[Federal Register: August 6, 2007 (Volume 72, Number 150)]
[Notices]
[Page 43616-43622]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06au07-37]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-475-819]
Certain Pasta from Italy: Preliminary Results of the Tenth
Countervailing Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
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, 2005, through December 31, 2005. We preliminarily
find that Pastificio Antonio Pallante S.r.L. (``Pallante'') and De
Matteis Agroalimetare S.p.A. (``De Matteis'') received countervailable
subsidies in this review, and Atar S.r.L. (``Atar'') did not receive
any countervailable subsidies in this review and its rate is,
consequently, zero. See the ``Preliminary Results of Review'' section,
below. Interested parties are invited to comment on these preliminary
results. See the ``Public Comment'' section of this notice.
DATES: Effective Date: August 6, 2007.
FOR FURTHER INFORMATION CONTACT: Audrey Twyman or Brandon Farlander,
AD/CVD Operations, Office 1, Import Administration, U.S. Department of
Commerce, 14th Street and Constitution Avenue, NW., Washington, DC
20230; telephone: (202) 482-3534 and (202) 482-0182, respectively.
SUPPLEMENTARY INFORMATION:
Background
On July 24, 1996, the Department of Commerce (``the Department'')
published a countervailing duty order on certain pasta (``pasta'' or
``subject merchandise'') from Italy. See Notice of Countervailing Duty
Order and Amended Final Affirmative Countervailing Duty Determination:
Certain Pasta From Italy, 61 FR 38544 (July 24, 1996) (``Pasta
Order''). On July 3, 2006, the Department published a notice of
``Opportunity to Request Administrative Review'' of this countervailing
duty order for calendar year 2005, the period of review (``POR''). See
Antidumping or Countervailing Duty Order, Finding, or Suspended
Investigation; Opportunity to Request Administrative Review, 71 FR
37890 (July 3, 2006). On July 31, 2006, we received a request for
review from Atar and Pallante. On July 31, 2006, we received a request
for review for De Matteis on behalf of New World Pasta Company,
American Italian Pasta Company, and Dakota Growers Pasta Company
(``petitioners''). In accordance with 19 CFR 351.221(c)(1)(i), we
published a notice of initiation of the review on August 30, 2006. See
Initiation of Antidumping and Countervailing Duty Administrative
Reviews and Requests for Revocation in Part, 70 FR 51573 (August 30,
2006).
On August 31, 2006, we issued countervailing duty questionnaires to
the Commission of the European Union, the Government of Italy
(``GOI''), Pallante, De Matteis, and Atar. We received responses to our
questionnaire in October and November 2006. We issued supplemental
questionnaires to the respondents in November 2006, and we received
responses to our supplemental questionnaires in December 2006 and
January 2007. In November 2006, we also requested that Agritalia S.r.L.
(``Agritalia'') provide a full questionnaire response because of its
status as a trading company for Italian pasta producers participating
in this review. We received Agritalia's questionnaire response in
January 2007. On March 2, 2007, we sent out supplemental questionnaires
to Agritalia, De Matteis and the GOI. We received responses on April
11, 2007. We sent out additional supplemental questionnaires to
Agritalia, De Matteis, Atar, Pallante, and the GOI on May 11, 2007, and
received responses in May and June 2007. We sent out additional
supplemental questionnaires to De Matteis, Agritalia, and Pallante on
June 19, 2007, and received responses on July 5, 2007.
In accordance with 19 CFR 351.213(b), this review covers only those
producers or exporters for which a review was specifically requested.
The companies subject to this review are De Matteis, Atar, and
Pallante.
Period of Review
The POR for which we are measuring subsidies is January 1, 2005,
through December 31, 2005.
Scope of the Order
Imports covered by the order are shipments of certain non-egg dry
pasta in packages of five pounds four ounces or less, whether or not
enriched or fortified or containing milk or other optional ingredients
such as chopped vegetables, vegetable purees, milk, gluten, diastasis,
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 the order 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, Bioagricoop S.r.l., QC&I International Services,
Ecocert Italia, Consorzio per il Controllo dei Prodotti Biologici,
Associazione Italiana per l'Agricoltura Biologica, or Codex S.r.l. In
addition, based on publicly available information,
[[Page 43617]]
the Department has determined that, as of August 4, 2004, imports of
organic pasta from Italy that are accompanied by the appropriate
certificate issued by Bioagricert S.r.l. are also excluded from this
order. See memorandum from Eric B. Greynolds to Melissa G. Skinner,
dated August 4, 2004, which is on file in the Department's Central
Records Unit (``CRU'') in Room B-099 of the main Department building.
In addition, based on publicly available information, the Department
has determined that, as of March 13, 2003, imports of organic pasta
from Italy that are accompanied by the appropriate certificate issued
by Instituto per la Certificazione Etica e Ambientale (ICEA) are also
excluded from this order. See memorandum from Audrey Twyman to Susan
Kuhbach, dated February 28, 2006, entitled ``Recognition of Instituto
per la Certificazione Etica e Ambientale (ICEA) as a Public Authority
for Certifying Organic Pasta from Italy'' which is on file in the
Department's Central Records Unit (``CRU'') in Room B-099 of the main
Department building.
The merchandise subject to review is currently classifiable under
items 1901.90.9095 and 1902.19.20 of the Harmonized Tariff Schedule of
the United States (``HTSUS''). Although the HTSUS subheadings are
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 antidumping and countervailing duty
orders. See Memorandum from Edward Easton to Richard Moreland, dated
August 25, 1997, which is on file in the CRU.
(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
antidumping and countervailing duty orders. See Letter from Susan H.
Kuhbach to Barbara P. Sidari, dated July 30, 1998, which is available
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 is within the scope of the
antidumping and countervailing duty orders. 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 antidumping and countervailing duty
orders. See Memorandum from John Brinkmann to Richard Moreland, dated
May 24, 1999, which is available in the CRU.
(4) On April 27, 2000, the Department self-initiated an anti-
circumvention inquiry to determine whether Pastificio Fratelli Pagani
S.p.A.'s importation of pasta in bulk and subsequent repackaging in the
United States into packages of five pounds or less constitutes
circumvention with respect to the antidumping and countervailing duty
orders on pasta from Italy pursuant to section 781(a) of the Act and 19
CFR 351.225(b). See Certain Pasta from Italy: Notice of Initiation of
Anti-Circumvention Inquiry of the Antidumping and Countervailing Duty
Orders, 65 FR 26179 (May 5, 2000). On September 19, 2003, we published
an affirmative finding of the anti-circumvention inquiry. See Anti-
Circumvention Inquiry of the Antidumping and Countervailing Duty Orders
on Certain Pasta from Italy: Affirmative Final Determinations of
Circumvention of Antidumping and Countervailing Duty Orders, 68 FR
54888 (September 19, 2003).
Subsidies Valuation Information
Allocation Period
Pursuant to 19 CFR 351.524(b), non-recurring subsidies are
allocated over a period corresponding to the average useful life
(``AUL'') of the renewable physical assets used to produce the subject
merchandise. The Department's regulations create a rebuttable
presumption that the AUL will be taken from the U.S. Internal Revenue
Service's 1977 Class Life Asset Depreciation Range System (``IRS
Tables''). See 19 CFR 351.524(d)(2). For pasta, the IRS Tables
prescribe an AUL of 12 years. None of the responding companies or
interested parties objected to this allocation period. Therefore, we
have used the 12-year allocation period for all respondents.
Attribution of Subsidies
Pursuant to 19 CFR 351.525(b)(6), the Department will attribute
subsidies received by certain companies to the combined sales of those
companies. Based on our review of the responses, we preliminarily find
that ``cross-ownership'' exists with respect to certain companies, as
described below, and we have attributed subsidies accordingly:
Pallante: Pallante has reported that it is affiliated with Vitelli
Foods LLC (``Vitelli''), which is a U.S. importer of subject
merchandise and other products from Italy and other countries. See
Pallante's questionnaire response at pages 1-2 (October 31, 2006).
Pallante also explained that until April 2003 it was affiliated with
Industrie Alimentare Molisane (``IAM''), another Italian pasta
producer, but that the affiliation has ended and they were not
affiliated during the POR. See Pallante's questionnaire response at
pages 2-4 (October 31, 2006). Because IAM is no longer cross-owned with
Pallante, and because Vitelli is located in the United States, we are
attributing Pallante's subsidies to the sales of Pallante only.
De Matteis: De Matteis has reported that it is affiliated with De
Matteis Construzioni S.r.L. (``Construzioni'') by virtue of being 100
percent owned by Construzioni. See De Matteis' questionnaire response
at pages 2-3 (October 31, 2007). In the Fourth Administrative Review
\1\ De Matteis had another affiliate, Demaservice S.r.l. De Matteis
reported that Demaservice S.r.l. is no longer in existence as of
December 21, 2001. See De Matteis' January 16, 2006, first supplemental
questionnaire response at pages 16-17. De Matteis has reported that
Construzioni did not receive any subsidies during the POR or AUL
period. See De Matteis' Second Supplemental Response at 1 (April 13,
2007). Therefore, we are attributing De Matteis' subsidies to its sales
only.
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\1\ See Certain Pasta from Italy: Preliminary Results and
Partial Rescission of Countervailing Duty Administrative Review, 66
FR 40987 (August 6, 2001) (``Fourth Administrative Review'');
(unchanged in Final Results) Certain Pasta From Italy: Final Results
of the Fourth Countervailing Duty Administrative Review, 66 FR 64214
(December 12, 2001).
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Atar: Atar has reported that it has no affiliates or cross-
ownership. Thus, we are attributing any subsidies received to Atar's
sales only.
Discount Rates
Pursuant to 19 CFR 351.524(d)(3)(i)(B), we used the national
average cost of long-term, fixed-rate loans as a discount rate for
allocating non-recurring benefits over time because no company for
which we need such discount rates took out any loans in the years in
which the government agreed to provide the subsidies in question.
Consistent with past practice in this proceeding, for years prior to
1995, we used the Bank of Italy reference rate adjusted upward to
reflect the mark-up an Italian commercial bank
[[Page 43618]]
would charge a corporate customer. See, e.g., Certain Pasta from Italy:
Preliminary Results and Partial Recision of the Eighth Countervailing
Duty Administrative Review, 70 FR 17971 (April 8, 2005) (decision
unchanged in the final results, Certain Pasta from Italy: Final Results
of the Eighth Countervailing Duty Administrative Review, 70 FR 37084
(June 28, 2005)). For benefits received in 1995-2004, we used the
Italian Bankers' Association prime interest rate (as reported by the
Bank of Italy), increased by the average spread charged by banks on
loans to commercial customers plus an amount for bank charges. The Bank
of Italy ceased reporting this rate in 2004. Because the ABI prime rate
was no longer reported after 2004, for these preliminary results, for
2005 we have used the ``Bank Interest Rates on Euro Loans: Outstanding
Amounts, Non-Financial Corporations, Loans With Original Maturity More
Than Five Years'' published by the Bank of Italy and provided by the
Government of Italy in their October 24, 2006, Questionnaire Response
at Exhibit 9. To this rate we made the adjustments described above. See
Memorandum to the File, ``Calculations for the Preliminary Results for
De Matteis Agroalimentare S.p.A.'' (July 31, 2007) (``De Matteis Calc
Memo'').
Analysis of Programs
I. Program Preliminarily Determined to be Countervailable
A. Industrial Development Grants Under Law 64/86
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.
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 continue receiving grants under Law 64/86 after 1993.
DeMatteis and Pallante received grants under Law 64/86 which
conferred a benefit during the POR.
In the Pasta Investigation, the Department determined that these
grants confer a countervailable subsidy within the meaning of section
771(5) of the Act. See Final Affirmative Countervailing Duty
Determination: Certain Pasta (``Pasta'') from Italy, 61 FR 30288 (June
14, 1996) (``Pasta Investigation''). They are 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 our determination that these grants are
countervailable subsidies.
In the Pasta Investigation, the Department treated the industrial
development grants as non-recurring. No new information has been placed
on the record of this review that would cause us to depart from this
treatment. We have followed the methodology described in 19 CFR
351.524(b)(2) which directs us to allocate over time those non-
recurring grants whose total authorized amount exceeds 0.5 percent of
the recipient's sales in the year of authorization. Where the total
amount authorized is less than 0.5 percent of the recipient's sales in
the year of authorization, the benefit is countervailed in full
(``expensed'') in the year of receipt. We determined that the grants
received by De Matteis and Pallante under law 64/86 exceeded 0.5
percent of their sales in the year in which the grants were approved,
as was done in the Fourth Administrative Review.
We used the grant methodology described in section 351.524(d) of
the regulations to calculate the countervailable subsidy from those
grants that were allocated over time. We divided the benefit received
by each company in the POR by its total sales in the POR.
On this basis, we preliminarily determine the countervailable
subsidy from the Law 64/86 industrial development grants to be 0.07
percent ad valorem for DeMatteis, and 0.28 percent ad valorem for
Pallante. See De Matteis Calc Memo; Memorandum to the File,
``Calculations for the Preliminary Results for Pastificio Antonio
Pallante S.r.L.'' (July 31, 2007) (``Pallante Calc Memo'').
B. Industrial Development Grants Under Law 488/92
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
(underdeveloped regions), Objective 2 (declining industrial regions),
or Objective 5(b) (declining agricultural regions) areas by the EU. 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.
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.
DeMatteis and Pallante received grants under Law 488/92 which
conferred a benefit during the POR.
Industrial development grants under Law 488/92 were found
countervailable in the Second Administrative Review \2\. The grants are
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 our determination
that these grants are countervailable subsidies.
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\2\ See Certain Pasta From Italy: Preliminary Results of
Countervailing Duty Administrative Review, 64 FR 17618 (April 12,
1999) (``Second Administrative Review''); (unchanged in Final
Results) Certain Pasta From Italy: Final Results of Second
Countervailing Duty Administrative Review, 64 FR 44489 (August 16,
1999).
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In the Second Administrative Review, the Department treated
industrial development grants under Law 488/92 as non-recurring. No new
information has been placed on the record of this review that would
cause us to depart from this treatment. In accordance with section
351.524(b)(2) of the regulations, we determined that the grants
received by De Matteis and Pallante under law 488/92 exceeded 0.5
percent of their sales in the year in which the grants were approved,
as was the case in the Fourth Administrative Review.
We used the grant methodology as described in section 351.524(d) of
the regulations to calculate the subsidy for those grants that were
allocated over
[[Page 43619]]
time. We divided the benefits received by Pallante in the POR by its
total sales in the POR, and the benefits received by De Matteis in the
POR by its sales of subject merchandise in the POR.
On this basis, we preliminarily determine the countervailable
subsidy from the Law 488/92 industrial development grants to be 0.81
percent ad valorem for DeMatteis and 0.61 percent ad valorem for
Pallante. See De Matteis Calc Memo and Pallante Calc Memo.
C. European Regional Development Fund ("ERDF") Programma Operativo
Plurifondo (P.O.P.) Grant
The ERDF is one of the European Union's Structural Funds. It was
created pursuant to the authority in Article 130 of the Treaty of Rome
in order to reduce regional disparities in socio-economic performance
within the EU. The ERDF program provides grants to companies located
within regions which meet the criteria of Objective 1 (underdeveloped
regions), Objective 2 (declining industrial regions), or Objective 5(b)
(declining agricultural regions) under the Structural Funds.
DeMatteis received a P.O.P. Grant from the Regione Campania in
1998. See Fourth Administrative Review. The P.O.P. Grants were funded
by the European Union, the GOI and the Regione Campania.
In the Pasta Investigation, the Department determined that ERDF
grants confer a countervailable subsidy within the meaning of section
771(5) of the Act. They are a direct transfer of funds 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 EU, the GOI nor the responding companies
have provided new information which would warrant reconsideration of
our determination that ERDF grants are countervailable subsidies.
In the Pasta Investigation, the Department treated ERDF grants as
non-recurring. No new information has been placed on the record of this
review that would cause us to depart from this treatment. In accordance
with section 351.524(b)(2) of the regulations, we determined that the
ERDF grant received by De Matteis exceeded 0.5 percent of its sales in
the year in which the grant was approved, as was the case in the Fourth
Administrative Review.
We used the grant methodology described in section 351.524(d) of
the regulations to calculate the countervailable benefit. We divided
the benefit received De Matteis in the POR by its total sales in the
POR.
On this basis, we preliminarily determine the countervailable
subsidy from the ERDF grant to be 0.06 percent ad valorem for
DeMatteis. See De Matteis Calc Memo.
D. Social Security Reductions and Exemptions--Sgravi
Italian law allows companies, particularly those located in the
Mezzogiorno region (southern Italy), to use a variety of exemptions
from and reductions (sgravi) of 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. We have found in past segments of this proceeding
that the benefits under some of these laws (e.g., Laws 183/76 and 449/
97) are available only to companies located in the Mezzogiorno and
other disadvantaged regions. 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.
In the Pasta Investigation and subsequent reviews, the Department
determined that the various forms of social security reductions and
exemptions confer countervailable subsidies within the meaning of
section 771(5) of the Act. They represent revenue foregone by the GOI
bestowing 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)(D)(iv) of the Act because they were limited
to companies in the Mezzogiorno or because the higher levels of
benefits were limited to companies in the Mezzogiorno.
In the instant review, no party in this proceeding challenged our
past determinations in the Pasta Investigation and subsequent reviews
that sgravi benefits were countervailable for companies located within
the Mezzogiorno region. Additionally, no new information or evidence of
changed circumstances was received that would warrant reconsideration
of these past determinations.
The laws identified as having provided countervailable sgravi
benefits during the POR are the following: Law 407/90 (De Matteis and
Pallante), 196/97 (De Matteis), 223/91 Article 8 Paragraph 2
(Pallante), and Law 223/91 Article 25 Paragraph 9 (Pallante). All of
these companies are located in the Mezzogiorno region of Italy and,
therefore, the programs provide countervailable subsidies to these
companies.
1. Law 407/90
Law 407/90 grants a two-year exemption from social security taxes
when a company hires a worker who has been previously unemployed for a
period of two years. A 100 percent exemption is allowed for companies
in southern Italy. However, companies located in northern Italy receive
only a 50 percent exemption.
In accordance with section 351.524(c) of the Department's
regulations and consistent with our methodology in the Pasta
Investigation and in reviews subsequent to the Pasta Investigation, we
have treated social security reductions and exemptions as recurring
benefits. To calculate the countervailable subsidy, we divided De
Matteis's and Pallante's savings in social security contributions
during the POR by their total sales in the POR. On this basis, we
preliminarily determine the countervailable subsidy from the sgravi
program to be 0.04 percent ad valorem for De Matteis and 0.03 percent
ad valorem for Pallante. See De Matteis Calc Memo and Pallante Calc
Memo.
2. Law 196/97
Law 196/97 allows for a reduction or exemption from social security
contributions for workers between the ages of 16 and 32 hired under
labor or training contacts. Reductions range from 25 percent to 100
percent depending on the location. The newly hired worker(s) must
increase the company's total work force or the worker must be 29 years
old or younger. For newly hired workers under a temporary contract,
employers are exempt from paying a social security contribution for up
to 2 years. If workers are then switched to a permanent contract, the
exemption may apply for another 12 months. These benefits will only
apply if the worker who is switched from a temporary to a permanent
contract increases the number of employees in the enterprise.
In accordance with section 351.524(c) of the Department's
regulations and consistent with our methodology in the Pasta
Investigation and in reviews subsequent to the Pasta Investigation, we
have treated social security reductions and exemptions as recurring
benefits. To calculate the countervailable subsidy, we divided De
Matteis's savings in social security contributions during the POR by
its total sales in the POR. On this basis, we preliminarily determine
the countervailable subsidy from the sgravi program to be 0.04 percent
ad valorem
[[Page 43620]]
for De Matteis. See De Matteis Calc Memo.
3. Law 223/91 Article 8, Paragraph 2
Law 223/91, Article 8, Paragraph 2 is intended to encourage the
hiring of laid off workers or mobility-listed people. Companies who
hire unemployed people are allowed to pay lower social security taxes
for up to a maximum of 18 months for employees hired under a long-term
contract with no expiration date. If an employee is hired for a short-
term contract, then the benefit will last as long as the contract. If
the short-term contract is renewed, the benefit can be used for an
additional 12 months. In the seventh review preliminary results we
stated that record information for law 223/91 shows that this law is
regionally specific within the meaning of section 771(5A)(D)(iv) of the
Act because the higher levels of benefits were limited to companies in
the Mezzogiorno and to handicraft enterprises. See Certain Pasta from
Italy: Preliminary Results and Partial Rescission of the Seventh
Countervailing Duty Administrative Review, 69 FR 45676, 45683 (July 30,
2004); (unchanged in Final Results) Certain Pasta from Italy: Final
Results of the Seventh Countervailing Duty Administrative Review, 69 FR
70657 (December 7, 2004).
In accordance with section 351.524(c) of the Department's
regulations and consistent with our methodology in the Pasta
Investigation and in reviews subsequent to the Pasta Investigation, we
have treated social security reductions and exemptions as recurring
benefits. To calculate the countervailable subsidy, we divided each
company's savings in social security contributions during the POR by
its total sales in the POR. On this basis, we preliminarily determine
the countervailable subsidy from the sgravi program to be 0.05 percent
ad valorem for Pallante. See Pallante Calc Memo.
4. Law 223/91 Article 8, Paragraph 4
Law 223/91, Article 8, Paragraph 4 is intended to encourage the
hiring of mobility-listed people. Companies who hire unemployed people
on a permanent and full time contract are granted a credit of 50
percent of what the employee would have received in unemployment
benefits.
In the 7th Administrative Review results we stated that record
information for law 223/91 shows that this law is regionally specific
within the meaning of section 771(5A)(D)(iv) of the Act because the
higher levels of benefits were limited to companies in the Mezzogiorno
and to handicraft enterprises. See Certain Pasta from Italy:
Preliminary Results and Partial Rescission of the Seventh
Countervailing Duty Administrative Review, 69 FR 45676, 45683 (July 30,
2004); (unchanged in Final Results) Certain Pasta from Italy: Final
Results of the Seventh Countervailing Duty Administrative Review, 69 FR
70657 (December 7, 2004).
In accordance with section 351.524(c) of the Department's
regulations and consistent with our methodology in the Pasta
Investigation and in reviews subsequent to the Pasta Investigation, we
have treated social security reductions and exemptions as recurring
benefits. To calculate the countervailable subsidy, we divided
Pallante's savings in social security contributions during the POR by
its total sales in the POR. On this basis, we preliminarily determine
the countervailable subsidy from the sgravi program to be 0.01 percent
ad valorem for Pallante. See Pallante Calc Memo.
E. Law 289/02
1. Article 62--Investments in Disadvantaged Areas
We preliminarily find that Article 62 of Law 289/02 is a credit
towards taxes payable. The law was established to promote investment in
disadvantaged areas by providing a tax credit to companies that make
investments such as the purchase of new equipment for existing
structures, or the building of new structures. See the GOI's Second
Supplemental Response at 3-4 and Annex 1, 2, 5, and 6 (April 13, 2007).
We preliminarily determine that Article 62 of Law 289/02 confers a
countervailable subsidy in the form of a financial contribution within
the meaning of section 771(5)(D)(ii) of the Act because it represents
revenue foregone by the GOI. A benefit is conferred in the amount of
the tax savings received by the companies per section 771(5)(E)(iv) of
the Act. Also, the program is specific within the meaning of
751(5A)(D)(iv) of the Act because it is limited to certain geographical
regions in Italy, specifically, the regions of Calabria, Campania,
Basilicata, Pugilia, Sicilia, and Sardegna, and certain municipalities
in the Abruzzo and Molise region, and certain municipalities in central
and northern Italy. See GOI Third Supplemental Response at 3 and Annex
1 and 2, (May 25, 2007).
De Matteis is located in Campania, therefore, it could take
advantage of this program. De Matteis explained that it received the
benefit for the construction of a new semolina milling facility,
including wheat silos, by-product storage silos, semolina silos, and
milling equipment. See De Matteis' Second Supplemental Response at 2
(April 13, 2007). The Department is treating this program as a credit
towards taxes payable per 19 CFR 351.509. Normally, the Department will
allocate the benefit of a tax exemption to the year in which the
benefit is considered to have been received per 19 CFR 351.509(c),
treating the benefit as recurring per 19 CFR 351.524(c). However, the
Department may find a benefit to be non-recurring by considering the
criteria in 19 CFR 351.524(c)(2)(i)-(iii). In this case, the tax
program is exceptional because it was only available for a limited
period of time, and was dependent upon companies making specific
investments. Further, the subsidy required the government of Italy's
express authorization, and the subsidy was tied to capital assets of
the firm.
In accordance with section 351.524(b)(2) of the regulations, we
determined that the tax credit received by De Matteis exceeded 0.5
percent of its sales in the year in which the tax credit was approved.
We used the non-recurring benefit calculation described in 19 CFR
351.524(d) of the regulations to calculate the countervailable benefit.
We divided the benefit received by De Matteis in the POR by its total
sales in the POR. On this basis, we preliminarily determine the
countervailable subsidy from Law 289/02 Article 62 to be 0.35 percent
ad valorem for De Matteis. See De Matteis Calc Memo.
Pallante is located in Campania and, therefore, it could also take
advantage of this program. In accordance with section 351.524(b)(2) of
the regulations, we determined that the tax credit received by Pallante
exceeded 0.5 percent of its sales in the year in which the tax credit
was approved. We used the non-recurring benefit calculation described
in 19 CFR 351.524(d) of the regulations to calculate the
countervailable benefit. We divided the benefit received by Pallante in
the POR by its total sales in the POR. On this basis, we preliminarily
determine the countervailable subsidy from Law 289/02 Article 62 to be
1.04 percent ad valorem for Pallante. See Pallante Calc Memo.
2. Article 63--Increase in Employment
We preliminarily find that Article 63 of Law 289/02 is a credit
towards taxes payable. The law was established to promote employment by
providing a tax credit to companies that hire new employees. The tax
credit is 100 euros for a new hire for any company in Italy. If the
employee is over 45 the amount
[[Page 43621]]
increases to 150 euros. An additional 300 euros will be granted if the
company is located in certain regions of Italy. See GOI Second
Supplemental Response at 3-4 and Annex 3, 4, 7, and 8 (April 13, 2007).
We preliminarily determine that Article 63 of Law 289/02 confers a
countervailable subsidy in the form of a financial contribution within
the meaning of section 771(5)(D)(ii) of the Act because it represents
revenue foregone by the GOI. A benefit is conferred in the amount of
the tax savings received by the companies per section 771(5)(E)(iv) of
the Act. The program is specific within the meaning of 751(5A)(D)(iv)
of the Act because the greater benefit amount is limited to certain
geographical regions in Italy, specifically, Campania, Basilicata,
Puglia, Calabria, Sicilia, Sardegna, Abruzzo, Molise, and the
municipalities of Tivoli, Formia, Sora, Cassino, Frosnone, Viterbo, and
Massa. See GOI Third Supplemental Response at 3-4 (May 25, 2007).
However, if a company is located outside the higher subsidy area, then
the program is not countervailable because it is not specific.
De Matteis is located in Campania and, therefore, it could take
advantage of the higher subsidy rate. The Department is treating this
program as a credit towards taxes payable per 19 CFR 351.509. Normally,
the Department will allocate the benefit of a credit towards taxes
payable to the year in which the benefit is considered to have been
received per 19 CFR 351.509. ``The Secretary normally will consider the
benefit as having been received on the date on which the recipient firm
would otherwise have had to pay the taxes associated with the exemption
or remission. Normally, this date will be the date on which the firm
filed its tax return.'' See 19 CFR 351.509(b). In expensing the
complete benefit in one year, the Department is considering this
program as recurring per 19 CFR 351.524(c) which states that
``{t{time} he Secretary normally will treat the following types of
subsidies as providing recurring benefits: Direct tax exemptions and
deductions; * * *'' To calculate the countervailable subsidy, we
divided De Matteis' tax credit used on the tax return filed during the
POR by its total sales in the POR. On this basis, we preliminarily
determine the countervailable subsidy from Law 289/02 Article 63 to be
0.03 percent ad valorem for De Matteis. See De Matteis Calc Memo.
F. Law 662/96
The GOI describes the Patti Territoriali grant (Law 662/96 Article
2, Paragraph 203, Letter d) as provided to companies for
entrepreneurial initiatives such as new plants, additions,
modernization, restructuring, conversion, reactivation, or transfer.
Companies that can apply for the grants must be involved in mining,
manufacturing, production of thermal or electric power from biomasses,
service companies, tourist companies, agricultural, maritime and salt-
water fishing businesses, aquaculture enterprises, or their
associations. The Patti Territoriali provides grants to companies
located within regions which meet the criteria of Objective 1 or
Objective 2 under the Structural Funds or article 87.3.c of the Treaty
of Rome. See the GOI's Second Supplemental Response at 4-5 and Annex 9-
13 (April 13, 2007).
The GOI has stated that De Matteis received disbursements from the
Patti Territoriali in 2000 and 2004 from a grant approved on January
29, 1999.
The Department preliminarily determines that the Patti Territoriali
grant confers a countervailable subsidy within the meaning of section
771(5)(D)(i) of the Act because it is a direct transfer of funds. A
benefit is conferred in the full amount of the grant. Further, the
grant is regionally specific within the meaning of section
771(5A)(D)(iv) of the Act because it is limited to companies located
within regions which meet the criteria of Objective 1 or Objective 2
under the Structural Funds or article 87.3.c of the Treaty of Rome.
We normally treat grants as non-recurring. In accordance with
section 351.524(b)(2) of the regulations, we determined that the Patti
Territoriali grant received by De Matteis exceeded 0.5 percent of its
sales in the year in which the grant was approved and, therefore, we
will allocate the grant over the 12 year AUL.
We used the grant methodology described in section 351.524(d) of
the regulations to calculate the countervailable benefit. We divided
the benefit received by De Matteis in the POR by its total sales in the
POR. On this basis, we preliminarily determine the countervailable
subsidy from the Patti Territoriali grant to be 0.57 percent ad valorem
for De Matteis. See De Matteis Calc Memo.
On July 23, 2007, petitioners submitted ``Comments In Anticipation
of Preliminary Results.'' In these comments, petitioners have made a
further claim concerning this program. Because we did not have time to
issue a supplemental questionnaire, we are not acting on the claim at
this time. Following the publication of these preliminary results, the
Department will decide whether to issue any further supplemental
questionnaires concerning this program.
II. Programs Preliminarily Determined to be Not Countervailable
A. Social Security Reductions and Exemptions--Sgravi(Article 120 of
Law 388/00)
Atar has reported receiving benefits from Article 120 of Law 388/
00. Unlike many other sgravi programs, Article 120 of Law 388/00
(fiscalizzazione program) is a nationwide sgravi program that provides
an equivalent level of deductions throughout Italy and is not specific
to the Mezzogiorno region or to the pasta industry pursuant to section
771(5A) of the Act. Article 120 of Law 388/00 provides a deduction of
certain social security payments related to health care or insurance.
The government takes over a minimal amount of the payments for social
contributions which are owed to the Instituto Nazionale Previdenza
Sociale (``INPS''). In the ninth administrative review we found this
program to be non-countervailable. See Certain Pasta from Italy:
Preliminary Results of the Ninth Countervailing Duty Administrative
Review and Notice of Intent to Revoke Order, in Part, 71 FR 17440
(April 6, 2006); and Certain Pasta from Italy: Final Results of the
Ninth Countervailing Duty Administrative Review and Notice of
Revocation of Order, in Part, 71 FR 36318 (June 26, 2006). Therefore,
we continue to find that Article 120 of Law 388/00 is not a
countervailable subsidy because the subsidy is not specific.
Accordingly, we determine that Atar did not receive countervailable
subsidies under this program.
III. Programs Preliminarily Determined to Not be Used
We examined the following programs and preliminarily determine that
the producers and/or exporters of the subject merchandise under review
did not apply for or receive benefits under these programs during the
POR:
A. Industrial Development Loans Under Law 64/86.
B. Law 236/93 Training Grants.
C. Law 1329/65 Interest Contributions (Sabatini Law) (Formerly
Lump-Sum Interest Payment Under the Sabatini Law for Companies in
Southern Italy).
D. Development Grants Under Law 30 of 1984.
[[Page 43622]]
E. Law 908/55 Fondo di Rotazione Iniziative Economiche (Revolving
Fund for Economic Initiatives) Loans.
F. Law 317/91 Benefits for Innovative Investments.
G. Brescia Chamber of Commerce Training Grants.
H. Ministerial Decree 87/02.
I. Law 10/91 Grants to Fund Energy Conservation.
J. Export Restitution Payments.
K. Export Credits Under Law 227/77.
L. Capital Grants Under Law 675/77.
M. Retraining Grants Under Law 675/77.
N. Interest Contributions on Bank Loans Under Law 675/77.
O. Preferential Financing for Export Promotion Under Law 394/81.
P. Urban Redevelopment Under Law 181.
Q. Industrial Development Grants Under Law 183/76.
R. Interest Subsidies Under Law 598/94.
S. Duty-Free Import Rights.
T. European Social Fund Grants.
U. Law 113/86 Training Grants.
V. European Agricultural Guidance and Guarantee Fund.
W. Law 341/95 Interest Contributions on Debt Consolidation Loans
(Formerly Debt Consolidation Law 341/95).
X. Interest Grants Financed by IRI Bonds.
Y. Grant Received Pursuant to the Community Initiative Concerning
the Preparation of Enterprises for the Single Market (PRISMA).
Z. Article 44 of Law 448/01.
IV. Programs Preliminarily Determined To Have Been Terminated
We examined the following programs at verification during the 9th
Administrative Review and preliminarily determine in this review that
they have been terminated prior to the current POR and that there will
be no remaining subsidy benefits from these programs after this POR.
See ``Verification of the Questionnaire Responses of the Government of
Italy in the 9th Administrative Review'' (March 31, 2006) which was
placed on the record of this proceeding on July 31, 2007.
A. Social Security Reductions and Exemptions--Sgravi Article 44 of
Law 448/01.
B. Social Security Reductions and Exemptions--Sgravi Law 337/90.
Preliminary Results of Review
In accordance with 19 CFR 351.221(b)(4)(i), we calculated an
individual subsidy rate for Pallante and De Matteis. Atar had no
countervailable subsidies. We did not calculate an individual rate for
Agritalia because a review was not requested for Agritalia. Agritalia
was only asked to participate because of the possible effect of
subsidies it received on its suppliers who are included in this review.
We have preliminarily found that Agritalia did not receive any
subsidies which affected any suppliers' rates. For the period January
1, 2005, through December 31, 2005, we preliminarily find the net
subsidy rates for the producers/exporters under review to be those
specified in the chart shown below:
------------------------------------------------------------------------
Net subsidy
Producer/exporter rate
(percent)
------------------------------------------------------------------------
De Matteis Agroalimetare S.p.A............................. 1.97
Pastificio Antonio Pallante S.r.L.......................... 2.02
Atar S.r.l................................................. 0.00
------------------------------------------------------------------------
The calculations will be disclosed to the interested parties in
accordance with 19 CFR 351.224(b).
If the final results of this review remain the same as these
preliminary results, the Department intends to instruct Customs to
assess countervailing duties at these net subsidy rates. The Department
will issue appropriate instructions directly to Customs within 15 days
of publication of the final results of this review.
For all other companies that were not reviewed (except Barilla G. e
R. F.lli S.p.A. and Gruppo Agricoltura Sana S.r.l., which are excluded
from the order, and Pasta Lensi S.r.l. which was revoked from the
order), the Department has directed CBP to assess countervailing duties
on all entries between January 1, 2005, and December 31, 2005, at the
rates in effect at the time of entry. Agritalia has been reviewed
previously and has its own exporter specific rate of 2.92 percent.
The Department also intends to instruct CBP to collect cash
deposits of estimated countervailing duties.
For all non-reviewed firms (except Barilla G. e R. F.lli S.p.A. and
Gruppo Agricoltura Sana S.r.l., which are excluded from the order, and
Pasta Lensi S.r.l. which was revoked from the order), we will instruct
CBP to collect cash deposits of estimated countervailing duties at the
most recent company-specific or ``all others'' rate applicable to the
company. These rates shall apply to all non-reviewed companies until a
review of a company assigned these rates is requested.
Public Comment
Pursuant to 19 CFR 351.224(b), the Department will disclose to
parties to the proceeding any calculations performed in connection with
these preliminary results within five days after the date of the public
announcement of this notice.
Pursuant to 19 CFR 351.309(c)(ii), 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 no later than five days after the date of
filing the case briefs, in accordance with 19 CFR 351.309(d). 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, pursuant to 19 CFR 351.310(c). Any
hearing, if requested, will be held two days after the scheduled date
for submission of rebuttal briefs.
The Department will publish a notice of the final results of this
administrative review within 120 days from the publication of these
preliminary results, in accordance with section 751(a)(3) of the Act.
We are issuing and publishing these results in accordance with
sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR 351.221(b)(4).
Dated: July 31, 2007.
Stephen J. Claeys,
Acting Assistant Secretary for Import Administration.
[FR Doc. 07-3832 Filed 8-3-07; 8:45 am]
BILLING CODE 3510-DS-P