Crescent Foundry Co. Pvt. Ltd. v. U.S., Slip Op. 96-200.

• Decision Date: 26 December 1996
• Docket Number: Slip Op. 96-200.,Court No. 95-09-01239.
• Citation: 951 F.Supp. 252
• Parties: CRESCENT FOUNDRY CO. PVT. LTD., Nandikeshwari Pvt. Ltd., Carnation Enterprises Pvt. Ltd., Kajaria Iron Castings Pvt. Ltd., Kejriwal Iron & Steel Works, Overseas Iron Foundry Pvt. Ltd., Raghunath Prasad Phoolchand Ltd., R.B. Agarwalla & Co., RSI India Pvt. Ltd., Serampore Industries Pvt. Ltd., Sitaram Madhogarhia & Sons Pvt. Ltd., Super Castings (India), Tirupati International (P) Ltd., UMA Iron & Steel Co., Plaintiffs, v. UNITED STATES, Defendant, Alhambra Foundry Inc., Allegheny Foundry Co., Deeter Foundry Inc., East Jordan Iron Works, Inc., Lebaron Foundry Inc., Municipal Castings, Inc., Neenah Foundry Co., U.S. Foundry & Manufacturing Co., and Vulcan Foundry, Defendant-Intervenors.
• Court: U.S. Court of International Trade

951 F.Supp. 252

CRESCENT FOUNDRY CO. PVT. LTD., Nandikeshwari Pvt. Ltd., Carnation Enterprises Pvt. Ltd., Kajaria Iron Castings Pvt. Ltd., Kejriwal Iron & Steel Works, Overseas Iron Foundry Pvt. Ltd., Raghunath Prasad Phoolchand Ltd., R.B. Agarwalla & Co., RSI India Pvt. Ltd., Serampore Industries Pvt. Ltd., Sitaram Madhogarhia & Sons Pvt. Ltd., Super Castings (India), Tirupati International (P) Ltd., UMA Iron & Steel Co., Plaintiffs, v. UNITED STATES, Defendant, Alhambra Foundry Inc., Allegheny Foundry Co., Deeter Foundry Inc., East Jordan Iron Works, Inc., Lebaron Foundry Inc., Municipal Castings, Inc., Neenah Foundry Co., U.S. Foundry & Manufacturing Co., and Vulcan Foundry, Defendant-Intervenors.

Slip Op. 96-200.

Court No. 95-09-01239.

United States Court of International Trade.

December 26, 1996.

COPYRIGHT MATERIAL OMITTED

Cameron & Hornbostel (Dennis James, Jr.) for plaintiffs.

Frank W. Hunger, Assistant Attorney General, David M. Cohen, Director, Commercial Litigation Branch, Civil Division, United States Department of Justice (Velta A. Melnbrencis) and Robert E. Nielsen, Senior Counsel, Office of Chief Counsel for Import Administration, Department of Commerce, of counsel, for defendant.

Collier, Shannon, Rill & Scott (Paul C. Rosenthal and Robin H. Gilbert) for defendant-intervenors.

MEMORANDUM OPINION AND ORDER

DiCARLO, Senior Judge:

This action arises from the 1990 administrative review of a countervailing duty order, first issued by the Department of Commerce in 1980, concerning certain iron metal castings from India exported to the United States, including manhole covers and frames, clean-out covers and frames, and catch basin grates and frames. Certain Iron Metal Castings from India, 60 Fed.Reg. 44,849 (Dep't Comm.1995) (final admin. review) [hereinafter Final Determination]; see Certain Iron Metal Castings from India, 45 Fed.Reg. 68,650 (Dep't Comm.1980) (original countervailing duty order). The court has jurisdiction pursuant to 19 U.S.C. § 1516a(a)(2)(A)(i) (1994) and 28 U.S.C. § 1581(c) (1994).

BACKGROUND

At the conclusion of the 1990 administrative review, Commerce amended the countervailing duty rates assigned to the fourteen Indian companies that exported the subject merchandise to the United States in 1990. Final Determination at 44,855. The following issues raised during that review are presently in dispute:

(1) Commerce determined that certain payments under the Indian government's Cash Compensatory Support (CCS) program were countervailable. The CCS program rebates indirect taxes and import duties borne by inputs physically incorporated into an exported product. While generally such rebates are not countervailable, Commerce found that some CCS payments made to plaintiff exporters refunded charges for services, not indirect taxes. Certain Iron Metal Castings from India, 60 Fed.Reg. 4,592, 4,594 (Dep't Comm.1995) (prelim. admin. review) [hereinafter Prelim. Determination]. These included fees for wharfage, berthage, pilotage, and towage assessed at the Port of Calcutta. Final Determination at 44,852. Based on this reclassification, Commerce determined that plaintiffs received an over-rebate in 1990 in the amount of the refunded service charges, resulting in a countervailable subsidy of 4.24% ad valorem. (Pls.' Mem. of Points & Authorities in Support of Pls.' R. 56.2 Mot. for J. on Agency R.App. at A-35 (Country-Wide Rate Calculation, Non-pub. Doc. No. 27);) Prelim. Determination at 4,594. Plaintiffs argue that Commerce should have treated certain of those fees as indirect taxes, rebates of which are noncountervailable.

(2) Commerce assigned eleven companies a common countervailing duty rate of 10.16% ad valorem based on the country-wide average benefit received, but assigned "significantly different," company-specific rates to the three remaining investigated companies pursuant to 19 C.F.R. § 355.22(d)(3): Overseas Steel at 18.52%, Sitaram Steel at 22.32%, and Nandikeshwari at 4.29%. Final Determination at 44,855; see Administrative Review of Orders and Suspension Agreements, 19 C.F.R. § 355.22(d)(3) (1994). To calculate the country-wide 10.16% figure, Commerce weight-averaged the subsidy rates of all fourteen investigated companies, including the three companies with "significantly different" rates. Prelim. Determination at 4,592; Final Determination at 44,855. Plaintiffs contend that the two companies with significantly higher subsidy rates should not have been included in the country-wide average.

(3) Section 80HHC of the Indian tax code permits exporters to deduct profits derived from the export of goods and merchandise from their taxable income. Prelim. Determination at 4,594. Commerce found that this § 80HHC program was a countervailable subsidy, calculated as the difference between the tax paid and the tax that would have been paid absent the deduction taken, or 2.59% ad valorem for all but three companies. Id.; (Pls.' Br.App. at A-35 (Country-Wide Rate Calculation, Nonpub. Doc. No. 27)). Part of the § 80HHC deduction taken was attributable to CCS payments, some of which Commerce classified as over-rebates. Final Determination at 44,854. Plaintiffs argue that Commerce should have excluded that part of the deduction from its calculation of the § 80HHC subsidy.

(4) Payments received under the Indian government's International Price Reimbursement Scheme (IPRS), which reimbursed exporters for the difference in price between higher-priced domestic pig iron and its foreign equivalent, were also deductible under § 80HHC. Id. Commerce found that none of the plaintiffs had received IPRS payments attributable to the subject merchandise in 1990. Prelim. Determination at 4,595. Plaintiffs argue that Commerce acted ultra vires when it included that part of the deduction in its calculation of the § 80HHC subsidy.

DISCUSSION

Once Commerce makes a final determination in a countervailing duty investigation, the court must uphold that determination unless it is "unsupported by substantial evidence on the record, or otherwise not in accordance with law." 19 U.S.C. § 1516a(b)(1)(B)(i) (1994). Substantial evidence is "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Universal Camera Corp. v. NLRB, 340 U.S. 474, 477, 71 S.Ct. 456, 459, 95 L.Ed. 456 (1951) (quoting Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 216-17, 83 L.Ed. 126 (1938)).

I.

According to the GATT Illustrative List of Export Subsidies, a countervailable benefit exists when the remission of prior stage cumulative indirect taxes and import duties on goods or services used in the production of exports exceeds the remission of like taxes on like products sold domestically. Agreement on Interpretation and Application of Articles VI, XVI, and XXIII of the General Agreement on Tariffs and Trade (Relating to Subsidies and Countervailing Measures), Apr. 12, 1979, Annex items (h-i), 31 U.S.T. 513, 546-47 [hereinafter Illustrative List]. There is an exception, however for taxes levied on goods that are physically incorporated into the exported product. Remission of those taxes is not countervailable. Id. item (h).

19 U.S.C. §§ 2502(1), 2503(c)(5) (1988) have incorporated the Illustrative List into United States domestic law. Creswell Trading Co. v. United States, 15 F.3d 1054, 1057 n. 4 (Fed.Cir.1994); Creswell Trading Co. v. United States, 20 CIT ___, 936 F.Supp. 1072, 1075 (1996). Commerce implements countervailing duty law according to its regulations in 19 C.F.R. §§ 355.1-355.51 (1994). Commerce has proposed a set of additional regulations codifying its already existing practice with respect to the identification and measurement of subsidies. Notice of Proposed Rulemaking and Request for Public Comments: Countervailing Duties, 54 Fed. Reg. 23,366 (1989) (to be codified at §§ 355.41-355.51) [hereinafter Proposed Rules]. The proposed regulations state that "the nonexcessive ... remission ... of prior stage cumulative indirect taxes or import charges levied on goods that are physically incorporated ... in the exported product shall not confer a countervailable benefit." Id. at 23,382; see also id. at 23,373 (summarizing proposed regulation). Commerce will not countervail a rebate if it finds that "(1) the [rebate] program operates for the purpose of rebating prior stage cumulative indirect taxes and/or import charges; (2) the [foreign] government accurately ascertained the level of the rebate; and (3) the government reexamines its schedules periodically to reflect the amount of actual indirect taxes and/or import charges paid." Prelim. Determination at 4,594; Proposed Rules at 23,382.

Even if the tax rebate program meets this general threshold requirement, Commerce will then examine whether there was an over-rebate in the specific period under review. There is an over-rebate if exporters receive a rebate greater than the amount actually paid in indirect taxes and import duties on inputs physically incorporated into the subject merchandise. If so, the excess is a countervailable benefit. Prelim. Determination at 4,594; Proposed Rules at 23,373.

Through the CCS program, the government of India provides a cumulative tax rebate, payable on export, for certain taxes incurred in the production of a finished good. Prelim. Determination at 4,594. In prior administrative reviews, Commerce determined that the CCS program rebated prior stage cumulative indirect taxes and import charges, and that the government of India periodically reexamined its schedules and maintained an accurate rebate level. Prelim. Determination at 4,594; see, e.g., Certain Iron Metal Castings from India, 56 Fed. Reg. 41,650, 41,653 (Dep't Comm.1991) (1989 prelim. admin. review). Because the program met the three conditions outlined above, Commerce had not countervailed CCS rebate payments in the past. Prelim. Determination at 4,594.

During the 1990 review period, Indian manufacturers moved from...