Certain Hot-Rolled Carbon Steel Flat Products from India: Notice of Preliminary Results and Partial Rescission of Countervailing Duty Administrative Review, 79791-79802 [E8-30997]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 73, Number 250 (Tuesday, December 30, 2008)]
[Notices]
[Pages 79791-79802]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-30997]


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DEPARTMENT OF COMMERCE

International Trade Administration

(C-533-821)


Certain Hot-Rolled Carbon Steel Flat Products from India: Notice 
of Preliminary Results and Partial Rescission 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 (CVD) order on certain 
hot-rolled carbon steel flat products from India for the period January 
1, 2007, through December 31, 2007, the period of review (POR). These 
preliminary results cover one company Essar Steel Ltd. (Essar). For the 
information on the net subsidy rate for the reviewed company, see the 
``Preliminary Results of Review'' section.
    We are preliminarily rescinding the administrative review regarding 
Ispat Industries Limited (Ispat), JSW Steel Limited (JSW), and Tata 
Steel Limited (Tata) due to the fact that they had no shipments during 
the POR. For more information on Ispat, JSW, and Tata's shipments 
during the POR, see the ``Background'' section of this notice.

EFFECTIVE DATE: December 30, 2008.

FOR FURTHER INFORMATION CONTACT: Gayle Longest, AD/CVD Operations, 
Office 3, Import Administration, International Trade Administration, 
U.S. Department of Commerce, Room 4014, 14\th\ Street and Constitution 
Ave., NW, Washington, DC 20230, telephone: (202) 482-3338.

SUPPLEMENTARY INFORMATION:

Background

    On December 3, 2001, the Department published in the Federal 
Register the CVD order on certain hot-rolled carbon steel flat products 
from India. See Notice of Amended Final Determination and Notice of 
Countervailing Duty Orders: Certain Hot-Rolled Carbon Steel Flat 
Products From India and Indonesia, 66 FR 60198 (December 3, 2001) 
(Amended Final Determination of HRC Investigation). On December 3, 
2007, the Department published a notice of opportunity to request an 
administrative review of this CVD order. See Antidumping or 
Countervailing Duty Order, Finding, or Suspended Investigation; 
Opportunity To Request Administrative Review, 72 FR 67889 (December 3, 
2007). On December 28, 2007, we received a timely request for review 
from Essar, an Indian producer and exporter of the subject merchandise. 
On December 31, 2007, United States Steel Corporation (petitioner) 
requested that the Department conduct an administrative review of the 
CVD order on certain hot-rolled carbon steel flat products from India 
with respect to Essar, Ispat, JSW and Tata.
    On January 28, 2008, the Department initiated an administrative 
review of the CVD order on certain hot-rolled carbon steel flat 
products from India, covering the period January 1, 2007, through 
December 31, 2007. See Initiation of Antidumping and Countervailing 
Duty Administrative Reviews and Request for Revocation in Part, 73 FR 
4829 (January 28, 2008).
    On February 26, 2008, Ispat and Tata notified the Department that 
it had no shipments during the POR. On February 28, 2008, the 
Department issued a questionnaire to the Government of India (GOI), 
Essar, and JSW. On March 5, 2008, JSW notified the Department that it 
had no shipments during the POR. The Department reviewed U.S. Customs 
and Border Protection (CBP) information concerning entries of subject 
merchandise during the POR and determined that there were no shipments 
from Ispat, JSW or Tata. See Memorandum to the File through Eric 
Greynolds regarding ``Entries Subject to the 2007 Countervailing Duty 
Administrative Review,'' (September 9, 2008) which is on file in the 
Central Records Unit (CRU), room 1117, of the main Commerce Building. 
The Department did however find that Essar had entries of the subject 
merchandise during the POR. See Id.
    On May 5, 2008, we received a questionnaire response from the GOI 
with the accompanying exhibits filed on May 9, 2008. As discussed 
below, the GOI's submission did not contain responses concerning 
certain programs such as the Special Economic Zone Act of 2005 (2005 
SEZ Act) and programs administered by the state governments. In spite 
of repeated extensions, the GOI did not file responses concerning these 
programs.
    We received a questionnaire response from Essar on May 12, 2008. We 
issued supplemental questionnaires to the GOI and Essar regarding 
programs addressed in the initial CVD questionnaire and received 
supplemental questionnaire responses. In the case of JSW, on May 12, 
2008, the company submitted a letter to the Department stating that it 
had no shipments of the subject merchandise during the POR. Therefore, 
JSW did not respond to the initial questionnaire.
    On May 29, 2008, petitioner submitted new subsidy allegations 
pertaining to Essar. On July 30, 2008, the Department published in the 
Federal Register an extension of the deadline for the preliminary 
results of this review. See Hot-Rolled Carbon Steel Products From 
India: Extension of Time Limit for Preliminary Results of 
Countervailing Duty Administrative Review, 73 FR 44220 (July 30, 2008). 
On September 25, 2008, the Department initiated an investigation of the 
new subsidies allegations regarding Essar.\1\ On September 26, 2008, we 
issued the new subsidies questionnaire to Essar and the GOI. On October 
10, 2008, and October 17, 2008, we received responses to our new 
subsidies questionnaires from the GOI and Essar, respectively. From 
October 14, 2008, through October 31, 2008, we received responses to 
our new subsidies supplemental questionnaires from the GOI.
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    \1\ See Memorandum to Melissa G. Skinner, Director, Office 3, 
through Eric B. Greynolds, Program Manager, from Gayle Longest, Case 
Analyst, regarding ``New Subsidy Allegations for Essar Steel 
Limited'' (September 25, 2008). This public document is available on 
the public file in the Department's CRU located in room 1117.
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    In accordance with 19 CFR 351.213(b), this review covers only those 
producers or exporters for which a review was specifically requested. 
The company subject to this review is Essar. This review covers 59 
programs.

Scope of Order

    The merchandise subject to this order is certain hot-rolled flat-
rolled carbon-quality steel products of a rectangular shape, of a width 
of 0.5 inch or greater, neither clad, plated, nor coated with

[[Page 79792]]

metal and whether or not painted, varnished, or coated with plastics or 
other non-metallic substances in coils (whether or not in successively 
superimposed layers), regardless of thickness, and in straight lengths, 
of a thickness of less than 4.75 mm and of a width measuring at least 
10 times the thickness. Universal mill plate (i.e., flat-rolled 
products rolled on four faces or in a closed box pass, of a width 
exceeding 150 mm, but not exceeding 1250 mm, and of a thickness of not 
less than 4 mm, but not exceeding 1250 mm, and of a thickness of not 
less than 4 mm, not in coils and without patterns in relief) of a 
thickness not less than 4.0 mm is not included within the scope of this 
order.
    Specifically included in the scope of this order are vacuum-
degassed, fully stabilized (commonly referred to as interstitial-free 
(IF)) steels, high-strength low-alloy (HSLA) steels, and the substrate 
for motor lamination steels. If steels are recognized as low-carbon 
steels with micro-alloying levels of elements such as titanium or 
niobium (also commonly referred to as columbium), or both, added to 
stabilize carbon and nitrogen elements. HSLA steels are recognized as 
steels with micro-alloying levels of elements such as chromium, copper, 
niobium, vanadium, and molybdenum. The substrate for motor lamination 
steels contains micro-alloying levels of elements such as silicon and 
aluminum.
    Steel products included in the scope of this order, regardless of 
definitions in the Harmonized Tariff Schedule of the United States 
(HTS), are products in which iron predominates, by weight, over each of 
the other contained elements; ii) the carbon content is 2 percent or 
less, by weight; and iii) none of the elements listed below exceeds the 
quantity, by weight, respectively indicated:
    1.80 percent of manganese, or
    2.25 percent of silicon, or
    1.00 percent of copper, or
    0.50 percent of aluminum, or
    1.25 percent of chromium, or
    0.30 percent of cobalt, or
    0.40 percent of lead, or
    1.25 percent of nickel, or
    0.30 percent of tungsten, or
    0.10 percent of molybdenum, or
    0.10 percent of niobium, or 0.15 percent of vanadium, or
    0.15 percent of zirconium.
    All products that meet the physical and chemical description 
provided above are within the scope of this order unless otherwise 
excluded. The following products, by way of example, are outside or 
specifically excluded from the scope of this order:
    Alloy hot-rolled steel products in which at least one of the 
chemical elements exceeds those listed above (including, e.g., ASTM 
specifications A543, A387, A514, A517, A506).
    SAE/AISI grades of series 2300 and higher.
    Ball bearings steels, as defined in the HTS.
    Tool steels, as defined in the HTS.
    Silico-maganese (as defined in the HTS) or silicon electrical steel 
with silicon level exceeding 2.25 percent.
    ASTM specifications A710 and A736.
    USS Abrasion-resistant steels (USS AR 400, USS AR 500).
    All products (proprietary or otherwise) based on an alloy ASTM 
specification (sample specifications: ASTM, A507, A507).
    Non-rectangular shapes, not in coils, which are the result of 
having been processed by cutting or stamping and which have assumed the 
character of articles or products classified outside chapter 72 of the 
HTS.
    The merchandise subject to this order is currently classifiable in 
the HTS as subheadings: 7208.10.15.00, 7208.10.30.00, 7208.10.60.00, 
7208.25.30.00, 7208.25.60.00, 7208.26.00.30, 7208.26.00.60, 
7208.27.00.30, 7208.27.00.60, 7208.36.00.30, 7208.36.00.60, 
7208.37.00.30, 7208.37.00.60, 7208.38.00.15, 7208.38.00.30, 
7208.38.00.90, 7208.39.00.15, 7208.39.00.30, 7208.39.00.90, 
7208.40.60.30, 7208.40.60.60, 7208.53.00.00, 7208.54.00.00, 
7208.90.00.00, 7211.14.00.90, 7211.19.15.00, 7211.19.20.00, 
7211.19.30.00, 7211.19.45.00, 7211.19.60.00, 7211.19.75.30, 
6211.19.75.60, and 6211.19.75.90. Certain hot-rolled flat-rolled 
carbon-quality steel covered by this order, including: vacuum-degassed 
fully stabilized; high-strength low-alloy; and the substrate for motor 
lamination steel may also enter under the following tariff numbers: 
7225.11.00.00, 7225.19.00.00, 7225.30.30.50, 7225.30.70.00, 
7225.40.70.00, 7225.99.00.90, 7226.11.10.00, 7226.11.90.30, 
7226.11.90.60, 7226.19.10.00, 7226.19.90.00, 7226.91.50.00, 
7226.91.70.00, 7226.91.80.00, and 7226.99.00.00. subject merchandise 
may also enter under 7210.40.10.00, 7212.40.50.00, and 7212.50.00.00. 
Although the HTS subheadings are provided for convenience and customs 
purposes, the Department's written description of the merchandise 
subject to this order is dispositive.

Adverse Facts Available

    As discussed above, on February 28, 2008, the Department issued the 
initial questionnaire to Essar and the GOI, including state 
governments. After requesting and receiving several extension requests, 
the GOI filed a response to the Department's initial questionnaire on 
May 5 and May 9, 2008.\2\ However, the GOI failed to provide a response 
to certain programs addressed in the Department's initial 
questionnaire, namely the 2005 SEZ Act and programs administered by the 
state governments.
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    \2\ The Department provided the GOI a total of 71 days to 
respond to the initial questionnaire, which was comprised of the 
standard 37-day deadline plus 31 days in extensions.
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    At the request of the GOI, the Department extended the GOI's 
deadline to respond to questions regarding the 2005 SEZ Act as well as 
questions concerning various programs administered by state 
governments. Specifically, on May 6, 2008, the Department granted the 
GOI an extension until May 9, 2008, to respond to the outstanding 
questions. On May 9, 2008, the GOI requested a three-week extension to 
respond to the questions concerning the 2005 SEZ Act and the state 
government programs. On May 15, 2008, the Department granted the GOI an 
extension until May 23, 2008, to respond to the questions concerning 
the 2005 SEZ Act and the state government programs.\3\ On May 23, 2008, 
the GOI submitted a letter in which it indicated that it was unable to 
specify a date on which it would be able to submit the requested 
information. No further response has been filed by the GOI with respect 
to the 2005 SEZ Act and the state government programs in this 
proceeding.
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    \3\ The Department included questions concerning the 2005 SEZ 
Act and the state government programs in its initial questionnaire. 
Thus, the Department provided the GOI with a total of 85 days to 
respond to questions concerning the 2005 SEZ Act and the state 
government programs.
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    Section 776(a)(1) and (2) of the Tariff Act of 1930, as amended 
(the Act), provide that the Department shall apply ``facts otherwise 
available'' if, inter alia, necessary information is not on the record 
or an interested party or any other person: (A) withholds information 
that has been requested; (B) fails to provide information within the 
deadlines established, or in the form and manner requested by the 
Department, subject to subsections (c)(1) and (e) of section 782 of the 
Act; (c) significantly impedes a proceeding; or (D) provides 
information that cannot be verified as provided by section 782(i) of 
the Act.

[[Page 79793]]

    Where the Department determined 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 the 
opportunity to remedy or explain the deficiency. If the party fails to 
remedy the deficiency within the applicable time limits and subject to 
section 782(e) of the Act, the Department may disregard all or part of 
the original and subsequent responses, as appropriate. Section 782(e) 
of the Act provides that the Department ``shall not decline to consider 
information that is submitted by an interested party and is necessary 
to the determination but does not meet all applicable requirements 
established by the administering authority'' if the information is 
timely, can be verified, is not so incomplete that it cannot be used, 
and if the interested party acts to the best of its ability in 
providing the information. Where all of these conditions are met, the 
statue requires the Department to use the information if it can do so 
without undue difficulties.
    Because the GOI failed to provide the requested information by the 
established deadlines, the Department does not have the necessary 
information on the record to determine whether the subsidies received 
by Essar under the 2005 SEZ Act and the state administered programs 
constitute financial contributions and are specific within sections 
771(D) and 771(5A) of the Act, respectively. Therefore, the Department 
must base its determination on the facts otherwise available in 
accordance with section 776(a)(2)(B) of the Act. As noted, the 
Department extended the GOI's deadline to respond to the 2005 SEZ Act 
and the programs administered by the state governments in the initial 
questionnaire on several occasions. However, the GOI failed to submit 
responses to these programs. Therefore, consistent with section 
776(a)(2)(B) of the Act, we must resort to facts available.
    Because the GOI did not provide the requested information on all of 
its subsidy programs, pursuant to section 776(b) of the Act, we find 
that the GOI did not act to the best of its ability and, therefore, we 
are employing adverse inferences in selecting from among the facts 
otherwise available. Section 776(b) of the Act provides that the 
Department may use an adverse inference in applying the facts otherwise 
available when a party has failed to cooperate by not acting to the 
best of its ability to comply with a request for information. Section 
776(b) of the Act also authorizes the Department to use as adverse 
facts available (AFA) information derived from the petition, the final 
determination, a previous administrative review, or other information 
placed on the record. In a countervailing duty case, the Department 
requires information from both the government of the country whose 
merchandise is under the order and the foreign domestic producers and 
exporters. When the government fails to provide requested information 
concerning alleged subsidy programs, the Department, as AFA, typically 
finds that a financial contribution exists under the alleged program 
and that the program is specific. See, e.g., Notice of Preliminary 
Results of Countervailing Duty Administrative Review: Certain Cut-to-
Length Carbon-Quality Steel Plate from the Republic of Korea, 71 FR 
11397, 11399 (March 7, 2006) (unchanged in the Notice of Final Results 
of Countervailing Duty Administrative Review: Certain Cut-to-Length 
Carbon-Quality Steel Plate from the Republic of Korea, 71 FR 38861 
(July 10, 2006), in which the Department relied on adverse inferences 
in determining that the Government of Korea directed credit to the 
steel industry in a manner that constituted a financial contribution 
and was specific to the steel industry within the meaning of sections 
771(5)(D)(i) and 771(5A)(D)(iii) of the Act, respectively). However, 
the Department will normally rely on the foreign producer's or 
exporter's records to determine the existence and amount of the 
benefit. Consistent with its past practice, because the GOI failed to 
provide information concerning certain alleged subsidies, the 
Department, as AFA, has determined that those programs confer a 
financial contribution and are specific pursuant to sections 771(5)(D) 
and 771(5A) of the Act, respectively.\4\ The analysis of the extent of 
the benefit, if any, is discussed in the ``Special Economic Zone Act of 
2005 (SEZ Act),'' and ``Gujarat Special Economic Zone Act (SGOG SEZ 
Act)'' sections below.
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    \4\ The GOI failed to provide any information on how the alleged 
programs operate. Therefore, in applying adverse inferences, we are 
unable to reference any sub-paragraphs under sections 771(5)(D) and 
771(5A) of the Act. We note that the GOI also failed to provide 
information regarding these programs in prior reviews.
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    With respect to the Export Promotion Capital Goods Scheme (EPCGS), 
the Department sent supplemental questionnaires to Essar on September 
29, 2008, and November 7, 2008, requesting additional and clarifying 
information with respect to several licenses under this program. While 
Essar provided responses to these questionnaires, it failed to provide 
all of the information requested with respect to several licenses under 
the EPCGS program.
    Because Essar failed to provide the requested information for the 
EPCGS licenses in question by the established deadlines, and after 
several requests, the Department does not have the necessary 
information to determine the net subsidy for these licenses. Therefore, 
the Department must base its determination on the facts otherwise 
available in accordance with section 776(a)(2)(B) of the Act with 
respect to the licenses for which we have incomplete information.
    Because Essar did not provide the requested information on all of 
its EPCGS licenses, pursuant to section 776(b) of the Act, we find that 
Essar did not act to the best of its ability and, therefore, we are 
employing adverse inferences in selecting from among the facts 
otherwise available. Section 776(b) of the Act provides that the 
Department may use an adverse inference in applying the facts otherwise 
available when a party has failed to cooperate by not acting to the 
best of its ability to comply with a request for information. Section 
776(b) of the Act also authorizes the department to use as AFA 
information derived from the petition, the final determination, a 
previous administrative review, or other information placed on the 
record. Normally, the Department will rely on the foreign producer's or 
exporter's records to determine the existence and amount of the 
benefit. Consistent with its past practice, because Essar failed to 
provide information concerning certain EPCGS licenses, the Department, 
as AFA in these preliminary results, is using Essar's highest 
calculated benefits pertaining to EPCGS licenses in this review.

Subsidies Valuation Information

Benchmarks for Loans and Discount Rates

    Pursuant to 19 CFR 351.524(d)(3)(i), the Department will use, when 
available, the company-specific cost of long-term fixed-rate loans 
(excluding loans deemed to be countervailable subsidies) as a discount 
rate for allocating non-recurring benefits over time. Similarly, 
pursuant to 19 CFR 351.505(a), the Department will use the actual cost 
of comparable borrowing by a company as a loan benchmark, when 
available. According to 19 CFR 351.505(a)(2), a comparable commercial 
loan is defined as one that, when compared to the loan being examined,

[[Page 79794]]

has similarities in the structure of the loan (e.g., fixed interest 
rate vs. variable interest rate), the maturity of the loan (e.g., 
short-term vs. long-term), and the currency in which the loan is 
denominated.
    For programs requiring the application of a benchmark interest 
rate, 19 CFR 351.505(a)(2)(ii) 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 bank for purposes of 
calculating benchmark rates.
    For programs requiring an Indian Rupee (rupee) denominated discount 
rate or the application of a rupee-denominated long-term fixed-rate 
benchmark, we used, where available, company-specific, weighted-average 
interest rates on comparable commercial long-term, rupee-denominated 
loans. When there were no comparable long-term, rupee-denominated loans 
from commercial banks during the year under consideration, pursuant to 
19 CFR 3351.5059a)(3)(ii), we used a national average interest rate as 
the benchmark. Specifically, we used India's prime lending rate (PLR), 
as published by the Reserve Bank of India (RBI), as our long-term, 
benchmark interest rate. However, at this time, we lack information 
regarding India's PLR for the POR. Therefore, for purposes of the 
preliminary results, we are using rupee long-term rates as reported by 
the International Monetary Fund's (IMF) publication International 
Financial Statistics. The use of the IMF's publication for benchmark 
rate information is consistent with the Department's practice in prior 
Indian cases. See Final Affirmative Countervailing Duty Determination: 
Certain Hot-Rolled Carbon Steel Flat Products From India, 66 FR 49635 
(September 28, 2001) (HRC Investigation) and accompanying Issues and 
Decision Memorandum (HRC Investigation Decision Memorandum) at 
``Benchmarks for Loans and Discount Rate'' section; see also 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) (Final Determination of Lined Paper 
Investigation), and accompanying Issues and Decision Memorandum (Final 
Determination of Lined Paper Investigation Decision Memorandum) at 
``Benchmarks for Loans and Discount Rate.'' After the preliminary 
results, we will seek information regarding India's PLR for the POR.
    For those programs requiring a foreign currency-denominated 
discount rate or application of a foreign currency-denominated long-
term fixed-rate benchmark, we used, where available, company-specific, 
weighted-average interest rates of comparable commercial long-term 
loans, denominated in the same currency. Where no such benchmark 
instruments were available, consistent with 19 CFR 351.505(a)(3)(ii), 
we used currency-specific lending rates from private creditors as 
reported by the IMF's publication International Financial Statistics. 
See Id.
    For variable-rate rupee-denominated or foreign currency-denominated 
loans outstanding during the POR, our preference is to use the interest 
rates of variable-rate lending instruments issued during the year in 
which the government loans were issued, pursuant to 19 CFR 
351.505(a)(5)(i). Where such benchmark instruments were unavailable, we 
used interest rates from loans issued during the POR as our benchmark, 
as, for purposes of this proceeding, such rates better reflect a 
variable interest rate that would be in effect during the review 
period.
    Pursuant to 19 CFR 351.505(a)(2)(iv), if a program under review is 
a government-provided, short-term loan, the preference is 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, we 
required both US dollar-denominated and rupee-denominated short-term 
loan benchmark rates to determine benefits received under the Pre-
Shipment Export Financing program. Absent a company-specific, 
commercial interest rate denominated in rupees to calculate the 
benefit, we sourced a rupee-denominated short-term interest rate for 
India as reported in the IMF's International Financial Statistics. 
Where we did not have comparable, company-specific short-term loans 
denominated in US dollars, we used the dollar-denominated short-term 
interest rate for the United States as reported in International 
Financial Statistics. See e.g., the ``Benchmarks for Loans and Discount 
Rate'' section of the Final Determination of Lined Paper Investigation 
Decision Memorandum.

Use of Uncreditworthy Benchmarks for Essar

    In the administrative review covering the period April 20, 2001, 
through December 31, 2002, we found Essar to be uncreditworthy during 
2001 and 2002. See Final Results of Countervailing Duty Administrative 
Review: Certain Hot-Rolled Carbon Steel Flat Products from India, 69 FR 
26549 (May 13, 2004) (Final Results of First HRC Review) and 
accompanying Issues and Decision Memorandum (Final Results of First HRC 
Review Decision Memorandum) at ``Creditworthiness.'' As no new evidence 
has been provided to the Department with respect to Essar's 
uncreditworthiness during 2001 and 2002, we will continue to apply the 
uncreditworthy benchmark methodology for those programs requiring a 
long-term benchmark for 2001 and 2002. For our long-term interest 
rates, we used India's PLRs and converted those rates into benchmark 
interest rates for Essar using the formula set forth in 19 CFR 
351.505(a)(3)(iii).

Allocation Period

    Under 19 CFR 351.524(d)(2)(i), we presume the allocation period for 
non-recurring subsidies to be the average useful life (AUL) of 
renewable physical assets for the industry concerned, as listed in the 
Internal Revenue Service's 1977 Class Life Asset Depreciation Range 
System (IRS tables), as updated by the U.S. Department of the Treasury. 
This presumption will apply unless a party claims and establishes that 
the IRS tables do not reasonably reflect the AUL of the renewable 
physical assets for the company or industry under review, and the party 
can establish that the difference between the company-specific or 
country-wide AUL for the industry under review is significant, pursuant 
to 19 CFR 351.524(d)(2)(ii). For assets used to manufacture products 
such as hot-rolled carbon steel flat products, the IRS tables prescribe 
an AUL of 15 years.
    In their questionnaire response, the respondent did not rebut the 
regulatory presumption of a 15-year AUL. Therefore, we used a 15-year 
AUL to allocate any non-recurring subsidies for purposes of these 
preliminary results.
    Further, for non-recurring subsidies, we have applied the ``0.5 
percent test'' described in 19 CFR 351.524(b)(2). Under this test, we 
compare the amount of subsidies approved under a given

[[Page 79795]]

program in a particular year to sales (total sales or total export 
sales, as appropriate) for the same year. If the amount of subsidies is 
less than 0.5 percent of the relevant sales, then the benefits are 
allocated to the year of receipt rather than allocated over the AUL 
period.

Analysis of Programs

A. Programs Administered by the Government of India

1. Pre- and Post-Shipment Export Financing

    The RBI provides short-term pre-shipment export financing, or 
``packing credits,'' to exporters through commercial banks. Upon 
presentation of a confirmed export order or letter of credit to a bank, 
companies may receive pre-shipment credit lines upon which they may 
draw as needed. Credit line limits are established by commercial banks 
based upon a company's creditworthiness and past export performance, 
and may be denominated either in Indian rupees or in foreign currency. 
Commercial banks extending export credit to Indian companies must, by 
law, charge interest on this credit at rates capped by the RBI. For 
post-shipment export financing, exporters are eligible to receive post-
shipment short-term credit in the form of discounted trade bills or 
advances by commercial banks at preferential interest rates to finance 
the period between the date of shipment of exported merchandise and 
payment from export customers (transit period).
    The Department has previously determined that these export 
financing programs are countervailable to the extent that the interest 
rates are capped by the GOI and are lower than the rates exporters 
would have paid on comparable commercial loans. See e.g., 
PolyethyleneTerephthalate Film, Sheet, and Strip form India: Final 
Results of Countervailing Duty Administrative Review , 72 FR 6530 
(February 12, 2007) (Final Results of 3\rd\ PET Film Review) and 
accompanying Issues and Decision Memorandum (Final Results of 3\rd\ PET 
Film Review Decision Memorandum) at ``Pre-Shipment and Post-Shipment 
Export Financing.'' Specifically, the Department determined that the 
GOI's issuance of financing at preferential rates constituted a 
financial contribution pursuant to section 771(5)(D)(i) of the Act and 
that the interest savings under this program conferred a benefit 
pursuant to section 771(5)(E)(ii) of the Act. The Department also found 
this program, which is contingent upon exports, to be specific within 
the meaning of section 771(5A)(B) of the Act. No new information or 
evidence of changed circumstances has been presented in this review to 
warrant a reconsideration of the Department's finding.
    Essar reported rupee-denominated, pre-shipment loans outstanding 
during the POR. Essar also reported U.S. dollar-denominated, pre-
shipment export loans outstanding during the POR. Essar reported that 
it did not use post-shipment loans during the POR.
    To calculate the benefit conferred by the pre-shipment loan 
program, we compared the actual interest paid on the loans with the 
amount of interest that would have been paid at the benchmark interest 
rates. We used a rupee- or U.S. dollar-denominated benchmark, as 
appropriate (see ``Subsidies Valuation Information'' section, supra). 
Where the benchmark interest exceeds the actual interest paid, the 
difference constitutes the benefit. For pre-shipment loans, we 
calculated the company-specific program rates by dividing the benefit 
received by the company during the POR by the company's total exports 
during the POR.
    For pre-shipment loans, we calculated the net subsidy rate by 
dividing the benefit by the participating company's total exports, 
consistent with the Department's practice. See e.g., Final 
Determination of Lined Paper Investigation Decision Memorandum at 
``Pre- and Post-Shipment Export Financing.''
    We preliminarily determine the new countervailable subsidy rate 
under the pre-shipment export financing program to be 5.14 percent ad 
valorem for Essar.

2. EPCGS

    The EPCGS provides for a reduction or exemption of customs duties 
and an exemption for excise taxes on imports of capital goods. Under 
this program, producers may import capital equipment at a reduced 
customs duty, subject to an export obligation equal to eight times the 
duty saved to be fulfilled over a period of eight years (12 years where 
the CIF value is Rs. 100 crore\5\) from the date the license was 
issued. For failure to meet the export obligation, a company is subject 
to payment of all or part of the duty reduction, depending on the 
extent of the export shortfall, plus penalty interest.
---------------------------------------------------------------------------

    \5\ A crore is equal to 10,000,000 rupees.
---------------------------------------------------------------------------

    The Department has previously determined that the import duty 
reductions provided under the EPCGS constitute a countervailable export 
subsidy. See e.g., Final Results of 3\rd\ PET Film Review Decision 
Memorandum at ``Export Promotion Capital Goods Scheme.'' Specifically, 
the Department has found that under the EPCGS program, the GOI provides 
a financial contribution under section 771(5)(D) of the Act. The 
Department also found this program to be specific under section 
771(5A)(B) of the Act because it is contingent upon export performance. 
No new information or evidence of changed circumstances has been 
provided with respect to this program. Therefore, we continue to find 
that import duty reductions provided under the EPCGS are 
countervailable export subsidies.
    Essar reported that it received import duty reductions under the 
EPCGS program. For these preliminary results, we have determined the 
benefit for the respondent in accordance with our findings and 
treatment of this program in other Indian CVD proceedings. Id. Because 
the importation of capital equipment is tied to firms' capital 
structure, we are, in accordance with 19 CFR 361.524(c)(2)(iii), 
treating the receipt of duty exemptions under the program as non-
recurring subsidies. Id. Furthermore, under the Department's approach, 
there are two types of benefits under the EPCGS program. The first 
benefit is the amount of unpaid duties that would have to be paid to 
the GOI if the export requirements 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. See 19 CFR 351.505(d)(1). See e.g., 
Final Results of 3\rd\ PET Film Review Decision Memorandum at ``Export 
Promotion Capital Goods Scheme.''
    For those EPCGS licenses for which Essar has not yet met the export 
obligations specified in the licenses by the end of the POR, we 
preliminarily find that the company had an outstanding contingent 
liability to be treated as an interest-free loan in the amount of the 
import duty reduction or exemption for those EPCGS licenses for which 
Essar applied but, as of the end of the POR, has not received a waiver 
of their obligations to repay the duties from the GOI.
    Accordingly, for those unpaid duties for which Essar has yet to 
fulfill its export obligations, we preliminarily find the benefit to be 
the interest that it would have paid during the POR had it borrowed the 
full amount of the duty reduction at the time of import. Pursuant to 19 
CFR 351.505(d)(1), we used a long-term interest rate as our benchmark 
to calculate the benefit of a contingent liability interest-free loan 
because the event upon which repayment of the duties depends (i.e.,

[[Page 79796]]

the date of expiration of the time period for the company to fulfill 
its export commitments) occurs at a point in time more than one year 
after the date the capital goods were imported. Specifically, we used 
the long-term benchmark interest rates as described in the ``Subsidies 
Valuation'' section, supra. The rate used corresponds to the year in 
which the company imported the items under the program.
    Furthermore, consistent with our policy, absent any acknowledgment 
from the GOI, in the form of an official letter demonstrating that the 
liability has been eliminated, we treat benefits from these licenses as 
contingent liabilities. See e.g., Final Results of 3\rd\ PET Film 
Review Decision Memorandum ``Export Promotion Capital Goods Scheme;'' 
see also Final Determination of Lined Paper Investigation Decision 
Memorandum at ``Export Promotion Capital Goods Scheme.''
    The second benefit is the waiver of duty on imports of capital 
equipment covered by those EPCGS licenses for which export requirements 
have been met. For certain licenses, Essar reported that it had 
completed its export obligation under the EPCGS program, thereby 
eliminating the outstanding contingent liabilities on the corresponding 
duty exemptions. However, as explained above, in keeping with our 
practice, we have only accepted those claims that are accompanied by 
official letters from the GOI as contingent liabilities.
    For those licenses for which respondent demonstrated that it had 
fulfilled the export obligations, we followed our methodology set forth 
in the Final Determination of Lined Paper Investigation and treated the 
import duty savings as grants received in the year in which the GOI 
waived the contingent liability on the import duty exemptions. See 
Final Determination of Lined Paper Investigation Decision Memorandum at 
``Export Promotion Capital Goods Scheme (EPCGS)'' section. In 
accordance with 19 CFR 351.524(b)(2), for each license, we performed 
the ``0.5 percent test'' to determine whether the benefit should be 
fully expensed in the year of receipt or allocated over the AUL used in 
this proceeding pursuant to the grant allocation methodology set forth 
in 19 CFR 351.524(d)(1).
    Essar reported that it paid application fees in order to obtain its 
EPCGS licenses. We preliminarily find that the application fees paid 
qualify as an ``application fee, deposit, or similar payment paid in 
order to qualify for, or to receive, the benefit of the countervailable 
subsidy.'' See Section 771(6)(A) of the Act. As a result, we have 
offset the benefit in an amount equal to the fees paid.
    To calculate the company-specific subsidy rates for this program, 
we summed the benefits from the waived licenses, which we determine 
confers a benefit in the form of a grant, and from those licenses that 
have yet to be waived, which we determine confers a benefit in the form 
of contingent liability loans. With respect to licenses related to 
imports of capital goods during the POR, we prorated the contingent 
liability by the actual number of days the contingent liability was in 
effect during the POR. See Final Determination of Lined Paper 
Investigation Decision Memorandum at ``Export Promotion Capital Goods 
Scheme.'' We then divided the total benefits received by each company 
by the company's total export sales for the POR. On this basis, we 
preliminarily determine the net countervailable subsidy from this 
program to be 1.02 percent ad valorem for Essar.

3. Sale of High-Grade Iron Ore for Less Than Adequate Remuneration

    The Department has previously determined that the GOI provides 
high-grade iron ore to steel producers for less than adequate 
remuneration through the government-owned National Mineral Development 
Corporation (NMDC). See Notice of Final Results of Countervailing Duty 
Administrative Review: Certain Hot-Rolled Carbon Steel Flat Products 
from India , 71 FR 28665 (May 17, 2006) (Final Results of Second HRC 
Review), and accompanying Issues and Decision Memorandum (Final Results 
of Second HRC Review Decision Memorandum) at ``Sale of High-Grade Iron 
Ore for Less Than Adequate Remuneration,'' see also Notice of 
Preliminary Results of Countervailing Duty Administrative Review: 
Certain Hot-Rolled Carbon Steel Flat Products from India, 71 FR 1512, 
1512 (January 10, 2006) (Preliminary Results of Second HRC Review). 
NMDC is governed by the Ministry of Steel and the GOI holds the vast 
majority of its shares. In past reviews, we have found the NMDC to be a 
government authority that provides a financial contribution within the 
meaning section 771(5)(D)(iii) of the Act. See e.g., Certain Hot-Rolled 
Carbon Steel Flat Products from India: Final Results of Countervailing 
Duty Administrative Review, 73 FR 40295 (July 14, 2008) (Final Results 
of Fourth HRC Review) and accompanying Issues and Decision Memorandum 
(Final Results of Fourth HRC Review Decision Memorandum) at ``Sale of 
High-Grade Iron Ore for Less Than Adequate Remuneration.'' No new 
information has been provided to the Department by the GOI to warrant a 
reconsideration of our finding. Therefore, for this review, we 
preliminarily find that the GOI directly, through the government-owned 
NMDC, continues to provide a financial contribution as defined under 
section 771(5)(D) (iii) of the Act and that the GOI's provision of 
high-grade iron ore is specific under section 771 (5A)(D)(iii)(I) of 
the Act because the actual recipient of the subsidy is limited to 
industries that use iron ore, including the steel industry, and is thus 
limited in number. Essar reported that it purchased high-grade iron ore 
(i.e., iron ore with iron (Fe) content of 64 percent or above) fines 
and high-grade direct reduced calibrated lump iron ore (DR-CLO lumps) 
from the NMDC during the POR.
    Section 771(5)(E)(iv) of the Act provides that a benefit is 
conferred by a government when the government provides the good or 
service for less than adequate remuneration. Pursuant to 19 CFR 
351.511(a)(2)(i) the Department will normally seek to measure the 
adequacy of remuneration by comparing the government price for the 
goods or service to a market-determined price resulting from actual 
transactions in the country in question. The regulations provide that 
such market-determined prices could include prices stemming from actual 
transactions between private parties, actual imports, or, in certain 
circumstances, actual sales from competitively run government auctions.
    Essar provided information concerning its purchases of DR-CLO iron 
ore lumps from a non-affiliated foreign supplier during the POR. There 
is no information on the record that suggests such private supplier 
prices, including import prices into India, do not reflect actual 
market-determined prices in India for comparable ore, or that such 
private supplier prices have been distorted by GOI control of or other 
involvement in the market. Therefore, pursuant to 19 CFR 
351.511(a)(2)(i), we used Essar's actual import prices charged by the 
non-affiliated foreign supplier for DR-CLO lumps to compare with 
Essar's purchases of DR-CLO lumps from NMDC. Our approach in this 
regard is consistent with the approach employed in the previous review. 
See Final Results of Fourth HRC Review Decision Memorandum at ``Sale of 
High-Grade Iron Ore for Less Than Adequate Remuneration.''
    With respect to Essar's purchases of iron ore fines from the GOI, 
the record of this review contains no information

[[Page 79797]]

on actual transaction prices between private parties in India, imports, 
or sales from government auctions that can be used to measure any 
benefit to Essar as a result of this program. Thus, for these 
transactions, the Department is unable to measure the adequacy of 
remuneration using actual market-determined prices in India, as 
directed by 19 CFR 351.511(a)(2)(i).
    Under 19 CFR 351.511(a)(2)(ii), where actual market-determined 
prices are not available with which to make the comparison under 
paragraph (a)(2)(i), the Department will seek to measure the adequacy 
of remuneration by comparing the government price to a world market 
price where it is reasonable to conclude that such prices would be 
available to purchasers in the country in question. This second tier 
directs the Department to examine prices which it would be reasonable 
to conclude that purchasers could obtain in India. There are 
publications on the record that include prices from the world market 
for comparable goods which can be used as a benchmark to determine 
whether the GOI sold iron ore fines to the respondent for less than 
adequate remuneration. Specifically, the Tex Report, a daily Japanese 
publication that reports on world-wide price negotiations for high-
grade iron ore, includes prices for high-grade iron ore that were set 
for 2007. Therefore, consistent with our approach in the Final Results 
of Fourth HRC Review, we continue to find that the prices reported in 
the Tex Report constitute world market prices that would be available 
to the respondent in accordance with 19 CFR 351.511(a)(2)(ii). See 
Final Results of Fourth HRC Review Decision Memorandum at ``Sale of 
High-Grade Iron Ore for Less Than Adequate Remuneration.'' 
Specifically, we used for benchmark purposes the 2007 fines price of 
iron ore from Hamersley, Australia, listed in the Tex Report as our 
world market price, as this price constitutes a world market price that 
would be available to the respondent in India.
    We compared Essar's actual domestic prices paid for iron ore fines 
and DR-CLO lumps (including delivery charges from the mine to the port 
and from the port to the factory) with benchmark prices that were 
inclusive of ocean freight. We further adjusted the benchmark to 
include inland freight from the port to the factory. We also included, 
for these preliminary results, central sales tax paid on Essar's 
domestic purchases of iron ore fines and DR-CLO lumps, and we in turn 
adjusted the benchmark prices to include import duties and any other 
fees payable on imports.
    Concerning the ocean freight adjustment to the benchmark used to 
measure the adequacy of remuneration of the GOI's sales of iron ore 
lumps and fines to Essar, we used the publicly available per metric ton 
cost that Tata incurred to transport coal from Australia to India.\6\ 
The use of this information was necessary because the prices in the Tex 
Report are FOB foreign port and, thus, lacked information concerning 
ocean freight delivery charges.
---------------------------------------------------------------------------

    \6\ See Memorandum to the File from Gayle Longest, Case Analyst, 
``Calculations for the Final Results of Countervailing Duty 
Administrative Review for the period of review (POR) January 1, 2006 
through December 31, 2006'' (October 23, 2008), in which the 
calculations were moved to the record of the ongoing review. These 
calculations contain the information concerning the freight 
adjustment discussed above.
---------------------------------------------------------------------------

    Essar reported its purchases of domestic iron ore on a transaction-
by-transaction basis. Therefore, we conducted our calculations for 
Essar on a transaction-specific basis. We also adjusted our 
calculations for iron (Fe) content. We first used the data provided and 
the information contained in invoices and contracts on the record to 
ascertain the actual percentage Fe of the domestic iron ore that was 
purchased. We then multiplied the derived domestic percentage Fe 
content by the benchmark price per percentage Fe content. Where the 
data were not available, to derive the actual Fe content of the 
domestic iron ore purchase, we multiplied the reported base Fe content 
of the domestic purchase by the benchmark price per percentage Fe 
content. This resulted in the benchmark price per wet metric ton for 
iron ore of the same Fe content as the domestic iron ore purchase. 
After adjusting this benchmark price by including delivery charges (as 
described above), we compared the delivered benchmark prices with the 
delivered domestic prices to obtain the benefit amounts on a 
transaction-by-transaction basis for each type of iron ore. Then, we 
summed the benefit amounts and divided the total benefit received 
during the POR by the company's total sales for 2007. On this basis, we 
preliminarily calculate a net countervailable subsidy rate of 11.48 
percent ad valorem for Essar.

4. Special Economic Zone Act of 2005 (SEZ Act)

    The Special Economic Zone Act of 2005, No. 28 (2005 SEZ Act), 
provides for the establishment, development and management of Special 
Economic Zones for the promotion of exports.\7\ In the previous 
administrative review of this order, petitioner alleged that Essar 
received benefits under the 2005 SEZ Act. However, in those previous 
reviews, the GOI did not respond to the Department's questionnaires 
concerning the 2005 SEZ Act. See e.g., Preliminary Results of Fourth 
HRC Review, 73 FR 1578 at 1579 (January 9, 2008) and Final Results of 
Fourth HRC Review, 73 FR 40295 (July 14, 2008). As explained above in 
the ``Adverse Facts Available'' section, supra, the GOI failed to 
respond to the Department's questionnaire with respect to the SEZ Act 
in this review as well. Accordingly, pursuant to sections 776(a) and 
(b) of the Act, we find that Essar's use of the programs under the 2005 
SEZ Act, as described below, constitute financial contributions section 
771(5)(D) of the Act. We further find that Essar's use of the programs 
under the 2005 SEZ Act was contingent on exports and, therefore, 
specific within the meaning of section 771(5A)(B) of the Act.
---------------------------------------------------------------------------

    \7\ See The Gazette of India Extraordinary Part II-Section 1, 
published by authority New Delhi, Thursday, June 23, 2005, Ministry 
of Law and Justice (Legislative Department), The Special Economic 
Zones Act, 2005 No. 28 of 2005, which petitioners placed on the 
record of the current review in their November 24, 2008 submission.
---------------------------------------------------------------------------

a. Duty free import/domestic procurement of goods and services for 
development, operation, and maintenance of SEZ units program

    Essar explained in its October 30, 2008, questionnaire response and 
November 18, 2008, supplemental questionnaire response (November 18, 
2008 QR) that the Essar Steel-Mod V SEZ unit (ESTL-MOD V unit) became 
eligible for duty free import for both overseas and domestic 
procurement of goods and services as of January 31, 2007. Essar 
reported that under this program it imported duty-free goods during the 
POR for use in its ESTL-MOD V unit. See October 30, 2008 QR at 9 and 
November 18, 2008 QR at 1-2.
    As explained above, we preliminarily determine, based on adverse 
facts available, that Essar's use of programs under the 2005 SEZ Act 
constitutes a financial contribution that is specific within the 
meaning of sections 771(5)(D) and 771(5A)(B) of the Act. Furthermore, 
we preliminarily determine that Essar's receipt of duty exemptions 
under the 2005 SEZ Act conferred a benefit under section 771(5)(E) of 
the Act. Because the GOI did not respond to questions concerning the 
2005 SEZ Act, we preliminarily determine that the exception described 
under 19 CFR 351.519(a)(4) applies. Accordingly, we determine that the 
benefit is equal to the entire amount of

[[Page 79798]]

the duty exemptions Essar received under the program. Therefore, to 
calculate the benefit, we summed all of the duty exemptions Essar 
received under the 2005 SEZ Act during the POR.
    To calculate the net subsidy rate, we divided the total benefits 
Essar received during the POR by its total export sales for the POR. On 
this basis, we preliminarily determined the net countervailable subsidy 
from this program to be 1.66 percent ad valorem for Essar.

b. Exemption from excise duties on goods machinery and capital goods 
brought from the Domestic Tariff Area for use by an enterprise in the 
SEZ

    Essar indicated in its questionnaire response that, as of January 
31, 2007, the ESTL-MOD V unit became eligible for exemption from excise 
duties on goods machinery and capital goods brought from the Domestic 
Tariff Area for use by an enterprise in the SEZ. Information Essar 
provided indicates that during the POR, it accrued excise duty 
exemptions under the program on raw materials and capital goods brought 
from a Domestic Tariff Area for use in its ESTL-MOD V unit.
    As explained above, we preliminarily determine, based on adverse 
facts available, that Essar's use of programs under the 2005 SEZ Act 
constitutes a financial contribution that is specific within the 
meaning of sections 771(5)(D) and 771(5A)(B) of the Act. Furthermore, 
we preliminarily determine that Essar's receipt of excise duty 
exemptions on capital goods under the 2005 SEZ Act conferred a benefit 
under section 771(5)(E) of the Act.
    In accordance with 19 CFR 351.524(c)(2)(iii), we preliminarily 
determine that the provision of excise duty exemptions on capital goods 
provides non-recurring benefits because the excise duty exemptions are 
tied to the capital assets of the firm. Therefore, we have treated the 
excise duty exemptions on capital goods received under the program as 
grants. We summed all of the duty exemptions on capital goods received 
under the program, which is equal to all of the duty exemptions on 
capital goods received during the POR, and divided the total by Essar's 
total export sales for the POR. Because the resulting rate was less 
than 0.5 percent, we expensed the duty exemptions on capital goods 
received under the program to the POR.
    In accordance with 19 CFR 351.517(a), we preliminarily determine 
that the benefit is equal to the entire amount of the excise duty 
exemptions Essar received on its imports of raw materials under the 
program. Accordingly, to calculate the benefit, we summed all of the 
excise duty exemptions Essar received under the program during the POR.
    To calculate the net subsidy rate, we divided the total benefits 
Essar received under the program during the POR by Essar's total export 
sales during the POR. Accordingly, we preliminarily determined the net 
countervailable subsidy from this program to be 2.57 percent ad valorem 
for Essar.

c. Exemption from the Central Sales Tax (CST)\8\
---------------------------------------------------------------------------

    \8\ In our initial questionnaire and in these preliminary 
results, we are treating the following as two separate sub-programs 
under the 2005 SEZ Act: the GOI's Exemption from the Central Sales 
Tax (CST) and the SGOG's Sales and Other State Taxes on Purchases of 
Inputs (Both Goods and Services) for the SEZ or a Unit Within the 
SEZ. We will seek clarification on whether these programs are two 
separate programs subsequent to the preliminary results.
---------------------------------------------------------------------------

    In its questionnaire response, Essar explained that the ESTL-MOD V 
unit became eligible for exemption from the 2 percent CST on inter-
state purchases as of January 31, 2007. Essar reported that under this 
program, it received CST exemptions on inter-state purchases made by 
the ESTL-MOD V unit during the POR.
    As explained above, we preliminarily determine, based on adverse 
facts available, that Essar's use of programs under the 2005 SEZ Act 
constitutes a financial contribution that is specific within the 
meaning of sections 771(5)(D) and 771(5A)(B) of the Act. Furthermore, 
we preliminarily determine that Essar's receipt of CST exemptions on 
inter-state purchases confer a benefit under section 771(5)(E) of the 
Act.
    In accordance with 19 CFR 351.510(a), we find that the benefit is 
equal to amount of sales tax that Essar would have paid during the POR 
absent the exemptions provided under the program. Pursuant to 19 CFR 
351.510(b), we are treating the benefit as having been received as of 
the time of Essar's inter-state purchases. In accordance with 19 CFR 
351.510(c), we are allocating the CST exemptions Essar received on its 
inter-state purchases made during the POR to the POR.
    To calculate the net subsidy rate, we divided the total benefits 
received by Essar by its total export sales for the POR. On this basis, 
we preliminarily determined the net countervailable subsidy from this 
program to be 0.002 percent ad valorem for Essar.

d. Exemption from the National Service Tax

    According to Essar, SEZ units are exempt from paying the national 
service tax of 12.36 percent. Therefore, according to Essar, a service 
provider to an SEZ unit is not required to pay the 12.36 percent 
service tax on invoices issued to SEZ units. Essar reported that it 
received a service tax exemption for the ESTL-MOD-V unit during the 
POR.
    As explained above, we preliminarily determine, based on adverse 
facts available, that Essar's use of programs under the 2005 SEZ Act 
constitutes a financial contribution that is specific within the 
meaning of sections 771(5)(D) and 771(5A)(B) of the Act. Furthermore, 
we preliminarily determine that Essar's receipt of national service tax 
exemptions on inter-state purchases confer a benefit under section 
771(5)(E) of the Act.
    In accordance with 19 CFR 351.510(a), we find that the benefit is 
equal to amount of service tax that Essar would have paid during the 
POR absent the exemptions provided under the program. Pursuant to 19 
CFR 351.510(b), we are treating the benefit as having been received as 
of the time Essar provided the services subject to the tax. In 
accordance with 19 CFR 351.510(c), we are allocating the service tax 
exemptions Essar received on its provision of services during the POR 
to the POR.
    To calculate the net subsidy rate, we divided the total benefits 
received by Essar by its total export sales for the POR. On this basis, 
we preliminarily determined the net countervailable subsidy from this 
program to be 0.07 percent ad valorem for Essar.

B. Programs Administered by the Government of Gujarat

1. Gujarat Special Economic Zone Act (SGOG SEZ Act)

a. Stamp duty and registration fees for land transfers, loan 
agreements, credit deeds, and mortgages

    According to Essar, during the POR the ESTL-MOD V unit leased an 
area of land from the SEZ Developer, Essar SEZ Hazira Limited, for a 
period of 20 years. Essar reported that under the SGOG SEZ act, the 
registration charge was not collected. Essar further reported that 
under the SGOG SEZ act, the stamp duty on the lease rental was also not 
collected. See Essar's November 18, 2008 QR at 7.
    As explained above, we preliminarily determine, based on adverse 
facts available, that Essar's use of programs under the 2005 SEZ Act 
constitutes a

[[Page 79799]]

financial contribution that is specific within the meaning of sections 
771(5)(D) and 771(5A)(B) of the Act. Furthermore, we preliminarily 
determine that the exemptions on registration charges and stamp duties 
confer a benefit under section 771(5)(E) of the Act.
    In accordance with 19 CFR 351.510(a), we find that the benefit is 
equal to amount of registration and stamp duty charges that Essar would 
have paid during the POR absent the registration and stamp duty 
exemptions provided under the program. Pursuant to 19 CFR 351.510(b), 
we are treating the benefit as having been received as of the time of 
the ESTL-MOD V unit's lease. Therefore, in accordance with 19 CFR 
351.510(c), we are allocating the registration charge and stamp duty 
exemptions Essar received on the lease it signed during the POR to the 
POR.
    To calculate the net subsidy rate, we divided the total benefits 
received by Essar by its total export sales for the POR. On this basis, 
we preliminarily determined the net countervailable subsidy from this 
program to be 0.001 percent ad valorem for Essar.

b. Sales tax, purchase tax, and other taxes payable on sales and 
transactions

    According to Essar, inputs purchased by SEZ units from within the 
State of Gujarat are exempted from payment of sales tax.
    As explained above, we preliminarily determine, based on adverse 
facts available, that Essar's use of programs under the 2005 SEZ Act 
constitutes a financial contribution that is specific within the 
meaning of sections 771(5)(D) and 771(5A)(B) of the Act. Furthermore, 
we preliminarily determine that the sales tax exemptions received by 
Essar confer a benefit under section 771(5)(E) of the Act.
    In accordance with 19 CFR 351.510(a), we find that the benefit is 
equal to amount of sales tax that Essar would have paid during the POR 
absent the exemption provided under the program. Pursuant to 19 CFR 
351.510(b), we are treating the benefit as having been received as of 
the time of the ESTL-MOD V unit's input purchases. Therefore, in 
accordance with 19 CFR 351.510(c), we are allocating the sales tax 
exemptions Essar received on the input purchase during the POR to the 
POR.
    To calculate the net subsidy rate, we divided the total benefits 
received by Essar by its total export sales for the POR. On this basis, 
we preliminarily determined the net countervailable subsidy from this 
program to be 0.002 percent ad valorem for Essar.

c. Sales and other state taxes on purchases of inputs (both goods and 
services) for the SEZ or a Unit within the SEZ

    According to Essar, a CST of 2 percent is charged on goods and 
services procured by SEZ units from states other than Gujarat. However, 
according to Essar, this amount is exempted when goods and services are 
supplied to SEZ units. Essar reported that under this program, it 
received sales tax exemptions on purchases from states other than 
Gujarat made by the ESTL-MOD V unit during the POR.
    As explained above, we preliminarily determine that Essar's use of 
programs under the SGOG SEZ Act constitutes a financial contribution 
that is specific within the meaning of sections 771(5)(D) and 
771(5A)(B) of the Act. Furthermore, we preliminarily determine that 
Essar's receipt of sales tax exemptions on inter-state purchases confer 
a benefit under section 771(5)(E) of the Act.
    In accordance with 19 CFR 351.510(a), we find that the benefit is 
equal to the amount of sales tax that Essar would have paid during the 
POR absent the exemptions provided under the program. Pursuant to 19 
CFR 351.510(b), we are treating the benefit as having been received as 
of the time of Essar's inter-state purchases. In accordance with 19 CFR 
351.510(c), we are allocating the sales tax exemptions Essar received 
on its inter-state purchases made during the POR to the POR.\9\
---------------------------------------------------------------------------

    \9\ We will seek additional clarifying information from Essar 
regarding any tax benefits it received under this program.
---------------------------------------------------------------------------

    To calculate the net subsidy rate, we divided the total benefits 
received by Essar by its total export sales for the POR. On this basis, 
we preliminarily determined the net countervailable subsidy from this 
program to be 0.002 percent ad valorem for Essar.

C. Programs Preliminarily Found Not To Confer a Countervailable Benefit 
During the POR

1. Own Your Own Wagon Scheme

    The Own Your Own Wagon (OYW) Scheme is a program through which the 
GOI seeks to enhance India's rail transport capacity to meet the needs 
of various sections of the economy. Under the OYW, the GOI encourages 
private participation in ownership of wagons (rail cars) to supplement 
the resources available with the Railways for acquiring rolling stock. 
The OYW Sc