Kajaria Iron Castings Pvt. Ltd. v. U.S.

• Decision Date: 08 September 1998
• Docket Number: No. 97-1490,97-1490
• Citation: 156 F.3d 1163
• Parties: KAJARIA IRON CASTINGS PVT. LTD., Calcutta Ferrous Ltd., Crescent Foundry Co. Pvt. Ltd., Commex Corporation, Dinesh Brothers, Nandikeshwari Pvt. Ltd., Carnation Enterprises Pvt. Ltd., Kejriwal Iron & Steel Works, R.B. Agarwalla & Company, RSI Limited, Serampore Industries Pvt. Ltd., Tirupati International (P) Ltd. and Uma Iron & Steel Co., Plaintiffs-Appellants, v. UNITED STATES, Defendant-Appellee, and 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, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Federal Circuit

Page 1163

156 F.3d 1163

KAJARIA IRON CASTINGS PVT. LTD., Calcutta Ferrous Ltd. Crescent Foundry Co. Pvt. Ltd., Commex Corporation, Dinesh Brothers, Nandikeshwari Pvt. Ltd., Carnation Enterprises Pvt. Ltd., Kejriwal Iron & Steel Works, R.B. Agarwalla &amp Company, RSI Limited, Serampore Industries Pvt. Ltd Tirupati International (P) Ltd. and Uma Iron & Steel Co. Plaintiffs-Appellants, v. UNITED STATES, Defendant-Appellee, and 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, Inc., Defendants-Appellees.

No. 97-1490.

United States Court of Appeals, Federal Circuit.

Sept. 8, 1998.

Rehearing Denied Dec. 29, 1998.

Dennis James, Jr., Cameron & Hornbostel, LLP, Washington, DC, argued for plaintiffs-appellants, Kajaria Iron Castings PVT. LTD., et al.

Robin H. Gilbert, Collier, Shannon, Rill & Scott, PLLC, Washington, DC, argued for defendant-appellees, Alhambra Foundry, Inc, et al. With him on brief was Paul C. Rosenthal.

Velta A. Melnbrencis, Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, Washington, DC, argued for defendant-appellee, United States. With her on brief were Frank W. Hunger, Assistant Attorney General, and David M. Cohen, Director. Of counsel on brief were Stephen J. Powell, Chief Counsel for Import Administration, Elizabeth C. Seastrum, Senior Counsel, and Robert E. Nielsen, Senior Attorney, Office of Chief Counsel for Import Administration, U.S. Department of Commerce.

Before RICH, RADER, and SCHALL, Circuit Judges. Opinion for the court filed by Circuit Judge SCHALL.

Opinion for the court filed by Circuit Judge SCHALL. Opinion, dissenting-in-part, filed by Circuit Judge RADER.

SCHALL, Circuit Judge.

This action stems from an administrative review of a countervailing duty order covering iron-metal castings from India. Plaintiffs-Appellants, Kajaria Iron Castings Pvt. Ltd. ("Kajaria"), Calcutta Ferrous Ltd., Crescent Foundry Co. Pvt. Ltd., Commex Corporation, Dinesh Brothers ("Dinesh"), Nandikeshwari Pvt. Ltd., Carnation Enterprises Pvt. Ltd., Kejriwal Iron & Steel Works, R.B. Agarwalla & Company, RSI Limited, Serampore Industries Pvt. Ltd., Tirupati International (P) Ltd., and Uma Iron & Steel Co. (collectively "Producers"), are Indian producers and exporters of iron-metal castings. Defendants-Appellees, 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, Inc. (collectively "Domestic Industry"), are United States producers of iron-metal castings. The Producers appeal the final decision of the United States Court of International Trade sustaining the determination of the International Trade Administration, United States Department of Commerce ("Commerce"), that the Producers were receiving net subsidies on iron-metal castings that were within the scope of the countervailing duty order and that were imported into the United States, and therefore imposing countervailing duties on the castings. See Kajaria Iron Castings Pvt. Ltd. v. United States, 969 F.Supp. 90 (Ct. Int'l Trade 1997) ("Kajaria II "); Kajaria Iron Castings Pvt. Ltd. v. United States, 956 F.Supp. 1023 (CIT 1997) ("Kajaria I ").

The Producers allege that Commerce's methodology double counted certain subsidies and included income from merchandise not covered by the countervailing duty order in calculating the net subsidy. They also allege that Commerce's methodology in calculating the country-wide countervailing duty rate was erroneous because it included producers with significantly different higher subsidy rates and rates based on the best information available ("BIA"). Because Commerce's methodology did double count subsidies and did include income from merchandise not covered by the countervailing duty order in determining the net subsidy, we reverse and remand for further proceedings. However, we affirm Commerce's methodology for calculating the country-wide countervailing duty rate.

BACKGROUND

I.

The countervailing duty laws impose additional duties on merchandise that is imported or sold or likely to be sold for importation, into the United States when the manufacture, production, or exportation of the merchandise is directly or indirectly subsidized. See 19 U.S.C. §§ 1303(a), 1671(a) (1988). ¹ These additional duties, called "countervailing" duties, are levied on subsidized imports to offset the unfair competitive advantages created by the foreign subsidies. See Wolff Shoe Co. v. United States, 141 F.3d 1116, 1117 (Fed.Cir.1998). The quantum of the countervailing duties imposed upon such merchandise is equal to the amount of the net subsidy. See 19 U.S.C. § 1671(a); see also 19 U.S.C. §§ 1677(6) (defining "net subsidy"), 1677(5) (defining "subsidy").

Once affirmative determinations of subsidization and material injury or threatened material injury to a domestic industry have been made, see 19 U.S.C. §§ 1671(a), 1671d(b), 1671e(a), Commerce issues a countervailing duty order that directs customs officials to assess a countervailing duty "equal to the amount of the net subsidy determined or estimated to exist." See 19 U.S.C. § 1671e(a)(1). That countervailing duty rate presumptively applies to all merchandise within the scope of the investigation. See 19 U.S.C. § 1671e(a)(2). Commerce annually reviews countervailing duty orders if properly requested to do so. See 19 U.S.C. § 1675(a)(1)(A); 19 C.F.R. § 355.22 (1992).

II.

A.

In 1980, Commerce issued a countervailing duty order covering "certain iron-metal castings [from India] consisting of manhole covers and frames, clean-out covers and frames, and catch basin grates and frames." ² Certain Iron Metal Castings From India: Countervailing Duty Order, 45 Fed.Reg. 68,650 (Oct. 16, 1980). On October 27, 1992, the Municipal Castings Fair Trade Council and individually-named members ("petitioners") requested an administrative review of the 1980 order pursuant to 19 U.S.C. § 1675(a)(1)(A) and 19 C.F.R. § 355.22(a). See Certain Iron-Metal Castings From India: Preliminary Results of Countervailing Duty Administrative Review, 60 Fed.Reg. 4596 (Jan. 24, 1995) ("Preliminary Results "). On November 27, 1992, Commerce initiated review for the period January 1 through December 31, 1991, involving fourteen producers/exporters ("producers") and twelve Indian programs. See Initiation of Antidumping and Countervailing Duty Administrative Reviews, 57 Fed.Reg. 56,318 (Nov. 27, 1992); Preliminary Results, 60 Fed.Reg. at 4596.

B.

On January 24, 1995, Commerce issued its preliminary results, in which it determined the country-wide net subsidy rate with respect to the iron-metal castings at issue to be 5.54 percent ad valorem for all manufacturers and exporters, except for firms which had received significantly different aggregate benefits and were assigned individual net subsidy rates. See Preliminary Results, 60 Fed.Reg. at 4596. Three firms were assigned significantly different net subsidy rates: (1) Dinesh (a net subsidy rate of zero), (2) Super Castings (India) Pvt. Ltd. ("Super Castings") (a net subsidy rate of 41.75 percent), and (3) Kajaria (a net subsidy rate of 16.14 percent). See id. at 4599. Commerce explained its calculation methodology as follows:

Pursuant to Ceramica Regiomontana, S.A. v. United States, 853 F.Supp. 431 (CIT 1994), Commerce is required to calculate a country-wide [countervailing duty] rate, i.e., the all-other rate, by "weight averaging the benefits received by all companies by their proportion of exports to the United States, inclusive of zero rate firms and de minimis firms." Therefore, we first calculated a subsidy rate for each company subject to the administrative review. We then weight-averaged the rate received by each company using as the weight its share of total Indian exports to the United States of subject merchandise. We then summed the individual companies' weight-averaged rates to determine the subsidy rate from all programs benefitting exports of subject merchandise to the United States.

Since the country-wide rate calculated using this methodology was above de minimis, as defined by 19 CFR 355.7 (1993), we proceeded to the next step and examined the net subsidy rate calculated for each company to determine whether individual company rates differed significantly from the weighted-average country-wide rate, pursuant to 19 CFR 355.22(d)(3). Three companies ... received significantly different net subsidy rates during the review.... These companies are treated separately for assessment and cash deposit purposes. All other companies are assigned the country-wide rate.

Id. at 4596.

In determining the subsidies received by each producer, Commerce found that the producers had received countervailable benefits under section 80HHC of India's Income Tax Act ("section 80HHC"). See id. at 4597. Pursuant to this provision, the government of India "allows exporters to deduct profits derived from the export of goods and merchandise from taxable income." Id. Commerce had determined in prior administrative reviews that the program provided a countervailable subsidy because the "receipt of benefits under this program [was] contingent upon export performance." Id. Commerce determined in this review that no new information altered its prior determination. See id. Commerce calculated the countervailable subsidy attributable to section 80HHC by subtracting the total amount of income tax a producer actually paid from the amount of income tax the producer would have paid absent the section 80HHC deduction. See id. at 4598.

Commerce also determined that the producers had received over-rebates under India's Cash Compensatory Support ("CCS") Program. ³ See id. "The CCS [P]rogram...