Polyethylene Terephthalate Film, Sheet, and Strip from India: Preliminary Results of Countervailing Duty Administrative Review, 45956-45965 [E8-18220]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 73, Number 153 (Thursday, August 7, 2008)]
[Notices]
[Pages 45956-45965]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-18220]


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DEPARTMENT OF COMMERCE

International Trade Administration

(C-533-825)


Polyethylene Terephthalate Film, Sheet, and Strip from India: 
Preliminary Results of Countervailing Duty Administrative Review

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, sheet and strip from India for the period 
January 1, 2006 through December 31, 2006. 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, below.

EFFECTIVE DATE: August 7, 2008

FOR FURTHER INFORMATION CONTACT: Elfi Blum, 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.

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 3, 2007, 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, 
72

[[Page 45957]]

FR 36420 (July 3, 2007). On July 30, 2006, the Department received 
timely requests to conduct an administrative review of the PET Film 
Order from MTZ Polyfilms, Ltd. (MTZ), and from Jindal Poly Films 
Limited of India (Jindal), formerly named Jindal Polyester Limited, 
both of which are Indian producers and exporters of subject 
merchandise.
    On August 24, 2007, the Department initiated an administrative 
review of the CVD order on PET film from India covering MTZ and Jindal 
for the period January 1, 2006 through December 1, 2006. See Initiation 
of Antidumping and Countervailing Duty Administrative Reviews and 
Requests for Revocation in Part, 72 FR 48613 (August 24, 2007). On 
October 3, 2007, pursuant to 19 CFR 351.213(d)(1), Jindal timely 
withdrew its request for an administrative review of the CVD order on 
PET film from India. Because no other party requested a review of 
Jindal, on April 10, 2008, the Department rescinded the administrative 
review of Jindal. See Polyethylene Terephthalate Film, Sheet, and Strip 
from India: Notice of Partial Rescission of Administrative Review of 
the Countervailing Duty Order, 73 FR 19474 (April 10, 2008).
    The Department issued questionnaires to the Government of India 
(GOI) and MTZ on October 5, 2007. On November 27, 2007, the GOI 
submitted its questionnaire response. MTZ submitted its questionnaire 
response on December 4, 2007. On February 22, 2008, the Department 
extended the time limit for the preliminary results of the 
countervailing duty administrative review until July 30, 2008. See 
Polyethylene Terephthalate (PET) Film, Sheet, and Strip from India: 
Extension of Time Limit for Preliminary Results of Countervailing Duty 
Administrative Review, 73 FR 9769 (February 22, 2008).
    The Department issued its first supplemental questionnaires to the 
GOI and MTZ on March 14, 2008, and April 11, 2008, respectively. On 
March 28, 2008, the GOI submitted its first supplemental response, and 
MTZ submitted its first supplemental response on May 7, 2008. The 
Department issued a second supplemental questionnaire to the GOI and to 
MTZ on May 14, 2008 and on May 28, 2008, respectively. The GOI 
submitted its response on May 28, 2008. On June 3, 2008, the Department 
issued a third supplemental questionnaire to the GOI and on June 9, 
2008 to MTZ. The GOI submitted its response to the third supplemental 
questionnaire on June 10, 2008. MTZ responded to the second and third 
supplemental questionnaire on June 23, 2008. On July 11, 2008, the 
Department issued a fourth supplemental questionnaire to the GOI and 
MTZ, respectively. The GOI filed its response on July 18, 2008, and MTZ 
on July 22, 2008.

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 3920.62.90. HTSUS subheadings are provided 
for convenience and customs purposes. The written description of the 
scope of this proceeding is dispositive.

Subsidies Valuation Information

Allocation Period

    Under 19 CFR 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 '351.524(d)(2)(i) and (ii). For assets 
used to manufacture plastic film, such as PET film, the IRS tables 
prescribe an AUL of 9.5 years.\1\ In the previous segment of this 
proceeding, the Department determined that MTZ had rebutted the 
presumption and applied a company-specific AUL of 20 years. See 
Polyethylene Terephthalate Film, Sheet, and Strip from India: Final 
Results of Countervailing Duty Administrative Review, 73 FR 7708 
(February 11, 2008), and accompanying Issues and Decision Memorandum, 
at ``Allocation Period'' (PET Film Final Results of 2005 Review). 
Therefore, the Department is using an AUL of 20 years for MTZ in 
allocating non-recurring subsidies.
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    \1\ For our subsidy calculations, we round the 9.5 years up to 
10 years.
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Benchmark Interest Rates and Discount Rates

    For programs requiring the application of a benchmark interest rate 
or discount rate, 19 CFR 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 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 351.505(a)(3)(ii).
    In addition, 19 CFR 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 Final Results of 
Countervailing Duty Administrative Review: Polyethylene Terephthalate 
Film, Sheet, and Strip from India, 71 FR 7534 (February 13, 2006), and 
accompanying Issues and Decision Memorandum, at Comment 3 (PET Film 
Final Results of 2003 Review). Further, in the PET Film Final Results 
of 2005 Review, at ``Benchmark Interest Rates and Discount Rates,'' the 
Department determined that the Industrial Finance Corporation of India 
(IFCI) and the Export-Import Bank of India (EXIM) are government-owned 
special purpose banks. As such, the Department does not use loans from 
the IDBI, IFCI, or EXIM, if reported by respondents, as a basis for 
loan benchmark.
    Pursuant to 19 CFR 351.505(a)(2)(iv), if a program under review is 
a government- provided, short-term loan program, the preference would 
be to use a company-specific 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 a rupee-denominated 
short-term loan benchmark rate to determine benefits received under the 
Pre-Shipment Export Financing and Post-Shipment Export Financing 
programs. For further information regarding this program, see the 
``Pre-Shipment and Post-Shipment Export Financing'' section below.

[[Page 45958]]

    We requested from MTZ information on rupee-denominated and U.S. 
dollar-denominated short-term commercial loans outstanding during the 
period of review (POR) on three separate occasions: in the original 
questionnaire, the first supplemental questionnaire, and in the second 
supplemental questionnaire. MTZ reported that it did not receive rupee-
denominated and U.S. dollar-denominated short-term commercial loans. 
MTZ further stated that it was unable to provide loan information in 
the form requested by the Department. Specifically, MTZ stated that MTZ 
does not maintain the information in a form permitting extraction of 
the data as requested by the Department. In response to the 
Department's fourth supplemental questionnaire, MTZ provided the 
Department with information on its short-term rupee-denominated loans 
during the POR. See MTZ's Fourth Supplemental Questionnaire Response, 
at S4-1 and Exhibits S4-1(a) (July 22, 2008) (MTZ's Fourth Supplemental 
Questionnaire Response). However, the Department finds MTZ's 
information to be incomplete. For further discussion, see the ``Pre-
Shipment and Post-Shipment Export Financing'' section below. Because 
MTZ provided the Department with incomplete information regarding its 
short-term rupee-denominated loans for purposes of establishing a 
company-specific benchmark loan interest rate, and is unable to provide 
us with the information requested to allow for the calculation of long-
term rupee and U.S. dollar denominated benchmark rates, we are using a 
national average dollar-denominated short-term and long-term interest 
rate, as reported in the International Monetary Fund's publication 
``International Financial Statistics'' (IMF Statistics), in accordance 
with 19 CFR 351.505(a)(3)(ii). Further, for those programs requiring a 
rupee-denominated discount rate or the application of a rupee-
denominated long-term benchmark rate, we also used national average 
interest rates from the IMF Statistics, pursuant to 19 CFR 
351.505(a)(3)(ii). With respect to long-term loans and grants allocated 
over time, the Department required benchmarks and discount rates to 
determine benefits received under the Export Promotion Capital Goods 
Scheme (EPCGS) program. As stated above, MTZ was unable to report 
comparable commercial long-term rupee-denominated loans for all 
required years.\2\ Therefore, we relied on the IMF statistics as 
benchmarks for the required years.
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    \2\ MTZ provided the Department with limited information 
regarding its long-term loans for purposes of establishing a 
company-specific benchmark. In its original questionnaire response, 
MTZ stated that it did not receive any packing credits in 2006 and 
thus did not respond to the benchmark questions. In the same 
response MTZ did not address the Benchmark Appendix for long-term 
loans with respect to programs such as EPCGS. See MTZ's 
Questionnaire Response, at 12 (December 5, 2007) (MTZ's 
Questionnaire Response). In its first supplemental response, MTZ 
provided bank ledger accounts including postings dating back to 
1999. See MTZ's First Supplemental Questionnaire Response, at 4-5, 
and Exhibit S1-4(a) (May 7, 2008) (MTZ's First Supplemental 
Response). MTZ further provided loan agreements for three banks, but 
MTZ did not clearly identify which supporting information pertains 
to its short-term loan and long-term loans. In its second 
supplemental questionnaire, the Department requested that MTZ fill 
out the prepared spreadsheet to allow, among other information, for 
the calculation of benchmarks. MTZ, in its second supplemental 
response, stated that it is unable to extract the loan data in the 
form requested by the Department, as the information is not 
maintained , if at all, in that form. See MTZ's Second Supplemental 
Response, at S2-1-2, (June 23, 2008) (MTZ's Second Supplemental 
Questionnaire Response).
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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 not 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 inasmuch as the interest rates provided 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 Notice of Final Affirmative 
Countervailing Duty Determination: Polyethylene Terephthalate Film, 
Sheet and Strip (PET Film) From India, 67 FR 34905 (May 16, 2002), and 
accompanying Issues and Decision Memorandum (PET Film Final 
Determination), at ``Pre-Shipment and Post-Shipment Financing.'' There 
is no new information or evidence of changed circumstances that would 
warrant reconsidering this finding. Therefore, for these preliminary 
results, we continue to find this program countervailable.
    In response to the original questionnaire, MTZ reported that in 
2005 it obtained packing credits based on its ability to present its 
export orders to its bank and to receive, as a loan, a portion of the 
funds to be paid by the customer in advance. As these payments are to 
be made in foreign currency and against firm sales, MTZ states, it pays 
a lower rate of interest on those foreign currency short-term loans 
than for other short term borrowing. According to MTZ, these short-term 
loans were not given under the Pre- and Post-Shipment Programs because 
MTZ did not borrow from the Reserve Bank of India. MTZ further stated 
that it did not receive any packing credits in 2006, and therefore, 
provided no other information with respect to this program. See MTZ's 
Original Questionnaire Response, at 12.
    In its first supplemental response, MTZ reiterated that it obtains 
loans from its banks based on its ability to take export orders, and 
these loans are not Pre-and Post-Shipment export

[[Page 45959]]

financing identified by the Department because MTZ does not borrow 
money from the RBI. Furthermore, MTZ maintained that the Department had 
defined the term ``packing credit'' as credit provided by the RBI. In 
addition, contrary to its claim that it did not receive any packing 
credits, MTZ included supporting documentation for one such pre-
shipment credit obtained during the POR. See MTZ's First Supplemental 
Questionnaire Response, at 5-6, and Exhbit S1-5.
    In response to the Department's second supplemental questionnaire, 
requesting that MTZ provide information regarding all short-term loans 
outstanding during the POR, MTZ referred to Exhibit S2-1. However, this 
exhibit was neither included in the paper copy of the response nor in 
the electronic submission of the spreadsheets. See MTZ's Second 
Supplemental Questionnaire Response, at S2-1.
    The GOI, in its first supplemental response, confirmed that, under 
the pre- and post-shipment export financing program, commercial banks 
extend working capital loans to exporters to purchase raw materials, 
etc., and that those exporters:
    generally qualify for export financing under the program by 
presenting to a bank a confirmed export order or letter of credit 
issued by a foreign importer. The bank then establishes pre-shipment 
credit limits upon which the exporter may draw loans as needed.
See GOI's First Supplemental Questionnaire Response, at 13-14 (March 
28, 2008) (GOI's First Supplemental Questionnaire Response).
    The GOI further reported that the RBI sets a ceiling on the 
interest rates banks may charge to borrowers under the program. Within 
this ceiling rate, banks are free to fix the interest rates for 
exporters on the basis of their actual cost of funds, operating 
expenses, etc. Also, in the same response, the GOI states that the 
``RBI has not prescribed any application process or application form 
for Export Credit program. Commercial banks directly administer the 
program in accordance with their own procedures.'' Id. at 15.
    MTZ's description of the process and conditions for obtaining these 
``packing credits'' for export is consistent with the GOI's own 
description of its pre-shipment and post-shipment program, and the 
Department's description above. The Department has not, in this 
administrative review or any prior segment under this order defined 
pre-shipment and post-shipment loans under this program as short-term 
loans obtained by a respondent from the RBI. On the contrary, the 
Department specifically stated that ``the RBI, through commercial 
banks, provides short-term pre-shipment financing, or packing credits, 
to exporters. . . Commercial banks extending export credit to Indian 
companies must, by law, charge interest at rates determined by the 
RBI.'' See PET Film Final Results of 2005 Review, at ``Pre-and Post-
Shipment Program,'' (emphasis added).
    On July 11, 2008, the Department issued a fourth supplemental 
questionnaire to provide MTZ with an additional opportunity to provide 
the information that it claimed to have provided in its second 
supplemental questionnaire response. In its response, MTZ stated that 
the missing Exhibit S2-1 from its second supplemental response related 
to the pre- and post-shipment loans. Instead of providing a copy of the 
missing Exhibit S2-1, MTZ provided two spreadsheets in response to the 
Department's renewed request to report all short-term loans outstanding 
during the POR: ``Short-Term Interest Bench Mark'' {sic{time}  and 
``Pre- and Post-Shipment Financing.'' The written response to the 
Department's request did not provide any descriptions or explanation of 
the loan data MTZ reported in the spreadsheets. See MTZ's Fourth 
Supplemental Questionnaire Response, at S4-1 and Exhibits S4-1(a) and 
S4-1(A)(ii) (July 22, 2008) (MTZ's Fourth Supplemental Questionnaire 
Response). Furthermore, upon review of MTZ's new information, the 
Department was unable to reconcile the information provided by MTZ in 
this response with the information in MTZ's First Supplemental 
Response, at S1-5. Specifically, the short-term loan information 
submitted in Exhibit S1-5 of the first supplemental response was 
neither reflected in the spreadsheet termed ``Short-Term Interest Bench 
Mark'' {sic{time}  nor in the spreadsheet termed ``Pre- and Post-
Shipment Financing.'' See Fourth Supplemental Questionnaire Response, 
at Exhibit S3-1(a) and S3-1(a)(ii). Based on this analysis, the 
Department determines that, despite repeated requests for complete 
information, the short-term loan information provided by MTZ remains 
incomplete, and is thus unreliable and unuseable.
    The Department preliminarily determines that MTZ obtained pre-
shipment and post shipment export financing loans under the GOI's Pre-
Shipment and Post-Shipment Export Financing program because the 
application process and requirements described by MTZ to obtain short-
term loans from commercial banks for pre-shipment and post-shipment 
export financing (see MTZ's First Supplemental Questionnaire Response, 
at 5-6), is consistent with the description of the program provided by 
the GOI (see GOI's First Supplemental Response, at 13-15). See also PET 
Film Final Results of 2005 Review, at ``Pre-and Post Shipment 
Program.'' As discussed above, the Department repeatedly requested that 
MTZ provide all short-term loans outstanding during the POR, and record 
evidence indicates that MTZ has failed to provide the Department with 
reliable and useable information regarding its short-term export 
financing loans. As a result, the Department does not have the 
information necessary to calculate a rate for MTZ based on its own 
information under the pre-shipment and post-shipment program for theses 
preliminary results.

Application of Facts Available

    Section 776 of the Tariff Act of 1930, as amended (the Act), 
governs the use of facts available and adverse facts available. Section 
776(a) provides that if an interested party or any other person: (1) 
withholds information that has been requested by the Department; (2) 
fails to provide such information by deadlines or in the form and 
manner requested; (3) significantly impedes a proceeding; or (4) 
provides such information but the information cannot be verified, the 
Department shall use the facts otherwise available in reaching its 
determination. The statute requires that certain conditions be met 
before the Department may resort to facts available. Where the 
Department determines that a response to a request for information does 
not comply with the request, section 782(d) of the Act provides that 
the Department will so inform the party submitting the response and 
will, to the extent practicable, provide that party an opportunity to 
remedy or to explain the deficiency.
    If the party fails to remedy the deficiency within the applicable 
timelines, the Department may, subject to section 782(e) of the Act, 
disregard all or part of the original and subsequent responses, as 
appropriate. Section 782(e) of the Act states that the Department shall 
not decline to consider information deemed ``deficient'' under section 
782(d) of the Act if: (1) the information is submitted by the 
established deadline; (2) the information can be verified; (3) the 
information is not so incomplete that it cannot serve as a reliable 
basis for reaching the applicable determination; (4) the interested 
party has

[[Page 45960]]

demonstrated that it acted to the best of its ability; and (5) the 
information can be used without undue difficulties.
    For these preliminary results, we determine that the application of 
facts available is warranted with respect to MTZ for the pre-shipment 
and post-shipment export financing program. As noted above, we asked 
MTZ on three occasions to provide the Department with its short-term 
loan information. MTZ first responded that it did not believe it 
participated in the program because it did not obtain loans from the 
RBI, and because it did not receive any packing credits in 2006. See 
MTZ Questionnaire Response, at 12. MTZ did not provide any loan 
information. However, in its original questionnaire, the Department 
stated that ``{t{time} he Reserve Bank of India (RBI), through 
commercial banks, provides pre-shipment financing or packing credits,' 
to exporters'' (emphasis added). The Department, from the onset of this 
administrative review, clearly identified the pre-shipment and post-
shipment export financing loans under this program as loans obtained 
from commercial banks, and not through the RBI. This language is 
consistent with the language used to describe the program in every 
other segment of this proceeding.
    In its first supplemental response, MTZ again failed to supply any 
loan data and reiterated the application process described in the 
original response, and that it believes that the loans it obtained are 
not part of the pre- and post shipment export financing program 
identified by the Department, as it does not borrow from the RBI. In 
the same response, MTZ asserted that the Department had defined 
``packing'' credits ``as being those credits which were expressly 
provided by the Reserve Bank of India.'' See MTZ's First Supplemental 
Questionnaire Response, at 5-6. Exhibit S1-5 of the same response 
provided sample documentation for export financing obtained by MTZ 
during the POR. This exhibit served as sample documentation supporting 
the application process for export financing, as described in MTZ's 
response, and was issued during the POR. Not only did MTZ's description 
of the application process coincide with the Department's and the GOI's 
description of the program, but it also evidenced that MTZ obtained 
export financing through this GOI program during the POR. Since this 
exhibit is proprietary, we will further discuss this exhibit in MTZ's 
calculation memorandum under ``Loans.''
    In the second supplemental questionnaire, the Department again 
requested that MTZ report all pre-and post-shipment export loans 
received during the POR from private commercial or semi-commercial 
banks, as well as from any government-owned entity. In response, MTZ 
referred to Exhibit S2-1 of its MTZ's Second Supplemental Questionnaire 
Response; however, the exhibit was not included in either the written 
response or the data set.
    On July 11, 2008, in order to clarify whether there was such an 
exhibit with the loan information, the Department again, in a fourth 
supplemental questionnaire, asked MTZ to report all its short-term 
loans outstanding during the POR, and also to report all pre-shipment 
and post-shipment export financing loans separately. In MTZ's Fourth 
Supplemental Questionnaire Response, it provided two spreadsheets, 
``Short-Term Interest Bench Mark'' {sic{time}  and ``Pre- and Post-
Shipment Financing.'' Upon examining the information provided in the 
spreadsheets, the Department was unable to find the loan identified in 
Exhibit S1-5 of MTZ's First Supplemental Questionnaire Response in 
either Exhibit S3-1(a), ``Short-Term Interest Bench Mark'' {sic{time}  
or S3-1(a)(ii), ``Pre and Post Shipment Financing,'' of MTZ's Fourth 
Supplemental Questionnaire Response. As a result, we have preliminarily 
determined that the loan data is not complete; without a 
reconciliation, the extent to which this data is incomplete is unclear.
    As discussed above, the Department asked MTZ to provide the 
requested pre-shipment and post-shipment export financing loan 
information on four separate occasions, the original questionnaire and 
three supplemental questionnaires; yet, the information on the record 
remains incomplete. Because MTZ failed to provide all the information 
requested by the Department, and MTZ's failure to provide this 
information within the established deadlines impeded our review, we 
find that the application of facts otherwise available is warranted 
under sections 776(a)(2)(A), (B), and (C) of the Act.

Application of Facts Available With An Adverse Inference

    Section 776(b) of the Act provides that the Department may use an 
inference adverse to the interests of a party that has failed to 
cooperate by not acting to the best of its ability to comply with the 
Department's requests for information. See also the SAA. The statute 
provides, in addition, that in selecting from among facts available the 
Department may, subject to the corroboration requirements of section 
776(c) of the Act, rely upon information drawn from the petition, a 
final determination in the investigation, any previous administrative 
review conducted under section 751 of the Act (or section 753 for 
countervailing duty (CVD) cases), or any other information on the 
record. See section 776(b) of the Act.
    The Department's practice when selecting an adverse rate from among 
the possible sources of information is to ensure that the rate is 
sufficiently adverse ``as to effectuate the purpose of the facts 
available role to induce respondents to provide the Department with 
complete and accurate information in a timely manner.'' See Notice of 
Final Determination of Sales at Less than Fair Value: Static Random 
Access Memory Semiconductors From Taiwan, 63 FR 8909, 8932 (February 
23, 1998). The Department's practice also ensures ``that the party does 
not obtain a more favorable result by failing to cooperate than if it 
had cooperated fully.'' See the SAA at 870. In choosing the appropriate 
balance between providing a respondent with an incentive to respond 
accurately and imposing a rate that is reasonably related to the 
respondent's prior experience, selecting the highest prior rate 
``reflects a common sense inference that the highest prior margin is 
the most probative evidence of current margins, because, if it were not 
so, the importer, knowing of the rule, would have produced current 
information showing the margin to be less.'' See Rhone Poulenc, Inc. v. 
United States, 899 F. 2d 1185, 1190 (Fed. Cir. 1990) (emphasis 
omitted).
    Because MTZ failed to cooperate to the best of its ability to 
comply with the Department's requests for information, an adverse 
inference, in accordance with section 776(b) of the Act, is warranted. 
Accordingly, the Department is making an adverse inference that the 
loan data is incomplete and therefore unreliable, and thus cannot be 
used for these preliminary results, pursuant to section 782(e)(3) of 
the Act.
    The Department normally determines the benefit conferred by the 
pre-shipment and post-shipment loans as the difference between the 
amount of interest the company paid on the loan and the amount of 
interest it would have paid on a comparable commercial loan during the 
POR. However, because MTZ failed to provide us with complete loan 
information this calculation is not possible. Therefore, as adverse 
facts available, for purposes of these preliminary results, the 
Department selected the highest calculated rate for

[[Page 45961]]

the same program in this proceeding, 2.9 percent ad valorem. See PET 
Film Final Determination, at ``Pre-Shipment and Post-Shipment Export 
Financing.''

Corroboration of Secondary Information

    Section 776(c) of the Act provides that, when the Department relies 
on secondary information rather than on information obtained in the 
course of an investigation or review, it shall, to the extent 
practicable, corroborate that information from independent sources that 
are reasonably at its disposal. To corroborate secondary information, 
the Department will, to the extent practicable, examine the reliability 
and relevance of the information to be used. The SAA emphasizes, 
however, that the Department need not prove that the selected facts 
available are the best alternative information. See the Statement of 
Administrative Action accompanying the Uruguay Round Agreements Act, 
H.R. Doc. No. 103-316, Vol. 1, 870 (1994) (SAA) at 869.
    With regard to the reliability aspect of corroboration, unlike 
other types of information, such as publicly available data on the 
national inflation rate of a given country or national average interest 
rates, there typically are no independent sources for data on company-
specific benefits resulting from countervailable subsidy programs. The 
rate being used as AFA was calculated in the final determination of the 
investigation in this proceeding. No information has been presented 
that calls into question the reliability of this calculated rate. With 
respect to the relevance aspect of corroboration, the Department will 
consider information reasonably at its disposal in considering the 
relevance of information used to calculate a countervailable subsidy 
benefit. Where circumstances indicate that the information is not 
appropriate as adverse facts available, the Department will not use it. 
See, e.g., Fresh Cut Flowers from Mexico: Final Results of Antidumping 
Duty Administrative Review, 61 FR 6812, 6814 (February 22, 1996). The 
rate being used is relevant because it was calculated for the same 
program, Pre-Shipment and Post-Shipment Export Financing, and in the 
same proceeding, PET film from India.
    On this basis, we preliminarily determine the countervailable 
subsidy for the pre-shipment and post-export shipment financing to be 
2.9 percent ad valorem for MTZ.

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, MTZ used an 
advance license to import certain materials duty free.
    In the 2005 administrative review of this proceeding, the GOI 
indicated that it had revised its Foreign Trade Policy and Handbook of 
Procedures for the ALP during that POR. The Department analyzed the 
changes introduced by the GOI to the ALP during 2005 and acknowledged 
that certain improvements to the ALP system were made. However, the 
Department found that systemic issues continued to exist in the ALP 
system during the POR. See Polyethylene Terephthalate Film, Sheet, and 
Strip from India: Final Results of Countervailing Duty Administrative 
Review, 72 FR 6530 (February 12, 2007), and accompanying Issues and 
Decision Memorandum, at Comment 3 (PET Film Final Results of 2004 
Review); and Notice of Final Affirmative Countervailing Duty 
Determination and Final Negative Critical Circumstances Determination: 
Certain Lined Paper Products from India, 71 FR 45034 (August 8, 2006), 
and accompanying Issues and Decision Memorandum, at Comment 10 (Lined 
Paper - Final Determination). Based on the information submitted by the 
GOI and examined at verification of the 2004 and 2005 PORs, the 
Department noted that the systemic issues previously identified by the 
Department in PET Film Final Results of 2004 Review continued to exist. 
See PET Film Final Results of 2004 Review, 72 FR 6530, at Comment 3. 
See also PET Film Final Results of 2005 Review, at ``Advance License 
Program (ALP).''
    There is no new information on the record of this review for the 
Department to reconsider its determination. Accordingly, the Department 
continues to find 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 
exempts the respondents from the payment of import duties that would 
otherwise be due; (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 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 the import duty deferral or exemption earned 
by the respondent constitutes a benefit under section 771(5)(E) of the 
Act; and, (3) this program is specific under section 771(5A)(B) of the 
Act because it is contingent upon exportation.
    Pursuant to 19 CFR 351.524(c)(1), the exemption of import duties 
normally provides a recurring benefit. Under this program, for 2006, 
MTZ did not have to pay certain import duties for inputs that were used 
in the production of subject merchandise. Thus, we are treating the 
benefit provided under the ALP as a recurring benefit. To calculate the 
subsidy, we first determined the total value of import duties exempted 
during the POR. From this amount, we subtracted the required 
application fees paid for each license during the POR as an allowable 
offset in accordance with section 771(6) of the Act. We then divided 
the resulting net benefit by the appropriate value of export sales. 
Consistent with our calculations in the final results of the 2004 
administrative review, ``deemed export'' sales are included in the 
export sales denominator for the ALP only when the respondents applied 
for and were bestowed licenses during the POR based on both physical 
exports and deemed exports. However, MTZ stated that it had physical 
exports only;\3\ therefore, we only used physical export sales in the 
denominator. On this basis, we determine the countervailable subsidy 
provided under the ALP to be 5.03 percent ad valorem for MTZ.
---------------------------------------------------------------------------

    \3\ See MTZ's Original Questionnaire Response, at 10.
---------------------------------------------------------------------------

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 shortfall in foreign currency earnings, plus penalty 
interest.
    In the investigation, the Department determined that import duty 
reductions provided under the EPCGS are a countervailable export 
subsidy because

[[Page 45962]]

the scheme: (1) provides a financial contribution pursuant to section 
771(5)(D)(ii) in the form of revenue forgone for not collecting import 
duties; (2) respondents benefit under section 771(5)(E) of the Act in 
two ways by participating in this program; and (3) the program is 
contingent upon export performance, and is specific under section 
771(5A)(B) of the Act. PET Film Final Results of 2004 Review, 72 FR 
6530, at ``EPCGS.'' There is no new information or evidence of changed 
circumstances that would warrant reconsidering our determination that 
this program is countervailable. Therefore, for these preliminary 
results, we continue to find this program countervailable.
    The first benefit is the amount of unpaid import duties that would 
have to be paid to the GOI if accompanying export obligations are not 
met. The repayment of this liability is contingent on subsequent 
events, and in such instances, it is the Department=s practice to treat 
any balance on an unpaid liability as an interest-free loan. Id. The 
second benefit is the waiver of duty on imports of capital equipment 
covered by those EPCGS licenses for which the export requirement has 
already been met. For those licenses for which companies demonstrate 
that they have completed their export obligations, we treat the import 
duty savings as grants received in the year in which the GOI waived the 
contingent liability on the import duty exemption.
    Import duty exemptions under this program are 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). In accordance with 19 CFR 351.524(c)(2)(iii), we are treating 
these exemptions as non-recurring benefits.
    MTZ reported that it imported capital goods under the EPCGS in 
years prior to the POR. According to the information provided in its 
responses, MTZ received various EPCGS licenses for equipment involved 
in the production of subject merchandise. Further, we note that MTZ did 
not demonstrate that its respective EPCGS licenses are tied to the 
production of a particular product within the meaning of 19 CFR 
351.525(b)(5). As such, we find that MTZ's respective EPCGS licenses 
benefit all of the company's exports.
    MTZ met the export requirements for certain EPCGS licenses prior to 
the current POR, and the GOI formally waived the relevant import duties 
prior to this POR. For other licenses, however, MTZ has not yet met its 
export obligation as required under the program. Therefore, although 
MTZ has 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 MTZ's EPCGS licenses 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 MTZ's capital equipment imports in the prior review, we 
considered the total amount of duties waived (net of any required 
application fees paid) to be the benefit. See section 771(6) of the 
Act. 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 MTZ's outstanding import 
duties. See PET Film Final Determination, 67 FR 34905, at Comment 5. 
Next, we performed the ``0.5 percent test,'' as prescribed under 19 CFR 
351.524(b)(2), for each year in which the GOI granted MTZ an import 
duty waiver. For all years in which MTZ received the final waiver of 
duties deferred under EPCGS licenses, the value of the duties waived 
exceeded 0.5 percent of MTZ's total export sales. Thus, in accordance 
with 19 CFR 351.524(b), we allocated the resulting benefits over MTZ's 
company-specific AUL. See ``Allocation Period'' section, above.
    As noted above, import duty reductions or exemptions that MTZ 
received on the imports of capital equipment for which it has not yet 
met export obligations may have to be 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 351.505(d)(1); and see, 
e.g., Final Affirmative Countervailing Duty Determination: Bottle-Grade 
Polyethylene Terephthalate (PET) Resin From India, 70 FR 13460 (March 
21, 2005), and accompanying Issues and Decision Memorandum, (Final 
Determination Indian PET Resin), at ``EPCGS.''
    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 formally waived by the GOI. Accordingly, we find the 
benefit to be the interest that MTZ would have paid during the POR had 
it borrowed the full amount of the duty reduction or exemption at the 
time of importation. See, e.g., 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) (PET Film Preliminary Results of 2003 Review) 
(unchanged in the final results, 71 FR 7534).
    As stated above, 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 more than one year after the date of 
importation of the capital goods. Pursuant to 19 CFR 351.505(d)(1), the 
appropriate 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 more than one year after the date of importation of 
the capital goods. As the benchmark interest rate, we used the national 
average interest rate from the IMF statistics for the year in which the 
capital good was imported and the duty reduction or exemption was 
originally granted. See the ``Benchmark Interest Rates and Discount 
Rates'' section above.
    The benefit received under the EPCGS is the total amount of: (1) 
the benefit attributable to the POR from the grant of formally waived 
duties for imports of capital equipment for which respondents met the 
export obligation by December 31, 2005, and/or (2) interest that should 
have been paid on the contingent liability loans for imports of capital 
equipment for which MTZ has not met its export obligation. To calculate 
the benefit from the formally waived duties for imports of capital 
equipment for which MTZ has met its export requirements, we treated 
each year's waived amount as a non-recurring grant. We applied the 
grant methodology set forth in 19 CFR 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 
MTZ, we multiplied the total amount of unpaid duties under each license 
by the long-term benchmark interest rate for the

[[Page 45963]]

year in which the license was approved.\4\ We summed this amount with 
the allocated benefits discussed above to determine the total benefit 
for this program. We then divided the benefit under the EPGCS by MTZ's 
total exports to determine a subsidy of 51.88 percent ad valorem for 
MTZ.
---------------------------------------------------------------------------

    \4\ MTZ stated, in its second supplemental response, at 8-9, 
that it was not liable for certain other duties during the year. 
However, MTZ did not provide any supporting documentation regarding 
these duties. Thus, we have included these duties in our 
calculations. We intend to inquire further about these duties.
---------------------------------------------------------------------------

4. Duty Entitlement Passbook Scheme (DEPS/DEPB)

    India's DEPS was enacted on April 1, 1997, as a successor to the 
Passbook Scheme (PBS). As with PBS, the DEPS program enables exporting 
companies to earn import duty exemptions in the form of passbook 
credits rather than cash. All exporters are eligible to earn DEPS 
credits on a post-export basis, provided that the GOI has established a 
SION for the exported product. DEPS credits can be used for any 
subsequent imports, regardless of whether they are consumed in the 
production of an exported product. DEPS credits are valid for twelve 
months and are transferable after the foreign exchange is realized from 
the export sales on which the DEPS credits are earned.
    The Department has previously determined that the DEPS program is 
countervailable. See, e.g., PET Film Final Determination, 67 FR 34905, 
at ``DEPS.'' In the investigation, the Department determined that under 
DEPS, a financial contribution, as defined under section 771(5)(D)(ii) 
of the Act, is provided because the GOI provides credits for the future 
payment of import duties. Moreover, the GOI does not have in place and 
does not apply a system that is reasonable and effective to confirm 
which inputs, and in what amounts, are consumed in the production of 
the exported products. Id. Therefore, under 19 CFR 351.519(a)(4) and 
section 771(5)(E) of the Act, the entire amount of import duty 
exemption earned during the POI constitutes a benefit. Finally, this 
program can only be used by exporters and, therefore, it is specific 
under section 771(5A)(B) of the Act. Id. No new information or evidence 
of changed circumstances has been presented in this review to warrant 
reconsideration of this finding. Therefore, we continue to find that 
the DEPS is countervailable.
    In accordance with past practice and pursuant to 19 CFR 
351.519(b)(2), we find that benefits from the DEPS are conferred as of 
the date of exportation of the shipment for which the pertinent DEPS 
credits are earned. See, e.g., Final Affirmative Countervailing Duty 
Determination: Certain Cut-to-Length Carbon-Quality Steel Plate From 
India, 64 FR 73131, 73134 (December 29, 1999), and accompanying Issues 
and Decision Memorandum, at Comment 4 (Final Determination Carbon Steel 
Plate from India). We calculated the benefit on an ``as-earned'' basis 
upon export because DEPS credits are provided as a percentage of the 
value of the exported merchandise on a shipment-by-shipment basis and, 
as such, it is at this point that recipients know the exact amount of 
the benefit (e.g., the duty exemption).
    MTZ reported that it received post-export credits on PET film under 
the DEPS program during the POR. Because DEPS credits are earned on a 
shipment-by-shipment basis, we normally calculate the subsidy rate by 
dividing the benefit earned on subject merchandise exported to the 
United States by total exports of subject merchandise to the United 
States during the POR. See, e.g., id. 64 FR at 73134. The DEPS licenses 
and supporting documentation provided by MTZ indicate that benefits 
were earned on both subject and non-subject merchandise. Although MTZ 
was able to separate the DEPS credits earned on exports to the United 
States in the data provided to the Department, it did not provide the 
supporting documentation establishing the destination of the shipments 
on which the DEPS credits were earned. However, MTZ provided supporting 
documentation for each DEPS license, indicating whether the DEPS credit 
was earned on subject or non-subject merchandise. Therefore, we 
calculated the DEPS program rate using the value of total post-export 
credits that MTZ earned for its export shipments of subject merchandise 
during the POR. We divided the total amount of the benefit by MTZ's 
total exports of subject merchandise during the POR. On this basis, we 
preliminarily determine MTZ's countervailable subsidy from the DEPS 
program to be 3.40 percent ad valorem.

5. Union Territories Central Sales Tax (CST) Program

    In the previous review, MTZ reported that a supplier located in a 
Union Territory did not collect any tax on MTZ's purchases because 
companies located in that Union Territory are exempt from charging CST. 
Based on analysis of the information on the record, the Department 
determined that a financial contribution, in the form of tax revenue 
forgone, as defined under section 771(5)(D)(ii) of the Act, is provided 
by the GOI under the Union Territories CST exemption program. The 
benefit equals the amount of sales taxes not paid by MTZ on its 
purchases, in accordance with to section 771(5)(E) of the Act. Pursuant 
to section 771(5A)(D)(iv) of the Act, this program is de jure specific 
because it is administered by the central government and is limited by 
law to certain geographical regions (i.e., Union Territories) within 
India. See PET Film Final Results of 2005 Review, 73 FR 7708, at 
``Union Territories Central Sales Tax (CST) Program.'' The CST program 
also provides a recurring benefit under 19 CFR 351.510(c) and 19 CFR 
351.524(c).
    In this POR MTZ purchased from a supplier located in a Union 
Territory. To calculate the benefit for MTZ under this program, we 
first calculated the total amount of CST that MTZ would have paid on 
its purchases from suppliers located in a Union Territory during the 
POR absent this program. We then divided this amount by MTZ's total 
sales during the POR. On this basis, we determine the subsidy rate 
under this program to be 1.57 percent ad valorem for MTZ.
    MTZ reported that the GOI has repealed the CST and is phasing out 
the CST in four stages, reducing it to zero percent by April 1, 2010. 
However, MTZ did not provide any supporting documentation, such as a 
copy of the law promulgated by the GOI, to demonstrate that the CST is 
being phased out and that there is no replacement program or residual 
benefits. Neither did MTZ request an adjustment of the cash deposit 
rate because of a program-wide change. We asked the GOI to provide the 
pertinent laws and regulations phasing out the CST. Instead, in its 
third supplemental response, the GOI provided the Department with a 
one-page excerpt of its 2008-2009 Budget that indicated the anticipated 
decline in revenue, needing to be reviewed on a monthly/quarterly 
basis. We further asked the GOI and MTZ to clarify whether there were 
residual benefits from the Union Territory CST program, or whether 
there was any replacement program implemented for the Union Territory 
CST program, to which the GOI responded that the CST was being phased 
out. However, it did not address whether there were any residual 
benefits remaining. MTZ responded that the CST ``has been repealed and 
is being phased out in stages.'' See MTZ's First Supplemental 
Questionnaire Response, at 13.

[[Page 45964]]

    Although MTZ and the GOI have reported that the CST is being phased 
out by April 1, 2010, they have not demonstrated this with sufficient 
information or documentation to enable the Department to measure the 
change in countervailable subsidies provided under this program. See 19 
CFR 351.526(a)(2). The Department measures the benefit as the tax 
savings on MTZ's purchases during the POR; there is no information on 
the record to measure how MTZ's tax savings have changed since the POR 
for purposes of adjusting the cash deposit rate. Therefore, for all of 
these reasons, there is no basis for the Department to determine that a 
program-wide change has occurred or to adjust the cash deposit rate 
pursuant to 19 CFR 351.526.

6. State Sales Tax Incentive Programs - State of Gujarat

    In the 2004 countervailing duty administrative review, the 
Department determined that various state governments in India grant 
exemptions to, or deferrals from, sales taxes in order to encourage 
regional development. See PET Film Final Results of 2004 Review, 72 FR 
6530, at ``State Sales Tax Incentive Programs.'' These incentives allow 
privately owned and partially privately owned (i.e., not 100 percent 
owned by the GOI) manufacturers in selected industries and located in 
the designated regions to sell goods without charging or collecting 
state sales taxes. The State of Gujarat (SOG) is one of the states 
offering these state sales tax incentive programs. As a result of this 
program, MTZ did not pay sales taxes on its purchases from suppliers 
located in the SOG during the POR. In the original countervailing duty 
investigation, we determined that the operation of these types of state 
sales tax programs confer a countervailable subsidy. See PET Film Final 
Results of 2005 Review, 73 FR 7708, at ``State Sales Tax Incentive 
Programs.'' The financial contribution is the tax revenue foregone by 
the respective state governments pursuant to section 771(5)(D)(ii) of 
the Act, and the benefit equals the amount of sales taxes not paid by 
MTZ pursuant to section 771(5)(E) of the Act. Pursuant to section 
771(5A)(D)(iv) of the Act, these programs are de jure specific because 
they are limited to certain geographical regions within the respective 
states administering the programs.
    MTZ stated that the SOG sales tax incentive program was terminated 
effective April 1, 2006. However, MTZ reported taxes saved on purchases 
within the SOG for the entire POR. See MTZ's Questionnaire Response, at 
Exhibit 17; and MTZ's Third Supplemental Questionnaire Response, at 
Exhibit S3-1. Further, in response to the Department's request to 
identify which taxes the ``Tax Saved On Purchases'' column header 
refers to, MTZ identified those taxes as part of the Gujarat Sales Tax 
Program for ``Items Purchased in Gujarat from Registered Dealers.'' See 
MTZ's First Supplemental Questionnaire Response, at Exhibit S1-15. To 
calculate the benefit, the Department normally calculates the total 
amount of state sales taxes respondent would have paid on its purchases 
during the POR absent these programs. The Department then divides this 
amount by respondent's total sales during the POR. MTZ only reported 
the monthly total of taxes saved on purchases, and MTZ did not indicate 
whether these totals are net of the Gokul Gram Yojana (a development 
promotion scheme of the SOG, and a liability MTZ has to pay), or not. 
Thus, we have not included this tax in our calculations. For these 
preliminary results we calculated MTZ's rate for this program by 
dividing the total amount of tax saved on purchases, as reported, by 
MTZ's total sales. On this basis, we preliminarily determine the 
subsidy rate under this program to be 1.83 percent ad valorem for MTZ.
    In the current review, MTZ argues that the sales tax law in the 
SOG, under which MTZ did not pay or collect sales taxes, was repealed, 
and thus, the rate from this program should not be included in the cash 
deposit rate. See MTZ's Questionnaire Response, at 25. Exhibit S2-9 of 
MTZ's second supplemental response includes a copy of the Gujarat 
Government Gazette of March 22, 2006, stating that the Gujarat Value 
Added Tax Rules, 2006, which MTZ states replaces the Gujarat sales tax, 
shall be effective April 1, 2008. In the first, second and third 
supplemental questionnaires the Department asked MTZ to clarify whether 
there are any residual benefits for MTZ from this program. MTZ 
responded that the only benefit was an exemption from tax on purchases, 
and that any purchase made after the repeal of the tax would not have 
benefited from an exemption because the tax did not exist.
    In response to the Department's third request for information, the 
GOI responded in its second supplemental questionnaire, at 12, that the 
Gujarat Sales Tax Act, 1969, has been repealed and the VAT Act, 2005, 
has been introduced. Thus, the GOI stated, the scheme no longer 
provides any benefit to a recipient, and no company exempted under the 
previous scheme accrues any benefit. In its third supplemental 
response, at 5, the GOI stated that the Gujarat VAT Rules, 2006, Rule 
18A, made provisions for industrial units to carry forward the 
exemptions for the residual period.\5\
---------------------------------------------------------------------------

    \5\ This ``residual period'' is specified in Form-109.
---------------------------------------------------------------------------

    In a fourth supplemental questionnaire, the Department requested 
that the GOI provide a copy of the Gujarat VAT Rules, 2006, including 
Rule 18A. In addition, the Department asked the GOI whether MTZ has 
filed Form-109 in accordance with Rule 18A, to carry forward the 
exemptions for the residual period, and if so, to provide a copy of 
MTZ's filing. The Department further asked the GOI to state how the SOG 
deals or intends to deal with the residual benefits originating from 
this program, other than Rule 18A, and whether the SOG intends to or 
has implemented any replacement program(s) for state sales tax 
incentive in the context of the value added tax (VAT) or otherwise. 
Based on the Department's request, the GOI provided the Gujarat VAT 
Rules, 2006, including rule 18A, applicable to residual benefits under 
the program, on the record of this review. Additionally, the GOI 
provided the Department with Form-109, Application for Certificate of 
Entitlement, as filed by MTZ, on the record of this review. This 
document indicates MTZ's residual benefits under the SOG Sales Tax 
program will continue for an extended period of time. See GOI's Fourth 
Supplemental Questionnaire Response, at 8-19 (July 18, 2008) (GOI's 
Fourth Supplemental Questionnaire Response).
    The Department issued the same questions to MTZ, asking it to 
provide proof of payment of the VAT on all purchases during the POR, 
and to demonstrate that MTZ did not file Form-109 and did not 
participate in a replacement program. MTZ responded by providing the 
same supporting documentation as the GOI. See MTZ's Fourth Supplemental 
Questionnaire Response, at Exhibits S3-2 and S3-3.
    As proof of termination of the Gujarat sales tax, MTZ provided the 
official act of the SOG in the form of the Gujarat Government Gazette, 
implementing the VAT with the Gujarat Value Added Tax Act, 2003, 
effective April 1, 2006, and announcing the repeal of the Gujarat Sales 
Tax Act, 1969, at section 100(1).\6\ However, the record shows that the 
existing state sales tax incentive program is providing residual 
benefits. Therefore, the Department preliminarily

[[Page 45965]]

determines that the conditions of 19 CFR 351.526 have not been met, and 
no adjustment to the rate for cash deposit purposes is warranted.
---------------------------------------------------------------------------

    \6\ MTZ's First Supplemental Questionnaire Response, at Exhibit 
S1-16(A); and MTZ's Second Supplemental Questionnaire Response, at 
Exhibit S2-9.
---------------------------------------------------------------------------

Programs Preliminarily Determined to be Not Used

    We preliminarily determine that MTZ did not apply for or receive 
benefits during the POR under the programs listed below:

1. Duty Free Replenishment Certificate (DFRC) (GOI)

2. Export Oriented Units (EOU) (GOI)

3. Target Plus Scheme (GOI)

4. Capital Subsidy (GOI)

5. Exemption of Export Credit from Interest Taxes (GOI)

6. Loan Guarantees from the GOI

7. Income Tax Exemption Scheme (Sections 10A & 10B) (GOI)

8. State Sales Tax Incentive Programs other than SOG

9. State of Maharashtra (SOM) Electricity Duty Exemption

10. State of Maharashtra (SOM) Capital Incentive Scheme

11. Octroi Refund Scheme- SOM

12. Waiving of Interest on Loan by SICOM Limited (SOM)

13. State Sales Tax Incentives-Section 4-A of the Uttar Pradesh Trade 
Tax Act

14. State Sales Tax Incentive of Uttaranchel

15. State of Uttar Pradesh Capital Incentive

16. SOG Infrastructure Assistance Schemes

17. Capital Incentive Scheme of Uttaranchel

Preliminary Results of Administrative Review

    In accordance with 19 CFR 351.221(b)(4)(i), we have calculated an 
individual subsidy rate for MTZ for the POR. We preliminarily determine 
the total countervailable subsidy to be 66.61 percent ad valorem for 
MTZ.

Cash Deposit Requirements

    The following cash deposit requirements w