66 FR 49635, September 28, 2001 C-533-821 Investigation Public Document DAS II/Office VI: DB, MG, RC, EBG September 21, 2001 MEMORANDUM TO: Faryar Shirzad Assistant Secretary for Import Administration FROM: Bernard T. Carreau Deputy Assistant Secretary for AD/CVD Enforcement II SUBJECT: Issues and Decision Memorandum: Final Results of the Countervailing Duty Investigation: Certain Hot-Rolled Carbon Steel Flat Products from India Summary We have analyzed the comments and rebuttals of interested parties in the final determination of the above-mentioned countervailing duty (CVD) investigation covering the period April 1, 1999 through March 31, 2000 (the POI). As a result of our analysis, we have made certain modifications to our Preliminary Determination. Below are the "Methodology and Background Information" and "Analysis of Programs" sections of this memorandum that describe the decisions made in this CVD investigation with respect to Essar Steel Ltd. (Essar), Ispat Industries, Ltd. (Ispat), the Tata Iron and Steel Company, Ltd. (TISCO), and the Steel Authority of India, Ltd. (SAIL), the producers/exporters of subject merchandise covered by this segment of the proceeding. Also below is the "Analysis of Comments" section in which we discuss the issues raised by interested parties. We recommend that you approve the positions we have developed below in this memorandum. Methodology and Background Information I. The Net Subsidy Rate Attributable to Jindal Vijaynagar Ltd. Section 776(a) of the Act requires the use of facts available when an interested party withholds information that has been requested by the Department of Commerce (the Department) or when an interested party fails to provide the information requested in a timely manner and in the form required. As described in the Notice of Preliminary Affirmative Countervailing Duty Determination and Alignment of Final Countervailing Duty Determination with Final Antidumping Duty Determinations: Certain Hot- Rolled Carbon Steel Flat Products from India, 66 FR 20240, at 20242 (April 20, 2001) (Preliminary Determination), we found that Jindal failed to respond to the Department's questionnaire. Consequently, we used facts otherwise available. Subsequent to the issuance of the Preliminary Determination, we received a letter from the GOI informing us that Jindal never received a questionnaire from the Department of Commerce. See the GOI's May 3, 2001 letter, a public document on file in the Central Records Unit (CRU) of the Main Commerce building. The letter requested that the Department provide Jindal with an opportunity to submit a questionnaire response. We have reconsidered our decision to apply adverse facts available to Jindal based upon the GOI's claim that Jindal never received a questionnaire. We note that we did not send a questionnaire to Jindal upon receiving the May 3, 2001 letter. We further note that petitioners did not comment on the GOI's letter. In light of assertions by the GOI coupled with the fact that we did not subsequently require a response from Jindal, we have determined that the application of adverse facts available is no longer warranted and, thus, we are no longer employing adverse facts available with respect to Jindal. Rather, we are applying the all others rate to Jindal. We note that in the "Suspension of Liquidation" section of the Preliminary Determination, we referred to Jindal as the Jindal Iron and Steel Company. See 66 FR 20250. In its May 3, 2001 letter, the GOI informed us that the company that shipped subject merchandise to the United States during the POI actually was named Jindal Vijaynagar Ltd. II. Subsidies Valuation Information A. Allocation Period Under section 351.524(d)(2) of the CVD regulations, we will 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 (IRS) 1977 Class Life Asset Depreciation Range System, as updated by the Department of the Treasury. The presumption will apply unless a party claims and establishes that these tables do not reasonably reflect the AUL of the renewable physical assets for the company or industry under investigation, and the party can establish that the difference between the company-specific or country-wide AUL for the industry under investigation is significant. In the Preliminary Determination, we used an allocation period of 15 years, which is the average useful life corresponding to the steel industry, as indicated by the IRS depreciation tables. See 66 FR at 20242. No party contested the Department's use of a 15-year AUL in the Preliminary Determination. Therefore, in accordance with section 351.524(d)(2) of the CVD regulations, we have allocated all non-recurring subsidies over 15 years. B. Creditworthiness As explained in the Preliminary Determination, we initiated a creditworthy investigation of SAIL for fiscal years 1999 and 2000, in accordance with section 351.505(a)(4)(i) of the CVD regulations. See 66 FR at 20243. Petitioners further alleged that SAIL was uncreditworthy during fiscal years 1997 and 1998. However, we did not initiate a creditworthy investigation of SAIL in those years due to insufficient information in the petition. Id. at 20243. In the Preliminary Determination, we found that SAIL was creditworthy during the fiscal years 1999 through 2000 based on the company's financial ratios for the period and on the fact that SAIL was able to secure commercial financing during fiscal years 1999 and 2000 without the aid of GOI guarantees. Id. at 20243. Petitioners further alleged that Ispat and Essar were uncreditworthy during the years 1997 through 2000. As explained in the Preliminary Determination, Ispat's and Essar's financial ratios as well as the fact that they were able to obtain commercial financial without GOI guarantees during the years in question lead us to conclude that they were creditworthy during fiscal years 1997 through 2000. Id. at 20243. See also the April 13, 2001, creditworthiness memorandum to Melissa G. Skinner, Director to the Office of AD/CVD Enforcement VI, a public document on file in the Department's Central Records Unit (CAU), Room B099 (Preliminary Creditworthiness Memorandum). As discussed in comment 9 of the "Analysis of Comments" section below, our verification of the questionnaire responses submitted by SAIL, Ispat, and Essar and comments from interest parties did not lead us to reconsider our findings on this matter. Accordingly, we continue to find SAIL creditworthy during fiscal years 1999 and 2000. We also continue to find Ispat and Essar creditworthy during the fiscal years 1997 through 2000. C. Benchmarks for Loans and Discount Rate Benchmarks for Loans and Discount Rate In the Preliminary Determination, for those programs requiring the application of a short-term benchmark interest rate, we used, in accordance with section 351.505(3)(i) of the CVD regulations, company- specific, short-term interest rates on commercial loans as reported by producers/exporters of subject merchandise. See 66 FR at 20242. With respect to the rupee-denominated, short-term benchmark, we used the weighted-average of the companies' cash credit loans. We note that in the Final Affirmative Countervail Duty Investigation: Certain Cut-to-Length Carbon-Quality Steel Plate from India, 64 FR 73131, 73137 (December 29, 1999) (CTL Plate from India), we found that cash credit loans provide the most comparable type of short-term benchmark when calculating the benefit under the GOI's short-term loan programs. Therefore, we have determined it is appropriate to use the weighted-average of those loans as a short-term benchmark in this case. In the Preliminary Determination, we further explained that for those programs requiring a rupee-denominated discount rate or the application of a rupee-denominated, long-term benchmark interest rate, we used, where available, company-specific, weighted-average interest rates on commercial long-term, rupee-denominated loans. See 66 FR 20242. We note that some producers/exporters of subject merchandise did not have rupee-denominated, long-term loans from commercial banks for all required years. Therefore, for those years, we had to rely on a rupee-denominated, long-term benchmark interest rate that is not company-specific, but provides a reasonable representation of industry practice, in order to determine whether a benefit was provided to the companies from rupee-denominated, long-term loans received from the GOI. Pursuant to section 351.505(a)(3)(iii) of the CVD regulations, we first sought to use national average interest rates for those years in which the producer/exporters did not report company-specific interest rates on comparable commercial loans. However, the GOI did not have national average interest rates on long- term, rupee-denominated financing for those years. Therefore, in keeping with the Department's past practice, we used as our benchmark in these instances the weighted-average interest rates of commercial rupee- denominated, long-term loans that were received by the other respondent companies in this investigation. This approach is consistent with the Department's practice in recent investigations. See e.g., Final Affirmative Countervailing Duty Determination: Stainless Steel Sheet and Strip in Coils from the Republic of Korea, 64 FR 30636, 30640 (June 8, 1999) and Final Affirmative Countervailing Duty Determination: Structural Steel Beams From the Republic of Korea, 65 FR 41051 (July 3, 2000). SAIL used a countervailable program requiring the use of long-term interest rate benchmarks that were denominated in foreign currencies. During verification, we attempted to obtain information on foreign- currency denominated loans issued in India. However, we were not able to obtain such information. See the August 17, 2001 Memorandum to Melissa G. Skinner, Director, Office of AD/CVD Enforcement VI, from Robert Copyak, Case Analyst, Office of AD/CVD Enforcement VI, "Meeting with Commercial Banker in New Delhi," a public document on file in Room B-099 of the CAU. Thus, because SAIL did not have any comparable, commercial loans denominated in the appropriate foreign currencies and because we were not able to obtain such loans during verification, we used currency-specific "Lending Rates" from private creditors, as published in the International Financial Statistics as the benchmark for SAIL's foreign currency loans. Our approach on this matter is consistent with our approach in the CTL Plate from India, 64 FR at 73133. Regarding Essar, during verification, we learned that the company- specific loans included in Essar's long-term fixed-rate benchmark interest rate included loans whose interest rates had been revised subsequent to the loans' issuance. When determining the benchmark interest rate for long- term loans, our goal is to use a comparable commercial loan the "terms of which were established during or immediately before the year in which the terms of the government provided loan were established." See19 CFR 351.505(a)(2)(iii) (2000). Thus, based on our findings at verification, we have derived the weighted-average of Essar's long-term benchmark interest rate using the interest rates in effect during the year of receipt of the commercial loans rather than using the revised interest rates that were applied to the commercial loans in later years. For further information, see page 5 of the July 3, 2001 Memorandum to Melissa G. Skinner, Director, Office of AD/CVD Enforcement VI, from Eric B. Greynolds and Darla Brown, Case Analysts, Office of AD/CVD Enforcement VI, "Verification of the Questionnaire Responses Submitted by Essar Steel, Limited (Essar)" (Essar Verification Report), a public document on file in Room B-099 of the CAU. Matters pertaining to benchmark interest rates are further discussed in comments 11, 19, and 22. III. Program-Wide Changes Respondents argue that, pursuant to section 351.526 of the CVD regulations, the Department should take into account program-wide changes involving countervailable programs that were eliminated by the GOI subsequent to the POI but before the Preliminary Determination when determining the final cash deposit rate for this investigation. Specifically, respondents argue that the Department should determine that no residual benefits continue to be bestowed from the Pre-Export Duty Entitlement Passbook Scheme (DEPS), the Exemption of Export Credit from Interest Tax program, the Special Import License (SIL) program, and the sale of Advance Licenses and, thus, should calculate the final cash deposit rate accordingly. As discussed in more detail in comment 7 of the "Analysis of Comments" section of this Decision Memorandum, we determine that the facts on the record of this investigation warrant a finding of program-wide changes with respect only to the Exemption of Export Credit from Interest Tax program and the SIL program. Thus, the net subsidy rates that we have calculated for these programs will not be included in any final cash deposit rates issued by the Department. Analysis of Programs I. Programs Conferring Subsidies A. 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., for the purchase of raw materials, warehousing, packing, and transporting of export merchandise. Exporters may also establish 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. 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 their lending bank. The credit covers the period from the date of shipment of the goods to the date of realization of export proceeds from the overseas customer. Under the Foreign Exchange Management Act of 1999, exporters are required to realize export proceeds within 180 days from the date of shipment, which is monitored by the RBI. Post-shipment financing is, therefore, a working capital program used to finance export receivables. This financing is normally denominated either in rupees or in foreign currency, except in those instances when an exporter uses foreign currency pre-shipment financing and is then restricted to post-shipment export financing denominated in the same foreign currency. In the Preliminary Determination, we found that the Pre- and Post- Shipment Export Financing programs conferred countervailable subsidies on the subject merchandise because 1) receipt of export financing was contingent upon export performance and 2) the interest rates under the program were lower than commercially available rates. See 66 FR at 20243. No new information, evidence of changed circumstances or comments from interested parties were presented in this investigation to warrant any reconsideration of these findings. However, information collected during verification as well as comments from interested parties have led us to revise the manner in which we calculated the net subsidy rate under the Pre- and Post-Shipment Export Financing program for certain producers of subject merchandise. For further information, see comment 10 and 25 in the "Analysis of Comments" section of this Decision Memorandum. Accordingly, the net subsidy rate under the Pre-Shipment Export Financing program is 0.60 percent ad valorem for Essar, 1.19 percent ad valorem for Ispat, 0.47 percent ad valorem for SAIL, and 1.32 percent ad valorem for TISCO. The net subsidy rate under the Post-Shipment Export Financing program is 0.09 percent ad valorem for Ispat, 0.01 percent ad valorem for SAIL, and 0.74 percent ad valorem for TISCO. B. Duty Entitlement Passbook Scheme India's DEPS was enacted on April 1, 1997, as a successor to the Passbook Scheme (PBS). As with PBS, the DEPS enables exporting companies to earn import duty exemptions in the form of passbook credits rather than cash. Exporting companies may obtain DEPS credits on a pre-export basis or on a post-export basis. Eligibility for pre-export DEPS credits is limited to manufacturers/exporters that have exported for a three-year period prior to applying for the program. The amount of pre-export DEPS credits that could be earned during the POI was ten percent of the average of total export performance of the applicant during the preceding three years. Pre- export DEPS credits are not transferable. All exporters are eligible to earn DEPS credits on a post-export basis, provided that the exported product is listed in the GOI's Standard Input and Output Norms (SIONs). Post-export DEPS credits can be used for any subsequent imports, regardless of whether they are consumed in the production of an export product. Post-export DEPS credits are valid for 12 months and are transferable. With respect to subject merchandise, exporters were eligible to earn credits equal to 14 percent of the f.o.b. value of their export shipments during the fiscal year ending March 31, 2000. During the POI, SAIL, Essar, Ispat, and TISCO all earned post-export DEPS credits. In the Preliminary Determination, we found that the DEPS conferred countervailable subsidies on subject merchandise because the program failed to meet the standards set forth in section 351.519 of the CVD regulations. See 66 FR at 20244. No new information, evidence of changed circumstances or comments from interested parties were presented in this investigation to warrant any reconsideration of these findings. See comments 6, 16, and 23 in the "Analysis of Comments" section of this memorandum. Accordingly, the net subsidy rate under the DEPS is 6.06 percent ad valorem for Essar, 13.98 percent ad valorem for Ispat, 10.73 percent ad valorem for SAIL, and 5.17 percent ad valorem for TISCO. C. Advance Licenses Under India's Duty Exemption Scheme, exporters may also import inputs duty-free through the use of import licenses. Using advance licenses, companies are able to import inputs "required for the manufacture of goods" without paying India's basic customs duty. Advance intermediate licenses and special imprest licenses are also used to import inputs duty- free. The GOI reported that advance intermediate licenses and special imprest licenses are not related to exports. During the POI, Essar and TISCO used advance licences and Essar and TISCO also sold some advance licenses. In the Preliminary Determination, based on prior decisions, we found that the Advance Licenses program conferred countervailable subsidies on subject merchandise because the program failed to meet the standards set forth in section 351.519 of the CVD regulations. See 66 FR at 20245. However, as explained below in Comment 5 of the "Analysis of Comments" section of this memorandum, changes in the program itself, information collected at verification, and comments from interested parties have led us to revise our approach to this program. Specifically we determine that, with respect to the Advance License program, the GOI has in place and applies a system to confirm which inputs are consumed in the production of the exported products and in what amounts, and, thus, is a reasonable and effective system for the purposes intended. Thus, duty drawback under this program is countervailable only to the extent that the advance licenses result in an over-rebate of duties on imports not consumed in the production process. Regarding the sale of advances, we have altered our approach in the Preliminary Determination and determine that the sale of quantity-based advanced licenses is not countervailable. See Comment 5 of the "Analysis of Comments" section of this memorandum Accordingly, the net subsidy rate under the Advance License program is 0.24 percent ad valorem for Essar. D. Special Import Licenses (SILs) During the POI, producers/exporters of subject merchandise sold through public auction two types of import licenses--SILs for Quality and SILs for Star Trading Houses. SILs for Quality are licenses granted to exporters which meet internationally-accepted quality standards for their products, such as the IS0 9000 (series) and ISO 14000 (series). SILs for Star Trading Houses are licenses granted to exporters that meet certain export targets. Both types of SILs permit the holder to import products listed on a "Restricted List of Imports" in amounts up to the face value of the SIL. Under the program, the SILs do not exempt or reduce the amount of import duties paid by the importer. In the Preliminary Determination, we found that the SIL program conferred countervailable subsidies on subject merchandise because the companies receive these licenses based on their status as exporters. See 66 FR at 20246. No new information, evidence of changed circumstances or comments from interested parties were presented in this investigation to warrant any reconsideration of these findings. However information collected at verification has led us to revise the manner in which have calculated the net subsidy rate under this program. This program is further discussed in comment 12 of the "Analysis of Comments" section of this Decision Memorandum. Accordingly, the net subsidy rate under the SIL program is 0.06 percent ad valorem for Essar, 0.15 percent ad valorem for SAIL, and 0.01 percent ad valorem for TISCO. E. Export Promotion Of Capital Goods Scheme (EPCGS) The EPCGS provides for a reduction or exemption of customs duties and an exemption from excise taxes on imports of capital goods. Under this program, producers may import capital equipment at reduced rates of duty by undertaking to earn convertible foreign exchange equal to four to five times the value of the capital goods within a period of eight years. 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. In the Preliminary Determination, we found that the EPCGS conferred countervailable subsidies on subject merchandise because it is based on export performance. See 66 FR at 20246. See also Final Negative Countervailing Duty Determination: Elastic Rubber Tape From India, 64 FR 19125, 19129 (April 19, 1999) (Elastic Rubber Tape from India). No new information, evidence of changed circumstances or comments from interested parties were presented in this investigation to warrant any reconsideration of these findings. However information collected at verification and comments from interested parties has led us to revise the manner in which have calculated the net subsidy rate under this program for certain producers of subject merchandise. See comments 11, 14, 17, 20, and 24 of the "Analysis of Comments" section of this Decision Memorandum. Accordingly, the net subsidy rate under the EPCGS is 1.35 percent ad valorem for Essar, 16.63 percent ad valorem for Ispat, 0.29 percent ad valorem for SAIL, and 0.95 percent ad valorem for TISCO. F. Loans from the Steel Development Fund (SDF) Fund The SDF was established in 1978 during a time when the steel sector in India was subject to price and distribution controls. From 1978 through 1994, India's integrated steel producers, SAIL, TISCO, Rashtriya Ispat Nigam Limited (RINL), and India Iron & Steel Company Limited (IISCO), were mandated by the GOI to increase the prices for the products they sold. The proceeds from the price increases were remitted to the SDF. Under the SDF program, companies that contributed to the fund are eligible to take out long-term loans at advantageous rates. The issuance and administration of loans under the SDF program are supervised by the Joint Planning Commission (JPC). However, according to the GOI, all of the SDF's lending decisions are subject to the review and approval of the SDF Managing Committee, whose membership is comprised entirely of GOI officials. In the Preliminary Determination, we found that the loans from the SDF conferred countervailable subsidies on subject merchandise because of the GOI's substantial control over the operation of the Fund. See 66 FR at 20247-48. No new information, evidence of changed circumstances or comments from interested parties were presented in this investigation to warrant any reconsideration of these findings. See comment 1 of the "Analysis of Comments" section of this Decision Memorandum. However information collected at verification and comments from interested parties has led us to revise the manner in which have calculated the net subsidy rate under this program for certain companies. See comments 1, 2, 4, 21, and 26 of the "Analysis of Comments" section of this Decision Memorandum. Accordingly, the net subsidy rate under the SDF loan program is 0.03 percent ad valorem for SAIL and 0.99 percent ad valorem for TISCO. G. The GOI's Forgiveness of SDF Loans Issued to SAIL In October of 1998, SAIL, which was facing financial problems, proposed a turnaround plan to the GOI, through the SDF Managing Committee, in which it outlined its financial and business restructuring. The goals of the restructuring plan were to restore the profitability and competitiveness of the company. In order to achieve these goals, SAIL included in its proposal to the GOI provisions for the forgiveness of portions of its outstanding SDF debt. As SAIL's principal shareholder, the GOI reviewed and approved SAIL's overall restructuring plan. However, the approval for the actual forgiveness of SAIL's SDF loans lay with the SDF Managing Committee. The SDF Managing Committee issued a resolution during the POI in which it waived Rs. 50.73 billion of SAIL's SDF debt. In addition, SAIL indicated that it received from the GOI three other waivers on its SDF loans in the years immediately preceding the POI. In the Preliminary Determination, we found that the GOI's forgiveness of SDF loans issued to SAIL conferred countervailable subsidies on subject merchandise. See 66 FR at 20248. No new information, evidence of changed circumstances or comments from interested parties (see comments 1 and 2 of the "Analysis of Comments" section) were presented in this investigation to warrant any reconsideration of these findings. Accordingly, the net subsidy rate for SAIL under this program is 6.06 percent ad valorem. H. GOI Forgiveness of Other Loans Issued to SAIL In the 1970s, IISCO, a subsidiary of SAIL, was an ailing private sector company, the management of which was assumed by SAIL in the early 1970s at the direction of the GOI. According to the GOI, pursuant to a 1978 Act of Parliament, IISCO was made a wholly-owned subsidiary of SAIL. However, IISCO continued to incur losses, and, in order to meet its capital expenditures and to finance its debts, the GOI issued loans to the company in the late 1980s and early 1990s. The GOI eventually forgave these loans as part of SAIL's financial restructuring package. In the Preliminary Determination, we found that the GOI's forgiveness of additional loans issued to SAIL conferred countervailable subsidies on subject merchandise. See 66 FR at 20249. No new information, evidence of changed circumstances or comments from interested parties (see comment 3 of the "Analysis of Comments" section) were presented in this investigation to warrant any reconsideration of these findings. Accordingly, the net subsidy rate for SAIL under this program is 0.44 percent ad valorem. I. Loan Guarantees from the GOI The GOI has stated that it normally extends loan guarantees to "Public Sector Companies" in particular industrial sectors. SAIL was the only producer/exporter of subject merchandise that reported loans outstanding during the POI on which it had received GOI loan guarantees. These long- term loans were denominated in several foreign currencies. In the Preliminary Determination, we found that GOI guarantees on loans provided to SAIL from commercial banks conferred countervailable benefits. See 66 FR 20240 at 20249. No new information, evidence of changed circumstances or comments from interested parties were presented in this investigation to warrant any reconsideration of these findings. In the Preliminary Determination, we also determined not to countervaile GOI guarantees on loans provided to SAIL from international lending institutions. However, based on record evidence and on comments received from interested parties, we have determined that guarantees provided by the GOI on loans issued by international lending institutions are countervailable. See comment 18 of the "Analysis of Comments" section. Accordingly, the net subsidy rate for this program is 0.19 percent ad valorem for SAIL. J. Exemption of Export Credit from Interest Taxes Under the Interest Tax Act of 1974, a tax is levied on the chargeable interest accruing to a credit institution in a given year. Under Section 28 of the Act, the GOI may exempt any credit institution or class of credit institutions, or the interest on any category of loan or advances from the levy of the interest tax. Pursuant to this section of the Act, the GOI has exempted working capital loans taken from banks for supporting exports from the interest tax. Loans obtained by producers/exporters of subject merchandise from banks under the pre- and post-shipment export financing program are covered by this exemption. All producers/exporters of subject merchandise used this program. In the Preliminary Determination, we found that this program conferred countervailable subsidies on subject merchandise. See 66 FR at 20248. No new information, evidence of changed circumstances or comments from interested parties (see comment 13) were presented in this investigation to warrant any reconsideration of these findings. Accordingly, we determine the net subsidy rate to be 0.01 percent ad valorem for Essar, 0.05 percent ad valorem for Ispat, 0.01 percent ad valorem for SAIL, and 0.08 percent ad valorem for TISCO. These net subsidy rates remain unchanged from the Preliminary Determination. II. Programs Determined To Be Not Used A. Income Tax Deductions Under Section 80 H.C. B. Grant-in-Aid Reported on SAIL's Annual Reports III. Total Ad Valorem Rate The net subsidy rate for producers/exporters of subject merchandise are as follows: Producer/Exporter Net Subsidy Rate Essar Steel Limited (Essar) 8.32 percent ad valorem Ispat Industries Limited (Ispat) 31.94 percent ad valorem Steel Authority of India Limited (SAIL) 18.38 percent ad valorem Tata Iron and Steel Company Limited (TISCO) 9.26 percent ad valorem All Others Rate 16.17 percent ad valorem IV. Cash Deposit Rates Under section 351.526 of the CVD regulations, the Department can adjust cash deposit rates to account for program-wide changes. During this investigation, the Department verified that two programs have been terminated subsequent to the POI. Therefore, we are adjusting the cash deposit rates to take into account these program-wide changes. Thus, in determining the cash deposit rates listed below, we have deducted the ad valorem subsidies found for these two programs from the overall subsidy rate calculated for the investigated companies. Producer/Exporter Cash Deposit Rate Essar Steel Limited (Essar) 8.25 percent ad valorem Ispat Industries Limited (Ispat) 31.89 percent ad valorem Steel Authority of India Limited (SAIL) 18.22 percent ad valorem Tata Iron and Steel Company Limited (TISCO) 9.17 percent ad valorem All Others Rate 16.08 percent ad valorem V. Analysis of Comments Comment 1: Steel Development Loans and Loan Forgiveness Respondents contend that the Department erred in the Preliminary Determination when it countervailed the loans received by SAIL and TISCO under the SDF program. Respondents further argue that the Department incorrectly countervailed the GOI's forgiveness of loans SAIL received through the Steel Development Fund (SDF). Respondents argue that the record evidence does not indicate that the GOI had a controlling interest in the SDF such that it was able to "entrust or direct" the SDF to provide a financial contribution within the meaning of section 771(5)(B)(iii) of the Act. Respondents contend that the Joint Planning Committee (JPC) is not an entity subject to GOI control because the JPC's membership is dominated by representatives of the integrated steel companies themselves, not the GOI, and mere membership of the Secretary of the Ministry of Steel on the JPC cannot be equated with the GOI itself acting through the JPC. Rather, respondents claim that the JPC acts independently with minimal input from the GOI through the membership of the Secretary. In addition, respondents claim that the SDF does not involve the high degree of interaction between the government and an intermediate entity that is necessary for the Department to conclude that a government's actions are sufficiently invasive such that it can be said to "entrust or direct" the intermediate entity to make a financial contribution to another party within the meaning of section 771(5)(B)(iii) of the Act. See, e.g., Final Negative Countervailing Duty Determination: Stainless Steel Plate in Coils From the Republic of Korea, 64 FR 15530, 15532 (March 31, 1999). In addition, respondents contend that the Department overlooked the fact that the "entrusts or direct" language in section 771(5)(B)(iii) of the Act requires that the alleged financial contribution "would normally be vested in the government" and that "the practice does not differ in substance from practices normally followed by governments." Respondents assert that, where an industry group, such as Indian integrated steel producers, contributes money to a jointly-administered fund and distributes loans from that fund back to contributing members, this is not inherently a government practice and, thus, does not satisfy the requirements enumerated by the statute. Respondents further argue that, although the GOI established the SDF and the JPC and that it authorized the JPC to determine the prices at which steel products could be sold by the integrated steel producers, the Department has never equated the mere establishment by a government of an entity with the conferral of a countervailable subsidy. Respondents also argue that finding the SDF loans and forgiveness of SDF loans countervailable would contradict the Department's precedent in other cases in which it found that loans from a pool of funds administered by an industry association, including those with government involvement, do not constitute countervailable subsidies. In support of their contention, respondents cite to, among other cases, Final Affirmative Countervailing Duty Determination: Steel Wire Rod From Germany, 62 FR 54990, 54993 (October 22, 1997), in which they claim that the Department found that benefits received by producers from financial pools created from contributions of the producer's own funds under the European Coal and Steel Community (ECSC) program are not countervailable. In further support of their argument, respondents cite to Final Affirmative Countervailing Duty Determinations; Certain Steel Products From Belgium, 47 FR 39304, 39326 (September 7, 1982), in which the Department found that a program benefitting the steel industry which is financed exclusively by ECC levies and levy-generated funds do not confer a countervailable benefit on steel production since it merely returns to companies funds which they originally paid in. In addition, respondents take issue with the Department's application of the "entrusts or directs" provision of the Act to the SDF because they claim the contributions to the SDF were comprised entirely of the companies' own money and, thus, any countervailable finding results in the absurd conclusion of a private entity subsidizing itself. Respondents assert that the entire corpus of the SDF consists of contributions from a portion of the sales receipts generated by the four integrated steel producers that contributed to the fund, the repayment of loans against the SDF by those producers, and interest earned. They claim that, in the case of the SDF, no subsidy can be conferred because the lack of any GOI funds makes the finding of a government financial contribution and benefit, as defined by section 771(5)(B) of the Act, impossible. Respondents state the Department acknowledges this point, apparently without recognition, when it stated in the Preliminary Determination that Steel producers collected the price increase, which was paid by steel consumers in India, and these additional funds were then placed into the SDF as a source of concessional financing for the Indian steel industry. 66 FR at 20248. Respondents claim that the Department attempts to avoid this conclusion by pointing to the GOI's control over the mechanism by which the SDF funds were collected from its members. However, they assert, that irrespective of the level of the GOI's involvement in the creation and maintenance of the SDF, such involvement cannot serve as a basis to consider the SDF loans, which came from the member companies' own funds, to be subsidies. Respondents further argue that no benefit was conferred on companies' participation in SDF because the overall impact of the GOI's steel price controls was to reduce their income. Respondents contend that the purpose of the GOI price controls imposed by the GOI was to support the development of steel-consuming industries in India by reducing the prices at which steel would be provided to them at levels that would obtain an unfettered market. They state that this policy adversely affected the steel producers subject to the price controls, as indicated by record evidence that demonstrates that the prices charged by Indian steel producers were below those charged for the same products on the open market. In light of this adverse effect that the GOI price controls had on Indian steel producers, respondents argue that it should be self-evident that government policies that reduce the income of companies that are subject to those practices cannot be a subsidy in any coherent definition of the statutory term because no financial contribution has been provided and no benefit has been conferred. Respondents argue that the loan program under the SDF is no different from if the GOI simply had removed the price controls that were adversely affecting the subject companies. They argue that, with the SDF, the GOI merely allowed the integrated steel producers to recoup through the SDF levy some of the funds they lost through the price controls. Petitioners contend that the SDF program is countervailable. Petitioners argue that the record overwhelmingly establishes government action and, thus, provides sufficient evidence that the GOI controlled and/or directed the SDF within the meaning of section 771(5)(B)(iii) of the Act. In support of their contention, petitioners cite to page three of the July 17, 2001, Memorandum to Melissa G. Skinner, "Verification of the Questionnaire Responses Submitted by the Government of India," the public version of which is on file in room B-099 of the CAU (GOI Verification Report), which states that "all four members of the SDF Managing Committee are members of the GOI." They note that the GOI Verification Report goes on to state that, The Secretary of the Ministry of Steel, which is one level removed from the Minister, is the Chairman of the SDF Managing Committee. The other three members are the Secretary of Expenditure, the Secretary of Planning Commission, and the Development Commissioner for Iron and Steel." Id. at 3. Petitioners further note that the Department learned at verification that the SDF Managing Committee "considers and grants the ultimate approval of the proposals put forth by the Joint Planning Committee . . . {and} handles all decisions regarding the issuance, terms, and waivers of SDF loans. Id. at 3. Citing to information submitted on the record prior to the Preliminary Determination, petitioners point out that, with respect to the GOI's control over the SDF, the India's Supreme Court recently reached the same conclusion as the Department did in its Preliminary Determination: "it is the Central government, which exercises control over the SDF. . ." Petitioners also claim that the India's Supreme Court found that the GOI itself had stated in an affidavit filed by the JP that "funds out of the SDF were disbursed . . .by the SDF Managing Committee as per directions issued by the Central government from time to time." Petitioners assert that in light of the evidence collected by the Department at verification, the GOI had a substantial and direct involvement in the SDF, involvement, which they argue, certainly "entrusts or directs" the SDF to carry out the GOI's policies as regards the SDF. Petitioners also state that the level of GOI control does indeed rise to a level that is equal if not greater than the level of government control found in other cases in involving the "entrusts or directs" language of the statute. See, e.g., Final Affirmative Countervailing Duty Determination: Cut-to-Length Carbon Quality Steel Plate from the Republic of Korea, 64 FR at 73184-85 (December 29, 1999). Petitioners argue that the SDF loans and forgiveness of SDF loans provided under the SDF program are de jure and de facto within the meaning of section 771(5A) of the Act because the program was limited to a specific group of integrated steel producers pursuant to GOI policy objectives. Petitioners further contend that respondents' notion that the SDF has been funded by the integrated steel producers' own monies in the form of revenues on the sale of their products is flawed. Petitioners claim that, contrary to respondents' arguments, the SDF was funded through GOI- mandated levies in which an extra element was added over and above the ex- works prices for steel. They claim these additional levies were paid by steel consumers, remitted to the JPC, and collected solely for use as a source of funds for the SDF. Petitioners also point out that the manner in which the SDF imposes the levies is distinct from collection procedures under the ECSC program. Petitioners argue that the cases cited by respondents involved ECSC programs that were funded by levies on the producers themselves and, therefore, came from pools of the producers' own funds. See, e.g., Final Affirmative Countervailing Duty Determination: Steel Wire Rod from Germany, 62 FR 54990, 54993 (October 22, 1997). They claim that with the SDF program, the situation is different because the program is funded by consumer levies and, therefore, come from public funds analogous to tax revenues. Petitioners also disagree with respondents' contention that the SDF program did not confer a benefit on participating companies because the SDF program and the consumer levies paid as part of the program were established within the GOI's overall price control structure that purportedly had the overall effect of suppressing the prices at which the integrated steel producers could sell their products. Petitioners argue that respondents' arguments on this matter ignore the bedrock principle that the Department may not consider the effect of a subsidy in determining whether that subsidy is countervailable. They point out that section 771(5)(C) of the Act specifically provides for the Department not to consider the effect of the subsidy in determining whether a subsidy exists and that section 351.503(c) of the CVD regulations similarly provides that in determining whether a benefit is conferred by a subsidy, the Department is not to consider the effect of the government action on the recipient firm's performance, including its prices or output, or how the firm's behavior is otherwise altered. Department's Position: As discussed in the Preliminary Determination and in more detail below, the Department has determined in this proceeding that the SDF Management Committee is a government body. In CTL Plate from India, we determined, based on information available to the Department at that time, that the SDF was financed solely by producer levies and other non-GOI sources. See 64 FR at 73138. We further determined that there was no information on the record to indicate that the GOI contributed tax revenues, either directly or indirectly to the fund, or that the GOI exerted any control over the fund. Id. On this basis, we determined that loans under the SDF were not countervailable. Id. at 73134. However, new information on the record of this investigation led us to reverse in the Preliminary Determination the non-countervailable finding we made in CTL Plate from India. We based our decision to countervail the loans issued under the SDF program and the GOI's forgiveness of loans under the SDF program in the Preliminary Determination on record evidence that indicated that the levies contributed to the fund originated from producer price increases that were mandated and determined by the JPC, which was itself subject to GOI control. See 66 FR at 20248. We concluded that the JPC was subject to GOI control because information submitted by respondents and the GOI indicated that high level government officials, namely the Secretary of the Ministry of Steel, had major leadership roles in the JPC and the SDF Managing Committee, the bodies that issue and administer the loans under the SDF. Id. at 20248. Accordingly, we found in the Preliminary Determination that the GOI directed the contribution of funds for the SDF within the meaning of section 771(5)(B) of the Act and that the loans and loan forgiveness received under the SDF were specific subsidies that constituted a government financial contribution and conferred a benefit under section 771(5) of the Act. During verification we examined the SDF program, and the information we collected during verification supports a determination that the SDF program is countervailable. For example, during verification we learned that although the JPC, which is chaired by the Secretary of the Ministry of Steel, manages the day-to-day affairs of the SDF, the SDF Managing Committee handles all decisions regarding the issuance, terms, and waivers of SDF loans, which included the decision to accept or reject the waiver of SAIL's SDF loans. GOI Verification Report at 3. Moreover, we learned that the Secretary of the Ministry of Steel, an official one level removed from the Minister of Steel, is the Chairman of the SDF Managing Committee. We further learned that the other three members on the SDF Managing Committee consist of the following GOI officials: the Secretary of Expenditure, the Secretary of the Planning Commission, and the Development Commissioner for Iron and Steel. In addition, during verification we reviewed numerous notes and minutes from SDF Management Committee meetings. The documents from the meetings demonstrate the SDF Management Committee's ability to control and direct loan approvals, interest payments on SDF loans, and SDF loan waivers. See page 5 and Exhibits 11 and 12 of the GOI Verification Report. Therefore, based on the evidence on the record of this proceeding, we determine that the SDF operates as a government entity, that all lending decisions are decisions ultimately made by the GOI, and that the decision to forgive SDF loans is also a decision made by the GOI. In addition, we do not agree with respondents' contention that the SDF levies, much like the ECSC program, represented the integrated steel producers' own money and, thus, cannot constitute a government financial contribution. Under the ECSC program, producers make voluntary contributions to a pool of money using their own funds. Under the SDF program steel consumers were compelled by the GOI to pay a levy, the proceeds of which were channeled back to a select group of steel producers. Thus, rather than constituting the steel producers' own funds, the SDF levies, as noted by petitioners, are analogous to tax revenues collected from consumers as mandated by the GOI. On this basis, we continue to find that the loans and loan forgiveness provided to steel producers under this program constituted a financial contribution and conferred a benefit within the meaning of section 771(5)(D)(i) and (E)(ii) of the Act, respectively. In addition, we disagree with respondents' assertion that the SDF program did not confer a benefit upon participating companies because the SDF program and the consumer levies paid as part of the program were established within the GOI's overall policy of price controls, a policy that adversely affected Indian steel producers. We note that section 351.503(c) of the CVD regulations states that in determining whether a benefit is conferred: the Secretary is not required to consider the effect of the government action on the firm's performance, including its prices or output, or how the firm's behavior otherwise is altered. The Preamble to the CVD Regulations elaborates on this point with the following illustration: . . .assume that a government puts in place new environmental restrictions that require a firm to purchase new equipment to adapt its facilities. Assume also that the government provides the firm with subsidies to purchase that new equipment, but the subsidies do not fully offset the total increase in the firm's cost - that is, the net effect of the new environmental requirements and the subsidies leaves the firm with costs that are higher than they previously were. In this situation, section 771(5B)(D) of the Act, which deals with one form of non-countervailable subsidy, makes clear that a subsidy exists. Section 771(5B)(D) of the Act treats the imposition of new environmental requirements and the subsidization of compliance with those requirements as two separate actions. [A subsidy that reduces a firms cost of compliance remains a subsidy (subject, of course, to the statute's remaining tests for countervail ability), even though the overall effect of the two government actions, taken together, may leave the firm with higher costs] (emphasis added). Preamble to the CVD Regulations, 63 FR at 65361. Thus, as our CVD Regulations make clear, our decision to countervail a particular government program begins and ends with the provision of a subsidy, as defined by the statute, and does not extend to the net effect that a government's involvement, beyond that of the provision of the subsidy under examination, may have on the subsidy recipient in question. Comment 2: Attribution of the GOI's Waiver of SAIL's SDF Loans Respondents argue that a substantial portion of the SDF loan waivers granted to SAIL, RS. 1566 Crores, (1) was, in fact, provided for the purpose of writing off loans and advances provided to the Indian Iron and Steel Company (CISCO), a subsidiary of SAIL that does not produce or export subject merchandise. Respondents further argue that another portion of the SDF loan waivers, 506 crores, was for the purpose of writing back interest waived on loans provided to IISCO. In support of its contention, respondents cite to SAIL's annual report for the POI which states that "as part of the financial restructuring, SAIL has written-off loans and advances (including interest receivable) from own sources of IISCO of RS. 1566 cores against waiver of SDF loans." In addition, respondents claim that the RS.1566 figure is reflected in IISCO's books and, thus, is further evidence that the waivers were tied to IISCO. Respondents claim that this scenario falls within the purview of the Department's regulation regarding the attribution of subsidies in a situation involving corporations with cross-ownership. They cite to section 351.525(b)(6)(iii) of the CVD regulations which states: If the firm that received the subsidy is a holding company, including a parent company with its own operations, the Secretary will attribute the subsidy to the consolidated sales of the holding company and its subsidiaries. However, if the Secretary finds that the holding company merely served as a conduit for the transfer of the subsidy from the government to a subsidiary of the holding company, the Secretary will attribute the subsidy to products sold by the subsidiary. Respondents claim that SAIL served as a "conduit," within the meaning of the Department's CVD Regulations, for the transfer of financial relief and, thus, any benefit that may have been received from this portion of the loan waiver is attributable to IISCO and not SAIL. Respondents argue that the Department's precedent on the matter of attribution compels the Department to tie debt relief to a specific product or market when the facts of a particular case allow it do so. Specifically, they cite to the Final Affirmative Countervailing Duty Determination: Certain Steel Products from Austria, 58 FR 37217 (July 9, 1993) (Certain Steel from Austria). They explain that although the Department determined in Certain Steel from Austria that the debt forgiveness in question benefitted the company and its wholly-owned subsidiary, the Department went on to state that, ". . . if the agency determines that benefits were tied to the production or sale of a particular product or products . . . it will allocate benefits to the sale of those products." 58 FR at 37272. Respondents also cite to the Final Affirmative Countervailing Duty Determination: Grain-Oriented Electrical Steel from Italy, 59 FR 18357, 18365 (April 18, 1994) (GOES from Italy) as further evidence that, in a situation in which the targeted subsidies apply only to a subsidiary company that produces subject merchandise, the Department's position is that it will attribute subsidies only to that subsidiary and not to the corporate group. Petitioners argue that the Department should reject respondents' argument that a portion of the SDF loan waivers did not provide a countervailable benefit to SAIL. Petitioners claim that no new evidence could possibly warrant a change from the Department's approach in the Preliminary Determination. Rather, petitioners contend that the evidence continues to demonstrate that the SAIL benefitted from the entire amount of the RS. 5073 crore SDF loan forgiveness. Petitioners state that the record evidence clearly establishes that SAIL, and only SAIL, was the obligor on the SDF loan that were forgiven by the GOI and, thus, was the party ultimately responsible for the repayment of those loans. They argue that any forgiveness of those loans provided SAIL with a direct financial contribution and benefit in the form of relieving it of its financial obligations. Petitioners point out that providing SAIL with a benefit, through relief of SAIL's financial obligations, was the central point of the SDF loan forgiveness. They argue that if SAIL had not been responsible for the repayment of the loans, SAIL would not have asked and the GOI would not have waived the SDF debt. Petitioners argue that the GOI conceded this point when it stated in its questionnaire responses that the loan forgiveness was provided as a part of SAIL's business and financial restructuring to increase its competitiveness and improve its financial health. Therefore, petitioners assert that the benefit to SAIL from the debt forgiveness is obvious. Petitioners further argue that as the Department found in the Preliminary Determination that "absent government involvement, SAIL would have borne the burden of IISCO's inability to repay its debts." See 66 FR at 20249. Thus, rather than suffering a loss, SAIL benefitted in having its own financial obligations to the SDF waived. Therefore, petitioners claim that, contrary to respondents' arguments, the SDF loan forgiveness did not target IISCO, it benefitted the entire corporate entity of SAIL. Petitioners also argue that the RS. 506 crore in SDF loan forgiveness that was designated for SAIL to "write back" interest it had previously written off on loans that it had given to IISCO is even more obviously beneficial to SAIL alone. Petitioners argue that whereas SAIL previously had received no interest income and had no prospects of receiving interest income on its loans to IISCO, the "write back" of the interest provided SAIL with net income of RS. 506 crores on the loans. Petitioners point out that respondents themselves acknowledge that the RS. 506 crores in interest was written back as profit to SAIL's profit and loss account in its financial statements. They further argue that conversely, there was no benefit to IISCO and no effect on its books from the RS. 506 in SDF loan forgiveness. Petitioners argue that respondents are incorrect in asserting that, pursuant to section 351.525(b)(6)(iii) of the CVD regulations, SAIL merely served as a "conduit" for a substantial portion of the SDF loan waivers and, thus, received no benefit from that portion of the waivers. Petitioners claim that this assertion is flatly refuted by the Preamble to the Department's CVD Regulations. Petitioners state that the Preamble unequivocally states that the Department: . . .considers certain subsidies, such as payments for plant closures, equity infusions, debt forgiveness, and debt-to-equity conversions, to be untied because they benefit all production. Preamble to the CVD regulations, 63 FR at 65400. Petitioners claim that, based on the Preamble to the CVD regulations, the Department must determine that SAIL's SDF loan forgiveness benefitted all of its production and cannot be attributed only to sales of particular products. Petitioners also take issue with respondents' reliance on Certain Steel from Austria and GOES from Italy. Petitioners state rather than support respondents' argument on the attribution issue, these cases refute it. Petitioners state that in Certain Steel from Austria, the Department determined that debt forgiveness provided to NZS Development, the wholly- owned subsidiary of New Zealand Steel (NZS), "by definition" benefitted NZS as a whole and should be allocated over the total sales of that corporate entity. See 58 FR at 37227. Regarding respondents' citation to GOES from Italy, petitioners claim that the Department determined to focus on the subsidies provided only to the producer of subject merchandise because the "extremely complex" nature of the restructuring of the companies in question required such an analysis. See GOES from Italy, 59 FR at 18366. Department's Position: We disagree with respondents' contention that a substantial portion of the SDF loan forgiveness (i.e., the RS. 1566 plus RS. 506 crores) is attributable to IISCO rather than to SAIL. We note that Exhibit 11 of the SAIL's January, 26, 2001 questionnaire response lists SAIL as the recipient of SDF loan waivers of RS. 5073 crore. In addition, during verification GOI officials explained that SAIL's waiver of SDF loans in the amount of RS. 5073 crore would be "set off," in other words, contingent upon several actions, which included "loans and advances from SAIL to IISCO" (i.e., the RS. 1566 crore) as well as a waiver of loans owed by IISCO to SAIL (i.e., the 506 crore). See page 8 July 3, 2001 memorandum to Melissa G. Skinner, Director, Office of AD/CVD Enforcement VI, from Eric B. Greynolds, Robert Copyak, Michael Grossman, and Darla Brown, Case Analysts, of which the public is on file in Room B-099 of the CRU in the Main Commerce Building (SAIL Verification Report). The SAIL Verification Report further states that, with respect to the RS. 1566 crore of the SDF Forgiveness . . . the GOI wanted to ensure the survival of IISCO. Thus, pursuant to {SAIL's} restructuring package, IISCO's responsibility to repay SAIL was abolished in lieu of SAIL receiving a waiver of its SDF loans in an equal amount. SAIL officials explained that this arrangement not only relieved the liability faced by IISCO but also the receivable from SAIL. We do not deny that IISCO benefitted as a result of this arrangement. However, we also find that the record evidence clearly demonstrates that SAIL also benefitted directly from its arrangement with the GOI. Prior to its financial restructuring, SAIL owed RS. 5073 crore in SDF loans. Upon undertaking several actions that were required by the GOI, which included a waiver of RS. 2072 crores in loans owed to it by IISCO (i.e., the RS. 1566 and RS. 506 crore in question), SAIL's obligation to repay the RS. 5073 crore in SDF loans was waived. Therefore, we find that the entire amount of the GOI's forgiveness of SAIL's SDF loans (i.e., the RS. 5073 crores) constituted a government financial contribution and have attributed this benefit over SAIL's consolidated sales. Comment 3: The Attribution of GOI Debt Forgiveness Respondents contend that the Department erred in the Preliminary Determination when it found that the GOI's waiver of 381 crore solely benefitted SAIL. They argue that the waiver of the GOI loans is fully attributable to IISCO and, thus, did not benefit SAIL. Respondents contend that the record is replete with evidence that the forgiveness of the GOI loans was for the benefit of IISCO, rather than SAIL itself. For example, they cite to previous questionnaire responses from the GOI which state that, "in order to provide relief to IISCO, the GOI approved the waiver of loans and interest thereon, aggregating RS. 381 crore to SAIL, and immediately thereafter SAIL in turn waived the loan liability of the same amount owed by IISCO to SAIL." Respondents further claim that SAIL's annual report for the POI indicates that the GOI "routed" the write-off of the GOI loans through SAIL. See, Exhibit 7 of SAIL's January 26, 2001 questionnaire response. They also state that the write-off of GOI loans is also reflected in IISCO's own annual report for the POI: "based on the Financial Restructuring of SAIL (Holding Company) as approved by the Central Government, the Holding Company has waived Loans, Interest on Loans and Current Liabilities" totaling to RS. 381 crore. Id. at 74. Respondents also assert that the information collected by the Department at verification further supports the notion that the waiver of the RS. 381 crore in GOI loans was tied to IISCO. They claim that the loan documents for the GOI loans in question indicate that the loans were designated either for IISCO's modernization or to cover IISCO's cash losses. See, SAIL Verification Report at Exhibit 10. Respondents further contend that at verification the GOI adequately explained that the "routing" of financing for a subsidiary through its parent or holding company is required by Indian law. GOI Verification Report at 4. They also contend that the "back-to-back" nature or "routing" of the loans was noted by the Department when it stated in the GOI Verification Report that, ". . .{in} SAIL's books, these loans appear as liabilities and as receivables from IISCO. In addition, they appear as liabilities in IISCO's books." Id. at 4. Respondents also argue that the repayment of the GOI loans was the sole responsibility of IISCO and that SAIL confirmed this point at verification when SAIL officials explained that, ". . . repayments on the loan from June of 1990 were contingent upon IISCO generating cash . . .IISCO never generated cash and, as a result, no payments were ever made." SAIL Verification Report at 8. Respondents claim that when the modernization of IISCO failed to generate the necessary funds to make the repayments, SAIL was not required to, and did not, step in to cover non- repayment by IISCO. The fact that SAIL was not obligated to cover IISCO's non-payment demonstrates that the responsibility for repayment and, therefore, any benefits stemming from the forgiveness of that repayment lies with IISCO. Respondents assert that the forgiveness of the RS. 381 crores clearly falls within the purview of section 351.525(b)(6)(iii) of the CVD regulations, regarding the attribution of subsidies in a situation involving corporations with cross-ownership. Because SAIL merely served as a "conduit" for IISCO's debt relief, there is no question that section 351.525(b)(6)(iii) of the CVD regulations applies with the result that none of the RS. 381 crore should be attributed to SAIL. Petitioners claim that the waiver of the RS. 381 crore of GOI loans is fully attributable to SAIL. Petitioners point out that information collected at verification indicates that SAIL was the only obligor on the GOI loans. Specifically, they point out that the loan agreements themselves identify SAIL as the party "to whom {the loans were} sanctioned." See GOI Verification Report at 4. They further argue that the statements made by GOI officials at verification confirm this point. Citing to the GOI Verification Report, petitioners explain that when GOI officials were asked at verification to identify the party ultimately responsible for repayment of the loans, "they stated that SAIL would have been responsible for repaying the loans." Id. at 4. Petitioners argue that the waiver of the GOI loans was provided as a vital part of SAIL's business and financial restructuring for the GOI's debt forgiveness would not have been necessary and would not have been included as part of the restructuring if SAIL was not responsible for repaying the loans. Also, petitioners claim that the GOI's own statements in its questionnaire response indicate that "SAIL was burdened with loans with no prospect of their recovery," thereby admitting that SAIL was responsible for the loans. See page II-45 of the GOI's January 26, 2001 questionnaire response. Lastly, petitioners argue that the fact that the original loan agreements mention that their purpose was to improve the financial condition or assist in the modernization of IISCO in no way indicates that the repayment of the loans was the sole responsibility of IISCO, thus making the benefit from the waiver of such loans somehow tied to IISCO. Department's Position: In the Preliminary Determination, we found that, "absent the involvement of the GOI, IISCO would not have been able to repay the loans it owed to SAIL" and that the waiver of the loans "enabled SAIL to avoid bad debt expenses." See 66 FR at 20249. On that basis, we found that the RS. 381 crore in GOI loans waivers benefitted SAIL. Id. Information on the record of this investigation, including information collected at verification, fully supports our finding in the Preliminary Determination. For example, GOI documents approving the waiver of SAIL's loans identify SAIL as the recipient of the GOI loan waivers. See February 18, 2000 letter from the Ministry of Steel that was included as Exhibit 11 of SAIL's January 26, 2001 questionnaire response. We further note that the loan agreements themselves list SAIL as the "party to whom {the loans were} sanctioned" and identify SAIL as the party to which the amount was "debitable." See GOI Verification Report at 4. Furthermore, as noted by petitioners, GOI officials stated that SAIL was the party ultimately responsible for the repayment of the loans and that the GOI "waived the RS. 3.81 billion to SAIL so that SAIL could waive loans to IISCO in the same amount." Id. at 4. Also, information in the proposal that SAIL submitted to the GOI regarding its restructuring indicates that the waiver of the GOI's loans would improve SAIL's financial standing. See Articles 8.1 and 8.2 of Exhibit 11 of SAIL's January 26, 2001 questionnaire response. Thus, in light of the fact that record evidence indicates that, among other things, SAIL was the recipient of the GOI loans, SAIL was the party to which the loans were "debitable," SAIL was the party ultimately responsible for repaying the loans, and that SAIL itself admits that the waiver of such loans would benefit its financial position, we continue to find that SAIL benefitted from the waiver of RS. 381 crore in GOI loans. Regarding respondents' and petitioners arguments on section 351.525(b)(6)(iii) of the CVD regulations regarding attribution, we note that the subsidy in question involved the forgiveness of loans, loans that were provided directly to SAIL by the GOI and that SAIL subsequently relent to IISCO. Thus, when the GOI waived the loans, two parties benefitted. IISCO was no longer obligated to repay SAIL, and, more importantly for purposes of this investigation, SAIL no longer faced the prospects of incurring bad debt expenses on the loan and no longer bore the obligation to repay the loans to the GOI. For these reasons, we have allocated the benefit for this program over SAIL's consolidated sales. Comment 4: Suspension of Interest Payments Due on SAIL's SDF Loans During the POI Petitioners explain that in the Preliminary Determination, the Department found that SAIL "had no outstanding SDF loans with interest payments due during the POI" and that, therefore, "these loans did not provide a benefit to SAIL during the POI." See 66 FR at 20248. Petitioners claim that the Department discovered new information during verification indicating that SAIL did, in fact, owe interest payments on some of its SDF debt during the POI. However, petitioners explain that the Department learned at verification that SAIL did not pay any of the interest that was owed on those SDF loans. Petitioners argue that since SAIL did not pay interest that was due, SAIL received a countervailable benefit under the SDF program in the form of interest-free loans. Petitioners cite to the Department's decision to countervail suspended loan payments in the Final Affirmative Countervailing Duty Determination: Structural Steel Beams from the Republic of Korea, 65 FR 41051 (July 3, 2001) (Steel Beams from Korea) as evidence that it is the Department's practice to find such interest payment suspension countervailable. Petitioners suggest the Department multiply the interest payments that should have been paid by SAIL's short-term benchmark interest rate in order to capture the benefit from the suspended interest payments. Respondents do not agree. They argue that, for the reasons explained above, none of the SDF loans issued to SAIL conferred a countervailable benefit. Second, respondents argue that SAIL has applied to the SDF Managing Committee to have the interest converted into a new loan. Third, respondents contend that if the Department were to decide that the SDF loans and SAIL's non-payment of its SDF interest are countervailable, the Department should calculate any benefit received by SAIL on a monthly, rather than annual, basis. Department's Position: We agree with petitioners that the suspension of SAIL's interest obligations conferred a countervailable benefit upon SAIL in the form of an interest-free loan. During verification, we learned that although RS. 5073 crore of SAIL's SDF loans had been waived, a portion of interest remained outstanding. See SAIL Verification Report at 11. We also learned that some of this outstanding interest came due during the POI but that SAIL had not paid any of this interest. Id. at 11. Instead it petitioned the SDF Managing Committee to convert this outstanding interest into a new SDF loan. Id. at 11. Thus, the information collected at verification indicates that SAIL avoided having to make interest payments that were otherwise due, thereby providing the company with a benefit in the form of an interest-free loan. To calculate the benefit under this program, we first determined the amount of interest that would have otherwise been paid by SAIL on the SDF loans at the company's long-term benchmark interest rate during the POI. As respondents correctly point out, the interest that was due on these SDF loans accrued on a monthly basis. Therefore, we calculated that amount of interest that would have otherwise been due based on those monthly accruals. We then multiplied the benchmark interest payment that would have otherwise been due by SAIL's company-specific, short-term benchmark interest rate for the POI. To calculate the total net subsidy rate under this program, we divided the total benefit by SAIL's total consolidated sales for the POI. Comment 5: Countervailability of Advance Licenses Respondents argue that India's advance license program is not countervailable. They argue that, during the POI, the advance license program functioned as a legitimate duty drawback scheme that is non- countervailable under sections 351.519(a)(2) and 351.519(a)(4) of the CVD regulations. Respondents disagree with the Department's determination in CTL Plate from India that the use of advance licenses is countervailable and that the sale of advance licenses is countervailable. They state that the Department's determination in CTL Plate from India is erroneous and immaterial and contend that an important change in the program differentiates the advance licenses used in the current investigation from those used in CTL Plate from India. According to respondents, these changes have made the program even more clearly an acceptable form of drawback under the Department's regulations. Specifically, during the period 1992-1997, advance licenses measured the units of authorized imports in terms of either their value, or their quantity, and SAIL, the only respondent in the CTL Plate from India investigation, used the value- based licensing system during the POI of that investigation. Respondents argue that the GOI changed the program so that, as of April 1, 1997, the advance license program is now a quantity-based as well as a value-based system. They contend that inputs imported under the quantity-based advance licensing program are subject to strict controls to ensure that the quantity of manufactured goods exported is sufficient to account for all the imported inputs. They argue that the GOI has changed its SION system by itemizing the inputs and corresponding duty amounts rather than "broadbanding" them by grouping inputs and duty amounts together. Petitioners argue that the advance license program is not a permissible duty drawback program and that the changes to the advance license program do not warrant a reversal of the Department's determination in CTL Plate from India. They contend that the use of the SIONs allow the GOI only to estimate the type and quantity of the inputs consumed in the production of a product and does not provide the verification system necessary for the program to constitute a permissible duty drawback or substitution drawback program. They also contend that the practice of "broadbanding" inputs in the SIONs continues to contribute to the inability to calculate accurate quantities of inputs consumed in the production of the exported product under the Advance Licenses scheme. In addition, they take issue with the fact there are no restrictions on the use of inputs imported using advance licenses. Arguing that the sale of advance licenses is countervailable, petitioners. state that the sale of an advance license that a company has obtained for exports produced using domestic inputs effectively allows the company selling the license to obtain a "refund" of import duties that it has never paid. Department's Position: In order for the Department to consider a drawback program to be not countervailable, the government must have in place and apply a reasonable system or procedure to confirm which inputs are consumed in the production of the exported products and in what amounts. In CTL Plate from India, the Department determined that advance licenses were countervailable because the GOI did not base the licenses it issued on the amount of import duties that were payable on the imported items that were consumed in the production of the exported merchandise. In addition, the Department took issue with the fact that the licenses specified ranges (rather than actual amounts) of quantities to be imported, and that the GOI did not carry out examinations of actual imports involved. In the Preliminary Determination, we again found the advance licenses to be countervailable for the same general reasons as those in CTL Plate from India. However, in the Preliminary Determination we stated that, at verification, we would examine respondents' claims that there have been changes in the advance license program that would warrant a reconsideration of the program's countervailability. The information on the record and the explanations provided by company and government officials at verification support a finding that there have been significant changes to the advance license program since CTL Plate from India. Notably, prior to 1997, advance licenses were value-based. The amount of duty exemptions a company could receive was based on the value of its imported inputs rather than the quantity of the inputs actually used. This was the type of license used by the respondent in CTL Plate from India. Conversely, the type of licenses used in the POI by the respondents in this investigation are quantity-based. Moreover, we found at verification that this new type of advance license program has a built-in monitoring system by virtue of the application process and the manner in which the amount of duty exemption to be granted is limited by the quantity stipulated in the license. The GOI now grants an advance license only for items listed on the SION for that industry. When a company applies for a license, it must list the specific items and quantities which it intends to import. The GOI will grant the license for the requested items and quantities only if the items and amounts requested are listed on the SION for the product. Due to this change, the GOI is able to base the duties to be exempted (when those imports are made using the license) on the amounts of imported inputs necessary for producing the product. The items specified in the advance licenses as items to be imported are item that used in the production of the relevant exported merchandise. Therefore, we conclude, based on the record facts in this investigation, the GOI has in place and applies a system to confirm which inputs are consumed in the production of the exported products and in what amounts, and this system is reasonable and effective for the purposes intended. However, we note that under this system the GOI allows for drawback of duty on certain items (e.g., rolls for rolling mills) that, though used in the production of subject merchandise, are not consumed in the production process. Therefore, we have found that a portion of the advance licenses attributable to these items constitute an over-rebate of duties because the amount drawn-back exceeds the amount of import charges on imported inputs that are consumed in the production of the exported product. As discussed above in the summary of this program, we find this over-rebate to be a countervailable subsidy. We also determine that sales of quantity-based advance licenses are not countervailable. The application process and the manner in which the amount of duty exemption to be granted is limited by the quantity stipulated in the license acts as a built-in system for monitoring that the amount of duty exemption ultimately granted to the importer who uses the licenses is commensurate with the quantity of the input used to produce the exported product. Whether the license ultimately is used by the original applicant of license or a purchaser of a license does not change the amount of duty exemption that can be claimed. That is, because the amount of exemption granted is determined at the time of import and is based on the type and quantity of a specific good used in the production of exported product, the amount of duty exemption ultimately granted need not be claimed by the original licensee. In light of the fact that over the years the GOI has made numerous changes to the advance license program and its other licensing programs, we will continue to examine this program in any subsequent administrative review or in any new proceeding. Comment 6: Countervailability of DEPS Ispat, SAIL, and TISCO used post-export DEPS licenses during the POI, and Essar used both pre-export and post-export DEPS licenses during the POI. Respondents argue that the Department should reverse its preliminary determination and find DEPS program to be a valid, non-countervailable substitution drawback program under section 351.519(a)(2) of the Department's regulations. They argue that the GOI has a system and procedures to confirm which imported inputs are consumed in the production of hot rolled carbon steel and in what amounts, and that this system and procedures are reasonable, effective for the purpose intended, and based on generally accepted commercial practices in India. Specifically, they argue that the GOI system meets the substitution drawback provisions through the establishment and review of the SIONs, by compiling extensive information on the imported inputs and exported products from evidence such as bills of entry and shipping bills, and through annual reviews and even revisions of the DEPS rates. They contend that, in setting the DEPS rate, the GOI carefully reviews each respondent's total customs duty incidence on imported inputs and the value of its exported hot rolled steel. In addition, respondents contend that use of the inflation of the denominator of the DEPS rate calculation through the incorporation of the "value-added" component is an important mechanism to ensure that the DEPS rate does not result in the excessive drawback. Respondents' Case Brief at 62. Respondents also refer to Ball Bearings from Thailand and Textile Products from Colombia as instances in which the Department has determined that the use of standard norms to facilitate fixed rate drawback programs is reasonable. Petitioners argue that the DEPS is not a permissible drawback or substitution scheme. They argue that the Department has reached this conclusion in several cases and found the program countervailable. See, e.g., CTL Plate from India, 64 FR 73131 at 73134. They further argue that even more recently Canada and the European Commission have both determined likewise. Petitioners assert that respondents have not demonstrated that the GOI has changed the DEPS in a manner that could possibly warrant a different result in this investigation. Petitioners claim that India's system is incapable of verifying which inputs are consumed in the production of exported products and in what amounts and, therefore, does not satisfy the requirements for a verification system under the Department's regulations. For example, petitioners argue that the SIONs do not measure the quantity, quality, or characteristics of the inputs that are actually used in an exported product. In addition, petitioners claim that the SIONs collected at verification cover several steel products and more than one steel company and, thus, contrary to respondents' claim, are not specific to particular products and production processes. Petitioners argue that the fact that the GOI granted a single DEPS rate of 14 percent during the POI for all producers of subject merchandise, regardless of their respective production processes further belies respondents' claims that the SION is part of a viable drawback/substitution system. Petitioners also argue that record evidence refutes the claim that the SIONs control the inputs that may be imported using DEPS. They claim that evidence indicates that TISCO imported inputs under the DEPS that, according to its SION, are not included in TISCO's production process. In addition to not providing a sufficient verification system, petitioners claim that the SIONs clearly allow respondent companies to obtain DEPS credits in excess of the duties for imported inputs that are consumed in the production of their products. Petitioners explain that SIONs allow for the importation of inputs that can be used multiple times in the production of their products and that this allowance is a violation of the Department's requirements for drawback programs. Petitioners further argue that there is record evidence indicating that even for inputs consumed in the production of the exported product, the respondent companies actually received excessive duty drawback under the DEPS during the POI. In support of this contention, petitioners provide sample calculations, based on information submitted by Essar, which, they claim, demonstrates that Essar received excessive duty drawback. Petitioners argue that the bulk of the GOI's monitoring of the DEPS program takes place through its review of the SIONs and DEPS rate applicable to particular products. However, petitioners point out that this review only occurs when a company is applying for a change in the SION or DEPS credit, and such a review cannot and does not show what companies actually do or which inputs they actually use in the production of their exported product. Petitioners also argue against respondents' claim that the "value added" component used by the GOI in calculating the DEPS rate effectively reduces the rate ultimately calculated. Petitioners claim that the "value added" component instead highlights the inaccuracies of the GOI's system. Petitioners claim these inaccuracies are inherent in the GIO's system in that the companies themselves seek to inflate the "value added" component of the DEPS calculation while the GOI arbitrarily sets its own "value added" component. Petitioners also argue that the DEPS fails as a substitution drawback program. Petitioners claim that at verification, GOI officials acknowledged that the GOI was only able to determine whether the quantities of substituted domestic inputs and imported inputs are "similar" and not "identical" as required for a permissible substitution drawback program. Regarding the issue of whether the quality of substituted domestic inputs and imported inputs are identical, petitioners claim that GOI officials admitted that they essentially rely on the companies themselves to make the determination, as opposed to the GOI monitoring this aspect of the program on its own. See GOI Verification Report at 8. On this issue, petitioners further argue that the fact that post-export DEPS are freely transferable provides additional evidence that a recipient company may obtain a benefit from the sale of the credits without importing any inputs whatsoever. Department's Position: The criteria regarding the remission, exemption or drawback of import duties is set forth in 19 CFR 351.519. Pursuant to this provision, the entire amount of an import duty exemption is countervailable if the government does not have in place and apply a reasonable system or procedure to confirm which inputs are consumed in the production of the exported products and in what amounts. Upon reviewing the information on the record and the explanations of company and government officials at verification, we now have a more complete understanding of how this program operates. Under our traditional approach, the Department analyzes whether a particular duty drawback system is reasonable and effective in the context of the actual experience of particular companies. In this investigation, we found that this standard has not been met. At verification we noted that the DEPS rates are not always tied to a company's actual import experience. We identified at least one company that receives DEPS credits at the full rate set by the GOI even though the company does not import the inputs upon which the credit rate is based. In addition, record evidence shows that TISCO applied for a change in the DEPS rate based on a good it does not import. Therefore, it appears that the DEPS rate of credit is not reflective of imports of the producers which it is intended to represent. Moreover, we have identified several problems with the DEPS program even when analyzed on an aggregate basis (i.e., whether the program, as a whole, results in excessive duty drawback). The GOI is not able to ensure that, in the aggregate, duty drawback claimed on exportation does not exceed duties paid on importation. The DEPS rates are calculated based on the value of those imports and not the quantity of the imports. Thus, there is no reliable method for the GOI to monitor whether the value of credits given is commensurate with the value of credits claimed. Thus, whether examined under a company-specific or aggregate approach, we find that, with regard to the DEPS program, the GOI does not have in place and does not apply a system 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. Therefore, consistent with 19 CFR 351.519(a)(4), we find that the entire amount of duty drawback confers a benefit to the recipient companies. Comment 7: Program-Wide Changes Respondents argue that the Department should take into account several program-wide changes and adjust the cash deposit rate accordingly. Specifically, respondents argue that program-wide changes have been made to four programs: pre-export DEPS, exemption from interest tax, SILs, and advance licenses. Respondents state that the pre-export DEPS was eliminated effective April 1, 2000, and the last date on which Indian companies could receive benefits under this program was March 31, 2001. Respondents also argue that the GOI abolished the interest tax effective April 1, 2000, thus also abolishing the exemption from interest tax granted to pre- and post-shipment export financing. In addition, respondents state that SILs have been eliminated as of April 1, 2000, and that although SILs could be redeemed through March 31, 2001 for exports made prior to April 1, 2000, as of March 31, 2001, all SILs have no value and, thus, could not have conferred a benefit. Finally, respondents state that advance licenses issued after March 31, 2000 are no longer transferrable. Petitioners contend that respondents have not provided sufficient evidence of program-wide changes to satisfy the requirements set out in the Department's regulations. Specifically, petitioners argue that other than a policy circular, respondents have not provided documentation in the form of an official act demonstrating that the pre-export DEPS program has been abolished. Moreover, petitioners argue that the fact that the GOI did not respond directly when asked in the original questionnaire to indicate the last date a company could apply for or receive benefits under this program provides evidence that the program has not been terminated. For those reasons, petitioners recommend rejecting respondents' argument that the pre-export DEPS program has been abolished. Petitioners also rebut respondents' argument that advance licenses are no longer transferrable. Petitioners maintain that respondents have provided no evidence beyond Article 7.4 of the GOI's Export Import Policy Handbook to support their declaration that this program has changed. Moreover, petitioners argue that Article 7.4 does not limit all advance licenses to actual user conditions (i.e., not transferrable). Petitioners assert that a close reading of Article 7.4 reveals that exporters holding advance licenses that are subject to actual user conditions may claim exemption from additional duties and antidumping duties in addition to the exemption from basic customs duty, while exporters holding transferrable advance licenses may not. Therefore, petitioners argue that the Department should reject the respondents' allegation that advance licenses are no longer transferrable. Department's Position: With respect to the interest tax exemption and SIL programs, we agree with respondents that program-wide changes have taken place. As stated above, petitioners urge the Department to reject respondents' claim that program-wide changes should be taken into consideration and the deposit rate adjusted accordingly. Petitioners assert that a GOI policy circular is not an adequate basis to warrant the finding of program-wide changes. We note that in Certain Iron-Metal Castings from India: Final Results of Countervailing Duty Administrative Review, 55 FR 50747, 50750 (December 10, 1990) (Iron-Metal Castings from India), petitioners made a similar argument asserting that the lack of an official act, statute, regulation, or decree rendered nullified respondents' claim of program-wide changes. In that proceeding, the Department determined that a decree issued by the Engineering Export Promotion Council, a decree verified by the Department, along with verified information indicating that the producer of subject merchandise did not use the program, constituted evidence that warranted the application of a program-wide change. Id. We determine that there is a similar fact pattern in this investigation. During verification, the Department examined policy circulars and sections of the GOI's Ex-Im Policy Handbook that indicated that the exemption from interest tax and SIL programs had been abolished by the GOI. Because these programs were implemented through amendments in the GOI's Ex-Im Policy Handbook, their termination may also be made through the same government documents. Moreover, no other evidence was found either at the GOI or the respondent companies to suggest that these program had not undergone the changes described by the GOI. Therefore, we find that there is sufficient evidence on the record of this investigation to warrant the application of program-wide changes with respect to the interest tax exemption and SILs. With respect to the pre-export DEPS and advance license programs, we determine that the programs themselves still exist, and, therefore, no program-wide change has occurred. Regarding the DEPS program, only one aspect of the program (i.e., the pre-export DEPS) has been eliminated, not the entire DEPS program. Therefore, we determine that there is not sufficient evidence on the record to warrant a program-wide change. With respect to the advance license program, again, the entire program has not been terminated, only the transferability of advance licenses. These programs differ from the interest tax exemption and SIL programs in that the interest tax exemption and SIL programs no longer exist, as we confirmed at verification. Comment 8: Income Tax Deductions under Section 80HHC of the Indian Tax Act Respondents state that the Department properly determined in its Preliminary Determination that none of the respondents obtained income tax deductions under section 80HHC of the Indian Tax Act. Department's Position: We agree with respondents. During verification, we confirmed that none of the companies investigated claimed a deduction under Section 80HHC (see Essar Verification Report at 12; Ispat Verification Report at 10; SAIL Verification Report at 19; and TISCO Verification Report at 8). Therefore, we determine that this program was not used by any of the respondents. Comment 9: Uncreditworthy Allegations The Department determined that SAIL, Ispat, and Essar were creditworthy during the fiscal years 1997 to 2000. See Preliminary Determination, 66 FR at 20243. Petitioners allege that the Department erred in finding SAIL creditworthy for fiscal years 1999 and 2000. Petitioners dispute the Department's finding on two points: they question SAIL's ability to secure long-term loans; and they argue that SAIL's relevant financial ratios are weak First, petitioners note that SAIL received no long-term loans during fiscal year 2000, and cite various press reports that describe SAIL's financial condition as poor. Moreover, while petitioners recognize that SAIL did secure long-term loans during fiscal year 1999, they argue that such loans were contingent on government intervention. Petitioners again cite a press report that contends government "pressure" enabled companies with uncompleted steel projects to secure private financing. Second, petitioners claim that SAIL's financial ratios do not meet the relevant standard of long-term financial health and solvency, citing Certain Hot-Rolled Lead and Bismuth Carbon Steel Products from Brazil for support. Petitioners suggest that any other standard, such as the ratios for the U.S. steel industry, are irrelevant; nevertheless, petitioners argue that if such a comparison is made, U.S. industry financial ratios are favorable. According to the standard of long-term financial health and solvency, petitioners suggest that the appropriate ratios for SAIL - debt-to-equity, total liabilities-to-net worth, fixed-assets-to-net worth, quick and current- are so poor that "no prudent lender" would have offered long-term loans to the company. The debt-to-equity ratio (which was dismissed in the Preliminary Determination but, according to petitioners, considered quite relevant in past cases) for SAIL increased from 182.39 to 312.17 percent between fiscal years 1996 and 2000 (petitioners provide all ratio data since fiscal year 1996). The total liabilities-to-net worth ratio, which Dun & Bradstreet claims should generally remain below 100 percent, likewise grew from 262.32 to 445.59 percent between fiscal years 1996 and 2000. SAIL's fixed assets-to-net-worth ratio has also risen from 217.37 percent for fiscal year 1996 to 364.06 percent for fiscal year 2000; Dun & Bradstreet states that ratios above 75 percent should normally "be examined with care." The current liabilities-to-net worth ratio for SAIL was 63.01 percent for fiscal year 1996 and 129.07 percent for fiscal year 2000; Dun & Bradstreet provides a safe upper threshold ratio of 66.6 percent. Although petitioners claim that quick ratio data for SAIL is not available, SAIL's current ratios ranged from 2.07 for fiscal year 1999 to 1.35 for fiscal year 2000; ratios of 2 or better are "considered good" by Dun & Bradstreet. Nevertheless, petitioners argue that the bulk of financial ratios for SAIL, as well as SAIL's purported inability to secure long-term commercial loans, indicate financial distress. Therefore, petitioners argue that the Department should find SAIL uncreditworthy for fiscal years 1999 and 2000. Respondents, in turn, support the Department's creditworthiness determination for SAIL (as well as determinations for Ispat and Essar, though these were not questioned by petitioners). Respondents note that SAIL has successfully obtained long-term commercial loans throughout the years at issue from both major Indian banking institutions and foreign commercial banks. Often relying on different set of measures than petitioners, respondents further argue that SAIL's financial information between fiscal years 1997 and 2000 supports the company's creditworthiness. SAIL's operating margin, for instance, varied between 7.4 percent for fiscal year 2000 to 17.4 percent for fiscal year 1997, which respondents suggest is comparable to gross and net margins for U.S. blast furnaces and steel mills. The operating flow-to-net sales ratio for SAIL ranged from 14.4 percent for fiscal year 2000 to 22.5 percent for fiscal year 1998; respondents claim that these ratios indicate SAIL's ability to pay interest on its debt, purchase capital goods, and pay dividends. Respondents also provide quick ratio data for SAIL (which petitioners claimed were not available), which vary from 1.0 in 1998 to 0.6 in 2000; they note that a ratio of 1.0 demonstrates a firm's ability to meet current liabilities with liquid assets. Respondents also confirm the current ratio figures reported by petitioners and argue that such ratios indicate SAIL's ability to meet current financial obligations. For these reasons, respondents advise the Department to maintain its Preliminary Determination finding that SAIL was creditworthy for fiscal years 1999 and 2000. Department's Position: We disagree with petitioners. As explained in our April 13, 2001, creditworthiness memorandum to Melissa G. Skinner, Director of the Office of AD/CVD Enforcement VI, a public document on file in the CRU (Preliminary Creditworthiness Memorandum), in the Preliminary Determination, we found SAIL creditworthy during fiscal years 1999 and 2000 based on the company's financial ratios for the POI and the fact that SAIL was able to secure commercial financing during fiscal years 1999 and 2000 without the aid of GOI guarantees. Moreover, during verification, we verified that SAIL had audited financial statements, confirming the validity of the ratios on which we based our preliminary creditworthy determination (see SAIL verification report at 9). We note that at verification we specifically examined a commercial bond that SAIL issued immediately preceding the POI. We note that the commercial bond was used as the basis for our long-term benchmark interest rate for the POI. Furthermore, at verification, we traced the information that SAIL had provided regarding this commercial loan to its corresponding source documents and found no discrepancies. Therefore, on the basis of the findings of the Preliminary Creditworthiness Memorandum, the information reviewed during verification, and pursuant to section 351.505(a)(4)(ii) of the CVD regulations, we determine that SAIL was creditworthy during the POI. Comment 10: Denominator to be Used for SAIL and Essar's Pre-shipment Export Financing To calculate the ad valorem benefit for SAIL and Essar from the pre- shipment export financing program and the exemption of pre-shipment export credit from the interest tax, petitioners claim the Department divided the benefits obtained by each company by the company's total exports. Petitioners state that the Department chose this approach because the two companies claimed they were unable to tie pre-shipment export credits to specific shipments. However, petitioners argue that the Department has now verified that SAIL and Essar are able to tie pre-shipment export credits to particular shipments. For that reason, petitioners advise the Department to revise the denominator for each company's ad valorem benefit under both programs to include only exports of the subject merchandise to the United States. Respondents contend that the exemption of export financing from interest tax is not an export subsidy and is not specific. However, respondents contend that if the Department continues to determine that the interest tax exemption is countervailable, it is unnecessary to quantify it separately. To do so, respondents argue, would be to double count the benefit conferred because the short-term benchmark loans reported by respondents are all subject to the interest tax. Thus, if the short-term benchmark interest rate (inclusive of the interest tax) is compared with the interest rate on pre- and post-shipment export financing (exclusive of the interest tax), the benefit would include the value of the interest tax exemption. Moreover, respondents point out that the interest tax was abolished, effective April 1, 2000. Thus, respondents argue that the Department should treat the elimination of the interest tax, and the corresponding elimination of the exemption, as a program-wide change and adjust the cash deposit rate accordingly. Department's Position: Regarding the denominator to be used when calculating the benefit for Essar and SAIL's pre-shipment export financing, we agree with petitioners. We confirmed at verification that SAIL is able to tie its pre-shipment export financing to sales of subject merchandise to the United States. (see SAIL Verification Report at 18). Essar also stated at verification that it is able to tie pre-shipment export financing to specific shipments, i.e., to the United States, via the corresponding letter of credit (see Essar Verification Report at 6). Therefore, we determine that Essar and SAIL are able to tie their pre- shipment export financing to sales of subject merchandise to the Unite States, and, thus, to calculate the total net subsidy rate under this program, we divided the total benefit for each SAIL and Essar by each company's respective exports of subject merchandise to the United States for the POI. We agree with respondents that the interest tax exemption was abolished (see Comment 7 above), and thus constitutes a program-wide change. Comment 11: Long-term Interest Rate Benchmark for Calculating the Benefit to Essar from the Export Promotion Capital Goods Scheme Petitioners state that the Department determined the countervailable benefit to Essar from the export promotion capital goods scheme ("EPCGS"), a import duty reduction and exemption program, by calculating the interest that Essar would have otherwise paid during the POI had the company borrowed the value of the duty reduction at the time of import. Essar provided the Department with an original and revised set of rupee- denominated long-term benchmark loan interest rates. Petitioners argue that the Department should use the original set of interest rates for its calculation, as Essar revised its benchmark loan rates subsequent to the POI and thus these rates were prospective only. Petitioners claim the import duty reductions served as interest-free loans for Essar, and citing section 351.505(c)(2) of the CVD regulations, petitioners further claim that the Department must determine benefits from interest-free loans based on benchmark loans rates during the same period as the POI. Therefore, petitioners state that the Department must rely on the original set of rupee-denominated long-term interest rates. Department's Position: We agree with petitioners that the original rupee- denominated long-term interest rates should be used when calculating Essar's benefit from the EPCGS program. Pursuant to section 351.505(c)(2) of the CVD regulations, to calculate the benefit for interest-free loans we will take the difference between interest payments made by the company and the interest payments the company would have made on the benchmark loan in the same time period. In other words, the interest rates reported by Essar in their original repayment schedule were the rates in effect during the POI, and, thus, are the rates that we used to calculate Essar's benefit under the EPCGS program. Comment 12: Sales Tax Obtained from the Sales of Special Import Licenses Respondents argue that the Department erred in the Preliminary Determination by including in the benefit the value of the sales taxes that SAIL and TISCO obtained in the sales of special import licenses (SILs). Respondents state that inclusion of sales taxes in the value of the benefit conferred by the sale of SILs is improper since those taxes do not confer a benefit to the company that has made the sale. They argue that the sales taxes are simply passed through the seller and ultimately remitted to the GOI, and therefore, no benefit is conferred from the receipt of sales tax upon the companies selling the SILs. Respondents argue that the Department should exclude the amount of sales taxes from the value of the benefit conferred. Respondents further state that if the Department includes the sales taxes in the value of the benefit, the Department should not double count the sales tax obtained from sales of SILs made by TISCO. They argue that the Department double counted the sales tax in the Preliminary Determination by adding the value in the "Revenue from sale" column in Exhibit 14 of TISCO's January 26, 2001 questionnaire response to the value in the "Taxes paid" column also in Exhibit 14. Respondent contends that sales taxes are already included in the "Revenue from sale" values reported and that the value of the taxes should be subtracted to avoid double counting. Petitioners counter that the sales taxes obtained from sales of SILs were properly included in the benefit for SAIL and TISCO in the Preliminary Determination. Petitioners state that section 771(6) of the Act sets forth the items the Department may deduct from the gross countervailable subsidy received by a company, and that sales taxes obtained in those sales are not included. Petitioners state that the Court of International Trade (CIT) has ruled that deductions other than those in section 771(6) are prohibited. (2) Petitioners also assert that this very same argument made by respondents in the current investigation was dismissed by the Department in CTL Plate. Department's Position: As was stated in our determination in CTL Plate, the only adjustments which can be made to a subsidy benefit are those that fall within section 771(6) of the Act. Under section 771(6)(A), the Department is only authorized to adjust the benefit from a subsidy by (A) any application fee, deposit, or similar payment paid in order to qualify for, or to receive, the benefit of the countervailable subsidy, (B) any loss in the value of the countervailable subsidy resulting from its deferred receipt, if the deferral is mandated by Government order, and (C) export taxes, duties, or other charges levied on the export of merchandise to the United States specifically intended to offset the countervailable subsidy received. No other adjustments to the benefit received under this program are applicable under section 771(6)(A) of the Act. Therefore the revenue earned by SAIL and TISCO on its special import licenses is the countervailable benefit under this program. No other offsets or adjustments to that benefit, such as taxes, are authorized under the Act. With regard to the double-counting of sales tax from TISCO's sale of SILs, we agree with respondents and have corrected the countervailable benefit for this final determination. Comment 13: Exemption of Export Credit from Interest Tax Respondents argue that the exemption of export credit from interest tax is not countervailable because it is neither an export subsidy under 19 USC 1677(5A)(B), nor does it satisfy the specificity requirement under 19 USC 1677(5A)(D). First, respondents state that petitioners are wrong to assert that the interest tax exemption is contingent upon export. Respondents argue that petitioners focus solely on the "notification" under the Interest Tax Act governing the exemption of income on export credits from the interest tax. Respondents cite to the Final Affirmative Countervailing Duty Determination: Structural Steel Beams from the Republic of Korea (Structural Steel Beams from Korea) and Certain Welded Pipes and Tubes and Welded Carbon Steel Line Pipe from Turkey (Pipes and Tubes from Turkey) in arguing that the enabling legislation determines the countervailability of the program. Respondents state that when properly viewed as part of the broader statutory scheme, the interest tax exemption cannot be seen as dependent on export performance. Second, respondents contend that the interest tax exemption is not specific. They state that the legislation authorized the GOI to "exempt any credit institution or any class of credit institutions or any interest on any category of loans or advances from the levy of interest-tax." Therefore, respondents maintain that the subsidy is not de jure specific. Further, respondents argue that there is no evidence on the record to suggest that the interest tax exemption is de facto specific. Respondents argue that the exemption was initially offered to banks, which passed the savings to their customers, possibly resulting in numerous recipients of this benefit. Respondents contend that, since the benefit from this program was imputed, it was not quantified on banks' or companies' balance sheets and, therefore, it is difficult to determine whether a particular enterprise or industry was a predominant user, or received a disproportionate share of the benefits. Also, there is no evidence that the manner in which the exemption was granted tended to favor one industry over another and eligibility was not limited to enterprises or industries within designated regions. Petitioners state that no new information or evidence has been placed on the record to warrant a reconsideration of the Department's Preliminary Determination with respect to this program. Further, petitioners argue that the interest tax exemption is tied to actual exportation and is therefore an export subsidy under section 771(5A) of the Act. Petitioners state that, even assuming that the exemption is not an export subsidy, it is still specific under section 771(5A). The GOI did not provide information regarding the companies and industries that have benefitted from the exemption. However, petitioners argue that the other areas for which the exemption purportedly has been granted are limited in scope as to the number of companies or industries that could benefit, thereby proving that the interest tax exemption is specific in fact. Petitioners counter respondents' assertion that the enabling legislation determines countervailability by stating that a subsidy is an export subsidy when it is in law, or in fact, contingent upon export performance. Petitioners state that in Structural Steel Beams from Korea, the Department did not focus solely on the enabling legislation in determining specificity of the subsidy at issue, and in Pipes and Tubes from Turkey, in contrast to this case, whether the program was an export subsidy was not at issue. Rather, the program in question was a domestic subsidy and the Department considered different factors from those it is considering in this investigation. As a result, petitioners argue that Pipes and Tubes from Turkey is irrelevant to the issue at hand. Further, in contrast to what was provided in this case by the GOI, petitioners contend that the Turkish government provided extensive information on the companies and industries that benefitted from the subsidy. Respondents state that, should the Department continue to find the exemption of export financing from interest tax countervailable, it should not quantify the benefit separately because double counting occurs. The short-term benchmark loans are all subject to the interest tax. When the short-term benchmark, inclusive of interest tax, is compared with the interest rate on pre- and post-shipment export financing (which is exempt from the interest tax), the benefit quantified will include the value of the interest tax exemption. Petitioners again point to Section 771(6) of the Act, which provides an exclusive list of the offsets that may be deducted from the amount of a gross subsidy to yield the net subsidy. The list does not include interest taxes. Consequently, petitioners contend that the Department properly did not make a deduction for the interest tax in calculating the benefit to the respondents under the pre- and post-shipment export financing programs. If the Department were to accept petitioners' argument and not calculate a separate subsidy rate for the exemption, the effect would be as if the Department had deducted the interest tax from the benefit under the export financing programs, which would be contrary to the law. Further, petitioners state that the exemption of export credit from interest tax is itself a distinct countervailable subsidy and should be treated as such. Department's Position: Under section 351.514(a) of the CVD regulations, the Department will consider a subsidy to be an export subsidy if "eligibility for, approval of, or the amount of, a subsidy is contingent upon export performance." In our Preliminary Determination, we found, based on direct statements made by respondents in questionnaire responses, that receipt of the interest tax exemption is contingent upon export performance, and is therefore an export subsidy under section 771(5A)(B) of the Act. Because no new information or evidence has been presented since the Preliminary Determination to change our ruling that the exemption of export credit from interest tax is an export subsidy, we continue to find it as such. Respondents also argue that a separate calculation to capture the benefit of the interest tax exemption would result in double counting, since the benefit from the interest tax exemption is included in the benefit from the pre- and post-shipment export financing when the benchmark interest rate is inclusive of the interest tax. While the cash credit loans are reported to have been subject to the interest tax during the POI, record evidence does not show that the interest tax was actually applied to the short-term cash credit loans used as benchmark interest rates for SAIL or Essar. With regard to TISCO, Verification Exhibit TISCO-2 provides an example of a loan included in TISCO's short-term benchmark that specifically excludes the interest tax from the reported interest rate. Therefore, for SAIL, Essar and TISCO, we determine that the benefit from the exemption of export credit from the interest tax is a separate program, as we found in the Preliminary Determination, and should be calculated separately from the pre- and post- shipment export financing programs. Further, since the record does not indicate that the benchmark rate is inclusive of the interest tax for those respondent companies, we have not adjusted the benchmark interest rate used to compare to the rates for pre- and post-shipment export financing. Ispat, on the other hand, has demonstrated that its benchmark interest rate is inclusive of the interest tax. Therefore, in order to avoid double counting the benefit from the exemption of export credit from the interest tax, we have deducted the interest tax from Ispat's reported benchmark interest rate when using that rate to compare to contractual interest rates under the pre- and post-shipment export financing programs. Comment 14: Ispat's Uninstalled and Common Capital Equipment under the EPCGS In the Preliminary Determination, the Department determined that one element of the countervailable benefit under the EPCGS involved the import duty reduction that producers/exporters received on the imports of capital equipment for which they had not yet met their export requirements. Because these are contingent liabilities in that duties not paid at the time of the importation of the capital equipment will have to be paid to the GOI in the event their export requirements are not met, the Department treats the balance on the liability as an interest-free loan in valuing the benefit. Respondents state that much of Ispat's imported capital equipment on which duties were tentatively waived under the EPCGS were debonded from warehouse prior to the end of the POI, but had not yet been installed and put to use. Ispat expects to commission the second and final phase of its hot rolling mill by April, 2002 at the earliest. Concerning Ispat's uninstalled capital assets, respondents state that there is no countervailable subsidy with respect to the "manufacture, production or exportation of a class or kind of merchandise imported into the United States," as is required under 19 USC 1671(a)(1). Respondents cite to Live Swine From Canada; Final Results of Countervailing Duty Administrative Review, 56 FR 28531, 28536 (June 21, 1991) and Final Affirmative Countervailing Duty Determination; Porcelain-on-Steel Cooking Ware From Mexico, 51 FR 36447, 36449 (October 10, 1986), in support of their argument that no subsidy exists if there is no benefit to the "manufacture, production, or exportation" of the subject merchandise. Respondents argue that equipment not yet installed cannot possibly have been used in the "production or export" of the subject merchandise and, therefore, no benefit is conferred. Furthermore, respondents point out that many of the capital goods imported under the EPCGS are common to both phases of the hot-rolling mill, but since the second phase has not yet been commissioned, these assets can only be used up to 50 percent of capacity. Respondents argue that since only 50 percent of these assets can be used in the "manufacture, production and export" of subject merchandise, only 50 percent of the value of the duty exemptions should be treated as a countervailable subsidy. Petitioners argue that, under 19 USC 1677(5)(C), the Department is not permitted to consider the effects of a subsidy in determining whether a subsidy exists. Further, the contingent liability for Ispat's unmet export requirements is treated as an interest-free loan and, under 19 USC 1677(5)(E)(ii), the statute establishes that "a benefit shall normally be treated as conferred where there is a benefit to the recipient, including...in the case of a loan, if there is a difference between the amount the recipient of the loan pays on the loan and the amount the recipient would pay on a comparable commercial loan...." Petitioners maintain that the CIT, in British Steel Corp. v. United States, rejected British Steel's assertion that subsidies related to unused capital assets are not countervailable since such assets do not benefit the "manufacture, production, or export" of subject merchandise. Petitioners state that the CIT determined that even if an asset does not provide a benefit to the firm, "the competitive benefit of funds used to acquire assets...continues to contribute to the firm's manufacture, production, or exportation of products accomplished by the firm's remaining assets." Petitioners state that this determination is particularly true in the current investigation since Ispat's subsidy is treated as an interest-free loan that benefits all of Ispat's manufacturing and exporting operations. Lastly, petitioners note that the CIT also emphasized in British Steel Corp. v. United States that subsidies for the purchase of capital goods bestow a benefit to a recipient firm by relieving it of costs normally incurred in acquiring such assets and freeing up those funds for other uses. In the instant case, petitioners argue that Ispat did not incur import duties that it otherwise would have had to pay upon importing the capital goods, and that the resulting cost savings benefitted all of Ispat's production and export operations. Department's Position: Section 771(5)(C) of the Act expressly states that the Department "is not required to consider the effect of the subsidy in determining whether the subsidy exists..." Further, section 351.503(c) of the CVD regulations states that "{i}n determining whether a benefit is conferred, the Secretary is not required to consider the effect of the government action on the firm's performance, including its prices or output, or how the firm's behavior otherwise is altered." Because the Department does not consider the effects of a countervailable subsidy in determining whether the subsidy exists, we do not examine whether the imported capital goods have been put to productive use, when looking at the case in hand. Ispat receives a countervailable subsidy in the sense that the company, in effect, has received an interest free loan due to the waiver of import duties, contingent upon Ispat meeting future export requirements. Whether the imported assets have been put to use, or to what extent, cannot be considered when determining whether Ispat would have been liable for duties that it otherwise would have been required to pay absent the EPCGS. Comment 15: Ispat's Corrected FOB Sales Values During verification, Ispat officials presented to the Department corrections it made in preparing for verification to explain how Ispat originally reported its export sales values. Respondents argue that the Department, to the extent it uses export FOB values as a denominator for countervailable subsidies, should use these corrected values. Department's Position: The Department has used, where necessary, corrected FOB sales values in determining the ad valorem rates of certain subsidies. Comment 16: Value of DEPS Benefits Conferred on Ispat Respondents state that the Department's Preliminary Determination calculated a benefit under the DEPS program of 14.02 percent ad valorem, which must be incorrect in that it exceeds the amount of the benefit (14 percent) for which Ispat was eligible. Respondents argue that the discrepancy arises from the fact that, to determine the gross amount of DEPS benefits obtained by Ispat, the Department took 14 percent of the FOB value of Ispat's sales as recorded in rupees by the GOI. In calculating DEPS benefits, the GOI converts the FOB value of the sales from U.S. dollars into rupees using the exchange rate in effect on the date of the bank realization certificate. In booking its sales to the United States, however, Ispat uses the exchange rate difference between the amount of DEPS credit to which it is entitled. Ispat books the exchange rate difference between the amount of DEPS calculated by the GOI and the amount of DEPS recorded in its ledger as a foreign exchange gain/loss. Thus, respondents argue the Department's method of calculating the net countervailable subsidy in the Preliminary Determination treated as countervailable the exchange rate differential between the methods by which the GOI and Ispat book the FOB sales values. Respondents state that the Department should correct this by dividing the total gross amount of the DEPS benefits received by Ispat, net of application fees, by the FOB value for Ispat's sales as recorded by the GOI. Respondents state that, if the Department uses the same methodology as in the Preliminary Determination, the Department should use the revised FOB sales value reported at the onset of verification. Petitioners argue that any error in the calculation of Ispat's subsidy rate for the DEPS is due solely to the failure of Ispat to report its correct sales figure for use in the denominator in calculating that rate. Petitioners state that the Department followed the correct methodology in calculating the subsidy rate and that documentation collected by the Department at verification proves this. Further, petitioners argue that, when using as the denominator the revised export sales of subject merchandise figure discovered at verification, Ispat's subsidy rate is exactly what respondents propose as the rate "in the event that the Department decides to use the same methodology as in the Preliminary Determination..." Petitioners further note, however, that the Department, during verification, discovered that the application fee paid to obtain DEPS credits is "0.5 percent of the total DEPS entitlement claimed, not 0.5 percent of the FOB value of exports..." As a result, petitioners stress that the Department should revise what was done in the Preliminary Determination with respect to application fees paid to account for the information discovered at verification. Department's Position: While the Department verified the corrected sales figures submitted by Ispat during verification, we did not examine the alleged exchange rate differentials between the methods by which the GOI and Ispat book the sales value for FOB sales. Therefore, as our denominator in calculating the ad valorem rate for this program, we are using the corrected export sales of subject merchandise to the United States that we confirmed during verification. We note that respondents' argument, that the benefit from the DEPS program in the Preliminary Determination must have been incorrect since the ad valorem rate of the program was greater than the DEPS benefit for which Ispat was eligible, is not an issue for this final determination. This is because, upon using Ispat's corrected sales figure reported at verification, the ad valorem rate for this program is not greater than the 14 percent rate for which Ispat was eligible. With respect to application fees, we have deducted application fees under the DEPS program in the amount of 0.5 percent of the total DEPS entitlement claimed, thereby revising our benefit calculation from the Preliminary Determination and incorporating the information we gathered during verification. Comment 17: Petitioners' Allegation of Errors in the Calculation of Ispat's Subsidy Rate Petitioners contend that the Department inadvertently failed to calculate the benefit to Ispat of one particular import under the EPCGS. Ispat paid no duties that otherwise would have been due absent the EPCGS. Additionally, petitioners argue that the Department understated the benefit of another import by applying an incorrect duty rate that would have been due absent the EPCGS. Department's Position: We agree with petitioners that, in the Preliminary Determination, we inadvertently omitted the benefit from one imported good and calculated the wrong benefit for another. We have corrected the benefit amounts for this final determination. Comment 18: Guarantee Fees Charged by the GOI for Loans Obtained by SAIL from International Lending Institutions As explained above, SAIL received GOI guarantees on loans issued by international lending institutions. Respondents argue that these loan guarantees did not provide a subsidy to SAIL because the international lending institutions required that SAIL obtain guarantees from the GOI as a prerequisite to obtaining the funding. They further argue that the Department has previously concluded that loan guarantees obtained pursuant to requirements imposed upon the borrower by international lending institutions are not countervailable because they are the result of policy requirements of these lending institutions. See, e.g., Carbon Steel Wire Rod From Spain; Final Affirmative Countervailing Duty Determination, 49 FR 19551, 19553 (May 8, 1984) (Wire Rope from Spain) and Preliminary Affirmative Countervailing Duty Determination; Oil Country Tubular Goods For Austria, 50 FR 23334, 23337 (June 3, 1985) (OCTG from Austria). Petitioners disagree. They argue that respondents' citations refer to determinations from the mid-1980s, which no longer serve as valid precedent. They further argue that the Department determined in 1991 that although loans made by international institutions are not countervailable, government-issued loan guarantees related to those loans - even if they are required by the lenders as a condition of the loan - are countervailable to the extent that they are provided on terms inconsistent with commercial considerations. See Oil Country Tubular Goods From Argentina, Final Results of Countervailing Duty Administrative Review, 56 FR 64493, 64495-96 (December 10, 1991) (OCTG from Argentina). Petitioners explain that in OCTG from Argentina, the respondent company, Siderca S.A. (Siderca), received a reduced-fee loan guarantee from the state-owned National Development Bank (BANADE), accompanied by a counterguarantee from the Argentine Ministry of France, for loans from the Inter-American Development Bank (IADB). Petitioners claim that the counterguarantee was required by the IADB as a prerequisite to the loans. See OCTG from Argentina, 56 FR at 64495-96. Petitioners explain that in that investigation, Siderca invoked the very same precedent cited by the respondents in the instant investigation, i.e., Wire Rope from Spain and OCTG from Austria, and made the very same argument - that "loan guarantees obtained because they are required by international lending institutions are not countervailable". Id. Petitioners claim that the Department rejected this argument, stating: {W}hile the Department does not consider loans provided by international lending institutions to be countervailable under U.S. countervailing duty law. . ., we do consider the government action taken in connection with such loans is within the purview of U.S. countervailing duty law. Id. at 64496. They explain that the Department reaffirmed its decision to countervail the loan guarantee in the 1997 administrative review of the order. See Oil Country Tubular Goods From Argentina; Preliminary Results of Countervailing Duty Administrative Review, 62 FR 32307, 32308 (June 13, 1997) (Preliminary Determination); Oil Country Tubular Goods From Argentina; Final Results of Countervailing Duty Administrative Review, 62 FR 55589, 55590 (October 27, 1997) (final determination). Department's Position: We disagree with respondents that the guarantee provided by the GOI did not provide a countervailable benefit. Under section 771(5)(D)(i) of the Act, a government loan guarantee is defined as a financial contribution. Therefore, because the GOI guaranteed a loan to SAIL under this program, the GOI has provided a financial contribution to SAIL under the CVD law. With respect to specificity, as explained in the Preliminary Determination, the loan guarantees under this program are specific within the meaning of section 771(5A)(D)(iii)(II) of the Act because they were limited to certain companies selected by the GOI on an ad hoc basis. See 66 FR at 20249. In addition, these loans confer a countervailable benefit to the extent that the total amount a firm pays for the loan with a government-provided guarantee is less than the total amount a firm would pay for a comparable commercial loan that the firm could actually obtain on the market, absent the government-provided guarantee. In calculating the benefit, we followed the same methodology and used the same benchmark interest rates employed on the other loans on which SAIL received GOI guarantees. Comment 19: Calculation of TISCO's Long-term Benchmark Interest Rate Respondents argue that the Department should correct its calculations of TISCO's long-term benchmark interest rates for fiscal years 1995, 1999, and 2000. They argue that the Department should use these corrected rates in the calculations for the EPCGS program and, if the Department determines that the SDF loan program is countervailable, in the calculations for TISCO's SDF loans. Respondents argue that the benchmark interest rate calculated for fiscal year 1995 is based on the interest rates obtained in fiscal year 1994. They also argue that the Department should recalculate the fiscal year 1999 benchmark interest rate as the weighted average of the long-term loans that TISCO obtained during the entire fiscal year rather than weighted-average of the loans obtained in the first quarter of calendar year 1999. Similarly, they argue that the Department should recalculate the benchmark interest rate for fiscal year 2000 as the weighted-average of the long-term loans TISCO obtained during fiscal year 2000. Respondents argue that the Department should correct its calculations for the EPCGS program with respect the various imports the company made with an EPCGS license during fiscal year 1999 and fiscal year 2000. They contend that the Department should use the weighted- average of the interest rate on the long-term loans TISCO obtained during fiscal year 1999 as the benchmark for the first nine imports made under this license during fiscal year 1999. Similarly, they argue that the Department should use the weighted-average of the interest rates on the long-term loans TISCO obtained during fiscal year 2000 as the benchmark for the all imports made under this license during fiscal year 2000. Department's Position: We agree with respondents. During verification, we collected revised information concerning these benchmark loans. See TISCO's May 14, 2001 submission. Accordingly, we have recalculated TISCO's long-term benchmark interest rates using this revised information. With respect to the EPCGS program, we have used these revised long-term benchmark interest rates in the calculation of TISCO's benefits under this program, as requested by respondents. Specifically, we calculated the benefit using the fiscal year 1999 long-term benchmark interest rate for imports made during fiscal year 1999 and the fiscal year 2000 long-term benchmark interest rate for imports made during fiscal year 2000. We have also used the revised long-term benchmark interest rate for fiscal year 1999, the POI, in the calculations for TISCO's SDF loans. Comment 20: Calculation of Duty and Application Fees Actually Paid by TISCO Under the EPCGS Program Respondents argue that the Department should correct is calculations with regard to the amount of duty actually paid on shipments made against one of its EPCGS licenses. They also contend the Department should account for the application fee that TISCO paid for that same license. Department's Position: We agree with respondents and have corrected our calculations accordingly. We reduced the benefit by subtracting the amount of application fee that TISCO paid from the amount of duty forgone that was calculated for that license. Comment 21: Calculation of TISCO's SDF Loan Repayments Respondents argue that, in calculating the benefit from the fifth tranche of TISCO's SDF loan number 3, the Department inadvertently added an extra zero to the repayment figure used to calculate the outstanding loan balance at the beginning of the POI. Department's Position: We agree with respondents and have corrected the formula used for calculating the outstanding balance at the beginning of the POI for tranche 5 of TISCO's SDF loan number 3. We reduced the repayment figure in formula used in the spreadsheet by a factor of ten. Comment 22: Calculation of TISCO's Short-Term Rupee-Denominated Benchmark Interest Rate Petitioners argue the Department should recalculate TISCO's short-term rupee-denominated benchmark interest rate for the POI using the revised cash credit loan information provided by respondent immediately prior to verification. This corrected information is contained in Exhibit TISCO-1 of the Department's August 6, 2001, verification report for TISCO. Department's Position: We agree with petitioners and have recalculated TISCO's short-term rupee-denominated benchmark interest rate for the POI. Comment 23: Calculation of DEPS Program Rate for TISCO Petitioners argue that the Department made a ministerial error in the calculation of the DEPS program rate for TISCO. They contend that the Department intended to divide the benefit calculated for the program by the value of subject merchandise exports to the United States but inadvertently calculated the program using the figure for TISCO's total exports to all destinations as the denominator. Department's Position: We agree with petitioners and have adjusted the calculation of the DEPS program for TISCO accordingly. Information contained in several of TISCO's submissions clearly indicate that all of the licenses reported were earned during the POI on exports of subject merchandise to the United States. Comment 24: Benefit to TISCO Under the EPCGS Program Respondents argue that, in determining the benefit conferred on TISCO by the EPCGS program, the Department should not include the amounts of "additional duty" that were exempted. They contend that, in the EPCGS calculations, the Department should subtract the total value of the additional duty from the total duty TISCO owed absent the program. Respondents state that this duty is commonly referred to as a "countervailing duty" and is designed to "countervail" the competitive advantage imported goods would otherwise have vis-a-vis domestically- produced goods, which are subject an excise tax. They state that this "additional" or "countervailing" duty is the functional equivalent of an excise tax collected on domestic sales. They argue that the exemption from additional duties does not confer a countervailable benefit because, even if a company were to pay the additional duty on capital goods, it would receive a credit in the amount of additional duties paid. They argue that the GOI grants a credit for additional duties/excises duties because they are a tax on consumers and are not intended to burden manufacturers. Respondents also argue that the Department determined that this very duty exemption was determined to be not countervailable in Elastic Rubber Tape from India. Department Position: We agree with respondents. In Elastic Rubber Tape From India, the Department determined that the excise duty portion of the EPCGS was similar to value added taxes that are passed on to customers and, thus, did not confer a benefit. See Elastic Rubber Tape from India, 64 FR at 19130. Critical to the Department's determination is the fact that the respondent company did not bear the ultimate financial responsibility for the excise duty. In CTL Plate from India, we again determined that the excise exemption was not countervailable. See CTL Plate from India, 64 FR at 73135. In this case, there is no new information to warrant a change in the Department's position. Comment 25: Denominator for TISCO's Post-Shipment Export Financing Program Petitioners raise a concern regarding a specific statement on page 8 of in the verification report for TISCO. They point out that the company officials explained that TISCO does not record its post-shipment loans in a destination-specific manner and that there was no way to tally the total interest payment for post-shipment loans pertaining to shipments of subject merchandise to the United states. Petitioners argue that the information on the record clearly indicates that TISCO's post-shipment loan information pertains to exports of subject merchandise to the United States. Therefore, Petitioners argue that the Department should continue to use TISCO's sale of subject merchandise to the United States as the denominator in its calculations regarding TISCO's post-shipment loans. Department's Position: We agree with petitioners. The specific statement in the verification report refers to the way respondents record data in their books, not the manner in which TISCO's post-export financing was reported to the Department. For purposes of the calculations regarding the post-shipment loans, we continue to use TISCO's sales of subject merchandise to the United States as the denominator. Comment 26: Calculation of TISCO's SDF Loans Petitioners argue that the Department should correct its calculations with regard to three of TISCO's SDF loans. Specifically, petitioners argue that the Department inadvertently miscalculated the principal balances for the POI for tranche 5 of SDF loan control number 5, loan control number 6, and loan control number 7. Department's Position: We agree with petitioners and have corrected the calculations accordingly. The details of these calculations are business proprietary. Further information regarding the nature of these corrections is contained in TISCO's Final Calculation Memorandum, the public version of which is on file in the CRU. VI. Recommendation: Based on our analysis of the comments received, we recommend adopting all of the above positions. If these recommendations are accepted, we will publish the final results of the determination in the Federal Register. __________ __________ Agree Disagree ______________________ Faryar Shirzad Assistant Secretary for Import Administration ______________________ Date ______________________________________________________________________ footnotes: 1. A crore is equal to Rs. 10,000,000 2. See British Steel plc v. United States, 879 F. Supp. 1254, 1309 (Ct. Int'l Trade 1995), aff'd in part and rev'd in part on other grounds, 127 F.3d 1471 (Fed. Cir. 1997)