RSI (India) Pvt., Ltd. v. US

• Decision Date: 27 April 1988
• Docket Number: Court No. 87-01-00086.
• Citation: 687 F. Supp. 605
• Parties: RSI (INDIA) PVT., LTD., et al., Plaintiffs, v. UNITED STATES, Defendant, and Pinkerton Foundry, Inc., et al., Defendant-Intervenors.
• Court: U.S. Court of International Trade

687 F. Supp. 605

RSI (INDIA) PVT., LTD., et al., Plaintiffs, v. UNITED STATES, Defendant, and Pinkerton Foundry, Inc., et al., Defendant-Intervenors.

Court No. 87-01-00086.

United States Court of International Trade.

April 27, 1988.

Brownstein, Zeidman & Schomer, Irwin P. Altschuler, Denise T. DePersio, David R. Amerine, and Ronald M. Wisla, and Kaplan, Russin & Vecchi, Dennis James, Jr. and Kathleen Patterson, Washington, D.C., for plaintiffs.

John R. Bolton, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, U.S. Dept. of Justice, Elizabeth C. Seastrum, U.S. Dept. of Commerce, Washington, D.C., Mark J. Sadoff, for defendant.

Collier, Shannon, Rill & Scott, Paul C. Rosenthal, Carol A. Mitchell and Robin H. Beeckman, Washington, D.C., for defendant-intervenors.

MEMORANDUM OPINION AND ORDER

DiCARLO, Judge:

Indian exporters and United States importers of iron-metal construction castings from India (plaintiffs) move under Rule 56.1 of the Rules of this Court for judgment upon the record that the International Trade Administration of the United States Department of Commerce (Commerce) compiled in a countervailing duty administrative review. This Court has jurisdiction pursuant to 19 U.S.C. § 1516a(a)(2)(B)(iii) (Supp. IV 1986) and 28 U.S.C. § 1581(c) (1982). The Court holds that Commerce's determination to countervail the entire benefit conferred by pig iron payments is supported by substantial evidence and is according to law, but that Commerce's calculation of the net benefit received by RSI (India) Pvt., Ltd. is not supported by substantial evidence on the record. The Court also holds that Commerce's methodology in constructing an interest rate benchmark for packing credit loans is reasonable and is according to law.

BACKGROUND

Commerce determined in 1980 that the government of India was providing subsidies to Indian producers of iron-metal castings for export to the United States. Countervailing Duties—Certain Iron-Metal Castings From India; Final Countervailing Duty Determination, 45 Fed. Reg. 55,502 (Aug. 20, 1980). After the United States International Trade Commission determined that a United States industry was materially injured by reason of the subsidized imports, Certain Iron-Metal Castings From India, 45 Fed.Reg. 66,915 (Oct. 8, 1980), Commerce imposed countervailing duties on the imported products, which included manhole covers and frames, clean-out covers and frames, and catch basin grates and frames. Certain Iron-Metal Castings From India; Countervailing Duty Order, 45 Fed.Reg. 68,650 (Oct. 16, 1980).

At the request of the domestic producers of iron construction castings, Commerce initiated a countervailing duty administrative review of merchandise imported during 1984. R. 11-12; Initiation of Antidumping and Countervailing Duty Administrative Reviews, 50 Fed.Reg. 46,689 (Nov. 12, 1985). After verifying questionnaire responses, holding a public hearing, and receiving comments from interested parties, Commerce determined the net subsidy from all the programs reviewed to be 8.08% ad valorem. Certain Iron-Metal Construction Castings From India; Final Results of Countervailing Duty Administrative Review, 51 Fed. 45,788 (Dec. 22, 1986).

Plaintiffs filed an action in this Court to challenge Commerce's final results in its administrative review as being unsupported by substantial evidence on the agency record or otherwise not in accordance with law. One plaintiff was dismissed from the action because it was found not to be an interested party. RSI (India) Pvt., Ltd. v. United States, 12 CIT ___, 678 F.Supp. 304 (1988).

SCOPE OF REVIEW

The Court will sustain Commerce's determinations in a review conducted pursuant to section 751 of the Tariff Act of 1930, as added by section 101 of the Trade Agreements Act of 1979, as amended, 19 U.S.C. § 1675 (1982 & Supp. IV 1986), if the findings are supported by substantial evidence on the record and are not contrary to law. 19 U.S.C. § 1516a(b)(1)(B) (1982). Under the substantial evidence standard for review of agency determinations, the Court will affirm the agency's findings if they are supported in the record by such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. Federal Trade Comm'n v. Indiana Fed'n of Dentists, 476 U.S. 447, 454, 106 S.Ct. 2009, 2015, 90 L.Ed.2d 445 (1986); Atlantic Sugar, Ltd. v. United States, 2 Fed.Cir. (T) 130, 136, 744 F.2d 1556, 1562 (1984). Substantial evidence is something less than the weight of the evidence, and the possibility of drawing two inconsistent conclusions from the evidence does not prevent an agency's finding from being supported by substantial evidence. ICC Indus. v. United States, 812 F.2d 694, 699 (Fed.Cir.1987); Matsushita Elec. Indus. v. United States, 3 Fed.Cir. (T) 44, 51, 750 F.2d 927, 933 (1984).

DISCUSSION

Plaintiffs' challenges frame three questions for the Court:

1. Did Commerce act reasonably and in accordance with law in countervailing pig iron payments made under a formula which grossly overstated actual consumption of pig iron?

2. Does the record contain substantial evidence to support Commerce's calculations of the net benefit of payments to RSI (India) Pvt., Ltd.?

3. Did Commerce use a reasonable methodology in constructing an interest rate benchmark for pre-shipment export loans?

I. International Price Reimbursement Scheme

IPRS is a program which the government of India originally established for exporters of products with steel inputs. R. 382-83. See Sawhill Tubular Div. Cyclops Corp. v. United States, 11 CIT ___, 666 F.Supp. 1550, 1551 (1987). When domestic pig iron prices increased substantially during 1983, the Indian government extended IPRS to include products manufactured with pig iron. R. 383; 51 Fed.Reg. at 35,677. By rebating to castings exporters the difference between the higher domestic and the government-determined lower "world price" of pig iron, a professed purpose of the program is to encourage Indian manufacturers to use Indian pig iron in producing castings. Conf.R. 111; 51 Fed.Reg. at 35,677.

IPRS is administered by the Joint Plant Committee, a body composed of India's main pig iron and steel producers and chaired by an Indian government official. R. 382-83; 51 Fed.Reg. at 45,789. The Joint Plant Committee regulates the price of Indian pig iron and determines the amount of the IPRS payments. 51 Fed. Reg. at 45,789. Payments are made from the Engineering Goods Export Assistance Fund, which is financed by a levy included in domestic pig iron prices. R. 382. The Joint Plant Committee calculates the amount of IPRS payments based upon the differential between domestic and "world" pig iron prices, multiplied by the amount of castings exported and a standard factor ostensibly representing the amount of pig iron consumed. R. 383-87; Fed.Reg. at 45,789. When Commerce verified the IPRS program, however, it found significant discrepancies between theory and practice.

First, Commerce found that the standard factor for pig iron consumption in the formula used to calculate IPRS payments grossly overstated the actual amounts of pig iron consumed in producing castings. Between January 1 and August 22, 1984, the standard factor for pig iron allocation was equal to 70% by weight of the iron content of exported castings, meaning that the rebate was calculated as if pig iron constituted 70% of the total volume of pig iron and scrap consumed in the manufacture of castings. R. 386-87; 51 Fed.Reg. at 45,789. During the latter part of 1984, the standard factor for pig iron allocation was raised to 110%. R. 386; Conf.R. 162; 51 Fed.Reg. at 45,789. An extra ten percent is used as a constant to represent the percentage of melting loss of pig iron in producing castings. R. 386. Commerce verified, however, that the Indian manufacturers' actual consumption rates were at confidential amounts, significantly lower than either the 70% or 110% standard factors. Conf.R. 162, 175-76; 51 Fed.Reg. at 45,789.

Second, Commerce found there was no true "world price" or "international price" for pig iron, as there is for steel quoted on the Japan and London Metals exchanges. R. 385. Commerce found instead that the "world price" used to calculate IPRS payments is actually the last contract purchase by the Steel Authority of India (SAIL), an Indian government agency which purchases large quantities of pig iron to cover differences between supply and demand for domestic pig iron. R. 384-85; 51 Fed.Reg. at 45,789. SAIL floats global tenders, receives quotations from Brazil, Japan, and Pakistan, and contracts with the lowest bidder. R. 385. During 1984, the "world price" of pig iron was based SAIL's August, 1983 contract for pig iron from India's neighbor, Pakistan. R. 385.

Based upon the absence of a genuine relationship between IPRS payments and actual consumption of pig iron, and with no reliable world price for pig iron, Commerce stated that it could not determine whether the IPRS was not distorting market forces, functioned as a duty drawback scheme, or was consistent with item (d) of the Illustrative List of Export Subsidies annexed to the GATT Subsidies Code. Commerce thus found the IPRS payments to be a direct export subsidy and countervailable in full. 51 Fed.Reg. at 45,789.

The Indian exporters assert that to the extent that IPRS payments rebate only the difference between the price of pig iron as it is available in India and the price commercially available on world markets, the payments do not constitute an export subsidy and should not be countervailed as a matter of law under paragraph (d) of the Illustrative List of Export Subsidies, annexed to the Agreement on Interpretation and Application of Articles VI, XVI, and XXIII of the General Agreement on Tariffs and Trade, Apr. 12, 1979, 31 U.S.T. 513, 546, T.I.A.S. 9619, 55 U.N.T.S. 194 (the GATT Subsidies Code), which characterizes as a subsidy:

The delivery by governments or

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