Polyethylene Terephthalate Film, Sheet, and Strip From India: Preliminary Results of Countervailing Duty New Shipper Review, 81574-81584 [2010-32677]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 75, Number 248 (Tuesday, December 28, 2010)]
[Notices]
[Pages 81574-81584]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-32677]


-----------------------------------------------------------------------

DEPARTMENT OF COMMERCE

International Trade Administration

[C-533-825]


Polyethylene Terephthalate Film, Sheet, and Strip From India: 
Preliminary Results of Countervailing Duty New Shipper Review

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.
SUMMARY: The Department of Commerce (the Department) is conducting a 
new shipper review under the countervailing duty (CVD) order on 
polyethylene terephthalate film, sheet and strip (PET film) from India 
in response to a request from SRF Limited (SRF). The period of review 
(POR) is January 1, 2009, through December 31, 2009. The domestic 
interested parties for this proceeding are DuPont Teijin Films, 
Mitsubishi Polyester Film, Inc., SKC, Inc. and Toray Plastics 
(America), Inc. (petitioners).
    We preliminarily determine that the U.S. sale of subject 
merchandise produced and exported by SRF was bona fide. See Bona Fides 
Analysis section below. We also preliminarily determine that SRF has 
benefitted from countervailable subsidies 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 intend to instruct 
U.S. Customs and Border Protection (CBP) to assess countervailing 
duties. Interested parties are invited to comment on the preliminary 
results of this new shipper review. See the ``Public Comment'' section 
of this notice, below. The final results will be issued 90 days after 
the date of signature of these preliminary results, unless extended.

DATES: Effective Date: December 28, 2010.

FOR FURTHER INFORMATION CONTACT: Elfi Blum or Toni Page, AD/CVD 
Operations, Office 6, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-
0197 or (202) 482-1398, respectively.

SUPPLEMENTARY INFORMATION:

Background

    On July 1, 2002, the Department published in the Federal Register 
the CVD order on PET film from India. See Notice of Countervailing Duty 
Order: Polyethylene Terephthalate Film, Sheet and Strip (PET Film) from 
India, 67 FR 44179 (July 1, 2002) (PET Film Order). On December 24, 
2009, the Department received a timely request from SRF, in accordance 
with section 751(a)(2)(B) of the Tariff Act of 1930, as amended (the 
Act) and 19 CFR 351.214(c), to conduct a semiannual new shipper review 
of the CVD duty order on PET film from India. The Department found the 
request for review met all of the requirements for initiation set forth 
in 19 CFR 351.214(b) and initiated the new shipper review on March 2, 
2010, covering the period January 1, 2009, through December 31, 2009. 
See Polyethylene Terephthalate Film, Sheet and Strip from India: 
Initiation of Antidumping Duty and Countervailing Duty New Shipper 
Reviews, 75 FR 10758 (March 9, 2010) (NSR Initiation).\1\
---------------------------------------------------------------------------

    \1\ As stated in the initiation notice, due to the closure of 
the Federal Government in Washington D.C. between February 5 and 
February 12, 2010, the Department tolled its deadlines during that 
period, thereby extending the deadline for the initiation of this 
new shipper review by one week, to March 8, 2010. See NSR 
Initiation, 75 FR at 10758.
---------------------------------------------------------------------------

    The Department issued the initial questionnaires to the Government 
of India (GOI) and to SRF and to its U.S. customer through SRF on April 
6, 2010. On May 27, 2010, the GOI submitted its questionnaire response. 
SRF and its U.S. customer (through SRF) submitted their questionnaire 
responses on June 10, 2010. The Department issued its first 
supplemental questionnaires to the GOI on July 8, 2010, and to SRF and 
to its U.S. customer (through SRF) on August 10, 2010. On August 10, 
2010, the GOI submitted its first supplemental response, and SRF and 
its U.S. customer submitted submitted their first supplemental 
responses on September 8, 2010. The Department issued a second 
supplemental questionnaire to the GOI on August 25, 2010, and the GOI 
filed its second supplemental response on September 22, 2010.
    On August 18, 2010, the Department extended the deadline for the 
preliminary results of the countervailing duty administrative review 
from August 29, 2010, to November 22, 2010. See Polyethylene 
Terephthalate Film, Sheet, and Strip from India: Extension of Time 
Limit for Preliminary Results of Countervailing Duty New Shipper 
Review, 75 FR 52717 (August 27, 2010). On November 5, 2010, the 
Department further extended the deadline for the preliminary results to 
December 14, 2010, and then on December 14, 2010, the Department again 
extended the deadline to December 21, 2010. See Polyethylene 
Terephthalate Film, Sheet, and Strip from India: Extension of Time 
Limit for Preliminary Results of Countervailing Duty New Shipper 
Review, 75 FR 69400 (November 12, 2010); Polyethylene Terephthalate 
Film, Sheet and Strip from India: Extension of Time Limit for 
Preliminary Results of Countervailing Duty New Shipper Review, 75 FR 
79336 (December 20, 2010).
    The Department issued a second supplemental questionnaire to SRF on 
November 22, 2010 and a second supplemental importer questionnaire on 
December 1, 2010.\2\ SRF's U.S. customer (through SRF) filed its 
response to the second importer questionnaire on December 6, 2010. 
SRF's second supplemental response is due after the preliminary 
results, on December 27, 2010.
---------------------------------------------------------------------------

    \2\ In contrast to the previous importer questionnaire, the 
second supplemental importer questionnaire was issued separately 
from the other questionnaires to SRF.

---------------------------------------------------------------------------

[[Page 81575]]

Scope of the Order

    For purposes of the order, the products covered are all gauges of 
raw, pretreated, or primed Polyethylene Terephthalate Film, Sheet and 
Strip, whether extruded or coextruded. Excluded are metallized films 
and other finished films that have had at least one of their surfaces 
modified by the application of a performance-enhancing resinous or 
inorganic layer of more than 0.00001 inches thick. Imports of PET film 
are classifiable in the Harmonized Tariff Schedule of the United States 
(HTSUS) under item number 3920.62.00.90. HTSUS subheadings are provided 
for convenience and customs purposes. The written description of the 
scope of this proceeding is dispositive.

Bona Fides Analysis

    Consistent with Department practice, we examined the bona fides of 
the new shipper sale at issue. In evaluating whether or not a sale in 
an NSR is commercially reasonable, and therefore bona fide, the 
Department considers, inter alia, such factors as: (1) The timing of 
the sale; (2) the price and quantity; (3) the expenses arising from the 
transaction; (4) whether the goods were resold at a profit; and (5) 
whether the transaction was made on an arm's-length basis. See Tianjin 
Tiancheng Pharmaceutical Co., Ltd. v. United States, 366 F. Supp. 2d 
1246, 1250 (Ct. Int'l Trade 2005) (TTPC). Accordingly, the Department 
considers a number of factors in its bona fides analysis, ``all of 
which may speak to the commercial realities surrounding an alleged sale 
of subject merchandise.'' See Hebei New Donghua Amino Acid Co., Ltd. v. 
United States, 374 F. Supp. 2d 1333, 1342 (Ct. Int'l Trade 2005) (New 
Donghua) (citing Fresh Garlic From the People's Republic of China: 
Final Results of Antidumping Administrative Review and Rescission of 
New Shipper Review, 67 FR 11283 (March 13, 2002), and accompanying 
Issues and Decision Memorandum (New Shipper Review of Clipper 
Manufacturing Ltd.)). In TTPC, the court also affirmed the Department's 
decision that ``any factor which indicates that the sale under 
consideration is not likely to be typical of those which the producer 
will make in the future is relevant,'' (TTPC, 366 F. Supp. 2d at 1250), 
and found that ``the weight given to each factor investigated will 
depend on the circumstances surrounding the sale.'' TTPC, 366 F. Supp. 
2d at 1263. Finally, in New Donghua, the Court of International Trade 
affirmed the Department's practice of evaluating the circumstances 
surrounding an NSR sale, so that a respondent does not unfairly benefit 
from an atypical sale and obtain a lower rate than the producer's usual 
commercial practice would dictate.
    Based on the totality of circumstances, we preliminarily find that 
the sale made by SRF during the POR was a bona fide commercial 
transaction. The facts that led us to this preliminary conclusion 
include the following: (1) Neither the price nor quantity were outside 
normal bounds; (2) neither SRF nor its customer incurred any 
extraordinary expenses arising from this transaction; (3) the sale was 
made between unaffiliated parties at arm's length; and (4) the timing 
of the sale does not indicate that the sale was not bona fide. Since 
much of the factual information used in our analysis of the bona fides 
of the transaction involves business proprietary information, a full 
discussion of the bases for our decision is set forth in the Memorandum 
to Thomas Gilgunn, Program Manager, from Toni Page, International Trade 
Analyst, regarding Bona Fide Nature of the Sale in the Duty New Shipper 
Review of Polyethylene Terephthalate Film, Sheet, and Strip from India: 
SRF Limited (Bona Fides Memorandum), dated concurrently with this 
notice and on file in the Central Records Unit (CRU), room 7046 of the 
main Department of Commerce building. We will continue to examine the 
bona fides of SRF's sale after the preliminary results.

Period of Review

    The period of this countervailing new shipper review covers the 
period January 1, 2009, through December 31, 2009.

Subsidies Valuation Information

Allocation Period

    SRF was not a respondent in the original investigation, nor was the 
company a respondent in any prior segment of this proceeding. In 
response to the Department's original questionnaire and its first 
supplemental questionnaire, SRF proposed a company-specific average 
useful life (AUL) of 16.49 years for its plant and machinery. In 
Exhibits 9(a)(i-ii) of its original questionnaire response, SRF 
provided its depreciation schedule over the past 15 years, and a 
detailed list of assets for plant and machinery related to the 
production of subject merchandise, respectively.\3\ However, SRF also 
reported that for its two plants in the Packaging Division, SRF has 
depreciated its assets using a straight-line methodology over either 8 
years or 19 years. We note that SRF has not fully explained why it used 
different depreciation periods for equipment producing the same 
merchandise nor how these different periods factored into its 
depreciation schedule. Based on these concerns, we preliminarily 
determine that SRF has not rebutted the presumption set forth in 19 CFR 
351.524 and that its company-specific AUL should not be used to 
determine the appropriate allocation period for non-recurring 
subsidies. Rather, for purposes of these preliminary results we are 
using the IRS Tables. We are continuing to gather information on SRF's 
calculation and will reconsider using SRF's company-specific AUL in the 
final results.
---------------------------------------------------------------------------

    \3\ SRF Original Response of June 10, 2010 (QR-SRF), at Exhibits 
9(a)(i-ii).
---------------------------------------------------------------------------

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 would pay on a comparable commercial 
loan that the company could have obtained in the market. Also, 19 CFR 
351.505(a)(3)(i) states 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).
    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 and a U.S. dollar-denominated short-term 
benchmark rate to determine benefits received under the Pre-Shipment 
Export Financing program. For further information regarding this 
program, see the ``Pre-Shipment and Post-Shipment Export Financing'' 
section below.
    In prior reviews of this case, the Department determined that 
Inland Bill Discounting (IBD) loans are more comparable to pre-shipment 
export financing and post-shipment export financing loans than other 
types of rupee-denominated short-term loans. See, e.g., Notice of 
Preliminary Results and Rescission in Part of Countervailing

[[Page 81576]]

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, 
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 (PET Film Final Results of 2003 Review). In the Notice of 
Preliminary Affirmative Countervailing Duty Determination and Alignment 
of Final Countervailing Duty Determination With Final Antidumping Duty 
Determination: Polyethylene Terephthalate Film, Sheet and Strip (PET 
Film) From India, 66 FR 53389, 53390-91 (October 22, 2001) (PET Film 
Preliminary Determination), unchanged in the final determination, 
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 ``Benchmarks for Loans 
and Discount Rates,'' the Department determined that, in the absence of 
IBD loans, cash credit (CC) loans are the next most comparable type of 
short-term loans to pre-shipment export financing than other types of 
loans, for rupee-denominated pre-shipment export financing, because, 
like pre-shipment export financing, CC loans are denominated in rupees 
and take the form of a line of credit which can be drawn down by the 
recipient. See PET Film Preliminary Determination, unchanged in the PET 
Film Final Determination), at ``Benchmarks for Loans and Discount 
Rates.'' There is no new information or evidence of changed 
circumstances which would warrant reconsidering this finding. SRF 
reported receipt of pre-shipment export financing. However, SRF did not 
obtain IBD loans during the POR. SRF did take out CC short-term loans 
during the POR. Therefore, for these preliminary results, we used SRF's 
weighted average CC loans as the basis for the short-term rupee-
denominated benchmarks for all pre-shipment financing.
    Further, in prior reviews, the Department determined that U.S. 
dollar-denominated working capital demand loans (WCDL) are comparable 
to U.S. dollar-denominated pre-shipment export financing and post-
shipment export financing, because these loans and WCDLs are used to 
finance both inventories and receivables. See PET Film Preliminary 
Results of 2003 Review, 70 FR 46484, unchanged in PET Film Final 
Results of 2003 Review, at ``Benchmarks for Loans and Discount Rate.'' 
There is no new information or evidence of changed circumstances which 
would warrant reconsidering this finding.
    SRF reported only one U.S. dollar-denominated short-term loan 
during the POR. However, SRF did not obtain any WCDL during the POR. 
Therefore, in accordance with 19 CFR 351.505(a)(3)(ii), the Department 
is using a national average dollar-denominated short-term interest 
rate, as reported in the International Monetary Fund's publication 
International Financial Statistics (IMF Statistics) for SRF.
    SRF received exemptions from import duties and central sales taxes 
(CST) on the importation of capital equipment under the Export 
Promotion Capital Goods Scheme (EPCGS) and the Special Economic Zones 
(SEZ) programs, which we have preliminarily determined to be non-
recurring benefits in accordance with 19 CFR 351.524(c).
    Pursuant to 19 CFR 351.505(a)(2)(ii) the Department will not 
consider a loan provided by a government-owned special purpose bank to 
be a commercial loan for purposes of selecting a loan to compare with a 
government-provided loan. The Department has previously determined that 
the Industrial Development Bank of India (IDBI) is a government-owned 
special purpose bank. See PET Film Final Results 2003 Review at Comment 
3. Further, in 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. 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 
(PET Film Final Results of 2005 Review). As such, the Department does 
not use loans from the IDBI, IFCI, or EXIM, if reported by respondents, 
as a basis for a commercial loan benchmark.
    In this review, SRF did not have comparable commercial long-term 
rupee-denominated loans for all required years; therefore, for those 
years for which we did not have company-specific information, and where 
the relevant information was on the record, we relied on comparable 
long-term rupee-denominated benchmark interest rates from the 
immediately preceding year as directed by 19 CFR 351.505(a)(2)(iii). 
When there were no comparable long-term, rupee-denominated loans from 
commercial banks during either the year under consideration or the 
preceding year, we used national average long-term interest rates, 
pursuant to 19 CFR 351.505(a)(3)(ii), from the IMF Statistics. Finally, 
19 CFR 351.524(d)(3) directs us regarding the selection of a discount 
rate for the purposes of allocating non-recurring benefits over time. 
The regulations provide several options in order of preference. The 
first among these is the cost of long-term fixed-rate loans of the firm 
in question, excluding any loans which have been determined to be 
countervailable, for each year in which non-recurring subsidies have 
been received.

Denominator

    When selecting an appropriate denominator for use in calculating 
the ad valorem subsidy rate, the Department considers the basis for 
respondent's receipt of benefits under each program at issue. As 
discussed in further detail below, we preliminarily determine that the 
benefits received by SRF under all but one of the programs found 
countervailable, were tied to export performance. Therefore, for those 
programs, except as cited below for pre- and post shipment export 
financing, we use total export sales, including deemed exports, as the 
denominator for our calculations. See 19 CFR 351.525(b)(2). Because 
pre-shipment and post-shipment export financing requires that the 
recipient demonstrate physical exports, we used total export sales net 
of deemed exports. Further, for the one program that was not tied to 
export performance, the State and Union Territory Sales Tax Exemption 
program, we have used SRF's total sales of subject merchandise as the 
denominator in our calculations.

A. 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

[[Page 81577]]

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, and may be obtained in Indian rupees and in 
foreign currencies. In the original 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 to the extent that the interest rates provided 
under these programs are lower than comparable commercial loan interest 
rates; and (3) these programs are specific under section 771(5A)(B) of 
the Act because they are contingent upon export performance. See 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.
    SRF reported that it did not receive any post-shipment export 
financing during the POR. However, it did report receiving pre-shipment 
export financing during the POR. With regard to pre-shipment loans, the 
benefit conferred is the difference between the amount of interest the 
company paid on the government loan and the amount of interest it would 
have paid on a comparable commercial loan (i.e., the short-term 
benchmark). Because pre-shipment loans are tied to a company's total 
exports rather than exports of subject merchandise, we calculated the 
subsidy rate for these loans by dividing the total benefit by the value 
of SRF's total exports, net of deemed exports, during the POR. See 19 
CFR 351.525(b)(2). On this basis, we preliminarily determine the 
countervailable subsidy from pre-shipment export financing for SRF to 
be 0.13 percent ad valorem.

2. Advance License Program (ALP)

    Under the ALP, aka Advance Authorization scheme,\4\ 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, SRF used advance licenses to import certain materials duty free.
---------------------------------------------------------------------------

    \4\ See Government of India Original Response of May 27, 2010 
(QR-GOI), at 19.
---------------------------------------------------------------------------

    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 in 2005 and acknowledged that 
certain improvements to the ALP system were made. However, the 
Department found that, based on the information submitted by the GOI 
and examined during previous reviews of this proceeding, systemic 
issues continued to exist in the ALP system during the POR. See PET 
Film Final Results of 2005 Review, Issues and Decision Memorandum, at 
Comment 3; 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), 
and accompanying Issues and Decision Memorandum at Comment 1. In the 
2005 review, the Department specifically stated that it continues to 
find the ALP countervailable because of the systemic deficiencies in 
the ALP identified in that review, including:

    The GOI's lack of a system or procedure to confirm which inputs 
are consumed in the production of the exported products and in what 
amounts that is reasonable and effective for the purposes intended, 
as required under 19 CFR 351.519. Specifically, we still have 
concerns with regard to several aspects of the ALP including (1) the 
GOI's inability to provide the SION calculations that reflect the 
production experience of the PET film industry as a whole; (2) the 
lack of evidence regarding the implementation of penalties for 
companies not meeting the export requirements under the ALP or for 
claiming excessive credits; and, (3) the availability of ALP 
benefits for a broad category of ``deemed'' exports.

PET Film Final Results of 2005 Review, at Comment 3.
    Further, in that same review, the Department found that PET film 
producers ``do not have to keep track of wastage since it is not 
recoverable for the production of PET film.'' Id. Accordingly, no 
allowance was made by the GOI to account for waste to ensure that the 
amount of duty deferred would not exceed the amount of import charges 
on imported inputs consumed in the production of the exported subject 
merchandise. See id. Furthermore, the Department found that, in 
developing the SIONs for Pet film, the GOI did not tie the relevant 
production numbers to a producer's accounting system or financial 
statement. Id.
    In this review, SRF pointed to the revisions addressed in the above 
referenced 2005 administrative review of the order, stating that the 
GOI introduced those measures in order to strengthen the supervision 
and monitoring of the ALP.\5\ Further, in response to the Department's 
request, SRF submitted ``a complete set of documents submitted to the'' 
Directorate General of Foreign Trade (DGFT). The cited documents 
include copies of SRF's application for redemption and its 
documentation received from the DGFT and Customs at the time of 
redemption.\6\ This information includes the application for 
redemption, which contains the import and export data from the ALP 
license, a back-up detail on imports and exports made by SRF, SRF's 
Appendix 23 as submitted to the GOI, which lists the total quantity 
consumed for the exported product, and the total quantity 
authorized.\7\ All of SRF's documents were certified by an accountant. 
The total values of the GOI redemption document reflect the import and 
export data SRF reported to the GOI. However, we note that the actual 
consumption and export data deviate from those specified in the 
original license.
---------------------------------------------------------------------------

    \5\ See QR-SRF, at 65-66, and Exhibits 31(a)-(c).
    \6\ See SRF's First Supplemental Response of September 8, 2010 
(SQR1-SRF), at 32-33 and Exhibits S1-23(a) and (b).
    \7\ See SQR1-SRF, at Exhibit S1-23(a) and (b).

---------------------------------------------------------------------------

[[Page 81578]]

    The GOI submitted a ``detailed note,'' which, it states, contains 
the step-by-step procedures, including management, enforcement and 
maintenance, involved in the issuance of an ALP and in the discharge of 
its export obligation.\8\ Specifically, in this note, the GOI states 
that the holder of an advance license is required to produce the 
relevant Bank Certificate of export and realization, along with a copy 
of the shipping bill(s) containing the details of the shipment 
(physical exports) or a copy of the invoice duly signed by the unit 
receiving the material and their jurisdictional excise authorities 
(deemed exports) for redemption of the ALP. It further states that, 
before discharging the bank guarantee against the ALP, the Indian 
Customs verifies that the details of exports as given in the redemption 
certificate are in accordance with their records.\9\
---------------------------------------------------------------------------

    \8\ See QR-GOI, at 20 and Exhibit 1.
    \9\ Id. 31.
---------------------------------------------------------------------------

    The Department requested that the GOI submit a complete set of 
documentation with respect to SRF's export obligation under the ALP, or 
any other company's complete set of documentation, but in its response, 
the GOI deferred to the respondent.\10\ Thus, to date the Department 
has not received from the GOI a complete set of documents, which would 
include documents from each Indian Government entity involved in the 
processing of the redemption of an export obligation under the ALP. The 
GOI has not provided SRF's relevant Bank Certificate(s) of export and 
realization, along with a copy of the shipping bill(s) containing the 
details of the shipment (physical exports) or a copy of the invoice 
duly signed by the unit receiving the material and their jurisdictional 
excise authorities (deemed exports) for redemption of the ALP. As such, 
the record does not include supporting documentation that demonstrates 
that Indian Customs verified that the details of exports as given in 
the redemption certificate are in accordance with the records 
maintained by Indian Customs with respect to imports and exports. 
Further, copies of those specific customs records have also not been 
submitted by the GOI.
---------------------------------------------------------------------------

    \10\ See Government of India (GOI) First Supplemental Response 
of August 10, 2010 (SQR1-GOI), at 18-19 and GOI Second Supplemental 
Response of September 22, 2010 (SQR2-GOI), at 13.
---------------------------------------------------------------------------

    Thus, for the preliminary results, the Department was unable to 
examine the totality of documents involved in the processing of an 
Application for Redemption of Advance License, as examined by the DGFT 
and the Indian customs, to assess the monitoring procedures in place. 
The Department was unable to determine whether Appendix 23 is indeed 
effective in tracing the consumption of the quantities of inputs 
imported duty free to the quantities of subject merchandise exported, 
in accordance with the 2005 SION for PET film. Therefore, there is 
insufficient record evidence demonstrating the functionality and 
accuracy of the GOI's monitoring procedures to ensure that the inputs 
imported duty free were consumed in the production of subject 
merchandise exported, in accordance with the newly established PET film 
SION. Moreover, contrary to the GOI's claim that the present ALP scheme 
permits for monitoring which inputs listed in the SION are actually 
consumed in the production of the exported product, the GOI did not 
address the concerns the Department had in the 2005 review with respect 
to the formulation and verification of the PET film SION. In 
particular, the Department verified in PET Film Final Results 2005 
Review that the GOI did not require the producer to tie the inventory 
and consumption data to the producer's accounting systems and financial 
statements in order to verify the accuracy of the producer's data, or 
to account for waste normally incurred in the production. See PET Film 
Final Results 2005 Review, Issues and Decision Memorandum, at Comment 
3. In fact, the GOI states in its response that it considers ``that the 
system need not provide for determination of `what amounts of inputs 
have actually been consumed' and whether an excess has been allowed in 
a particular situation and in a given case, as an exporter is required 
to provide on annual basis a copy of the consumption register Appendix 
23, duly certified by a Chartered Accountant.'' \11\
---------------------------------------------------------------------------

    \11\ See QR-GOI, at 37.
---------------------------------------------------------------------------

    Further, the Department determined in the 2005 review that the GOI, 
in its revisions to the ALP, did not address the Department's concerns 
that it has no specific procedure in place to monitor that these 
finished products are ultimately exported. Specifically, the Department 
determined that Appendix 23 does not differentiate and identify sales 
as being either physical exports, deemed exports, or sales to 
intermediate suppliers, nor does it segregate imported inputs from 
domestically procured ones, nor does it differentiate the exported 
product produced from these inputs by separately identifying physical 
exports from deemed exports. In this new shipper review, neither the 
GOI nor SRF claimed that the laws and procedures underlying the ALP had 
changed with respect to ``deemed exports.'' The Appendix 23 submitted 
by SRF does not indicate any changes to the Appendix 23 examined in the 
2005 review, and thus still does not address the Department's concern 
regarding deemed exports.\12\ Thus, with respect to physical exports 
versus deemed exports, the GOI still did not demonstrate that it has a 
reliable monitoring system in place to determine which inputs, and in 
which amounts, are consumed in the production of the exported product. 
See 19 CFR 351.519(a)(4).
---------------------------------------------------------------------------

    \12\ See SQR1-SRF, at Exhibit S1-23(a).
---------------------------------------------------------------------------

    Because there is no evidence on the record demonstrating that the 
systemic deficiencies in the ALP system identified above have been 
resolved, 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, making normal allowance for waste nor did the 
GOI carry out an examination of actual inputs involved to confirm which 
inputs are consumed in the production of the exported product, and in 
what amounts; thus, the entire amount of the import duty deferral or 
exemption provided to the respondent constitutes a benefit under 
section 771(5)(E) of the Act; and, (3) this program is specific under 
section 771(5A)(A) and (B) of the Act because it is contingent upon 
exportation.
    Pursuant to 19 CFR 351.524(c)(1), the exemption of import duties on 
raw material inputs normally provides a recurring benefit. Under this 
program, during the POR, SRF 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.
    SRF received various ALP licenses, which it reported separately for 
the production of subject merchandise and non-subject merchandise.\13\ 
However, because the original license(s) identify Polyester Film only, 
it cannot be established whether the licenses were issued for subject 
merchandise only, or

[[Page 81579]]

for both subject- and non-subject merchandise, e.g., metalized film. 
Therefore, we were not able to determine whether the licenses were in 
fact tied to the production of a particular product within the meaning 
of 19 CFR 351.525(b)(5). Accordingly, we find that SRF's ALP licenses 
benefit all of the company's exports.
---------------------------------------------------------------------------

    \13\ See Exhibits 30, QR-SRF, and S1-22(a), SQR1-SRF.
---------------------------------------------------------------------------

    To calculate the subsidy, we first determined the total value of 
import duties exempted during the POR for SRF. 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 benefit by the total value of export 
sales. On this basis, we determine the countervailable subsidy provided 
under the ALP to be 0.59 percent ad valorem.

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 an 
interest penalty.
    In the investigation, the Department determined that import duty 
reductions or exemptions provided under the EPCGS are countervailable 
export subsidies because the scheme: (1) Provides a financial 
contribution pursuant to section 771(5)(D); (2) provides two different 
benefits under section 771(5)(E) of the Act; and (3) is specific 
pursuant to section 771(5A) (A) and (B) of the Act because the program 
is contingent upon export performance. See, e.g., PET Film Final 
Determination at ``EPCGS.'' Because there is no new information or 
evidence of changed circumstances that would warrant reconsidering our 
determination that this program is countervailable, we continue to find 
that this program is countervailable for these preliminary results.
    Since the unpaid duties are a liability contingent on subsequent 
events, under the EPCGS, the exempted import duties would have to be 
paid to the GOI if accompanying export obligations are not met. It is 
the Department's practice to treat any balance on an unpaid liability 
that may be waived in the future, as a contingent liability interest-
free loan pursuant to 19 CFR 351.505(d)(1). See PET Film Final 
Determination at ``EPCGS.'' These contingent-liability loans constitute 
the first benefit under the EPCGS. 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 obligation, 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 pursuant to 19 CFR 351.505(d)(2).
    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) and past practice, 
we are treating these import duty exemptions on capital equipment as 
non-recurring benefits.\14\
---------------------------------------------------------------------------

    \14\ See e.g., Polyethylene Terephthalate Film, Sheet, and Strip 
(PET Film) From India: Final Results of Countervailing Duty 
Administrative Review, 75 FR 6634, (February 10, 2010) and 
accompanying Issues and Decision Memorandum at Comment 9.
---------------------------------------------------------------------------

    SRF reported that it imported capital goods under the EPCGS in the 
years prior to the POR. SRF received various EPCGS licenses, which it 
reported were for the production of subject merchandise and non-subject 
merchandise. Information provided by SRF indicates that some of the 
licenses were issued for the purchase of capital goods and materials to 
be used in the production of both subject and non-subject 
merchandise.\15\ Based on the information and documentation submitted 
by SRF, we cannot determine that the EPCGS licenses are tied to the 
production of a particular product within the meaning of 19 CFR Sec.  
351.525(b)(5). As such, we find that all of SRF's EPCGS licenses 
benefit all of the company's exports.
---------------------------------------------------------------------------

    \15\ See Exhibits 16 and 18(a), QR-SRF.
---------------------------------------------------------------------------

    SRF met the export requirements for certain EPCGS licenses prior to 
December 31, 2009, and the GOI has formally waived the relevant import 
duties. For most of its licenses, however, SRF has not yet met its 
export obligation as required under the program. Therefore, although 
SRF 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.
    To calculate the benefit received from the GOI's formal waiver of 
import duties on SRF's capital equipment imports where its export 
obligation was met prior to December 31, 2009, we considered the total 
amount of duties waived, i.e., the calculated duties payable less the 
duties actually paid in the year, net of required application fees, in 
accordance with section 771(6) of the Act, to be the benefit and 
treated these amounts as grants pursuant to 19 CFR 351.504. 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 SRF's outstanding import duties. See PET Film 
Final Determination 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 SRF an import duty waiver. Those waivers with 
values in excess of 0.5 percent of SRF's total export sales in the year 
in which the waivers were granted were allocated using the allocation 
period for non-recurring subsidies to be the AUL prescribed by the 
Internal Revenue Service (IRS) for renewable physical assets for 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), in accordance with 19 CFR 351.524(d)(2)(i), while 
waivers with values less than 0.5 percent of SRF's total export sales 
were expensed in the year of receipt. See ``Allocation Period'' 
section, above.
    As noted above, import duty reductions or exemptions that SRF 
received on the imports of capital equipment for which they have 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 Sec.  351.505(d)(1); and 
PET Film Final Determination and Issues and Decision Memorandum, at 
``EPCGS''; see also Final Affirmative Countervailing Duty 
Determination: Bottle-Grade Polyethylene Terephthalate (PET) Resin From 
India,

[[Page 81580]]

70 FR 13460 (March 21, 2005) (Indian PET Resin Final Determination), 
and accompanying Issues and Decision Memorandum at ``Export Promotion 
Capital Goods Scheme (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 finally waived by the GOI. Accordingly, we find the 
benefit to be the interest that SRF 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., PET Film Preliminary Results of 2003 
Review, 70 FR 46483, 46488 (August 10, 2005) (unchanged in the final 
results, 71 FR 7534).
    As stated above, under the EPCGS program, the time period for 
fulfilling the export requirement expires eight years after importation 
of the capital good. As such, pursuant to 19 CFR 351.505(d)(1), the 
benchmark for measuring the benefit is a long-term interest rate 
because the event upon which repayment of the duties depends (i.e., the 
date of expiration of the time period to fulfill the export commitment) 
occurs at a point in time that is more than one year after the date of 
importation of the capital goods (i.e., under the EPCGS program, the 
time period for fulfilling the export commitment is more than one year 
after importation of the capital good). As the benchmark interest rate, 
we used the weighted-average interest rate from all comparable 
commercial long-term, rupee-denominated loans for the year in which the 
capital good was imported. See ``Benchmarks for Loans and Discount 
Rate'' section above for a discussion of the applicable benchmark. We 
then multiplied the total amount of unpaid duties under each license by 
the long-term benchmark interest rate for the year in which the license 
was approved and summed these amounts to determine the total benefit 
for each company.
    The benefit received under the EPCGS is the sum of: (1) The benefit 
attributable to the POR from the formally waived duties for imports of 
capital equipment for which respondents met export requirements by 
December 31, 2009, and (2) interest due on the contingent liability 
loans for imports of capital equipment that have not met export 
requirements. We then divided the total benefit received by SRF under 
the EPCGS program by SRF's total exports to determine a countervailable 
subsidy of 0.04 percent ad valorem.

4. Special Economic Zones (SEZs) Formerly Known as Export Process 
Zones/Export Oriented Units (EPZs/EOUs)

    In the original questionnaire, we asked the GOI and SRF whether SRF 
had received benefits under the EPZs/EOUs program. This program was 
found not to have been used in the original investigation. See PET Film 
Final Determination at ``Programs Determined to be Not Used,'' and 
aspects of EOUs were subsequently found countervailable in Indian PET 
Resin Final Determination. See Indian PET Resin Final Determination, at 
e. to g. In its questionnaire response the GOI stated that this program 
had been converted into a different program, the SEZ program. In 
response to the Department's request to explain and describe in detail 
the conversion of the program into a different program, the GOI 
responded that the conversion of the EPZs/EOUs to the SEZ program was 
via the Special Economic Zones Act, 2005, effective February 2006 (SEZ 
Act). The GOI stated that this was not really a new program but only a 
renaming of the EPZs/EOUs.\16\ This new shipper review is the first 
review under this order where this program was reported to be used by a 
respondent. In response to the Department's questionnaire requesting 
information on EPZs and EOUs, SRF reported that it first received 
approval to set up an SEZ from the Development Commissioner \17\ in 
August 2003 and commenced production in October 2004.\18\ Subsequently, 
SRF expanded its SEZ unit twice, once in 2007 and then again in 
2009.\19\
---------------------------------------------------------------------------

    \16\ See SQR1-GOI, at 11-12.
    \17\ The Central Government of India may appoint any of its 
officers of a certain rank to the position of Development 
Commissioner of one or more SEZs.
    \18\ See SQR1-SRF, at Revised Exhibit 9(a)(I).
    \19\ See QR-SRF, at Exhibits 19(a) and (b), and SQR1-SRF, at 26-
27.
---------------------------------------------------------------------------

    In response to the Department's original questionnaire, and 
specifically concerning EPZs and EOUs, the GOI stated that the nature 
of an SEZ is to provide a long-term and stable policy framework with a 
minimum of regulatory regime and to provide an expeditious and single 
window clearance mechanism for all eligible to apply for an SEZ. An SEZ 
may be established jointly or individually by the Central Government, 
the State Government or a person, i.e., companies like SRF, to 
manufacture goods or provide services, or both, as well as to serve as 
a Free Trade and Warehousing Zone.\20\ Companies/persons or Governments 
that want to set-up an SEZ in an identified area, can submit their 
proposal to the relevant State Government. To be eligible under the SEZ 
Act, the companies inside an SEZ must commit to export their production 
of goods and/or services. Specifically, all products produced, 
excluding rejects and certain domestic sales, must be exported and must 
achieve a net foreign exchange (NFE), calculated cumulatively for a 
period of five years from the commencement of production. In return, 
the companies inside the SEZ are eligible to receive various forms of 
assistance.
---------------------------------------------------------------------------

    \20\ See QR-GOI, at 15 and SQR1-GOI, at 12.
---------------------------------------------------------------------------

    Companies in a designated SEZ may receive the following benefits: 
(1) Duty-free importation of capital goods and raw materials, 
components, consumables, intermediates, spare parts and packing 
material; (2) purchase of capital goods and raw materials, components, 
consumables, intermediates, spare parts and packing material without 
the payment of central sales tax (CST) thereon; (3) exemption from the 
services tax for the services consumed within the SEZ; \21\ (4) 
exemption from stamp duty of all transactions and transfers of 
immovable property, or documents related thereto within the SEZ; (5) 
exemption from electricity duty and cess thereon on the sale or supply 
to the SEZ unit; (6) income tax exemptions under the Income Tax 
Exemption Scheme Section 10A; \22\ and (7) discounted land in an 
SEZ.\23\
---------------------------------------------------------------------------

    \21\ The Department previously determined central excise duty 
exemptions to be not countervailable. See 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 at ``Export Oriented 
Units (EOUs) Programs: Purchase of Material and other Inputs Free of 
Central Excise Duty.''
    \22\ See QR-GOI, at 16 and QR-SRF, at 50-51.
    \23\ See SQR1-SRF, at Exhibits S1-20(a)-20(c).
---------------------------------------------------------------------------

    In this new shipper review, SRF reported that it produced subject 
and non-subject merchandise in an SEZ unit located in Indore during the 
POR. Specifically, SRF reported using the SEZ program to obtain: (1) 
Duty-free importation of capital goods and raw materials, components, 
consumables, intermediates, spare parts and packing material; (2) 
purchase of capital goods and raw materials, components, consumables, 
intermediates, spare parts and packing material without the payment of 
central sales tax (CST) thereon; (3) exemption from stamp duty of all 
transactions and transfers of immovable property, or documents related 
thereto within the SEZ; (4) exemption from electricity duty and cess 
thereon on the sale or supply to the

[[Page 81581]]

SEZ unit; (5) income tax exemptions under Income Tax Exemption Scheme 
Section 10A; and (6) discounted land in an SEZ.
    Since eligibility for the SEZ program is contingent upon export 
performance, we find that the assistance provided under the SEZ program 
is specific within the meaning of sections 771(5A)(A) and (B) of the 
Act.
a. Duty-Free Importation of Capital Goods and Raw Materials, 
Components, Consumables, Intermediates, Spare Parts and Packing 
Material
    Companies in SEZs are entitled to import capital goods and raw 
materials, components, consumables, intermediates, spare parts and 
packing material duty-free in exchange for committing to export all of 
the products it produces, excluding rejects and certain domestic sales. 
Additionally, such companies have to achieve an NFE calculated 
cumulatively for a period of five years from the commencement of 
production.
    We preliminarily determine that the duty-free importation of 
capital goods and raw materials, components, consumables, 
intermediates, spare parts and packing material provide a financial 
contribution pursuant to section 771(5)(D)(ii) of the Act through the 
foregoing of duty payments. This SEZ program confers benefits in the 
amounts of exemptions of customs duties not collected in accordance 
with section 771(5)(E) of the Act.
    With regard to these import duty exemptions provided on goods, such 
as raw materials, that may be consumed in the production of the 
exported product, the GOI did not provide any information to 
demonstrate that such exemptions meet the criteria for non-
countervailability set forth in 19 CFR 351.519(a)(4). Absent such 
information, the Department finds that all of the import duty 
exemptions provided under this category of the SEZ program are 
countervailable. Based on the information provided by SRF in the form 
of copies of its ``Executed Legal agreement for SEZ Unit'' with the 
GOI, until an SEZ demonstrates that it has fully met its export 
requirement, the company remains contingently liable for the import 
duties.\24\ SRF has not yet met its export requirement under this 
program and will owe the unpaid duties if the export requirement is not 
met. Therefore, consistent with 19 CFR 351.505(d)(1), until the 
contingent liability for the unpaid duties is officially waived by the 
GOI, we consider the unpaid duties to be an interest-free loan made to 
SRF at the time of importation. We determine the benefit to be the 
interest that SRF would have paid during the POR had it borrowed the 
full amount of the duty reduction or exemption at the time of 
importation.
---------------------------------------------------------------------------

    \24\ See QR-SRF, at 58 and Exhibit 21(a); see also id. Exhibit 
20(c).
---------------------------------------------------------------------------

    Pursuant to 19 CFR 351.505(d)(1), the benchmark for measuring the 
benefit is a long-term interest rate because the event upon which 
repayment of the duties depends (i.e., the date of expiration of the 
time period to fulfill the export commitment) occurs at a point in time 
that is more than one year after the date of importation of the capital 
goods (i.e., under the SEZ program, the time period for fulfilling the 
export commitment is more than one year after importation of the 
capital good). We used the long-term, rupee-denominated benchmark 
interest rate discussed in the ``Benchmarks for Interest Rates and 
Discount Rates'' section above for each year in which capital goods 
were imported as the benchmark.
    We calculated the benefit from these exemptions by multiplying the 
value of the item imported by the applicable duty rates for customs 
duty and cess, and multiplied these amounts by the appropriate interest 
rate. We then summed the results, and divided that total by SRF's 
exports to determine the countervailable subsidy of 0.44 percent ad 
valorem.
b. Exemption From Payment of Central Sales Tax (CST) on Purchases of 
Capital Goods and Raw Materials, Components, Consumables, 
Intermediates, Spare Parts and Packing Material
    Under this program, SRF did not have to pay CST on raw materials, 
capital goods and other goods, such as packaging materials procured 
domestically. We preliminarily determine that the exemption from 
payment of CST on purchases of capital goods and raw materials, 
components, consumables, intermediates, spare parts and packing 
material provides a financial contribution pursuant to section 
771(5)(D)(ii) of the Act through the foregoing of CST payments. This 
SEZ program confers benefits in the amount of exemptions of CST not 
collected, in accordance with section 771(5)(E) of the Act. 
Specifically, the benefit associated with domestically purchased 
materials is the amount of CST due and uncollected on those purchases 
by SRF during the POR.
    Normally, uncollected indirect taxes, such as the CST, are 
considered to be recurring benefits. However, a portion of the benefit 
of this program is tied to the purchase of capital goods. As such, 
pursuant to 19 CFR 351.524(c)(2)(iii), we would normally treat such 
uncollected taxes due on purchases of capital goods as non-recurring 
benefits. However, we performed the ``0.5 percent test,'' as prescribed 
under 19 CFR 351.524(b)(2) and found that the amount of uncollected CST 
that was tied to the purchase of capital goods during the POR was less 
than 0.5 percent of total export sales during the POR. We also 
performed the ``0.5 percent test on SRF's uncollected CST on its 
purchases of capital goods in 2008, 2007, 2006, 2005 and 2004, and 
found that each year's uncollected CST was less than 0.5 percent of 
total export sales for each year. Therefore, each annual benefit for 
2004-2008 was expensed in the year earned and the only benefit 
attributable to the POR was the amount of the uncollected CST on 
purchases of capital goods under this program during the POR. See 19 
CFR 351.524(b)(2).
    With regard to the CST exemptions on goods, such as raw materials, 
that may be consumed in the production of the exported product, the GOI 
did not provide any information to demonstrate that such exemptions 
meet the criteria for non-countervailability set forth in 19 CFR 
351.518. Absent such information, the Department finds that all of the 
CST exemptions provided under this category of the SEZ program are 
countervailable. Therefore, we are treating all other CST exemptions on 
all purchases (other than capital goods) as recurring benefits pursuant 
to 19 CFR 351.524.
    To calculate the benefit, we summed the total value of uncollected 
CST for capital goods purchased during the POR and the total value of 
uncollected CST due on all other purchases during the POR. We then 
divided this amount by the total value of SRF's export sales during the 
POR. On this basis, we preliminarily determine the countervailable 
subsidy provided to SRF through the CST exemptions under the SEZ 
program to be 0.53 percent ad valorem.
c. Exemption From Stamp Duty of all Transactions and Transfers of 
Immovable Property, or Documents Related Thereto Within the SEZ
    According to SRF, ``{t{time} he Indian Stamp Act, 1899, is a 
Central enactment and States have powers to adopt the Indian Stamp Act, 
1899, with amendments to the same to suit the transactions peculiar to 
each State,'' and that the state of Madhya Pradesh has made amendments 
and imposed various types of Stamp duty. These amendments include the 
Stamp Duty, Surcharge on

[[Page 81582]]

Stamp Duty (under Madhya Pradesh Upkar Adhiniyam), Gram Panchyat Taxes 
(under Madhya Pradesh Panchayat Raj Adhiniyam, 1993), and 
Municipalities tax (under Madhya Pradesh Municipalities Act, 1961). 
Further, SRF states that under Section 13(2) of The Indore Special 
Economic Zone (Special Provisions) Act, 2003, the transfers of 
immoveable property or documents related thereto within the SEZ shall 
be exempt from stamp duty, and that SRF has been exempted from payment 
of stamp duty on its land lease deed.\25\
---------------------------------------------------------------------------

    \25\ See QR-SRF, at p. 57 and Exhibit 26(b) and SQR1-SRF, at 29-
30.
---------------------------------------------------------------------------

    In response to the Department's request to explain how the GOI 
monitors the exemption from stamp duty, the GOI responded that the 
monitoring criterion is that the documents on which stamp duty is being 
exempted should relate to the transfer of immovable property within the 
SEZ. In addition, the GOI provided an exhibit containing the applicable 
rates of stamp duty.\26\
---------------------------------------------------------------------------

    \26\ See SQR1-GOI, at p. 16 and Exhibit 6.
---------------------------------------------------------------------------

    For these preliminary results, we determine that the program 
provides a financial contribution in the form of revenue foregone by 
the State Government of Madhya Pradesh pursuant to section 
771(5)(D)(ii) of the Act, and confers a benefit equal to the amount of 
the tax exemption, pursuant to section 771(5)(E) of the Act. We also 
determine that the SEZ exemption from stamp duty/taxes provides a 
recurring benefit under 19 CFR 351.524(c).
    To calculate the benefit, we first calculated the value of the 
uncollected stamp duties and taxes, as listed above, which SRF did not 
pay during the POR, by multiplying the value of the immovable property 
based on the tax rates provided. We then divided this amount by SRF's 
total export sales during the POR to calculate a countervailable 
subsidy of 0.01 percent ad valorem.
d. Exemption From Electricity Duty and Cess Thereon on the Sale or 
Supply to the SEZ Unit
    SRF reports that under Section 11(4) of The Indore Special Economic 
Zone (Special Provisions) Act, 2003, the supply of electricity to an 
SEZ is exempt from electricity duty and cess.\27\ In response to the 
Department's request to explain its monitoring procedure, the GOI cited 
to Section 11(4) of The Indore Special Economic Zone (Special 
Provisions) Act, 2003, stating that the unit to which electricity duty 
is exempted should be located within the Special Economic Zone as 
approved by the GOI. In addition, the GOI provided an exhibit including 
the Madhya Pradesh Electricity Duty (Amendment) Act, 1995 and the 
Madhya Pradesh Ordinance No. 18 of 200, i.e., the State's laws 
governing the taxation of electricity.\28\
---------------------------------------------------------------------------

    \27\ See QR-SRF, at p. 58 and Exhibits 27(a) and (b).
    \28\ See SQR1-GOI, at 16 and Exhibit S1-7.
---------------------------------------------------------------------------

    For these preliminary results, we determine that the electricity 
duty and cess exemptions provide a financial contribution in the form 
of revenue foregone by the State Government of Madhya Pradesh pursuant 
to section 771(5)(D)(ii) of the Act, and confers a benefit equal to the 
amount of the tax exemption, pursuant to section 771(5)(E) of the Act. 
We also determine that the SEZ exemption from electricity duty and cess 
provides a recurring benefit under 19 CFR 351.524(c).
    To calculate the benefit, we first calculated uncollected 
electricity duty and cess which SRF did not pay during the POR, by 
multiplying the monthly billed amount of electricity consumed by the 
tax rates provided. We then divided this amount by SRF's total export 
sales during the POR to calculate a countervailable subsidy of 0.18 
percent ad valorem.
e. SEZ Income Tax Exemption Scheme