65 FR 48479 August 8, 2000
[C-475-819]
Certain Pasta From Italy: Preliminary Results and Partial
Rescission of Countervailing Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of preliminary results and partial rescission of
countervailing duty administrative review.
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SUMMARY: The Department of Commerce is conducting an administrative
review of the countervailing duty order on certain pasta from Italy for
the period January 1, 1998, through December 31, 1998. We have
preliminarily determined that certain producers/exporters have received
net subsidies during the period of review. If the final results remain
the same as these preliminary results, we will instruct the U.S.
Customs Service to assess countervailing duties as detailed in the
Preliminary Results of Review section of this notice.
Because its request for review was withdrawn, we are rescinding
this review for La Molisana Industrie Alimentari S.p.A. (``La
Molisana'').
Interested parties are invited to comment on these preliminary
results (see the Public Comment section of this notice).
EFFECTIVE DATE: August 8, 2000.
FOR FURTHER INFORMATION CONTACT: Craig Matney, Sally Hastings, Annika
O'Hara, or Andrew Covington, AD/CVD Enforcement, Group I, Office 1,
Import Administration, U.S. Department of Commerce, 14th Street and
Constitution Avenue, NW., Washington, DC 20230; telephone (202) 482-
1778, 482-3464, 482-3798, or 482-3534, respectively.
SUPPLEMENTARY INFORMATION:
Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions of section 751(a) of the Tariff Act of
1930, as amended by the Uruguay Round Agreements Act (``URAA'')
effective January 1, 1995 (``the Act''). Unless otherwise indicated,
all citations to the Department's regulations are to the regulations
codified at 19 CFR part 351 (1999).
Case History
On July 24, 1996, the Department of Commerce (``the Department'')
published in the Federal Register (61 FR 38544) the countervailing duty
order on certain pasta from Italy. On July 15, 1999, the Department
published a notice of ``Opportunity to Request Administrative Review''
of this countervailing duty order (64 FR 38181). We received requests
for review and initiated the review, covering calendar year 1998, on
August 30, 1999 (64 FR 47167). Corrections to the initiation notice
were published in the Federal Register on September 8, 1999 (64 FR
48897) and November 4, 1999 (64 FR 60161). In accordance with 19 CFR
351.213(b), this review of the order covers the following producers or
exporters of the subject merchandise for which a review was
specifically requested: Delverde S.p.A. (``Delverde''), Tamma Industrie
Alimentari S.r.L. (``Tamma''), Rummo S.p.A. Molino e Pastaficio
(``Rummo''), and Pastificio Riscossa F.lli Mastromauro S.r.L.
(``Riscossa''). La Molisana, which had requested to be included in this
review, withdrew its request on October 14, 1999 (see Partial
Rescission of Review section, below). This review covers 29 programs.
On October 4, 1999, we issued countervailing duty questionnaires to
the Government of Italy (``GOI''), the Commission of the European Union
(``EC''), and the above-named companies under review. We received
responses to our questionnaires and issued supplemental questionnaires
throughout the period November 1999 through January 2000. Responses to
the supplemental questionnaires were received in January and February
2000.
On April 6, 2000, the Department published a notice in the Federal
Register extending the time limit for issuing these preliminary results
until no later than July 31, 2000 (65 FR 18069). We issued a second set
of supplementary questionnaires to Delverde and Tamma on June 6, 2000,
and to the GOI on June 9, 2000. We received responses to these
supplemental questionnaires on June 23, 2000.
Partial Rescission
On October 14, 1999, La Molisana submitted a timely request for
withdrawal from this administrative review. Therefore, consistent with
the Department's regulations and practice, we are rescinding this
review with respect to La Molisana. See 19 CFR 351.213(d)(1).
Scope of the Review
Imports covered by this review are shipments of certain non-egg dry
pasta in packages of five pounds (2.27 kilograms) or less, whether or
not enriched or fortified or containing milk or other optional
ingredients such as chopped vegetables, vegetable purees, milk, gluten,
diastases, vitamins, coloring and flavorings, and up to two percent egg
white. The pasta covered by this scope is typically sold in the retail
market, in fiberboard or cardboard cartons, or polyethylene or
polypropylene bags, of varying dimensions.
Excluded from the scope of this review are refrigerated, frozen, or
canned pastas, as well as all forms of egg pasta, with the exception of
non-egg dry pasta containing up to two percent egg white. Also excluded
are imports of organic pasta from Italy that are accompanied by the
appropriate certificate issued by the Instituto Mediterraneo Di
Certificazione (``IMC''), by Bioagricoop Scrl, by QC&I International
Services, by Ecocert Italia, or by the Conzorzio per il Controllo dei
Prodotti Biologici.
The merchandise subject to review is currently classifiable under
item 1902.19.20 of the Harmonized Tariff Schedule of the United States
(``HTSUS''). Although the HTSUS subheading is provided for convenience
and customs purposes, the written description of the merchandise
subject to the order is dispositive.
Scope Rulings
The Department has issued the following scope rulings to date:
(1) On August 25, 1997, the Department issued a scope ruling that
multicolored pasta, imported in kitchen display bottles of decorative
glass that are sealed with cork or paraffin and bound with raffia, is
excluded from the scope of the countervailing duty order. (See August
25, 1997 memorandum from Edward Easton to Richard Moreland, which is on
file in the Central Records Unit (``CRU'') in Room B-099 of the main
Commerce building.)
(2) On July 30, 1998, the Department issued a scope ruling, finding
that multipacks consisting of six one-pound packages of pasta that are
shrink-wrapped into a single package are within the scope of the
countervailing duty order. (See July 30, 1998 letter from Susan H.
Kuhbach, Acting Deputy Assistant Secretary for Import Administration,
to Barbara P. Sidari, Vice President, Joseph A. Sidari
[[Page 48480]]
Company, Inc., which is on file in the CRU.)
(3) On October 26, 1998, the Department self-initiated a scope
inquiry to determine whether a package weighing over five pounds as a
result of allowable industry tolerances may be within the scope of the
countervailing duty order. On May 24, 1999, we issued a final scope
ruling finding that, effective October 26, 1998, pasta in packages
weighing or labeled up to (and including) five pounds four ounces is
within the scope of the countervailing duty order. (See May 24, 1999
memorandum from John Brinkmann to Richard Moreland, which is on file in
the CRU.)
Period of Review
The period of review (``POR'') for which we are measuring subsidies
is from January 1, 1998, through December 31, 1998.
Reorganization of Delverde
Delverde began a company reorganization during the POR that
continued through 1999. Although Delverde did not operate under its new
organization during the POR, the company made the reorganization
legally effective for accounting and tax purposes as of January 1,
1998.
Prior to the reorganization, Delverde was a wholly-owned subsidiary
of a non-producing holding company, Sangralimenti S.r.L.
(``Sangralimenti''). This holding company also held an ownership
interest in Pietro Rotunno, S.r.L. (``Rotunno'') which ceased producing
pasta in 1994. The principal result of the reorganization was the
merger of Delverde S.r.L. and Sangralimenti. The new, merged entity is
known as Delverde S.p.A. As part of the reorganization, Sangralimenti's
ownership interest in Rotunno was sold to an unrelated company. Except
for the merger with Sangralimenti, the ownership structure of Delverde
changed little as a result of the reorganization.
Cross-Ownership
In previous segments of this proceeding, the Department found that
Delverde and Tamma warranted treatment as a single company because of
Tamma's \1\ ownership in Delverde's holding company, Sangralimenti, and
common corporate officers. Therefore, in the investigation and previous
reviews of this case, we calculated a single countervailing duty rate
for these two companies. See Final Affirmative Countervailing Duty
Determination: Certain Pasta (``Pasta'') from Italy, 61 FR 30287 (June
14, 1996) (``Pasta Investigation''); Certain Pasta from Italy: Final
Results of Countervailing Duty Administrative Review, 63 FR 43905
(August 17, 1998) (``Pasta First Review''); and Certain Pasta From
Italy: Final Results of the Second Countervailing Duty Administrative
Review, 64 FR 44489 (August 16, 1999) (``Pasta Second Review'').
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\1\ ``Tamma's ownership'' refers to the shares in Delverde owned
by individual Tamma family members as well as shares owned by the
Tamma company.
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However, in this administrative review, we are applying the 1998
countervailing duty regulations which are effective for the first time
in this proceeding. See 19 CFR 702(a)(2). These regulations require
``cross-ownership'' before the Department will assign subsidies
received by one company to another company (see preamble to
Countervailing Duties; Final Rule, 63 FR 65348, 65401 (November 25,
1998)). According to section 351.525(b)(6)(vi) of the Department's
regulations, cross-ownership exists between two or more corporations
where one corporation can use or direct the individual assets of the
other corporation in essentially the same ways it can use its own
assets. The regulations state that this standard will normally be met
where there is a majority voting ownership interest between two
corporations. The preamble to the Department's regulations identifies
situations where cross ownership may exist even though there is less
than a majority voting interest between two corporations: ``in certain
circumstances, a large minority interest (for example, 40 percent) or a
`golden share' may also result in cross-ownership.'' (See 63 FR 65401.)
Based on our new regulations and for purposes of these preliminary
results, we do not believe that Tamma's ownership interest in Delverde
is sufficient to establish cross-ownership between Tamma and Delverde.
Although Tamma's ownership in Delverde is significant, it does not have
a majority ownership interest; nor does it have a ``golden share'' in
Delverde. Additionally, there is a small number of other shareholders
which, together, effectively control more shares in Delverde than
Tamma.
Our treatment of Delverde and Tamma is consistent with our finding
in Final Affirmative Countervailing Duty Determination: Certain Cut-to-
Length Carbon-Quality Steel Plate from France, 64 FR 73277 (December
29, 1999). At issue in that case was the relationship between two
respondents, Usinor and GTS, a company in which Usinor indirectly owned
48 percent. We treated Usinor and GTS as two separate companies because
Usinor was not the majority shareholder in GTS and because, despite its
large ownership position, Usinor did not control GTS directly or
indirectly. Due to the high level of Usinor's ownership interest in
GTS, we also examined a number of factors in making our determination
that cross-ownership did not exist. Among them was whether Usinor
controlled GTS via control over its Board of Directors and its
management decision making process.
Despite our preliminary decision to calculate separate rates for
Delverde and Tamma, we intend to examine this issue further. Although
Tamma's ownership interest in Delverde is less than fifty percent, it
is substantial. Moreover, other aspects of the corporate relationship,
such as common corporate officers, in combination with Tamma's
ownership interest, raises a concern as to whether cross-ownership
exists. Therefore, for the final results, we will further consider the
issue and seek additional information, if necessary, to fully address
whether or not cross-ownership exists between these two companies. We
invite comments from all interested parties.
Subsidies Valuation Information
Benchmarks for Long-term Loans and Discount Rates: The companies
under review did not take out any long-term, fixed-rate, lira-
denominated loans or other debt obligations which could be used as
benchmarks in any of the years in which the government grants or loans
under review were received. Therefore, for years prior to 1995, we used
the Bank of Italy reference rate, adjusted upward to reflect the mark-
up an Italian commercial bank would charge a corporate customer, as the
benchmark interest rate for long-term loans and as the discount rate.
For subsidies received in 1995 and later, we used the Italian Bankers'
Association (``ABI'') interest rate, increased by the average spread
charged by banks on loans to commercial customers plus an amount for
bank charges.
Allocation Period: In the investigation of this case, the
Department used, as the allocation period for non-recurring subsidies,
the average useful life (``AUL'') of renewable physical assets in the
food-processing industry as recorded in the Internal Revenue Service's
1977 Class Life Asset Depreciation Range System (``the IRS tables''),
i.e., 12 years. However, the U.S. Court of International Trade
(``CIT'') subsequently ruled against this allocation methodology for
non-recurring subsidies (see British Steel plc v. United States, 879
F.Supp. 1254,
[[Page 48481]]
1289 (CIT 1995) (``British Steel I'')). In accordance with the CIT's
remand order, the Department determined that the most reasonable method
of deriving the allocation period for non-recurring subsidies was a
company-specific AUL of renewable physical assets. This remand
determination was affirmed by the CIT on June 4, 1996 (see British
Steel plc v. United States, 929 F.Supp. 426, 439 (CIT 1996) (``British
Steel II'')).
Therefore, in past administrative reviews of this case, we used a
company-specific AUL to allocate non-recurring subsidies that were not
countervailed in the investigation. However, for non-recurring
subsidies which had already been countervailed in the investigation,
the Department used the original allocation period, i.e., 12 years,
because it was deemed neither reasonable nor practicable to reallocate
those subsidies over a different time period. This methodology was
consistent with our approach in Certain Carbon Steel Products from
Sweden; Final Results of Countervailing Duty Administrative Review, 62
FR 16549 (April 7, 1997).
As mentioned above, the Department is operating under new
countervailing duty regulations in this review. Pursuant to section
351.524(d)(2) of these regulations, the Department will use the AUL in
the IRS tables as the allocation period unless a party can show that
the IRS tables do not reasonably reflect the company-specific AUL or
the country-wide AUL for the industry. If a party can show that either
of these time periods differs from the AUL in the IRS tables by one
year or more, the Department will use the company-specific AUL or the
country-wide AUL for the industry as the allocation period.
Riscossa and Rummo do not contest the 12-year allocation period in
the IRS tables. Delverde and Tamma, however, have urged the Department
to apply the methodology used in previous administrative reviews. To
this end, Delverde and Tamma have resubmitted their calculation of the
company-specific AUL from Pasta Second Review based on the depreciation
and value of productive assets as reported in their financial
statements. Delverde and Tamma have not stated which allocation period
they believe is appropriate for subsidies received during the current
POR.
Pursuant to our new regulations, information submitted in the
questionnaire responses, and our practice to not reallocate subsidies,
we have preliminarily decided to allocate non-recurring subsidies as
follows:
(a) Subsidies countervailed in the investigation (i.e., subsidies
received in 1994 and earlier) will continue to be allocated over 12
years.
(b) Subsidies countervailed in the first two administrative reviews
(i.e., subsidies received in 1995, 1996, and 1997), which were
allocated over the respondents' company-specific AULs, will continue to
be allocated over the company-specific AULs.
(c) Subsidies received during the current POR (i.e., 1998) will be
allocated over 12 years as specified in the IRS tables, in accordance
with our regulations because no company demonstrated that its AUL
differed from the 12-year period in the IRS tables.
Benefits to Mills: During the POR, Tamma and Riscossa owned
semolina mills (semolina is the main input product in pasta). Neither
Tamma nor Riscossa's mills were separately incorporated, i.e., both the
semolina and the downstream product (pasta) were produced within a
single corporate entity. Therefore, in accordance with section
351.525(b)(6)(i) of the regulations, the Department has attributed
subsidies provided for the production of semolina and pasta to the
sales by the corporate entities that received them.
Change in Ownership
One of the companies under review, Delverde, purchased an existing
pasta factory from an unaffiliated party in 1991. The previous owner of
the purchased factory had received non-recurring countervailable
subsidies prior to the transfer of ownership. In Pasta Investigation,
we calculated the amount of the prior subsidies that passed through to
Delverde with the acquisition of the factory, following the spin-off
methodology described in the Restructuring section of the General
Issues Appendix (``GIA''), appended to Final Countervailing Duty
Determination; Certain Steel Products from Austria, 58 FR 37225, 37265
(July 9, 1993). We followed the same methodology in Pasta First Review
and Pasta Second Review.
After the Department's final determination in Pasta Investigation,
Delverde sued in the CIT, arguing that the Department's spin-off
methodology was erroneous and inconsistent with the Act. Initially, the
CIT agreed with Delverde and remanded the case to the Department. See
Delverde I, 989 F.Supp. at 234. However, after the Department had
explained its spin-off methodology in more detail and further argued
its reasonableness on remand, the CIT affirmed the Department's
methodology. See Delverde II, 24 F.Supp.2d at 315 (``Delverde II'').
Delverde appealed the CIT's decision to the Court of Appeals for the
Federal Circuit (``CAFC'') which held on February 2, 2000, that the
Department may not presume that non-recurring subsidies survive a
transfer in a subsidized company's ownership. Accordingly, the CAFC
vacated the CIT's decision in Delverde II and stated that it would
instruct the CIT to remand the case to the Department. See Delverde v.
United States, 202 F.3rd 1360, 1369 (Fed. Cir. 2000). On June 20, 2000,
the CAFC denied the Department's petition for rehearing and suggestion
for rehearing en banc. See Delverde, S.r.L. v. United States, Court No.
99-1186 (Fed. Cir. 2000).
The Department has not received a remand from the CIT and has,
thus, not yet addressed what revisions to our change-in-ownership
methodology are necessary. We are examining what information may be
relevant to the change in ownership issue decided in Delverde and, if
necessary, will issue a questionnaire as soon as possible. For these
preliminary results, we have continued to use the spin-off methodology
described in the GIA in the same way as it was used in Pasta
Investigation and previous administrative reviews. We invite comments
from interested parties on revisions to our change of ownership
methodology.
Analysis of Programs
I. Programs Preliminarily Determined To Confer Subsidies
1. Law 64/86 Industrial Development Grants
Law 64/86 provided assistance to promote development in the
Mezzogiorno (the south of Italy). Grants were awarded to companies
constructing new plants or expanding or modernizing existing plants.
Pasta companies were eligible for grants to expand existing plants but
not to establish new plants, because the market for pasta was deemed to
be close to saturated. Grants were made only after a private credit
institution chosen by the applicant made a positive assessment of the
project. (Loans were also provided under Law 64/86; see below.)
In 1992, the Italian Parliament abrogated Law 64/86 and replaced it
with Law 488/92 (see below). This decision became effective in 1993.
However, companies whose projects had been approved prior to 1993 were
authorized to receive grants under Law 64/86 after 1993. Delverde,
Tamma, and Riscossa benefitted from industrial
[[Page 48482]]
development grants under Law 64/86 during the POR.
In Pasta Investigation, the Department determined that these grants
conferred a countervailable subsidy within the meaning of section
771(5) of the Act. They provided a direct transfer of funds from the
GOI bestowing a benefit in the amount of the grant. Also, these grants
were found to be regionally specific within the meaning of section
771(5A) of the Act. In this review, neither the GOI nor the responding
companies have provided new information which would warrant
reconsideration of this determination.
In Pasta Investigation, the Department treated the industrial
development grants as non-recurring based on the analysis set forth in
the Allocation section of the GIA, 58 FR at 37226. In the current
review, no new information has been placed on the record that would
cause us to depart from this treatment. In Pasta Investigation and
previous administrative reviews, we applied the methodology described
in our old (proposed) countervailing duty regulations when determining
whether to allocate non-recurring grants over time or expense them in
the year of receipt (``the 0.5 percent test''). Accordingly, grant
disbursements exceeding 0.5 percent of a company's sales in the year of
receipt were allocated over time while grants below or equal to 0.5
percent of sales were countervailed in full (``expensed'') in the year
of receipt (see Countervailing Duties (Proposed Rules), 54 FR 23366,
23384 (19 CFR 355.49(a)(3)) (May 31, 1989)). However, section
351.524(b)(2) of our new countervailing duty regulations directs us to
allocate over time those non-recurring grants whose total authorized
amount exceeds 0.5 percent of a company's sales in the year of
authorization. We applied this new regulation only to disbursements
received during the POR, i.e., we did not redo the 0.5 percent test for
disbursements received prior to the POR because we had already
calculated a benefit stream for those disbursements in the
investigation or in a previous administrative review.
Pursuant to section 351.504(c) of our regulations, we used our
standard grant methodology as described in section 351.524(d) of the
regulations to calculate the countervailable subsidy from those grants
that passed the 0.5 percent test. We divided the benefit attributable
to each company in the POR by its total sales, or total pasta sales, as
appropriate, in the POR. On this basis, we preliminarily determine the
countervailable subsidy from the Law 64/86 industrial development
grants to be 1.73 percent ad valorem for Delverde, 3.10 percent ad
valorem for Tamma, and 0.77 percent ad valorem for Riscossa.
2. Law 488/92 Industrial Development Grants
In 1986, the European Union (``EU'') initiated an investigation of
the GOI's regional subsidy practices. As a result of this
investigation, the GOI changed the regions eligible for regional
subsidies to include depressed areas in central and northern Italy in
addition to the Mezzogiorno. After this change, the areas eligible for
regional subsidies are the same as those classified as Objective 1,
Objective 2, and Objective 5(b) areas by the EU (see below). The new
policy was given legislative form in Law 488/92 under which Italian
companies in the eligible sectors (manufacturing, mining, and certain
business services) may apply for industrial development grants. (Loans
are not provided under Law 488/92.) Law 488/92 grants are made only
after a preliminary examination by a bank authorized by the Ministry of
Industry. On the basis of the findings of this preliminary examination,
the Ministry of Industry ranks the companies applying for grants. The
ranking is based on indicators such as the amount of capital the
company will contribute from its own funds, the number of jobs created,
regional priorities, etc. Grants are then made based on this ranking.
Delverde and Tamma benefitted from Law 488/92 industrial
development grants in the POR. The grants were provided for
modernization of both companies' pasta factories and Tamma's warehouse.
Industrial development grants under Law 488/92 were found
countervailable in Pasta Second Review. The grants were a direct
transfer of funds from the GOI bestowing a benefit in the amount of the
grant. Also, these grants were found to be regionally specific within
the meaning of section 771(5A) of the Act. In this review, neither the
GOI nor the responding companies have provided new information which
would warrant reconsideration of this determination.
In Pasta Second Review, the Department treated industrial
development grants under Law 488/92 as non-recurring based on the
analysis set forth in the Allocation section of the GIA, 58 FR at
37226. In the current review, no new information has been placed on the
record that would cause us to depart from this treatment. We allocated
the grant over time because it met the 0.5 percent test, as described
above. Pursuant to section 351.504(c) of our regulations, we used our
standard grant methodology as described in section 351.524(d) of the
regulations to calculate the countervailable subsidy. We divided the
benefits attributable to each company in the POR by its total sales in
the POR. On this basis, we preliminarily determine the countervailable
subsidy from the Law 488/92 industrial development grants to be 0.28
percent ad valorem from Delverde and 0.09 percent ad valorem for Tamma.
3. Law 183/76 Industrial Development Grants
Law 183/76 is known to the Department as a law that authorizes
companies located in the Mezzogiorno to take reductions or exemptions
in social security contributions for the hiring of new employees. Law
183/76 also allows for the provision of industrial development grants.
In 1983, Riscossa applied for an industrial development grant under
Law 183/76. The GOI approved the application and disbursed the grant in
tranches. Only the last of these disbursements, received by Riscossa in
1988, falls within that company's 12-year AUL period. Therefore, only
this last disbursement has been countervailed in the current review.
In Pasta Investigation and the prior review, the Department
determined that the industrial development grant received by Riscossa
conferred a countervailable subsidy within the meaning of section
771(5) of the Act. It was a direct transfer of funds from the GOI
bestowing a benefit in the amount of the grant. Also, we found this
grant to be regionally specific within the meaning of section 771(5A)
of the Act. The Department has not received any new information in this
review which would merit a reexamination of this determination.
We have previously treated Riscossa's industrial development grant
as a non-recurring grant based on the analysis set forth in the
Allocation section of the GIA, 58 FR at 37226. In the current review,
no new information has been placed on the record that would cause us to
depart from this treatment. We allocated the last disbursement of this
grant over time because it met the 0.5 percent test, as described
above. Pursuant to section 351.504(c) of our regulations, we calculated
the countervailable subsidy using our standard grant methodology, as
described in section 351.524(d) of the regulations. We divided the
benefit attributable to Riscossa in the POR by the company's total
sales in the POR. On this basis, we preliminarily determine the
countervailable subsidy
[[Page 48483]]
from the Law 183/76 industrial development grant to be 0.08 percent ad
valorem for Riscossa.
4. Law 64/86 Industrial Development Loans
In addition to the industrial development grants discussed above,
Law 64/86 also provided reduced rate industrial development loans with
interest contributions paid by the GOI on loans taken by companies
constructing new plants or expanding or modernizing existing plants in
the Mezzogiorno. For the reasons discussed above, pasta companies were
eligible for interest contributions to expand existing plants, but not
to establish new plants. The interest rate on these loans was set at
the reference rate with the GOI's interest contributions serving to
reduce this rate. In 1992, the Italian parliament abrogated Law 64/86.
This decision became effective in 1993. Project approved prior to 1993,
however, were authorized to receive interest subsidies after 1993.
Delverde and Tamma benefitted from outstanding Law 64/86 industrial
development loans during the POR.
In Pasta Investigation, the Department determined that the Law 64/
86 loans conferred a countervailable subsidy within the meaning of
section 771(5) of the Act. They were a direct transfer of funds from
the GOI providing a benefit in the amount of the difference between the
benchmark interest rate and the interest rate paid by the companies
after accounting for the GOI's interest contributions. Also, they were
found to be regionally specific within the meaning of section 771(5A)
of the Act. In this review, neither the GOI nor the responding
companies have provided new information which would warrant
reconsideration of this determination.
In accordance with section 351.505(c)(2) of our regulations, we
calculated the benefit for the POR by computing the difference between
the payments Delverde and Tamma made on their Law 64/86 loans during
the POR and the payments the companies would have made on a comparable
commercial loan. We divided Delverde's and Tamma's benefits
attributable to the POR by their total sales or total pasta sales, as
appropriate, in the POR. On this basis, we preliminarily determine the
countervailable subsidy from the Law 64/86 industrial development loans
to be 0.56 percent ad valorem for Delverde and 0.23 percent ad valorem
for Tamma.
5. Law 304/90 Export Marketing Grants
Under Law 304/90, the GOI provided grants to promote the sale of
Italian food and agricultural products in foreign markets. The grants
were given for pilot projects aimed at developing links and integrating
marketing efforts between Italian food producers and foreign
distributors. The emphasis was on assisting small- and medium-sized
producers.
Delverde received a grant under this program for an export sales
pilot project in the United States. The purpose of the project was to
increase the presence of all Delverde's products in the U.S. market,
not only pasta.
In Pasta Investigation, the Department determined that these export
marketing grants conferred a countervailable subsidy within the meaning
of section 771(5) of the Act. They were a direct transfer of funds from
the GOI bestowing a benefit in the amount of the grant. Also, these
grants were found to be specific within the meaning of section 771(5A)
of the Act because their receipt was contingent upon exportation. In
this review, neither the GOI nor the responding companies have provided
new information which would warrant reconsideration of this
determination.
Each project funded by Law 304/90 grants requires a separate
application and approval, and the projects represent one-time events in
that they involve an effort to establish warehouses, sales offices, and
a selling network in overseas markets. Therefore, in Pasta
Investigation, the Department treated the grant received under this
program as non-recurring based on the analysis set forth in the
Allocation section of the GIA, 58 FR at 37226. In the current review,
we have found no reason to depart from this treatment. We allocated the
grant over time because it met the 0.5 percent test, as described
above.
Pursuant to section 351.504 (c) of our regulations, we used our
standard grant methodology as described in section 351.524(d) of the
regulations to calculate the countervailable subsidy. We divided the
benefit attributable to the POR by the value of Delverde's total
exports to the United States in the POR. On this basis, we
preliminarily determine the countervailable subsidy from the Law 304/90
export marketing grants to be 0.26 percent ad valorem for Delverde.
6. Social Security Reductions and Exemptions--Sgravi
Italian law allows companies, particularly those located in the
Mezzogiorno, to use a variety of exemptions and reductions (``sgravi'')
of the payroll contributions that employers make to the Italian social
security system for health care benefits, pensions, etc. The sgravi
benefits are regulated by a complex set of laws and regulations and are
sometimes linked to conditions such as creating more jobs. The benefits
under some of these laws (e.g., Laws 1089/68, 183/76, 30/97, and 449/
97) are available only to companies located in the Mezzogiorno. Other
laws (e.g., Laws 407/90 and 863/84) provide benefits to companies all
over Italy, but the level of benefits is higher for companies in the
south than for companies in other parts of the country. All the
respondent companies in this review benefitted from the sgravi program
during the POR.
In Pasta Investigation, the Department determined that the various
forms of social security reductions and exemptions conferred
countervailable subsidies within the meaning of section 771(5) of the
Act. They represent revenue foregone by the GOI and confer a benefit in
the amount of the savings received by the companies. Also, they were
found to be regionally specific within the meaning of section 771(5A)
of the Act because they were limited to companies in the Mezzogiorno.
In this review, neither the GOI nor the responding companies provided
new information which would warrant reconsideration of this
determination.
In the investigation and previous reviews, we treated social
security reductions and exemptions as recurring benefits. In the
current review, we have found no reason to depart from this treatment.
To calculate the countervailable subsidy, we divided each company's
savings in social security contributions during the POR by that
company's total sales in the POR. In those instances where the
applicable law provided a higher level of benefits to companies in the
south, we divided the amount of the asgravi benefits that exceeded the
amount available to companies in other parts of Italy by the recipient
company's total sales in the POR, in accordance with section 351.503(d)
of the regulations. On this basis, we preliminarily determine the
countervailable subsidy from the sgravi program to be 0.30 percent ad
valorem for Delverde, 0.21 percent ad valorem for Tamma, 0.36 percent
ad valorem for Rummo, and 0.26 percent ad valorem for Riscossa.
7. Law 598/94 Interest Subsidies
Under Law 598/94, the GOI pays a portion of the interest on certain
loans granted to small- and medium-sized industrial companies. These
loans are to be used for investments related to technological
innovation and/or environmental protection. Rummo received interest
subsidies under this
[[Page 48484]]
program in the POR in connection with a long-term, variable-rate loan
obtained prior to the POR. The GOI paid the interest subsidies directly
to the lending bank shortly after Rummo had made the full twice-yearly
interest payments to the bank. The bank then credited the amount of the
GOI's payments to Rummo's account.
The GOI has stated that the general level of subsidies under Law
598/94 is 30 percent of the initial interest payable, but is 45 percent
for companies in disadvantaged regions of Italy. Because Rummo is
located in a disadvantaged region it received the higher level of
benefits.
We preliminarily determine that the higher level of interest
subsidies for companies in disadvantaged regions under Law 598/94
confers a countervailable benefit within the meaning of section 771(5)
of the Act. It is a direct transfer of funds from the GOI. As discussed
in section 351.508 of the regulations, because the interest subsidy is
tied to a particular loan and because Rummo knew that it would receive
the subsidy when it applied for the loan, we are treating the interest
subsidy as a reduced-interest loan in accordance with section
351.508(c)(2) of the regulations.
Because the higher level of subsidies under Law 598/94 is limited
to companies in certain regions of Italy, we preliminarily determine
that this program is regionally specific within the meaning of section
771(5A) of the Act. In accordance with sections 351.503(d) and
351.505(c)(2) of our regulations, we calculated the benefit for the POR
by dividing the portion of the interest subsidy that exceeded the
amount available to companies in non-disadvantaged regions by Rummo's
total sales in the POR. On this basis, we preliminarily determine the
countervailable subsidy from the Law 598/94 interest subsidies to be
0.10 percent ad valorem for Rummo.
8. Law 236/93 Training Grants
Under Law 236/93, which is administered by the regional governments
but funded by the GOI, grants are provided to Italian companies for
worker training. Delverde received a grant under this program during
the POR. The company submitted an application to the Regional Council
of Abruzzo where Delverde is located. The application was examined by
an evaluating committee appointed by the Regional Council, which
approved the application in 1997. The grant was disbursed in tranches,
the first of which was received by Delverde in the POR. Since the grant
did not cover the entire training cost, Delverde also contributed its
own funds.
The Department considers worker training programs to provide a
countervailable benefit to a company when the company is relieved of an
obligation it otherwise would have incurred. See section 351.513(a) of
the regulations. Companies normally incur the costs of training to
enhance the job-related skills of their own employees. Therefore, we
preliminarily determine that the Law 236/93 training grant relieved
Delverde of an obligation that the company otherwise would have
incurred.
The Department has not received any information from the GOI or the
Regional Government of Abruzzo (``GOA'') showing how the funds under
Law 236/93 were distributed across Italian regions and industries.
Delverde has stated that assistance under the program was available to
production facilities in the region of Abruzzo, but there is no
information on the record as to whether funding under Law 236/93 was
also available to companies in other regions of Italy. Because this
information is not on the record, we must base our preliminary
specificity determination on facts available pursuant to section 776(a)
of the Act.
Pursuant to section 776 (b) of the Act, we preliminarily determine
that it is appropriate to use adverse facts available because the GOI
and the GOA did not cooperate to the best of their ability to provide
information requested on the distribution of benefits by industry and
by region as requested by the Department. Specifically, in our January
12, 2000, supplemental questionnaire to the GOI, we asked that certain
questions be forwarded to the GOA concerning the Law 236/93 training
grants, including a request for information about which other
industries received benefits under the program. We received a partial
response from the GOA, but, as noted above, we did not receive a
response to our question about which other industries had received
benefits under this law. We, therefore, preliminarily determine that
the GOI and the GOA have failed to cooperate by not acting to the best
of their abilities to comply with our request for information regarding
this program (see 19 CFR 351.308). On this basis, as adverse facts
available, we preliminarily find the Law 236/93 grant received by
Delverde to be specific.
We also preliminarily determine that the Law 236/93 grant confers a
countervailable subsidy within the meaning of section 771(5) of the
Act. It provides a direct transfer of funds from the GOI bestowing a
benefit in the amount of the grant.
Under section 351.524(c)(1) of the regulations, the Department
normally considers worker training subsidies to provide recurring
benefits. Therefore, to calculate the countervailable subsidy, we
divided the amount received by Delverde in the POR by the company's
total sales in the POR. On this basis, we preliminarily determine the
countervailable subsidy from the Law 236/93 training grant to be 0.02
percent ad valorem for Delverde.
9. European Social Fund
The European Social Fund (``ESF''), one of the EU's structural
funds, was created under Article 123 of the Treaty of Rome to improve
employment opportunities for workers and to help raise their living
standards. There are six different objectives identified for the
structural funds: Objective 1 covers projects located in underdeveloped
regions; Objective 2 addresses areas in industrial decline; Objective 3
relates to the employment of persons under the age of 25; Objective 4
funds training for employees in companies undergoing restructuring;
Objective 5 pertains to agricultural areas; and Objective 6 applies to
regions with very low population (i.e., the far north).
Delverde and Riscossa received ESF grants during the POR.
Riscossa's grant was provided under Objective 4; there is no
information on the record about the EU objective pertaining to
Delverde's grant.
In the case of Riscossa, the Regional Government of Puglia
(``GOP'') approved a program in 1997, allowing Riscossa to receive an
employee training grant jointly funded by the ESF, the GOP, and the GOI
through the National Rotational Fund. The GOP published the details and
goals of the program in the Official Bulletin of the Puglia Region on
January 30, 1997. Riscossa arranged for a private company to organize a
training course and requested the GOP to provide funds to cover the
cost of the course, as allowed by the program. These funds were given
to Riscossa, which in turn paid the company offering the course.
Riscossa itself was responsible for covering about 20 percent of the
cost of the course.
In the case of Delverde, the company received a grant for employee
training which was disbursed to the company in several tranches. The
grant, which was provided under a regional operational program, was
jointly funded by the ESF and the GOI through the National Rotational
Fund. Previous tranches of this grant were found to be countervailable
in Pasta First Review.
[[Page 48485]]
The Department considers worker training programs to provide a
countervailable benefit to a company when the company is relieved of an
obligation it otherwise would have incurred. See 19 CFR 351.513(a).
Companies normally incur the costs of training to enhance the job-
related skills of their own employees. Riscossa in particular has
stated that it would have paid for the training using its own funds in
the absence of the grant. Therefore, we preliminarily determine that
the training grants relieved Riscossa and Delverde of an obligation
that the companies otherwise would have incurred.
The Department has requested, but has not received, information
from the GOI and the EC showing how ESF funds under Objective 4 were
distributed across Italian regions and industries. Nor, despite
requests, have we received such information regarding payments from the
National Rotational Fund, the GOP, or the regional operational program
under which Delverde received its grant. Therefore, because this
information is not on the record, we must base our preliminary
specificity determination on facts available pursuant to section 776
(a) of the Act.
Pursuant to section 776(b) of the Act, we preliminarily determine
that it is appropriate to use adverse facts available because the EC,
the GOI and the GOP did not cooperate to the best of their ability to
provide information requested on the distribution of benefits by
industry and by region as requested by the Department. In its
questionnaire response, the EC has stated that it does not maintain any
company-specific data. For information on how EU funds are distributed
within individual EU member countries, the EC refers to the national or
regional government authorities in the country in question. Therefore,
in our January 12, 2000, supplemental questionnaire, we asked the GOI
to provide such information. In addition, we asked that certain
questions be forwarded to the GOP concerning the training grant
provided to Riscossa, including a request for information on which
other industries in the region received benefits under the program. As
noted above, we did not receive a response to any of these questions
from either the GOI or the GOP. We, therefore, preliminarily determine
that the GOI and the GOP have failed to cooperate by not acting to the
best of their abilities to comply with our request for information
regarding this program (see 19 CFR 351.308(a)). On this basis, as
adverse facts available, we preliminarily find the ESF grants received
by Delverde and Riscossa to be specific.
Accordingly, we preliminarily determine that the ESF grants confer
a countervailable subsidy within the meaning of section 771(5) of the
Act. They provide a direct transfer of funds from the GOI, the GOP, and
the EU bestowing a benefit a in the amount of the grant.
Pursuant to section 351.524(c)(1) of the regulations, the
Department normally considers worker training subsidies to provide
recurring benefits. Therefore, to calculate the countervailable
subsidy, we divided the amounts received by Delverde and Riscossa in
the POR by the companies' total sales in the POR. On this basis, we
preliminarily determine the countervailable subsidy for this program to
be 0.01 percent ad valorem for Delverde and 0.02 percent ad valorem for
Riscossa.
10. Export Restitution Payments
Since 1962, the EU has operated a subsidy program which provides
restitution payments to EU pasta exporters based on the durum wheat
content of their exported pasta products. The program is designed to
compensate pasta producers for the difference between EU prices and
world market prices for durum wheat. Generally, under this program, a
restitution payment is available to any EU exporter of pasta products,
regardless of whether the pasta was made with imported wheat or wheat
grown within the EU. The amount of the restitution payment is
calculated by multiplying the prevailing restitution payment rate on
the date of exportation by the weight of the unmilled durum wheat used
to produce the exported pasta. The weight of the unmilled durum wheat
is calculated by applying a conversion factor to the weight of the
pasta. The EU calculates the restitution payment rate on a monthly
basis by first computing the difference between the world market price
of durum wheat and an internal EU price and then adding a monthly
increment (in all months except June and July, which are harvest
months). The EU will not normally allow the restitution payment rate to
be higher than the levy that the EU imposes on imported durum wheat, as
such a situation would lead to circular trade.
Because there was no significant price difference between the EU
price and the world market price on durum wheat during most of the POR,
the restitution payment rate was zero until mid-October 1998 when it
was set at 0.91 percent for exports to the United States. The export
restitution payments received by the respondents in the POR included
restitution for exports made prior to the POR.
In Pasta Investigation, the Department determined that export
restitution payments conferred a countervailable subsidy within the
meaning of section 771(5) of the Act. Each payment represents a direct
transfer of funds from the EU bestowing a benefit in the amount of the
payment. The restitution payments were found to be specific because
their receipt is contingent upon export performance. In this review,
the GOI, the EU, and the responding companies have not provided new
information which would warrant reconsideration of this determination.
Delverde and Rummo received export restitution payments during the
POR for shipments of pasta to the United States.
In Pasta Investigation, we treated the export restitution payments
as recurring benefits pursuant to 19 CFR 351.524(c). We have found no
reason to depart from this treatment in the current review. Therefore,
to calculate the countervailable subsidy, we divided the export
restitution payments received by Delverde and Rummo in the POR for
pasta shipments to the United States by the value of each company's
pasta exports to the United States in the POR. On this basis, we
preliminarily determine the countervailable subsidy from the export
restitution program to be 0.70 percent ad valorem for Delverde, and
0.07 percent ad valorem for Rummo.
II. Programs Preliminarily Determined Not To Confer Countervailable
Subsidies in the POR
1. Social Security Reductions and Exemptions--Fiscalizzazione
Fiscalizzazione is a nationwide program that allows for a reduction
of certain social security payments similar to the sgravi program
discussed above. In Pasta Investigation and previous administrative
reviews, the Department found the fiscalizzazione program to confer a
countervailable subsidy on companies in the Mezzogiorno because
manufacturing enterprises in the south were allowed to take higher
deductions for certain categories of social security payments than
companies in the north.
The questionnaire responses submitted in the current review show
that the particular category of social security contributions for which
higher deductions were allowed for companies in the south was abolished
as of January 1, 1998. The only remaining fiscalizzazione program in
1998 was related to orphans of Italian workers (``ENAOLI'').
Contributions under this
[[Page 48486]]
program were the same for all companies in the manufacturing sector
regardless of where they were located. Thus, the particular deductions
under the fiscalizzazione program which we previously found
countervailable no longer exist. We, therefore, preliminarily determine
that the fiscalizzazione program did not confer a countervailable
subsidy in the POR.
2. Law 113/86 Training Grant
Rummo reported receiving grants under Law 113/86 in 1990 and 1994
to offset the cost of worker training. The program, which no longer is
in effect, according to Rummo, was available only to companies located
in the Mezzogiorno.
Pursuant to section 351.524(c)(1) of the regulations, the
Department normally considers worker training subsidies to provide
recurring benefits. Because Rummo did not receive any training grants
under Law 113/86 in the POR, we preliminarily determine that this
program did not confer a countervailable subsidy in the POR.
3. Law 64/86 VAT Reductions
During the period 1987 through 1991, Rummo was allowed to reduce
the value added tax (``VAT'') the company paid on the purchase of fixed
assets in accordance with Law 64/86. The VAT reduction was eight
percent of the value of the asset.
Pursuant to section 351.524(c)(1) of the regulations, the
Department normally considers rebates of indirect taxes to provide
recurring benefits. Because Rummo did not receive the VAT reductions
under Law 64/86 in the POR, we preliminarily determine that this
program did not confer a countervailable subsidy in the POR.
4. Law 357/94 Tax Benefits
Rummo has stated that it received VAT tax benefits under Law 357/94
in 1995 and 1996 but that no benefits were received in the POR. No
other information on this program has been made available to the
Department.
Pursuant to section 351.524(c)(1) of the regulations, the
Department normally considers tax programs to provide recurring
benefits. Because Rummo did not use the tax benefits under Law 357/94
in the POR, we preliminarily determine that this program did not confer
a countervailable subsidy in the POR.
III. Programs Preliminarily Determined To Be Not Used
We examined the following programs and preliminarily determine that
the producers and/or exporters of the subject merchandise did not apply
for or receive benefits under these programs during the POR:
1. Local Income Tax (``ILOR'') Exemptions
2. Remission of Taxes on Export Credit Insurance under Article 33 of
Law 227/77
3. Export Credits under Law 227/77
4. Capital Grants under Law 675/77
5. Retraining Grants under Law 675/77
6. Interest Contributions on Bank Loans under Law 675/77
7. Interest Grants Financed by IRI Bonds
8. Preferential Financing for Export Promotion under Law 394/81
9. Corporate Income Tax (``IRPEG'') Exemptions
10. Urban Redevelopment under Law 181
11. Debt Consolidation Law 341/95
12. Interest Contributions under Law 1329/65
13. Grant Received Pursuant to the Community Initiative Concerning the
Preparation of Enterprises for the Single Market (``PRISMA'')
14. European Agricultural Guidance and Guarantee Fund (``EAGGF'')
15. European Regional Development Fund (``ERDF'')
Preliminary Results of Review
In accordance with 19 CFR 351.221(b)(4)(i), we calculated an
individual subsidy rate for each producer/exporter subject to this
administrative review. For the period January 1, 1998 through December
31, 1998, we preliminarily determine the net subsidy rates for
producers/exporters under review to be those specified in the chart
shown below. If the final results of this review remain the same as
these preliminary results, the Department intends to instruct the U.S.
Customs Service (``Customs'') to assess countervailing duties at these
net subsidy rates. The Department also intends to instruct Customs to
collect cash deposits of estimated countervailing duties at these rates
on the f.o.b. value of all shipments of the subject merchandise from
the producers/exporters under review entered, or withdrawn from
warehouse, for consumption on or after the date of publication of the
final results of this administrative review.
Because the URAA replaced the general rule in favor of a country-
wide rate with a general rule in favor of individual rates for
investigated and reviewed companies, the procedures for establishing
countervailing duty rates, including those for non-reviewed companies,
are now essentially the same as those in antidumping cases, except as
provided for in section 777A(e)(2)(B) of the Act. The requested reviews
will normally cover only those companies specifically named. See 19 CFR
351.213(b). Pursuant to 19 CFR 351.212(c), for all companies for which
a review was not requested, duties must be assessed at the cash deposit
rate, and cash deposits must continue to be collected, at the rate
previously ordered. As such, the countervailing duty cash deposit rate
applicable to a company can no longer change, except pursuant to a
request for a review of that company. See Federal-Mogul Corporation and
The Torrington Company v. United States, 822 F.Supp. 782 (CIT 1993),
and Floral Trade Council v. United States, 822 F.Supp. 766 (CIT 1993)
(interpreting 19 CFR 353.22(e), the antidumping regulation on automatic
assessment, which is identical to 19 CFR 355.22(g), the predecessor to
19 CFR 351.212(c)). Therefore, the cash deposit rates for all
companies, except those covered by this review, will be unchanged by
the results of this review.
We will instruct Customs to continue to collect cash deposits for
non-reviewed companies (except Barilla G. e R. F.lli S.p.A.
(``Barilla'') and Gruppo Agricoltura Sana S.r.L. (``Gruppo'') which
were excluded from the order during the investigation) at the most
recent company-specific or country-wide rate applicable to the company.
Accordingly, the cash deposit rates that will be applied to non-
reviewed companies covered by this order are those established in the
Notice of Countervailing Duty Order and Amended Final Affirmative
Countervailing Duty Determination: Certain Pasta from Italy, 61 FR
38544 (July 24, 1996) or the company-specific rate published in the
most recent final results of an administrative review in which a
company participated. These rates shall apply to all non-reviewed
companies until a review of a company assigned these rates is
requested. In addition, for the period January 1, 1998 through December
31, 1998, the assessment rates applicable to all non-reviewed companies
covered by this order are the cash deposit rates in effect at the time
of entry, except for Barilla and Gruppo which were excluded from the
order during the original investigation.
------------------------------------------------------------------------
Ad valorem
Company rate
(percent)
------------------------------------------------------------------------
Delverde S.p.A./Delverde S.r.L............................. 3.86
Tamma Industrie Alimentari S.r.L........................... 3.63
Pastificio Riscossa F.lli Mastromauro S.r.L................ 1.14
[[Page 48487]]
Rummo S.p.A. Molino e Pastaficio........................... 0.53
------------------------------------------------------------------------
The calculations will be disclosed to the interested parties in
accordance with section 351.224(b) of the regulations.
Because we are rescinding the review with respect to La Molisana,
the company-specific rate for this company remains unchanged.
Public Comment
Interested parties may submit written arguments in case briefs
within 30 days of the date of publication of this notice. Rebuttal
briefs, limited to issues raised in case briefs, may be filed not later
than five days after the date of filing the case briefs. Parties who
submit briefs in this proceeding should provide a summary of the
arguments not to exceed five pages and a table of statutes,
regulations, and cases cited. Copies of case briefs and rebuttal briefs
must be served on interested parties in accordance with 19 CFR
351.303(f).
Interested parties may request a hearing within 30 days after the
date of publication of this notice. Any hearing, if requested, will be
held two days after the scheduled date for submission of rebuttal
briefs.
Representatives of parties to the proceeding may request disclosure
of proprietary information under administrative protective order no
later than 10 days after the representative's client or employer
becomes a party to the proceeding, but in no event later than the date
the case briefs, under 19 CFR 351.309(c)(ii), are due.
The Department will publish a notice of the final results of this
administrative review within 120 days from the publication of these
preliminary results.
This administrative review and notice are in accordance with
sections 751(a)(1) and 777(i)(1) of the Act.
Dated: July 31, 2000.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 00-19948 Filed 8-7-00; 8:45 am]
BILLING CODE 3510-DS-P