Notice of Preliminary Results and Rescission, in Part, of Countervailing Duty Administrative Review: Polyethylene Terephthalate Film, Sheet, and Strip from India, 45037-45044 [E6-12813]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 71, Number 152 (Tuesday, August 8, 2006)]
[Notices]
[Pages 45037-45044]
From the Federal Register Online via the Government Printing 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