
subsidy, we divided the benefit attributable to the POR by the
company's total sales during the same period. On this basis, we
preliminarily determine the net countervailable subsidy provided to
Polyplex under this program to be 0.01 percent ad valorem.
6. Export Oriented Units (EOU)
Companies that are designated as an EOU are eligible to receive
various forms of assistance in exchange for committing to export all of
the products they produce, excluding rejects and certain domestic
sales, for five years. Companies designated as EOUs may receive the
following benefits: (1) duty-free importation of capital goods and raw
materials; (2) reimbursement of central sales taxes (CST) paid on
materials procured within India; (3) purchase of materials and other
inputs free of central excise duty; and (4) receipt of duty drawback on
furnace oil procured from domestic oil companies.
Consistent with the previous review, Jindal reported that it had
been designated as an EOU. See Second PET Film Review - Preliminary
Results, at 46489 (unchanged in the final results). Specifically,
Jindal reported receiving the following benefits: (1) The duty-free
importation of capital goods; (2) the reimbursement of CST paid on raw
materials and capital goods procured domestically; and (3) the purchase
of materials and other inputs free of central excise duty. For the
other two types of benefits received by Jindal, the Department
previously determined that the purchase of materials and/or inputs free
of central excise duty is not countervailable. See Final - Indian PET
Resin. The Department determined that the EOU program was specific,
within the meaning of section 771(5A)(B) of the Act, since the receipt
of benefits under this program was contingent upon export performance.
See Preliminary Affirmative Countervailing Duty Determination and
Alignment with Final Antidumping Duty Determination: Bottle-Grade
Polyethylene Terephthalate (PET) Resin From India, 69 FR 52866, 52870
(August 30, 2004) (unchanged in final determination) (PET Resin from
India - Preliminary Determination). There is no new information or
evidence of changed circumstances which would warrant reconsidering
this finding. Therefore, for these preliminary results, we continue to
find this program countervailable.
a. Duty-Free Importation of Capital Goods and Raw Materials
Under this program, an EOU is entitled to import, duty-free,
capital goods and raw materials for the production of exported goods in
exchange for committing to export all of the products it produces, with
the exception of sales in the Domestic Tariff Area over five years. The
Department previously determined that the duty-free importation of
capital goods provides a financial contribution and confers benefits
equal to the amount of exemptions and reimbursements of customs duties
and certain sales taxes. See sections 771(5)(D)(ii) and (E) of the Act.
See also PET Resin from India - Preliminary Determination, at 52870
(unchanged in final determination).
However, according to the GOI and Jindal, until an EOU demonstrates
that it has fully met its export requirements, the company retains a
contingent liability to repay the import duty exemptions. Jindal has
not yet met its export contingency and will owe the unpaid duties if
the export requirements are not met. Upon Jindal meeting its export
requirement, the Department will treat the unpaid duties as a grant. In
the meantime, consistent with 19 CFR Sec. 351.505(d)(1), until the
contingent liability for the unpaid duties is officially waived by the
GOI, we consider the unpaid duties to be an interest-free loan made to
Jindal at the time of importation. We determine the benefit to be the
interest that Jindal would have paid during the POR had it borrowed the
full amount of the duty reduction or exemption at the time of
importation. Pursuant to 19 CFR Sec. 351.505(d)(1), the benchmark for
measuring the benefit is a long-term interest rate because the event
upon which repayment of the duties depends (i.e., the date of
expiration of the time period to fulfill the export commitment) occurs
at a point in time that is more than one year after the date of
importation of the capital goods (i.e., under the EOU program, the time
period for fulfilling the export commitment is more than one year after
importation of the capital good). We used the long-term, rupee-
denominated benchmark interest rate discussed in the ``Benchmarks for
Loans and Discount Rate'' section above for each year in which capital
goods were imported as the benchmark.
The benefit for each year is the total amount of interest that
would have been paid if the firm had received a loan to pay the duties.
To calculate the subsidy, we divided the total amount of benefits under
the program during the POR by Jindal's total value of export sales. We
preliminarily determine the net countervailable subsidy provided to
Jindal through the duty-free importation of capital goods under the EOU
program to be 3.53 percent ad valorem.
b. Reimbursement of CST Paid on Materials Procured Domestically
Jindal was reimbursed for the CST it paid on raw materials and
capital goods procured domestically. The benefit associated with
domestically purchased materials is the amount of reimbursed CST
received by Jindal during the POR. The Department previously determined
that the reimbursement of CST paid on materials procured domestically
provides a financial contribution and confers benefits equal to the
amount of exemptions and reimbursements of sales
[[Page 45043]]
taxes pursuant to sections 771(5)(D)(ii) and (E) of the Act. See, e.g.,
Second Pet Film Review - Final Results, at 46490. Normally, tax
reimbursements, such as the CST, are considered to be recurring
benefits. However, a portion of the benefit of this program is tied to
a company's capital assets. As such, we would treat reimbursements
which are tied to capital goods as a non-recurring benefit pursuant to
19 CFR Sec. 351.524(c)(2)(iii). However, we performed the ``0.5
percent test,'' as prescribed under 19 CFR Sec. 351.524(b)(2) and find
that the amount of CST reimbursements tied to capital goods received
during the POR was less than 0.5 percent of total export sales for
2004. Therefore, the benefit is the amount of CST reimbursements
received during the POR. See 19 CFR Sec. 351.524(b)(2).
To calculate the benefit for Jindal, we first summed the total
amount of CST reimbursements for capital goods and raw materials
received during the POR. We divided this amount by the total value of
export sales during the POR. On this basis, we preliminarily determine
the countervailable subsidy provided to Jindal through the
reimbursement of CST under the EOU program to be 0.07 percent ad
valorem.
7. State Sales Tax Incentive Programs
According to the GOI, various state governments in India grant
exemptions to, or deferrals from, sales taxes in order to encourage
regional development. See Government of India's Questionnaire Response,
at 45 (September 29, 2005). These incentives allow privately-owned
(i.e., not 100 percent owned by the GOI) manufacturers, that are in
selected industries and which are located in the designated regions, to
sell goods without charging or collecting state sales taxes. As a
result of these programs, the respondents did not pay sales taxes on
their purchases from suppliers located in certain states. The states
from which Jindal and Polyplex made purchases but did not pay sales
taxes during the POR are the states of: Uttaranchal/Uttar Pradesh (SOU/
SUP), Maharashtra (SOM), West Bengal, Gujurat, Himachal Pradesh, Daman,
Union Territory of Dadra & Nagarhaveli, Karnataka, Delhi, Chattisgarh,
Tamilnadu, Rajasthan, and Punjab. In the previous review, we determined
that the operation of these types of state sales tax programs confers a
countervailable subsidy. See Second PET Film Review - Final Results, at
46490. The financial contribution is the tax revenue foregone by the
respective state governments and the benefit equals the amount of sales
taxes not paid by Jindal and Polyplex. Pursuant to section
771(5A)(D)(iv) of the Act, these programs are also de jure specific
because they are limited to certain regions within the respective
states administering the programs. There is no new information or
evidence of changed circumstances which would warrant reconsidering
this finding. Therefore, for these preliminary results, we continue to
find this program countervailable.
To calculate the benefit, we first calculated the total sales tax
reduction or exemption the respondents received during the POR by
subtracting taxes paid from the amount that would have been paid on
their purchases during the POR absent these programs. We then divided
these amounts by each respondent's total sales during the POR to
calculate a net countervailable subsidy of 1.02 percent ad valorem for
Jindal and 4.90 percent ad valorem for Polyplex.
8. Duty Free Replenishment Certificate (DFRC)
The DFRC scheme was introduced by the GOI in 2001 and is
administered by the Director-General for Foreign Trade (DGFT). The DFRC
is a duty replenishment scheme that is available to exporters for the
subsequent import of inputs used in the manufacture of goods without
payment of basic customs duty. In order to receive a license, which
entitles the recipient to subsequently import, duty free, certain
inputs used in the production of the exported product, as identified in
SION, within the following 24 months, a company must: (1) export
manufactured products listed in the GOI's export policy book and
against which there is a SION for inputs required in the manufacture of
the export product based on quantity; and (2) have realized the payment
of export proceeds in the form of convertible foreign currency. See the
Ministry of Commerce and Industry Directorate General of Foreign Trade
Policy 2004-2009, sect. 4.2 fact. See also page 13 of the Government of
India's Supplemental Questionnaire Response dated April 28, 2006. The
application must be filed within six months of the realization of the
profits. DFRC licenses are transferrable, yet the transferee is limited
to importing only those products and in the quantities specified on the
license.
Although 19 CFR Sec. 351.519(b)(2) provides that the Secretary
will normally consider any benefit from a duty drawback or exemption
program as having been received as of the date of exportation, we
preliminarily find that an exception to this normal practice is
warranted here in view of the unique manner in which this program
operates. Specifically, a company may not submit an application for a
DFRC license until the proceeds of the sale are realized. The license,
once granted, specifies the quantity of the particular inputs that the
bearer may subsequently import duty free. In the case of the DFRC, the
company does not know at the time of export the value of the duty
exemption that it will ultimately receive. It only knows the quantity
of the inputs it will likely be able to import duty free if its
application for a DFRC license is granted. Under the DFRC, the
respondent will only know the total value of the duty exemption when it
subsequently imports the specified products duty free with the license,
or sells it. Therefore, we preliminarily determine that the date of
receipt is linked to when the company imports an input duty free with
the certificate. See Notice of Preliminary Results of Countervailing
Duty Administrative Review: Certain Hot-Rolled Carbon Steel Flat
Products from India, 71 FR 1512 (January 10, 2006) (unchanged in the
final results). In the case in which the company sells the certificate,
the date of sale is when the benefit occurs. See Certain Iron-Metal
Castings From India; Final Results of Countervailing Duty
Administrative Review 62 FR 32297 (June 13, 1997) (1994 Indian Castings
Final Results).
Neither Jindal nor Polyplex reported imports using a DFRC license
or exports against a DFRC license during the POR. However, Polyplex
reported selling part of its rights under the DFRC Scheme. The
Department has previously determined that the sale of import licenses
confers a countervailable export subsidy. See e.g., 1994 Indian
Castings Final Results. Therefore, in accordance with section
771(5A)(B) of the Act, we determine that Polyplex's partial sale of its
rights under the DFRC Scheme is an export subsidy and that a financial
contribution is provided, under section 771(5)(D)(ii) of the Act, in
the form of the revenue foregone. We further find that the sale
conferred a benefit under section 771(5)(E) of the Act in the amount of
the revenue from the sale. There is no new information or evidence of
changed circumstances which would warrant reconsidering this finding.
Therefore, for these preliminary results, we continue to find this
program countervailable.
To calculate the benefit to Polyplex on the partial sale of its
rights under the DFRC Scheme, we identified the proceeds it realized
from the sale during the POR (net of required application fees). We
then calculated the subsidy by dividing the total benefit by the total
[[Page 45044]]
value of Polyplex's export sales during the POR. On this basis, we
determine the net countervailable subsidy for this program to be 0.03
percent ad valorem for Polyplex.
Programs Preliminarily Determined to be Not Used
We preliminarily determine that the producers/exporters of PET film
products did not apply for or receive benefits during the POR under the
programs listed below:
1. Duty Entitlement Passbook Scheme (DEPS)
2. Electricity Duty Exemption Scheme - State of Maharashtra
Preliminary Results of Administrative Review
In accordance with 19 CFR Sec. 351.221(b)(4)(i), we have
calculated individual subsidy for Jindal and Polyplex for the POR. We
preliminarily determine the total estimated net countervailable subsidy
to be 13.15 percent ad valorem for Jindal and 13.19 percent ad valorem
for Polyplex.
If the final results of this review remain the same as these
preliminary results, the Department intends to instruct CBP, within 15
days of publication, to liquidate shipments of PET film from India
entered, or withdrawn from warehouse, for consumption on or after
January 1, 2004 through December 31, 2004 at 13.15 percent ad valorem
for Jindal and at 13.20 percent ad valorem for Polyplex.
We will instruct CBP to collect cash deposits for Jindal and
Polyplex at the rates indicated above. As discussed above, if we
determine in the final results that the Section 80HHC program has been
terminated, we will remove the rate for that program from the cash
deposit rate for each company. In addition, we will instruct CBP to
continue to collect cash deposit rates for non-reviewed companies at
the most recent rate applicable to the company.
Public Comment
Pursuant to 19 CFR Sec. 351.224(b), the Department will disclose
to parties to the proceeding any calculations performed in connection
with these preliminary results within five days after the date of the
public announcement of this notice. Pursuant to 19 CFR Sec. 351.309,
interested parties may submit written comments in response to these
preliminary results. Unless otherwise instructed by the Department,
case briefs must be submitted within 30 days after the date of
publication of this notice, pursuant to 19 CFR Sec. 351.309(c)(ii).
Rebuttal briefs, limited to arguments raised in case briefs, must be
submitted no later than five days after the time limit for filing case
briefs, unless otherwise specified by the Department, pursuant to 19
CFR Sec. 351.309(d). Parties who submit argument in this proceeding
are requested to submit with the argument: (1) a statement of the
issues, and (2) a brief summary of their arguments. Parties submitting
case and/or rebuttal briefs are requested to provide the Department
copies of the public version on disk. Case and rebuttal briefs must be
served on interested parties in accordance with 19 CFR Sec.
351.303(f). Also, pursuant to 19 CFR Sec. 351.310(c), within 30 days
of the date of publication of this notice, interested parties may
request a public hearing on arguments to be raised in the case and
rebuttal briefs. Unless the Secretary specifies otherwise, the hearing,
if requested, will be held two days after the date for submission of
rebuttal briefs.
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 Sec. 351.309(c)(ii), are due. See 19 CFR
Sec. 351.305(b)(3). The Department will publish the final results of
this administrative review, including the results of its analysis of
arguments made in any case or rebuttal briefs.
This administrative review is issued and published in accordance
with sections 751(a)(1) and 777(i)(1) of the Act, and 19 CFR Sec.
351.221(b)(4).
Dated: July 31, 2006.
David M. Spooner,
Assistant Secretary for Import Administration.
[FR Doc. E6-12813 Filed 8-7-06; 8:45 am]
BILLING CODE 3510-DS-S