                          Slip Op. 04 - 54

            UNITED STATES COURT OF INTERNATIONAL TRADE

- - - - - - - - - - - - - - - - - - x

KISWOK INDUSTRIES PVT. LTD. and      :
CALCUTTA FERROUS LTD.,
                                     :
                          Plaintiffs,
                                      :   Consolidated
                 v.                       Court No. 00-06-00280
                                     :
UNITED STATES,
                                    :
                         Defendant.
- - - - - - - - - - - - - - - - - - x

                         Memorandum & Order


[Plaintiffs' motion for judgment on the agency
 record granted in part and denied in part; re-
 manded to International Trade Administration.]


                                          Decided:   May 20, 2004


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

     Peter D. Keisler, Assistant Attorney General; David M. Cohen,
Director, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice (Lucius B. Lau); and Office of Chief Counsel
for Import Administration, U.S. Department of Commerce (Robert E.
Nielsen), of counsel, for the defendant.



           AQUILINO, Judge:   This case commenced pursuant to 19

U.S.C. §§ 1516a(a)(2)(A)(i)(I) and (B)(iii) and 28 U.S.C. §§ 1581-

(c) and   2631(c) consolidates complaints filed by Calcutta Ferrous

Ltd., CIT No. 00-06-00277, and by Kiswok Industries Pvt. Ltd., CIT

No. 00-06-00280, each praying for relief from Certain Iron-Metal

Castings from India: Final Results of Countervailing Duty Adminis-

trative Review, 65 Fed.Reg. 31,515 (May 18, 2000), promulgated by
Consolidated
Court No. 00-06-00280                                      Page 2


the International Trade Administration, U.S. Department of Commerce

("ITA").


           Following the grant of plaintiffs' motion for consoli-

dation, counsel interposed a consent motion to stay this case

pending resolution of a related issue still sub judice in Crescent

Foundry Co. v. United States, CIT No. 95-09-01239, and Kajaria Iron
Castings Pvt. Ltd. v. United States, CIT No. 95-09-01240, namely,

     how income received on merchandise not subject to the
     relevant countervailing duty order should be treated when
     calculating benefits from an Indian income tax exemption
     program.


Those matter(s) thereafter finally rested.   See Kajaria Iron Cast-

ings Pvt. Ltd. v. United States, 21 CIT 99, 956 F.Supp. 1023, re-

mand results aff'd, 21 CIT 700, 969 F.Supp. 90 (1997), aff'd in

part, rev'd in part and remanded, 156 F.3d 1163 (Fed.Cir. 1998),

remanded, 23 CIT 13 (1999), second remand results remanded, 24 CIT

134, third remand results remanded, 24 CIT 1274 (2000), fourth

remand results aff'd, 25 CIT     , Slip Op. 01-5 (Jan. 24, 2001);

and Crescent Foundry Co. v. United States, 20 CIT 1469, 951 F.Supp.

252 (1996), remand results aff'd, 21 CIT 696, 969 F.Supp. 1341

(1997), aff'd in part, rev'd in part, 168 F.3d 1322 (Fed.Cir.

1998), remanded, 23 CIT 12 (1999), second remand results remanded,

24 CIT 141, third remand results remanded, 24 CIT 1278 (2000),

fourth remand results aff'd, 25 CIT     , Slip Op. 01-6 (Jan. 24,

2001). By its terms, the parties' stay thus expiring, the plain-
Consolidated
Court No. 00-06-00280                                        Page 3


tiffs have filed a motion for judgment upon the ITA record pursuant

to USCIT Rule 56.2.

                                I

          All of this litigation, of course, has grown out of

Certain Iron Metal Castings From India: Countervailing Duty Order,

45 Fed.Reg. 68,650 (Oct. 16, 1980).   And, as indicated, this par-

ticular consolidated case focuses on the final results of an ITA
review of imports subject to that order for the calendar year 1997.

Plaintiffs' motion faults those results as follows:


     A.   ITA Did Not Use the Correct Benefit Received
          by Calcutta Ferrous to Determine the Counter-
          vailable   Subsidy   from  India's   Passbook
          Scheme[.]

     B.   Countervailing Preferential Export Financing
          as Well as Income Tax Deductions under Tax
          Code Section 80 HHC Double-Counts the Subsi-
          dies from the Financing Programs[.]

     C.   ITA Failed to Properly Account for Penal In-
          terest Paid by Calcutta Ferrous on Preferen-
          tial Export Loans[.]

     D.   Since Kiswok Was Able to Break down Revenues
          Between Subject and Non-Subject Castings, ITA
          Should Have Calculated the Section 80 HHC
          Subsidy Based on Tax Savings Relating to
          Subject Castings Only[.]

Plaintiffs' Memorandum, p. i (capitalization in original).


                                A

          The ITA's administrative review herein found that the

government of India's "Passbook Scheme" remained in effect for the

first three months of the year at issue.   See Certain Iron-Metal
Consolidated
Court No. 00-06-00280                                         Page 4


Castings From India:    Preliminary Results and Partial Recission of

Countervailing Duty Administrative Review, 64 Fed.Reg. 61,592,

61,596 (Nov. 12, 1999).    For that time frame, the scheme

      provided exporters with credits that could be used to pay
      the countervailing and custom duties levied on imported
      products. [It] was available to certain categories of
      exporters, i.e., those manufacturer and merchant export-
      ers which were granted the status of export house,
      trading house, star trading house, or super star trading
      house. Upon the export of finished goods, which were
      produced with indigenous raw materials, and not imported
      materials, the exporter was eligible to claim credits
      which could be used to pay customs duties on subsequent
      imports. The . . . scheme was only applicable for those
      exported products for which standard input/output norms
      had been fixed. The standard input/output norms set out
      quantities of imported raw materials needed to produce
      one unit of finished output. The credit in the passbook
      . . . was calculated on the basis of input/output norms
      for the deemed input content of the exported product.
      The Indian Customs Authority (ICA) determined the basic
      customs duty payable against the input as if it had been
      imported and not sourced from the domestic market. A
      company's passbook account was then credited for the
      amount equivalent to the basic customs duty payable on
      such deemed imports. The company could then utilize the
      credits in its passbook account to pay the countervailing
      and customs duty levied on imported goods.       Any good
      which was not included in the Negative List of Imports
      could be imported under the Passbook Scheme. Payment of
      the duties was made through a debit entry in the com-
      pany's passbook account by the ICA.

Id.   The agency verified that it was not mandatory for the

      passbook holder to consume the goods, imported with
      passbook credits, in the production of exported products.
      There was no relation between the imported goods and the
      production of the exporter and no relation between the
      standard input/output norms of the export product and the
      goods being imported with passbook credits. The norms
      were simply used to calculate the credits. A company
      could not transfer or sell passbook credits received, but
      the goods imported with passbook credits could be
      transferred or sold in the domestic market.
Id.
Consolidated
Court No. 00-06-00280                                                   Page 5

            The record indicates that Calcutta Ferrous Ltd. ("CFL"),

a plaintiff at bar, availed itself of this program and also that

the ITA determined the scheme was an export subsidy "[b]ecause

receipt    of   the    passbook     credits   was   contingent   upon   export

performance"1 and countervailable because

     a financial contribution was provided by the government
     in the form of customs duty revenue forgone[, and t]he
     amount of customs duty which should have been paid by the
     company to import the goods constitute[d] the benefit
     . . ..

Id. at 61,596-97.


          To calculate the benefit conferred by this program,
     we summed the amount of passbook credits each respondent
     company used during the POR to pay the customs duty on
     goods imported.   We then divided the benefit by each
     company's f.o.b. value of total exports for 1997.2


This approach resulted in a rate of 7.27 percent for CFL3 that is

contested by this plaintiff in several ways.


                                       (1)

            CFL contends that the ITA inappropriately relied on 19

C.F.R. §351.519(a)(3)(ii), adopted November 25, 1998, and which

provided    with      regard   to    identification    and   measurement    of

countervailable subsidies:


     1
         64 Fed.Reg. at 61,597.
     2
       Id. The "we" quoted here and hereinafter refers to the ITA
and "POR" to the period of review.
     3
         See ibid.
Consolidated
Court No. 00-06-00280                                       Page 6

           Exemption of import charges.     If the Secretary
     determines that the exemption of import charges upon
     export confers a benefit, the Secretary normally will
     consider the amount of the benefit to be the import
     charges that otherwise would have been paid on the inputs
     not consumed in the production of the exported product,
     making normal allowance for waste, and the amount of
     charges other than import charges covered by the exemp-
     tion.


          Implicit in plaintiff's position are two propositions,

namely, that the ITA did in fact rely on this provision, and that

the reliance was unfounded.   But CFL fails to show how and where on

the record the agency so relied.    Instead, it states in conclusory

fashion that the "ITA initially based its reason for using the

unpaid duties as the benefit on 19 C.F.R. §351.519(a)(3)(ii)".

Plaintiffs' Memorandum, p. 7.      Later, it tempers this assertion

with "apparently".   See id. at 11.   Whatever the choice of words,

the record shows that the ITA plainly and repeatedly indicated that

it did not rely on section 351.519(a)(3)(ii), viz:


     . . . All citations to the Department's regulations
     reference 19 CFR part 351 (1998), unless otherwise
     indicated. Because the request for this administrative
     review was filed before January 1, 1999, the Department's
     substantive countervailing regulations, which were
     published in the Federal Register on November 25, 1998
     (see CVD Regulations, 63 FR 65348), do not govern this
     review.

65 Fed.Reg. at 31,515-16 (bold face in original);


     . . . [U]nless otherwise indicated, all citations to the
     Department's regulations are to the regulations as
     codified at 19 CFR Part 351 (1998).

64 Fed.Reg. at 61,593;
Consolidated
Court No. 00-06-00280                                               Page 7

       . . . We note that the Department's substantive CVD
       Regulations cited by respondents are not controlling in
       this review because the request for the review was
       received prior to the effective date of the new regula-
       tions.

ITA Issues and Decision Memorandum ("DecMemo"), PubDoc 94, p. 16,

n. 27.

                                  (2)

            CFL contends that the ITA inappropriately applied 19

U.S.C. §1677(5)(D)(ii), which defined "financial contribution" to

mean   a   governmental   authority's    "foregoing   or   not   collecting

revenue that is otherwise due, such as granting tax credits or

deductions from taxable income".        The gist of plaintiff's argument

is that the agency failed to find both governmental pecuniary

assistance and a benefit as required by 19 U.S.C. §§ 1677(5)(D) and

(E). Cf. Delverde, SRL v. United States, 202 F.3d 1360, 1366 (Fed.

Cir. 2000)("the statute clearly requires that in order to find that

a person received a subsidy, Commerce [must] determine that that

person received from a government both [pecuniary assistance] and

benefit").    In particular, CFL insists that the ITA did not make a

determination under section 1677(5)(E).         In support thereof, it

directs the court's attention to the ITA's lack of reference to

that section in its decision memorandum, page 17:


       . . . [T]he respondents are incorrect on the valuation of
       the benefit. It is irrelevant whether the respondents
       make a profit on the sale of the imported good.       The
       financial contribution and benefit provided to the
       respondents by the government under this program is the
       amount of duties that otherwise would have been paid on
       these imports. See section [1677](5)(D)(ii) of the Act.
Consolidated
Court No. 00-06-00280                                       Page 8

       Therefore, we calculated the benefit under this program
       based upon the amount of import duties that would have
       been paid by the respondents absent the use of credits
       provided under the Passbook Scheme.

The plaintiff claims that, because only that subsection (5)(D)(ii)

is cited, the agency relied on it alone and could not have properly

derived any benefit conferred.   See Plaintiff's Memorandum, p. 12.


            In a case such as this, the court must consider the

entire record within the meaning of 19 U.S.C. §1516a(b)(2).      E.g.,

Ausimont USA, Inc. v. United States, 19 CIT 151, 157, 882 F.Supp.

1087, 1092 (1995), citing Universal Camera Corp. v. NLRB, 340 U.S.

474, 488 (1951).   Having now done so, the inference the court draws

is that the ITA properly relied on both subsections (5)(D) and (5)

(E) in deriving the benefit conferred.     Its Preliminary Results

state that the amount of customs which should have been paid by the

company to import the goods constitutes the benefit under (5)(E) of

the Act. 64 Fed.Reg at 61,596-97.    At the beginning, the decision

memorandum assures that there were no changes in methodology from

that used in the Preliminary Results.    The agency's Final Results

are to the same effect.   See 65 Fed.Reg. at 31,515.   To the extent

the record induces a conflicting inference, "the court will uphold

a decision of less-than-ideal clarity if the agency's path may be

reasonably discerned". Neenah Foundry Co. v. United States, 25 CIT

   ,      , 142 F.Supp.2d 1008, 1020 (2001), citing Colorado Inter-

state Gas Co. v. FPC, 324 U.S. 581, 595 (1945).   In sum, the court

cannot find that the ITA's approach was not in accordance with law.
Consolidated
Court No. 00-06-00280                                               Page 9

                                   (3)

           CFL claims its benefit was the profit earned on the goods

it imported and not the amount of duty foregone by the Indian

government.      Plaintiffs' Memorandum, p. 11.     The court can concur

that the company benefitted from that profit, but this is not to

say that it therefore disagrees with the ITA's conclusion. Indeed,

CFL may have benefitted twice under the scheme, first via the

exemption from duties and then the profit earned on the goods

subject to the exemption.


           The question the court must decide is whether the ITA's

approach   was    permissible.    The    court   concludes   that   it   was

consistent with the statute, subparagraph 1677(5)(B) of which

states:

          A subsidy is described in this paragraph in the case
     in which an authority - -

                   (i) provides a financial contribution,

                (ii) provides any form of income or price
           support within the meaning of Article XVI of
           the GATT 1994, or

                (iii) makes a payment to a funding mecha-
           nism to provide a financial contribution, or
           entrusts or directs a private entity to make a
           financial contribution, if providing the con-
           tribution would normally be vested in the
           government and the practice does not differ in
           substance from practices normally followed by
           governments,

     to a person and a benefit is thereby conferred. For pur-
     poses of this paragraph . . . , the term "authority"
     means a government of a country or any public entity
     within the territory of the country.
Consolidated
Court No. 00-06-00280                                        Page 10

Furthermore, a benefit "shall normally be treated as conferred

where there is a benefit to the recipient".4      Whatever twists of

reasoning this language may permit, they do not negate the agency's

determination.


            CFL's preferred approach on the other hand, the benefit

conferred should be the profit earned, would nullify the intent of

the statute in all those instances where recipients of home-govern-

ment, countervailable benefits still do not turn a profit.         Of

course, that intent, unchanged from the law's enactment, has been

to compensate for the unfair opportunity to compete that receipt of

such benefits entails, not what actually is made of such opportun-

ity:

       . . . This purpose is relatively clear from the face of
       the statute and is confirmed by the congressional
       debates: The countervailing duty was intended to offset
       the unfair competitive advantage that foreign producers
       would otherwise enjoy from export subsidies paid by their
       governments.

Zenith Radio Corp. v. United States, 437 U.S. 443, 455-56 (1978),

citing to remarks in the Congressional Record by three Senators

with regard to the Tariff Act of 1897; Wolff Shoe Co. v. United

States, 141 F.3d 1116, 1117 (Fed.Cir. 1998)(countervailing duties

"are levied on subsidized imports to offset the unfair competitive

advantages created by foreign subsidies").

       4
       19 U.S.C. §1677(5)(E). Apparently, the word "normally" was
added "only to indicate that in the case of certain types of
subsidy programs . . . [none of which are involved here] the use of
the benefit-to-the-recipient standard may not be appropriate."
H.R. Rep. 103-826(I), p. 109 (1994).
Consolidated
Court No. 00-06-00280                                      Page 11

                                 B

          According to the ITA's Preliminary Results herein, the

Reserve Bank of India ("RBI"),

     through commercial banks, provides short-term pre-ship-
     ment financing, or "packing credits," to exporters. Upon
     presentation of a confirmed export order or letter of
     credit, companies may receive pre-shipment loans for
     working capital purposes, i.e., for the purchase of raw
     materials and for packing, warehousing, 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.   Companies that have pre-shipment credit
     lines typically pay interest on a quarterly basis on the
     outstanding balance of the account at the end of each
     period. In general, packing credits are granted for a
     period of up to 180 days.

          Commercial banks extending export credit to Indian
     companies must, by law, charge interest on this credit at
     rates determined by the RBI.      The rate of interest
     charged on pre-shipment export loans up to 180 days was
     13.0 percent for the period January 1, 1997 through
     October 21, 1997, and 12.0 percent for the period October
     22, 1997 through December 31, 1997. For pre-shipment
     loans not repaid within 180 days, the banks charged
     interest at the following rates for the number of days
     the loans were overdue: 15.0 percent for the period
     January 1, 1997 through October 21, 1997, and 14.0
     percent for the period October 22, 1997 through December
     31, 1997. An exporter would lose the concessional in-
     terest rate if the export loan was not repaid within 270
     days. If that occurred, the banks were able to assess
     interest at a non-concessional interest rate above the
     ceiling rate of interest set by the RBI.


64 Fed.Reg. at 61,593.   The agency also found that post-shipment

export financing

     consists of loans in the form of trade bill discounting
     or advances by commercial banks. 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. Post-shipment finance, therefore, is a working
Consolidated
Court No. 00-06-00280                                       Page 12

     capital finance or sales finance against receivables.
     The interest amount owed is deducted from the total
     amount of the bill at the time of discounting by the
     bank. The exporter's account is then credited for the
     rupee equivalent of the net amount.

          In general, post-shipment loans are granted for a
     period of up to 90 days. The following interest rates
     were charged on post-shipment loans up to 90 days: 13.0
     percent for the period January 1, 1997 through June 23,
     1997, 12.0 percent for the period June 24, 1997 through
     October 21, 1997, and 11.0 percent for the period October
     22, 1997 through December 31, 1997.

          For loans not repaid within the negotiated number of
     days (90 days maximum), banks assessed the following
     rates of interest for the number of days the loans were
     overdue, up to six months from the date of shipment: 15.0
     percent for the period January 1, 1997 through June 23,
     1997, 14.0 percent for the period June 24, 1997 through
     October 21, 1997, and 13.0 percent for the period October
     22, 1997 through December 31, 1997. If a post-shipment
     loan was not repaid within six months of the date of
     shipment, an exporter would lose the concessional in-
     terest rate on the financing, and interest would be
     charged at a commercial rate determined by the banks.


Id. at 61,594.


           CFL availed itself of such financing, which the ITA

determined to be an export subsidy because it was contingent upon

export performance and also countervailable because the interest

rates charged were less than what the company otherwise would have

had to pay on comparable short-term loans.   See id.; 65 Fed.Reg. at

31,517.   To calculate the benefit, the agency

     compared the actual interest paid on the loans with the
     amount of interest that would have been paid at the
     benchmark interest rate.     Where the benchmark rate
     exceeded the program rates, the difference between those
     amounts is the benefit.
Consolidated
Court No. 00-06-00280                                       Page 13

          If the . . . loans were received solely to finance
     exports of subject merchandise to the United States, we
     divided the benefit derived from those loans by exports
     of subject merchandise to the United States. For all
     other . . . loans, we divided the benefit by total ex-
     ports to all destinations.

64 Fed.Reg. at 61,594.


          CFL's complaint now is that the agency "double-counted"

the export finance subsidies.   Its reliance on Kajaria, supra, in

this regard, however, is misplaced.    Countervailing a subsidy and

countervailing the non-taxation of that subsidy is not countenanced

by Kajaria; countervailing a subsidy and countervailing the non-

taxation of a different subsidy that incidentally includes a

partial benefit via the other is not impermissible. The facts at

bar constitute an instance of the latter, not the former, and

therefore do not run afoul of that case.


          The issue in Kajaria was whether the ITA had double-

counted a subsidy by countervailing both a section 80HHC deduction

on export profits and some over-rebates resulting from India's Cash

Compensatory Support ("CCS") Program.     The court held in the af-

firmative, 156 F.3d at 1173-74.   The over-rebates were the result

of the agency's finding that certain rebates claimed and received

under the CCS program were improper.      That program rebated both

indirect taxes and import duties imposed on products physically

incorporated into an export product.    The ITA determined that port

and harbor taxes were not the type of taxes and duties falling

within the rebate exemption under the CCS; instead, they were
Consolidated
Court No. 00-06-00280                                             Page 14

service charges.   The rebate of these non-exempt service charges

was   countervailable   as   a   subsidy.   See   156    F.3d.   at   1168.

Concurrently, section 80HHC deductions that included the over-

rebates were countervailed by the agency.     See id. at 1167.        Those

deductions included the over-rebates because the rebates were

exempt from taxation under that tax section.            See id. at 1172,

1174-75.

           The plaintiffs in Kajaria argued that countervailing both

the CCS over-rebates and the section 80HHC deductions that were

based on them double-counted the over-rebates.            The court con-

curred:

      . . . Countervailing the portion of the section 80HHC
      deduction attributable to the CCS over-rebates counter-
      vails the tax [Kajaria et al.] would have paid on the CCS
      over-rebates as a result of their inclusion in taxable
      income. In effect, Commerce fully countervailed the CCS
      over-rebates and the tax that would have been paid on the
      over-rebates. However, [Kajaria et al.] only received a
      benefit equal to the full amount of the CCS over-rebates,
      which Commerce fully countervailed. Commerce overstated
      the subsidies received by double-counting the CCS over-
      rebates.


Id. at 1174-75.


           Here, however, the ITA did not attempt to countervail

more subsidies than were received. It countervailed interest saved

under the export financing program, and it countervailed taxes

saved under the section 80HHC deduction for export profits, two

distinct subsidies, each of which benefitted CFL. That they can be

seen to partially overlap via accounting principles is not enough
Consolidated
Court No. 00-06-00280                                      Page 15

to render the agency's approach impermissible. This is because the

ITA is not required to take into account the secondary tax effect

of subsidies, despite the net benefit's being the amount of the

subsidy minus the taxes paid on it:


     . . . Mindful of the burden on Commerce, our decision
     does not mean that in every administrative review or
     investigation Commerce must trace the tax treatment of
     subsidies to determine if two independent subsidies
     partially include the same benefit. However, Commerce
     must avoid double-counting subsidies, i.e., countervail-
     ing both the full amount of a subsidy and the nontaxation
     of that subsidy . . ..

Id. at 1175.

                                 C

          CFL alleges that the ITA failed to account for the

"penal" interest it paid in determining the benefit actually

derived from the preferential financing:


          Where Calcutta Ferrous paid interest on the same
     loan at rates both less than and greater than the
     benchmark rate, all the interest -- including the penal
     interest paid at rates greater than the benchmark rate --
     must be taken into account to determine the actual
     benefit to the company from the loans. The methodology
     used by ITA, however, improperly eliminates the overdue
     penal interest from the calculation of the benefit from
     the export loans and uses only the preferential interest
     rates.

Plaintiff's Memorandum, p. 21.   The sum and substance of defend-

ant's response to this complaint has been as follows:


     . . . As we explained in the preliminary results, ex-
     porters discount their export bills with Indian commer-
     cial banks to finance their operations. . . . By dis-
     counting an export bill, the company receives payment
     from the bank in the amount of the export bill, net of
Consolidated
Court No. 00-06-00280                                       Page 16

     interest charges. The loan is considered "paid" once the
     foreign currency proceeds from an export sale are
     received by the bank. If those proceeds are not paid
     within the negotiated period, then the loan is considered
     "overdue." For the overdue loan, the bank will charge
     the company interest on the original amount of the loan
     at a higher interest rate[;] however, the bank does not
     go back and levy the higher penalty interest on the
     original term of the loan. In essence, the overdue loan
     becomes a new loan with a new applicable interest rate.
     Because penalty interest does not apply to the period
     preceding the date the loan is considered overdue, we
     have not taken the penalty interest into account when
     calculating the subsidy provided on the original dis-
     counted loan.


DecMemo, p. 24.    See also Defendant's Memorandum, pp. 21-25.


          While that memorandum defends this position as being

supported by substantial evidence on the record and otherwise in

accordance with law within the meaning of 19 U.S.C. §1516a(b)(1)-

(B)(i), the defendant does admit that "Commerce has previously

taken penalty interest into account."    Id. at 22, citing Certain

Iron-Metal Castings From India; Amended Final Results of Counter-

vailing Duty Administrative Review, 62 Fed.Reg. 590 (Jan. 3, 1997).


     . . . Since that time, however, Commerce reconsidered its
     practice and concluded that adjusting for penalty
     interest did not conform to the requirements of the
     statute, particularly to the net countervailable subsidy,
     offset provision, 19 U.S.C. § 1677(6).


Id., citing Certain Iron-Metal Castings From India; Final Results

of Countervailing Duty Administrative Review, 62 Fed.Reg. 32,297

(June 13, 1997).    In that determination, the ITA recited section

1677(6) and proceeded to conclude that penalty interest under
Consolidated
Court No. 00-06-00280                                             Page 17

India's Post-Shipment Export Credit in Foreign Currency Program did

not   fall    within   that   statutory   section's   exclusive   list   of

allowable offsets.     See 62 Fed.Reg. at 32,305. This court concurs,

but it cannot agree that that offset section, on its face5, is

actually apposite.


             Indeed, the ITA's reasoning in this matter, quoted above,

makes no mention of that section.         Rather, its "essence" is that

"the overdue loan becomes a new loan with a new applicable interest

rate."     Nothing on the record, however, supports this thesis, nor

should any support be found, given that the loan(s) at issue con-

sisted of a sum certain of money receivable within a specified

period of time at a particular rate of interest or thereafter at a

greater rate.       Those were the elements of the borrowing, the


      5
          The full text of this provision is as follows:

           For the purpose of determining the net counter-
      vailable subsidy, the [ITA] may subtract from the gross
      countervailable subsidy the amount of --

               (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 counter-
             vailable 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.
Consolidated
Court No. 00-06-00280                                       Page 18

benefit of which is not necessarily conclusive upon the close of

that specified, initial period.       The duration of the loan, any

loan, cannot be disregarded.   It is a critical element of the ulti-

mate cost thereof.


                                  D

           The section 80HHC of India's Income Tax Act that has been

referred to hereinabove enabled exporters to deduct from taxable

income profits derived from the export of merchandise.   The record

shows that the plaintiffs availed themselves of this deduction,

which the ITA countervailed

     because it result[ed] in a financial contribution by the
     government in the form of tax revenue not collected which
     also constitute[d] the benefit.


64   Fed.Reg at 61,595.   Its Preliminary Results report in part

pertinent to this case:


           In its questionnaire responses, Kiswok Industries
     . . . stated that its profit rate on export sales of
     subject castings is lower than the profit rate the
     company realizes on the export sales of other castings.
     The company submitted audited derivations of its profit
     rate for exports of subject castings in 1997, and its
     profit rate for exports of other castings for the same
     year. The company then calculated that portion of the 80
     HHC tax deduction which was applicable to export profit
     earned on subject castings.

          In prior reviews of this order, the Department has
     found the section 80HHC tax deduction program to be an
     "untied" export subsidy program. The benefits provided
     under this program are not tied to the production or sale
     of a particular product or products. It is the Depart-
     ment's consistent and long-standing practice to attribute
     a benefit from an export subsidy that is not tied to a
     particular product or market to all products exported by
Consolidated
Court No. 00-06-00280                                      Page 19

     the company. . . . Therefore, to calculate the benefit
     Kiswok Industries received under the section 80HHC
     program, we have not made any adjustments to our standard
     allocation methodology.

          To calculate the benefit each company received under
     section 80HHC, we subtracted the total amount of income
     tax the company actually paid during the review period
     from the amount of tax the company otherwise would have
     paid had it not claimed a deduction under section 80HHC.
     We then divided this difference by the f.o.b. value of
     the company's total exports.


Id., citing Final Affirmative Countervailing Duty Determination:

Certain Pasta from Turkey, 61 Fed.Reg. 30,366 (June 14, 1996).


          In contesting this approach, the plaintiff Kiswok refers

to the opinion of the Court of Appeals for the Federal Circuit in

Kajaria, supra, to wit:


     . . . [W]hen the party under investigation provides
     documentation that allows Commerce to separate the
     portion of the tax deduction based on rebates related to
     non-subject merchandise from the remainder of a counter-
     vailable tax deduction, Commerce should not countervail
     the portion of the tax deduction subsidy tied to non-
     subject merchandise. Since the Producers provided such
     data, Commerce should eliminate the . . . rebates from
     the calculation of the subsidy provided by the section 80
     HHC deduction.

156 F.3d at 1176.       Whereupon, it argues that this reasoning

"applies with equal force to Kiswok's calculations in the case at

bar." Plaintiffs' Memorandum, p. 25. This court cannot concur, as

countervailing a subsidy tied to non-subject merchandise is dif-

ferent than countervailing profit on non-subject merchandise.
Consolidated
Court No. 00-06-00280                                                Page 20

           Kajaria et alia had challenged the ITA's decision to

countervail that portion of a section 80HHC deduction attributable

to IPRS rebates (reimbursements to exporters for the difference in

price   between    domestic   and   foreign    pig   iron)   on   non-subject

merchandise.      The agency reasoned that the deduction was an untied

export subsidy and, in accordance with its policy, allocated the

benefit of the subsidy over Kajaria’s total exports, which included

the non-subject merchandise entitled to IPRS rebates. See 156 F.3d

at 1175-76.    The question the court had to answer was "whether the

portion of the section 80HHC deduction based on the IPRS rebates

was a countervailable subsidy." Id. at 1176.             It answered in the

negative, holding that the ITA

      erred in countervailing the portion of the section 80HHC
      deduction based on the IPRS rebates because the rebates
      involved were tied to merchandise not within the scope of
      the review.

Id.   In other words, a subsidy tied to non-subject merchandise--a

non-countervailable      subsidy--does   not    become    countervailable

merely by virtue of its being deductible under a separate, untied

countervailable subsidy that is a tax deduction.


           This precept does not apply herein.            The Kajaria court

was faced with two subsidies: one tied and countervailable, and one

tied and not countervailable; and two groups of exports: one

subject to investigation and one not.          The record at bar, on the

other hand, involves one subsidy, untied and countervailable, and

merchandise, some subject to administrative review and some not.
Consolidated
Court No. 00-06-00280                                       Page 21

The question thus is whether that non-subject merchandise is of any

moment, not, as in Kajaria, whether the countervailing-duty order

governed a subsidy tied to non-subject merchandise.    On its face,

that case is not controlling here, nor does it counsel this court

to apply its reasoning by analogy.


            Untied subsidies are not linked to any particular mer-

chandise; they are presumed to benefit an exporter in general and

are therefore allocated to its total business. See, e.g., British

Steel PLC v. United States, 19 CIT 176, 879 F.Supp. 1254 (1995),

aff’d in part, rev’d in part and remanded sub nom. LTV Steel Co. v.

United States, 174 F.3d 1359 (Fed.Cir. 1999).    The presumption is

sensible.    Money is fungible.   A cash subsidy, regardless of its

intended or actual use, frees up revenue, which in turn may be

applied for other purposes, and thus entails general benefit. See,

e.g., Usinor Sacilor v. United States, 19 CIT 711, 893 F.Supp. 1112

(1995), aff'd in part, rev’d in part, 215 F.3d 1350 (Fed.Cir.

1999).


            In short, Kiswok is asking this court to reject this

longstanding approach of the ITA because profit rates on subject

and non-subject merchandise differed. Yet it fails to point to any

authority supporting its position.   The simple truth of the matter

is that the statute does not favor Kiswok’s request.       Counter-

vailing-duty orders are based on the existence of a countervailable
Consolidated
Court No. 00-06-00280                                       Page 22

subsidy, 19 U.S.C. §1671(a).    Just as a foreign firm’s revenue or

expenses do not affect a countervailing-duty order on its subsi-

dized merchandise, the extent to which the exporter profits on that

merchandise is irrelevant when it comes to imposition of duties

thereunder.


                                 II

           In view of the foregoing, plaintiffs' motion for judgment

upon the agency record must be, and it hereby is, denied, except

that the defendant is directed to recalculate the benefit the

plaintiff Calcutta Ferrous Ltd. realized from its preferential

loan(s), taking into account all of the interest paid thereon. The

defendant may have until July 9, 2004 to report the results thereof

to the court and the plaintiffs, which may then have until July 23,

2004 to comment thereon.

           So ordered.

Decided:   New York, New York
           May 20, 2004

                                      Thomas J. Aquilino, Jr.
                                               Judge
