53 FR 27197
NOTICES
DEPARTMENT OF COMMERCE
[C-475-702]
Final Negative Countervailing Duty Determination; Certain Granite Products
From Italy
Tuesday, July 19, 1988
*27197
AGENCY: Import Administration, International Trade Administration,
Commerce.
ACTION: Notice.
SUMMARY: We determine that de minimis countervailable benefits are being
provided to manufacturers, producers or exporters in Italy of certain granite
(Cite as: 53 FR 27197, *27197)
products as described in the "Scope of Investigation" section of this notice. Since the
estimated net subsidy is either de minimis or zero for all manufacturers, producers
or exporters in Italy of certain granite products, our determination is negative.
We have notified the U.S. International Trade Commission (ITC) of our
determination.
EFFECTIVE DATE: July 19, 1988.
FOR FURTHER INFORMATION CONTACT:Mark Linscott, Lori Cooper or Barbara
Tillman, Office of Investigations, Import Administration, International Trade
Administration, U.S. Department of Commerce, 14th Street and Constitution
Avenue NW., Washington, DC 20230; telephone: (202) 377-8330, 377-8320 or
377- 2438.
SUPPLEMENTARY INFORMATION:
Final Determination
Based on our investigation, we determine that de minimis countervailable
benefits are being provided to manufacturers, producers or exporters in Italy of
certain granite products. For purposes of this investigation, the following programs
are found to confer subsidies:
- Preferential Transportation Rates
- Interest Rebates on Conversion Loans from the European Coal and Steel
Community (ECSC)
- Reductions in Social Security Payments for Companies Located in the Mezzogiorno
- Tax Concessions under Law 614.
We determine the estimated net subsidy under these programs to be de minimis or
zero for all manufacturers, producers or exporters in Italy of certain granite
products.
Case History
Since the publication of the preliminary determination [Preliminary Negative
Countervailing Duty Determination: Certain Granite Products from Italy (
52 FR 48732, December 24, 1987)] (Certain Granite), the following events have
occurred. On December 30, 1987, petitioner requested an extension of the final
determination to correspond with the final determination in the concurrent
antidumping duty investigation of certain granite products from Italy. On
January 28, 1988, we published the extension notice (53 FR 2521). On March 2,
1988, respondents requested a postponement of the final antidumping duty
determination from May 9, 1988, to June 20, 1988. On March 15, 1988, we
published a postponement notice (53 FR 8479, March 15, 1988). On June 2, 1988,
respondents requested another postponement of the final determination in the
antidumping duty investigation to July 13, 1988. This postponement notice was
published on June 15, 1988 (53 FR 22369).
The Government of Italy (GOI) and respondent companies submitted
supplemental questionnaire responses on the following dates: January 28, 29,
February 1, 2, and March 29, 1988.
From April 5 to May 2, 1988, we conducted verification in Italy of the
questionnaire responses of the GOI and the following respondent companies:
Campolonghi and related companies Freda and Olympia Marmi, Euromarble,
Henraux and related company Giuseppe Furrer, Pisani, Fratelli Guarda, Bonotti,
Antolini Luigi, Granitex, Margraf, Marcolini Marmi and Cremar.
*27198
Amended responses based on information reviewed at verification were submitted
by the GOI on May 19, 1988, and by the respondent companies on June 15 and 16,
1988. None of the interested parties requested a public hearing; however, initial
case briefs were filed by petitioner, respondent companies and the GOI on June 2,
1988. The parties filed rebuttal briefs on June 10. Comments on verification were
filed by the GOI on June 13, 1988. Petitioner
filed its rebuttal to the GOI's verification comments on July 7, 1988.
On May 31, 1988, we served a supplemental questionnaire on the Commission of the
European Communities (EC), the GOI and the respondent companies concerning
EC-sourced loan programs. We received responses on June 14 and 15, 1988, and we
conducted verification of the EC response from June 29 to July 1, 1988, in
Luxembourg. We received initial briefs on the EC verification on July 7, 1988, and
reply briefs on July 8, 1988, from petitioner and respondents. The Commission of
the EC submitted factual corrections to the EC verification report on July 7, 1988.
Scope of Investigation
The products covered by this investigation are certain granite products from
Italy. Certain granite products are 3/8 inch (1 cm) to 2 1/2 inches (6.34 cm) in
thickness and include the following: Rough-sawed granite slabs; face- finished
granite slabs; and finished dimensional granite including, but not limited to, building
facing, flooring, wall and floor tiles, paving, and crypt fronts. Certain granite
products do not include monumental stones, crushed granite, or curbing. Certain
granite products are currently classified under TSUSA item number 513.7400 and
under HS item numbers 2516.12.00, 6802.23.00 and 6802.93.00.
Exclusion Requests
As discussed in Certain Granite, the largest companies comprising 60 percent of the
value of exports of the subject merchandise to the United States in 1986 (our review
period) requested exclusion from any possible countervailing duty order
which might result from this investigation, claiming not to have benefitted from
countervailable subsidies. Following our standard practice, we required the GOI to
certify that those companies requesting exclusion either did not use any of the
programs under investigation or received only de minimis benefits under these
programs. Based on the responses and the government's certification, we
preliminarily determined that those companies producing and exporting the subject
merchandise which requested exclusion would have qualified for exclusion from
any eventual countervailing duty order. However, since we preliminarily
determined that manufacturers and exporters of Italian granite do not receive
subsidies, based on the responses of firms not requesting exclusion, we did not need
to reach the issue of exclusion.
While verifying the GOI's responses, we also verified the government's certification
of the exclusion requests. We verified that the certification was essentially accurate
in all respects and that the government correctly certified that no exclusion
company received benefits that were cumulatively
above de minimis. During this verification and the verification of the responses of
the companies requesting exclusion, we discovered a few minor discrepancies
which are described in the verification report. However, these discrepancies in the
government certification were insignificant in nature and were not sufficient to raise
any company requesting exclusion above the de minimis level. Accordingly, we
would determine that those companies that requested exclusion and are producers
and exporters of the subject merchandise would qualify for exclusion. However, we
find that the situation here is identical to that in our preliminary determination.
Because the estimated net subsidy for respondent companies that did not request
exclusion is de minimis, no final order will be issued and the exclusion provision
does not apply.
Analysis of Programs
For purposes of this final determination, the period for which we are measuring
subsidization is calendar year 1986 (the review period), which corresponds to the
fiscal year of all but one of the respondent companies.
At the outset of this investigation, the GOI identified the largest producers and
exporters of certain granite products that accounted for at least 60 percent of
exports of the subject merchandise to the United States during the review period.
These companies subsequently requested exclusion and the
government certified these exclusion requests. We then informed the GOI that, by
requesting exclusion, these companies had set themselves on a separate
investigative track, necessitating our choosing a new representative group of
companies consisting of the largest producers and exporters accounting for 60
percent of the remaining pool of exports to the United States. In response, the GOI
identified twelve additional companies, and we sent questionnaires to ten of these
companies.
In countervailing duty investigations, it is our practice to calculate a
country-wide rate which is an average rate for all companies whose individual rates
for all countervailable programs combined are neither de minimis nor significantly
different from rates for other companies. Since no respondent company's individual
rate is above de minimis, we have not calculated country- wide rates for those
programs determined to be countervailable.
Based upon our analysis of the petition, the responses to our questionnaires,
verification, and written comments from respondents and petitioner, we determine
the following:
I. Programs Determined To Confer Subsidies
We determine that subsidies are being provided to manufacturers, producers or
exporters in Italy of certain granite products under the following programs:
A. Preferential Transportation Rates
Petitioner alleges that manufacturers, producers and exporters of certain granite
products in Italy receive preferential transportation rates from Ferrovie dello
Stato (the Italian state railway system).
The provisions set forth in Article 19 of Law 887 establish reduced rail rates for raw
mineral substances produced and processed in the Italian islands. There are two
levels of incentives available under Article 19: For raw mineral substances mined or
extracted in the Italian islands, the normal tariff rates are reduced by 30 percent;
for the same substances that are further processed on the islands, the rates are
reduced by 60 percent.
According to the text of Law 887, raw mineral substances are the only products
eligible for preferential rail rates. However, it does not specify a list of qualifying raw
mineral substances and we could verify only that oil, clay, marble and granite,
among other substances, are included within the definition of raw mineral
substances.
The normal railway rates to which the reductions are applied are calculated based
on the weight, distance, and tariff classification of the shipped products. For
shipments from the islands, the calculation includes the distance covered by the
state-run ferries, which are used to transport the rail
cars across the water. The reductions are automatically applied to qualifying
shipments of raw mineral substances by state rail officials.
*27199
In our preliminary determination we stated that, based on information submitted to
the Department by the GOI and respondent companies, none of the respondent
companies received benefits under this program. However, at the company
verifications and after the government verification, we were informed for the first
time that, during the review period, three respondent companies received 30
percent discounts from Ferrovie dello Stato for rail shipments of granite blocks from
Sardinia to the Italian mainland.
No information provided to us during verification indicated what industries, in fact,
ship qualifying substances from the Italian islands, or even what materials
specifically fall under the definition of raw mineral substances within the meaning of
Law 887. Based on the limited information submitted on the record of this
investigation, we determine that granite producers are one group of a limited
number of industrial groups in the Italian economy that purchase the raw mineral
substances for which preferential rates under Law 887 are granted, and, therefore,
that these special rates are limited to a specific enterprise or industry, or group of
enterprises or industries, within the meaning of section 771(5)(B) of the Act.
Of the respondent companies, we verified that only Henraux, Antolini Luigi and
Cremar received reductions in transportation rates during the review period.
To calculate the benefit to these companies under this program, we took the
difference between the price they would have paid absent the 30 percent reduction
and the price they actually paid with the reduction for shipments of granite and
allocated this amount over total granite sales during the review period. This
resulted in an estimated net subsidy of less than 0.0001 percent ad valorem for
Henraux, 0.04 percent ad valorem for Cremar, and 0.30 percent ad valorem for
Antolini Luigi. The ad valorem rate is zero for all others.
B. Interest Rebates on Conversion Loans From the European Coal and Steel
Community (ECSC)
Although not alleged by the petitioner, we investigated this program because it was
discovered during the course of the company verifications.
Article 56(2)(b) of the Treaty of Paris, which created the ECSC, authorizes ECSC aid
to "activities capable of reabsorbing redundant [ECSC] workers into productive
employment." A council decision published in the Official Journal of the European
Communities, No. C 178 of July 27, 1977, authorized conversion loans for projects
that involve, or are likely to involve, reemployment of redundant ECSC workers.
Directorate General-18 (DG-18), the office of the Commission of the European
Communities that administers these loans, may finance up to 50 percent of the
costs associated with a qualifying investment. An applicant must be a small- or
medium-sized enterprise, defined as an enterprise that: (1) Employs less than 500
people; (2) has net fixed assets of less than 75 million European Currency Units
(ECUs); and (3) has no parent enterprise that owns more than one-third of its share
capital. A qualifying project must create new positions that are capable of being
filled by coal and steel workers.
We verified that loans are available and have been disbursed to companies in
virtually every manufacturing and service industry. We also verified that no region
of a member country is excluded from receipt of conversion loans. However,
interest rebates associated with these loans are determined based on regional
location. For firms located in "priority" regions that have suffered high
unemployment in the coal and steel industries, the interest rebate is granted
whether or not a qualifying firm actually employs redundant ECSC workers. A five
percent interest rebate is granted for the portion of loan principal equal to (a) the
number of new positions created, multiplied by (b) two-thirds, multiplied by (c)
20,000 ECUs per worker. In contrast, firms located outside "priority" regions must
hire redundant ECSC workers. Their five percent interest rebate applies only to a
portion of the loan equal to the proportion of newly-created positions actually filled
by redundant ECSC workers multiplied by 20,000 ECUs.
We verified that Fratelli Guarda, the only respondent company that received a
conversion loan, is located in a "priority" region and that it received an interest
rebate for a loan that was outstanding during the review period. We also verified
that it filled no newly-created position with a redundant ECSC worker. If Fratelli
Guarda were located outside a "priority" region, it would not have qualified for an
interest rebate. Therefore, we determine that this rebate is countervailable because
receipt was dependent on location in a specifically designated "priority" region.
To calculate the benefit under this program, we divided the total value of rebates
received by Fratelli Guarda during the review period by its total sales of all products
during the review period and arrived at an estimated net subsidy of 0.10 percent ad
valorem for Fratelli Guarda. The ad Valorem rate is zero for all others.
C. Reductions in Social Security Payments Under the Cassa per il Mezzogiorno
Program
Petitioner alleges that manufacturers, producers and exporters in Italy of
certain granite products receive benefits under the following Mezzogiorno Regional
Assistance Programs: (1) National corporate tax exemptions; (2) local corporate tax
exemptions; (3) capital grants; (4) interest rate reductions; and (5) reductions in
social security payments. We verified that
the first four programs were not used by the respondent companies (see section
III.C. of this notice). The last program, reductions in social security payments, is
discussed below.
According to the government's responses, all Italian companies that operate
facilities in the Mezzogiorno region of Italy are entitled to a ten percent
reduction in social security payments owed to the National Social Security Institute
(INPS) for all workers employed in this region. The reduction may be increased to
20 percent for any additional employees hired after September 30, 1968, over and
above the number of individuals employed by the company on that date. For staff
employed between July 1, 1976, and December 31, 1980, there was a total
exemption from payments owed to the INPS, up to December 31, 1986.
Because benefits under this program are available only to firms that locate facilities
in the Mezzogiorno, we determine that this program is limited to a specific
enterprise or industry, or group of enterprises or industries, within the meaning of
the Act and, therefore, is countervailable.
We verified that only Henraux received reductions in social security payments
during the review period for employees at stockyards it owns in the Mezzogiorno.
Henraux filed a timely request for exclusion and was certified by the Government of
Italy as having received only de minimis benefits under this program.
To calculate the benefit under this program, we divided the total value of the
social security reductions Henraux received during the review period by its total
sales of all products during the review period and arrived at an estimated net
subsidy of 0.08 percent ad valorem for Henraux. The Ad valorem rate is zero for all
others.
D. Tax Concessions Under Law 614
Article 30 of Law 614 provides for reductions in local corporate income tax (ILOR)
rates to small- and medium-sized Italian companies that establish or
*27200
expand facilities in designated depressed territories of northern and central Italy.
ILOR is one component of a company's overall national corporate tax liability;
and other component is the national corporate tax, IRPEG. Both IRPEG and ILOR
are imposed and collected by the national government; however ILOR revenues are
redistributed to local areas based on need and other criteria, without regard to the
amount collected from a given locality.
If an enterprise is newly established, the total amount of the company's income is
exempt from the ILOR tax. For firms expanding their productive facilities, the ILOR
exemption applies only to income derived as a result of the expansion. Reductions
may be claimed for ten years following the establishment or expansion of a facility.
Law 614 was terminated for most regions on December 31, 1985. It was
later reinstated under Law 879 until December 21, 1990, exclusively for two
depressed territories devastated be earthquakes: Friuli-Venezia Giulia and Marche.
Residual benefits under Law 614 may continue for ten years following expiration.
Because this program is available only to firms that invest in designated areas of
northern and central Italy, we determine that it is limited to a specific
enterprise or industry, or group of enterprises or industries, within the meaning of
the Act and, therefore, is countervailable.
Based on our review of certified tax returns for all respondent companies, we
verified that only Granitex claimed a reduction in taxes under this program on the
tax return filed during the review period. We calculated the benefits under this
program based on the company's overall corporate income tax liability for the year
in which the tax return was filed. We included in this calculation the net effect on
Granitex's national corporate tax (IRPEG) liability, because both ILOR and IRPEG
are part of a company's overall national tax liability. We first determined the
difference between what Granitex paid in ILOR and IRPEG during the review period
and what it would have paid absent this program. We then divided this amount by
the total sales of Granitex during this period. Based on this calculation, we arrived at
an estimated net subsidy of 0.36 percent ad valorem for Granitex. The ad valorem
rate for all others is zero.
II. Programs Determined Not To Confer a Subsidy
We determine that subsidies are not being provided to manufacturers, producers or
exporters in Italy of certain granite products under the following programs:
A. Interest Rate Reductions Under Decree 902 of 1976
Petitioner alleges that manufacturers, producers and exporters in Italy of
certain granite products receive loans under Decree 902 of 1976 that are limited in
availability and that are received on terms inconsistent with commercial
considerations. In its responses, the GOI stated that Decree 902 offers loans to firms
located in all regions of Italy and involved in all types of production activity.
During verification, we reviewed the legislative structure that implemented this
program. Decree 902 was issued pursuant to Law 183 of May 2, 1976. Article 15 of
Law 183 authorized the establishment of a national fund to promote
industrialization and modernization in northern, central and southern Italy.
Decree 902 divides administration of the loan program, which offers reductions in
interest rates, between the Ministry of Industry and Commerce (MIC), which has
authority to disburse loans to firms in northern and central
Italy under Title II, and the Cassa per il Mezzogiorno (the Mezzogiorno Agency),
which has similar authority for firms in southern Italy under Title III.
As originally enacted, Decree 902 authorized the maximum interest rate reduction
for firms located in either southern Italy or in areas designated as insufficiently
developed in northern and central Italy. For these firms, the reduced rate was
equal to 40 percent of the "reference rate," a conglomerate of commercial interest
rates in Italy compiled monthly by the Bank of Italy. The minimum benefit,
equal to 60 percent of the reference rate, was available to firms located in the
remaining areas of northern and central Italy. In 1981, these benefits were
changed by ministerial decree to an interest rate of 36 percent of the reference rate
for firms in southern Italy, 48 percent for firms in insufficiently developed areas
of central Italy and 72 percent for firms in the remaining areas of central Italy
and all areas of northern Italy. In 1986, the rates in effect were 50 percent of
the reference rate for southern Italy and 60 percent for northern and central
Italy.
The determine whether any countervailable benefits were provided to
manufacturers, producers and exporters in Italy of certain granite products, we
examined the availability and use of 902 benefits by Italian firms.
Together, Articles Five, Six and Eight of Title II and Article 12 of Title III offer
benefits to all companies in all areas of Italy. There are no provisions
in Decree 902 that limit availability of benefits to particular types of production
activities. The only restrictions set forth in Decree 902 are capitalization ceilings, as
the program is designed for small- and medium-sized firms, and project
requirements. Firms located in southern Italy and in insufficiently developed
areas of central and northern Italy may receive loans for modernization,
expansion or new construction of production facilities, while firms located in the
remaining areas of central and northern Italy qualify for modernization of
existing facilities.
We verified that, since 1980, loans under decree 902 have been awarded to virtually
every productive sector in Italy. In each year between 1980 and 1987, all 17
categories of Italian manufacturing industries, as defined by the Istituto Centrale di
Statistica, received 902 loans. These categories include: food; textiles; leather;
woodworking; metallurgical; mechanical; non-metallic mineral; plastic products;
consumer products repair; mineral extraction; apparel and furnishings; steel;
chemical; rubber; paper and paper products; printing and publishing; and other
manufacturing. We also verified that the non-metallic mineral grouping, in which
granite production is categorized, received neither a dominant nor a
disproportionate share of loans in any of these years. In addition, we verified that
Law 902 loans have been awarded in every region of Italy but at differing
interest rates, depending upon the region.
In past cases (e.g., Final Affirmative Countervailing Duty Determination:
Certain Fresh Atlantic Groundfish from Canada (51 FR 10041, 10045, March 24,
1986)) (Groundfish from Canada), where the level of benefits under a particular
program was tiered, i.e., varied between regions, but the tiers together covered all
regions of the country, we calculated countervailable benefits based on any
additional benefits received over and above the lowest tier of benefits that was
available under the program. We reasoned that, when a tiered program is available
in every region of the country, the lowest level of benefits is not limited, so long as
the minimum level of benefits has been received by more than a group of
enterprises or industries.
We verified that Giuseppe Furrer and Ronchi Marmi, the only two producers of
certain granite products to have received Decree 902 loans, were never
*27201
located in southern Italy or in insufficiently developed areas of northern and
central Italy, and that these two companies received only the minimum benefit
that was available.
Because the manufacturers, producers and exporters in Italy of certain granite
products received only the lowest level of benefits under Decree 902, and we
verified that the lowest level of benefits has been received by more than a specific
enterprise or industry, or group of enterprises or industries, and by companies in all
regions of Italy, we determine that the minimum level of benefits received by
these companies is not countervailable.
B. Contributions for Purchases of Electronic Equipment Under Law 696
Under Law 696 of December 19, 1983, small- and medium-sized Italian companies
engaged in production activities could apply for a contribution from the MIC toward
the price of certain electronic machinery. This program was not alleged by
petitioner but was discovered in reviewing the financial statements of the
respondent companies. Under this program, a contribution of 32 percent of the
price of the machinery is available to firms operating in the Mezzogiorno region. The
remaining areas of Italy are eligible to receive a 25 percent contribution.
During verification we reviewed the criteria set forth in the law and the procedure
developed by MIC to administer this program. The following eligibility criteria must
be met by a firm applying for a Law 696 contribution: (1) It must have no greater
than 300 employees; (2) it must have a net invested capital of less than L. 12 billion
in 1986; (3) it must be a manufacturing, mining, artisan or crafts enterprise; (4) the
application filed with MIC must be for the purchase of electronically-controlled
machines; and (5) the application must have been submitted to MIC on or before
April 30, 1985, for machinery ordered between December 21, 1983 and March 31,
1985.
Law 696 provisions for contributions toward the purchase of electronic
machinery were terminated on December 29, 1984 for all applications postmarked
after April 30, 1985. MIC is still in the process of processing and approving
applications filed prior to this deadline.
In our preliminary determination, we stated that additional information was needed
to determine whether Law 696 conferred subsidies on the manufacture, production
or exportation of certain granite products from Italy. In order to determine if
the provision of Law 696 contributions constitutes a countervailable subsidy, we
must determine if the benefits provided are limited to a specific enterprise or
industry, or group of enterprises or industries, in accordance with section 771(5)(B)
of the Act.
The text of Law 696 states that a 25 percent contribution is available to Italian firms
in the mining and manufacturing sectors as well as artisan or crafts enterprises. The
contribution is increased to 32 percent for firms operating in the Mezzogiorno. We
verified that none of the respondent companies received Law 696 contributions at
the 32 percent level during the operation of the program. Several of the respondent
companies received contributions of 25 percent.
At verification we reviewed the sectors that received Law 696 contributions during
the 18 months of its existence. We confirmed that contributions have been awarded
to thousands of companies throughout Italy representing a variety of industries
and a wide range of products. Law 696 contributions have been
approved and disbursed to companies in virtually all manufacturing sectors,
including mineral extraction, food, textiles, steel, metallurgical work, chemicals,
rubber, plastic products, paper and paper products, printing and publishing,
consumer goods, leather, wood, mechanical products, non-metallic mineral
processing and industrial construction and installation. We also verified that
non-metallic minerals processing, the industrial group in which granite production
falls, received neither a dominant nor a disproportionate share of Law 696 benefits.
As discussed in section II.A., above, where the level of benefits under a particular
program is tiered, i.e., varies between regions, but the tiers together covered all
regions of the country, we calculate countervailable benefits based only on any
additional benefits received over and above the lowest tier of benefits available
under the program. When a tiered program is available in every region of a country,
the lowest level of benefits is not limited, so long as the minimum level of benefits
has been utilized by more than a group of enterprises or industries.
Because we verified that the respondent companies received only the minimum 25
percent contribution for purchases of electronically-controlled machinery under
Law 696 and that this benefit has been granted to more than a specific enterprise or
industry, or group of enterprises or industries, we determine that the minimum
level of rebate awarded to these companies is not countervailable.
C. Loans From Italian Special Credit Institutions
Petitioner alleges that medium- and long-term loans disbursed by Italian special
credit institutions, also known as medium- and long-term credit institutions (MLTs),
to manufacturers, producers and exporters in Italy of certain granite products
confer countervailable benefits. Petitioner argues that these institutions are either
financed or directed by the GOI and, therefore, this all medium- and long-term loans
from them are countervailable.
During verification, we met with officials of Istituto Mobiliare Italiano (IMI) and an
official of Mediocredito Toscano. Both institutions are MLTs and are authorized by
law to engage in medium- and long-term lending. There are approximately 40 to 50
MLTs in Italy. Most of these institutions were established pursuant to Law 445
of 1952 and they derive their lending authority pursuant to this law. Except in very
limited circumstances, only MLTs are authorized to disburse loans of more than 18
months. The government owns shares in many MLTs; 50 percent of IMI is owned by
Cassa Depositi, which, in turn, is owned by the Ministry of Treasury. In contrast,
Mediocredito Toscano has no direct government ownership.
We verified that all MLTs disburse two separate and distinct forms of medium-
and long-term credit: (1) Loans that carry interest rate reductions under specific
government programs and (2) commercial loans that are not mandated or funded
by government programs. By reviewing all loan contracts for each respondent
company, we were able to identify those loan transactions in which the government
intervened in the form of interest rate reductions under specific programs (e.g.,
Decree 902) and those which involved no government intervention. At each
company, we confirmed that a loan contract pursuant to a government loan
program always identifies the loan program and, if relevant, contains provisions
which prescribe the interest rate reduction, such as the reduction available under
Decree 902 which is calculated as a certain percentage of the reference rate (see
discussion of "Interest Rate Reductions under Decree 902 of 1976" in section II.A.
above). We found no evidence that those loans, for which the loan contracts specify
no government program, are disbursed on any basis other than a commercial one.
As we stated in the Final Negative Countervailing Duty Determination:
*27202
Carbon Steel Wire Rod from Singapore (53 FR 16304, May 6, 1988), " [G]overnment
ownership or control of a bank does not necessarily lead to the conclusion that the
bank is operating in other than a commercial fashion." Based on information
obtained during verification, we confirmed that agencies of the GOI own shares, at
varying proportions, in many deposit banks which lend short-term, and in MLTs. All
MLTs, whether government-owned in part or not, act
on behalf of the government in disbursing loans with interest rate reductions under
specific government programs.The bulk of their lending, however, involves no
government intervention.
We examined the commercial nature of MLT lending that is not tied to
government-funded programs by comparing interest rates on loans disbursed by
one MLT, IMI, that has significant government ownership and those disbursed by
another, Mediocredito Toscano, that has no government ownership. We found that,
for loans disbursed simultaneously and on comparable terms, the interest rates
were also comparable. Accordingly, we determine that medium- and long- term
lending by MLTs, in which the GOI has direct or indirect ownership, that involves no
government program does not confer countervailable subsidies on manufacturers,
producers and exporters in Italy of certain granite products.
D. Interest Contributions Under the Sabatini Law
Although not alleged by the petitioner, we investigated this program because the
company questionnaire responses indicated that several firms benefitted under the
Sabatini Law during the review period. In our preliminary determination, we stated
that we needed additional information in order to determine whether this program
confers subsidies on the manufacture, production or exportation of certain granite
products from Italy.
The Sabatini Law was enacted in 1965 to encourage the sale of machine tools and
production machinery. It provides for deferred payment of up to five years on
installment contracts for the purchase of such equipment and for a one-time, lump
sum contribution from Medicredito Centrale (MC), the administering agency,
toward the interest owned by the buyer of such equipment on the installment
contracts.
Under the Sabatini Law, a buyer of machine tools issues promissory notes to the
seller, with deferred payment of up to five years. The seller then discounts the notes
payable at a MLT. The MLT decides whether to make application to MC for Sabatini
Law benefits for the financing. If it applies, and if MC approves, the interest
contribution is paid in one lump sum by MC either to the MLT, or to the seller, which
in turn passes the contribution on to the buyer. The buyer then pays the MLT on the
notes according to schedule, including all the charges and fees required by the
institution.
The contribution is calculated as the present value of the difference between the
stream of payments, over the term of all notes, using a market discount rate (the
"reference rate") and the stream of payments using a beneficial discount rate
(calculated as a certain percentage of the reference rate). The benefit associated
with the lower discount rate is passed on to the buyer as a lump sum interest
contribution for its obligations on the promissory notes. The discount transaction
between the seller and the MLT for the notes remains a
commercial operation, because the actual discount rate is a market rate.
Benefits under the Sabatini Law are available to companies throughout Italy at
varying levels depending upon company location. The benefit is calculated using a
discount rate equal to 35 percent of the reference rate for purchases of machines to
be used in production units in southern Italy and a discount rate of 45 percent
of the reference rate for purchases of machines to be used in production units in the
remaining areas of Italy. The MC contribution accounts for the balance of the
reference rate. During verification we found that the respondent companies
received Sabatini Law contributions equal to the minimum level of benefit (i.e., a
discount rate of 45 percent of the reference rate).
The text of the Sabatini Law specifies no limitation regarding beneficiaries; all
companies are eligible. Article One establishes a minimum machinery cost that now
stands at L. 1,000,000. The text of the Sabatini Law does not limit eligibility based
on regional location.
During verification, we reviewed documentation relating to the availability and use
of Sabatini benefits throughout Italy. We verified that between 14 and 16
industrial groups covering all spheres of manufacturing received Sabatini Law
benefits in each of the years from 1982 through 1986. These industrial groupings
were as follows: Mining; food; textiles and clothing; skins, leather and shoes; wood
and furniture; metallurgy; mechanics; non-metallic
minerals; chemicals and artificial fibers; paper and cardboard; other manufacturing;
agriculture and livestock; building construction and plant installation; trade;
transportation and communication; and other services. We also verified that
non-metallic mineral processing, the industrial group in which granite production
falls, received neither a dominant nor a disproportionate share of the Sabatini Law
benefits in any of these years.
Because the manufacturers, producers and exporters in Italy of certain granite
products received only the minimum benefit under the Sabatini Law, and because
we verified that Sabatini Law benefits are not limited to a specific enterprise or
industry, or group of enterprises or industries, we determine that the minimum
level benefits received by the respondent companies under the Sabatini Law are not
counteravailable.
E. IVA Deductions
This program was not alleged by petitioner but was discovered in reviewing the
financial statements of the respondent companies. Under Article 15 of Law 130,
companies operating in Italy were granted a six percent credit on the balance of
their value-added tax, the "imposta sul valore aggiunto" (IVA), for purchases of
depreciable assets ordered between April 26 and December 31, 1983, and delivered
before December 31, 1984. For purchases ordered or delivered
after these dates, credits in the same amount were allowed only for purchases
approved under Law 696 (see section II.B. of this notice). The last application date
for credits under Article 15 of Law 130 was the year-end IVA return for 1984, due
on March 5, 1985, while the last application date for credits under Law 696 was the
year-end IVA return for 1986, due on March 5, 1987. We verified that, since the
termination of these laws, there has been no renewal of the six percent credit.
However, because credits could be carried forward or received as future cash
payments a year or more after filing the return, we were unable to verify that
qualifying companies would no longer receive lagged benefits.
Article 15 states that qualifying companies must operate in an industrial category
listed under Groups IV through XIV of a ministerial decree of October 29, 1974.
Groups IV through XIV include the following manufacturing and artisan activities:
extraction of metallic and non-metallic minerals; food processing; wood processing;
mechanical and metallurgical manufacturing; non-metallic mineral processing,
which includes granite processing; chemical manufacturing; pulp and paper
manufacturing; skins and leather processing; textiles and garment manufacturing;
and rubber, resins and plastics manufacturing. If a company's
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activities fell under one of these categories and it purchased depreciable assets,
other than real estate, it could claim the deduction automatically in its IVA returns.
We verified that the credit is applied for simply by entering the proper amount in a
year-end IVA return. There is no formal approval process. Rejections occur only if a
tax audit reveals that a firm's activities fall outside Groups IV through XIV.
Because a six percent credit under Article 15 of Law 130 and under Law 696 was
available to virtually all Italian manufacturing firms for depreciable assets related to
manufacturing, and because we have no evidence that the GOI exercises discretion
through an application and approval process in administering this program, we
determine that this program is not limited to a specific enterprise or industry, or
group of enterprises or industries, within the meaning of the Act and, therefore, is
not counteravailable.
F. Income Tax Programs
The following programs were not alleged by petitioner but were discovered in
reviewing the financial statements submitted by the respondent companies.
1. Reinvestment Fund Under Article 54 of DPR 597/73
Italian firms are permitted to claim a tax exemption for any capital gains earned on
the sale of fixed assets, provided that the gains are reinvested in
capital assets. Article 54 of Presidential Decree (DPR) 597/73 states that firms must
establish a special liability fund for capital gains, and reinvest these tax-exempt
gains in depreciable assets in the second fiscal year following the one in which the
gains were realized.
We verified that this provision of Italian tax law is available to all entities in Italy,
regardless of geographic location or type of industry. Receipt of this exemption is
only contingent upon a company's subsequent use of the gains for reinvestment in
capital assets. Because benefits under Article 54 of (DPR) 597/73 are available to all
Italian firms and because we have no evidence that the GOI exercises discretion
through an application and approval process in administering this program, we
determine that this provision is not limited to a specific enterprise or industry, or
group of enterprises or industries, within the meaning of the Act and, therefore, is
not countervailable.
2. Accelerated Depreciation
Article 68 of DPR 597/73 sets forth rules governing the depreciation of assets under
Italian tax law. The normal deductible depreciation of a company's assets is
dependent upon the asset's classification in the Italian government's depreciation
schedule. In addition, accelerated depreciation of an extra 15
percent above the normal rate can be claimed for the first three years after the asset
is acquired.
We verified that normal rates of depreciation under Article 68 of DPR 597/73 are
based on the useful lives of assets in individual industries and that the accelerated
rate is available to all Italian firms regardless of geographic location or type of
industry. On this basis, and because we have no evidence that the GOI exercises
discretion through an application and approval process in administering this
program, we determine that this program is not limited to a specific enterprise or
industry, or group of enterprises or industries, with the meaning of the Act and,
therefore, is not countervailable.
3. Revaluation of Assets under Law 72 of 1983 and Law 576 of 1975
The Italian government allowed all companies to revalue assets in 1975 and again in
1983 to reflect market value rather than book value. The revaluations were
necessary to account for periods of high inflation which preceded these years.
Because we verified that all Italian firms, regardless of geographic location or type
of industry, were permitted to revalue assets, and because we have no evidence that
the GOI exercises discretion through an application and approval process in
administering this program, we determine that these revaluations were not limited
to a specific enterprise or industry, or group of
enterprises or industries, within the meaning of the Act and, therefore, are not
countervailable.
4. Contributions Under Article 55 of DPR 597/73
Article 55 of DPR 597/73, relating to "contingent assets," authorizes Italian
companies to establish a reserve fund which postpones the payment of taxes on
certain monies received by a company until such funds are distributed as profits to
that company's shareholders. Funds received from the government in the form of a
reimbursement, for example, would be included on the asset side of a company's
balance sheet. Article 55 permits the company to shield temporarily such revenues
from taxation by establishing an offsetting reserve fund on the debit side of its
balance sheet, such that the money held on reserve becomes taxable only when
distributed as profits.
Because we verified that Article 55 applies to all taxpayers regardless of geographic
location or type of industry and because we have no evidence that the GOI exercises
discretion through an application and approval process in administering the
program, we determine that this program is not limited to a specific enterprise or
industry, or group of enterprises or industries, within the meaning of the Act and,
therefore, is not countervailable.
III. Programs Determined Not To Be Used
We determine, based on verified information, that manufacturers, producers or
exporters in Italy of certain granite products did not apply for, claim, or receive
benefits during the review period for exports of certain granite products to the
United States under the following programs:
A. Rebates of Indirect Taxes Under Law 639
Italian Law 639 authorizes the rebate of customs duties and certain indirect taxes
upon the export of products containing certain raw materials. We verified that the
respondent companies were not eligible for and did not receive benefits under this
program because it is available only to mechanical industries.
B. Export Credit Financing
Under Italian Law 227, a medium-term export credit line is available to foreign
purchasers that import Italian goods and services. Administered by Mediocredito
Centrale, this program applies only to export credits of greater than 18 months. We
verified that none of the respondent companies, nor their
U.S. importers, had outstanding credit lines under this program during the review
period.
C. Mezzogiorno Regional Assistance Programs
Accordingly to the responses, companies with facilities located in the mezzogiorno
region of Italy are eligible for certain government programs aimed at the
economic development of this region. The programs alleged by the petitioner under
this regional development plan are: (1) National corporate tax exemptions; (2) local
corporate tax exemptions; (3) capital grants; (4) interest rate reductions; and (5)
reductions in social security payments. We verified that the first four programs were
not used by the respondent companies during the review period. The last program,
reductions in social security payments, is described in section I.C. of this notice.
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D. European Investment Bank (EIB) Lending
The EIB is a European Community (EC) financial institution which offers loans to
designated depressed areas of EC member states. EIB loans were found to be
countervailable in our 1982 steel cases after specific allegations from the petitioners
involved and a full-length investigation of their
countervailability. See Carbon Steel Products from Belgium, 47 FR 39304, 39929
(September 7, 1982).
In the present investigation, the petitioner did not allege any EC programs in its
petition. We first found references to loans denominated in ECUs, some involving
the "BEI," in company financial statements submitted as part of the responses to our
initial questionnaire. We requested information on these loans in a supplemental
questionnaire; however, the respondent companies stated that these loans were not
from any EC-related entity, nor were they provided or mandated by any
government program. As we normally do for purposes of preliminary
determinations, we took these statements at face value. At no time did petitioner
come in with a formal allegation against EC programs.
During our verification of company responses in late April, we examined all loan
contracts entered into by these companies and discovered that several loans,
although disbursed through Italian MLTs, were funded by the EIB. Immediately
following verification, we reviewed prior countervailing duty determinations
involving EC programs, and noted that EIB loans had been determined to be
countervailable in the 1982 steel cases. On May 25, 1988, we requested comments
on these loans from all interested parties including, for the first time, the Delegation
of the Commission of the EC. In a May 27, 1988, letter, the EC Commission pledged
its full cooperation in our investigation. We detemined that it was appropriate to
investigate these loans and, therefore,
on June 1, 1988, we forwarded a questionnaire to the EC Commission, the
respondent companies and the GOI. We received responses on June 14 and 15.
Verification was conducted between June 29 and July 1, and included the EIB and
the ECSC (discussed in Section I.B.). We received initial briefs on the EC verification
on July 7 and rebuttal briefs on July 8.
By necessity, our investigation of EIB financing has been limited to abbreviated
questionnaire and response, verification and briefing periods, covering a total of
only five weeks. Due to time constraints, we were unable to take full advantage of
our standard investigative procedures, which normally allow ample time for
supplemental questionnaires, the thorough analysis of responses and
comprehensive, in-depth verifications. In contrast, we were fully able to follow such
procedures in our investigation of the program administered by the GOI. For
example, we sent an initial questionnaire and four supplemental questionnaires to
the GOI and respondent companies between August 1987 and March 1988. We spent
weeks analyzing each response before seeking additional information or
clarifications. We also spent more than four weeks verifying the GOI and company
responses.
Despite the restrictions described above, based on the questionnaire response
submitted by the EC and the subsequent verification conducted at the EIB's offices in
Luxembourg, we have been able to determine the countervailability of the ECSC
interest rebates received by one respondent company (see section I.B.,
above) and to establish that none of the respondent companies received EIB-
sourced loans for firms located in depressed areas of the EC. The loans actually
disbursed to the respondent companies through the EIB are funded by resources
under the New Community Instrument (NCI) and not by EIB's own resources. The
NCI is a pool of funds that is financed directly by the EC Commission.
This is the first countervailing duty investigation in which we have examined
NCI loans and, for the reason described above, this initial investigation has been an
unusually short one.
The EC Commission has cooperated fully in this investigation, yet had only a
fraction of the time available to the other parties to participate in this investigation.
Because of the limited time which was available to us, we find that difficult questions
remain concerning both the linkage between NCI loans and the EIB's regular lending
and the EIB decision-making process in granting global loans to intermediary
banking institutions in member states. Without the benefit of having more
information on the record, particularly with respect to a program that we are
examining for the first time, the only way we are examining for the first time, the
only way we could make a determination as to the countervailability of this program
would be by resorting to the best information available.
We have calculated benefits under the NCI program and found that the benefits
received by the respondent companies are de minimis. Furthermore, no company's
subsidy rate would rise above de minimis were we to find this program
countervailable and add ad valorem rates for this program to rates for the other
programs. Therefore, due to the unique circumstances surrounding our
investigation of the NCI program, we have decided to reserve judgment on the
countervailability of this program until some future investigation allows us
sufficient time and opportunity to examine the program in greater depth.
IV. Program Determined Not to Exist
We determine, based on verified information, that the following program does not
exist. This program was described in Certain Granite:
Loans Under Law 908
During verification we found no evidence of the existence of Law 908 which was
alleged to have provided subsidized loans at below market rates for certain
industrial projects in northern and central Italy.
Interested Party Comment
Comment 1: Petitioner supports our preliminary determination that Decree 902
benefits are countervailable, based upon regional differences in interest rate, loan
amount, repayment terms, and type of project eligible. Petitioner argues that there
is no minimum benefit available to all companies in Italy under Decree 902,
because a company in the Mezzogiorno is not eligible for the minimum Decree 902
benefit provided to companies in northern and central Italy. Petitioner
contends that, where benefits vary from region to region, such benefits constitute
regional subsidies, quoting Groundfish from Canada at 10045, "[d]espite the fact
that the criteria for assignment to a tier [of benefits] may be neutral, the program
nevertheless authorizes benefits to vary from tier to tier, and thus, from region to
region." Petitoner further contends that it is immaterial that Decree 902 funds were
provided to a wide range of industries, given the regional nature of the program.
Respondent companies and the GOI argue that the minimum Decree 902 benefit is
available to all small- and medium-sized businesses in Italy and, therefore, does
not constitute a countervailable regional subsidy. Respondents further argue that
limitation to small-and medium-sized businesses does not render Decree 902
benefits countervailable. They cite the Department's Final Affirmative
Countervailing Duty Determination: Forged Undercarriage Components from
*27205
Italy (48 FR 52111, 52116, November 16, 1983) (Forged Undercarriage
Components), where the Department determined that a benefit that
was generally available to small-and medium-sized Companies in Italy pursuant
to a program similar to Decree 902 was not countervailable.
Respondents argue that the Department distinguishes between special benefits
provided to particular regions and any minimum benefit available to all companies
in determining whether a program confers a preferential regional benefit,
quantifying the amount of the preference by comparing the special benefits to the
minimum benefit. Respondents contend that the benefit is countervailable only if
the company's benefit exceeds the benchmark (i.e., the minimum benefit), citing the
Deprtment's final determination in Groundfish from Canada, supra, at 10045.
DOC Position: A program is determined to be regional and, therefore, limited only
when its funding is authorized by the central government to benefit only certain
regions within its jurisdiction. In this investigation, we verified that Decree 902
provides varying levels of benefits, depending upon regional location, but that any
small-and medium-sized business in Italy can receive at least the minimum
Decree 902 benefit, regardless of location. We also verified that the respondent
companies which received benefits under Decree 902 received only the minimum
benefit.
Both petitioner and respondents cite Groundfish from Canada, in support of
opposing arguments on this issue. In Groundfish from Canada, we found
countervailable the IRDP program, which provided varying levels, or "tiers," of
benefits to companies depending upon regional location. We determined the benefit
under the IRDP program by taking the difference between the level of assistance
actually provided to the companies under investigation and the level of assistance
provided to companies located in areas eligible only for the minimum, or Tier I,
benefit. We found countervailable only that portion of a company's benefit which
exceeded the minimum-level benefit.
Applying the Groundfish from Canada, analysis to this case, the "benchmark" for
determining whether the respondent companies received a countervailable subsidy
would be the minimum benefit available under Decree 902. Because the respondent
companies in question received only the minimum, or benchmark, Decree 902
benefit, there is no countervailable subsidy provided under this program to the
producers of certain granite products from Italy.
Comment 2: Respondent companies argue that Zilio Graniti S.p.A., a company
related to Savema S.p.A. (Savema), has never received any benefits under Decree
902. Respondents contend that the "Zilio Graniti" identified by the Department
during verification as having received a loan under Decree 902 is not the
Savema-related Zilio Graniti S.p.A., but rather is an unrelated company, Remo Zilio
Graniti & Marmi S.r.l.
Respondent companies also argue that the purchase of Furrer stock by Henraux in
1986 eliminated any possible benefit from the Decree 902 loan granted to Furrer.
Any countervailable subsidy conferred by the loan "flowed through" to
Furrer shareholders at the time of the purchase and, therefore, would no longer
benefit Furrer.
DOC Position: We have found the minimum level of benefits under the Decree 902
program to be not countervailable and that the respondent companies received the
minimum level. Therefore, the issue of an individual company's receipt of benefits
under Decree 902 is moot.
Comment 3: Petitioner contends that, due to the direct financial involvement and
control by the GOI in Mediocredito Centrale, IMI and regional credit institutions, all
medium- and long-term loans granted by such credit institutions to respondent
companies should be considered to confer countervailable subsidies where the
terms and conditions are inconsistent with commercial considerations. Petitioner
further contends that granite producers which were not reasonable commercial
credit risks have been able to borrow from these insititutions and that such
borrowings amount to direct subsidization by the Italian government.
DOC Position: We disagree. Government ownership or control of a credit institution
does not necessarily lead to the conclusion that the credit institution is operating in
other than a commercial fashion, nor does it mean that the funds provided are part
of a cuntervailable program. The fact that a credit institution is government-owned
does not automatically make its loans preferential and countervailable. During
verification, we reviewed all loan
contracts for each company and identified the loan transactions which are given
under government-mandated (GOI or EC) programs. We found no evidence that
those that did not specify a government program were disbursed on a non-
commercial basis.
Comment 4: Petitioner argues that the Italian respondent companies are
uncreditworthy and, as such, any countervailable loans should be analyzed in
accordance with the methodology for uncreditworthy companies set forth in the
"Subsidies Appendix" attached to the notice of Cold-Rolled Carbon Steel Flat- Rolled
Products from Argentina: Final Affirmative Countervailing Duty
Determination and Countervailing Duty Order (49 FR 18006, April 26, 1984).
Respondent companies assert that they are not uncreditworthy. Respondents argue
that petitioner's uncreditworthiness allegation, filed immediately prior to
verification and just two months before the final determination was both untimely
and inadequate. In support of this argument, respondents cite previous
determinations in which the Department dismissed such allegations on the basis of
their untimeliness: Final Affirmative Countervailing Duty Determination:
Certain Stainless Steel Hollow Products from Sweden (52 FR 5794, 5800, February
26, 1987) and Final Affirmative Countervailing Duty Determination and
Countervailing Duty Order: Lime from Mexico (49 FR 35672, 35677,
September 11, 1984).
DOC Position: We agree that the petitioner's uncreditworthiness allegation was
untimely and, therefore, we did not consider this allegation in this investigation. A
creditworthiness determination requires a complex analysis of a company's present
and past financial health, as reflected in its financial statements and accounts, its
ability to meet obligations with its cash flow, and projections of future profitability
based on market studies, country and industry economic forecasts, and project and
loan appraisals. Not only the verification, but the entire investigation must be
structured to accommodate this analysis. Petitioner had access to respondents'
financial statements as of October 1987. Using those financial statements as a basis,
they alleged uncreditworthiness on April 1, 1988, two days before our departure for
verification, and approximately two months before our scheduled final
determination.
Comment 5: Petitioner contends that the average long-term interest rates provided
by the GOI should not be used as benchmarks in any long-term loan calculation
because the rates include other than commercial long-term lending rates. Petitioner
adds that short-term benchmark information provided by the GOI is also
insufficiently supported, and that both the long- and short-term
*27206
interest rates wrongly include rates on public sector financing.
Respondent companies argue that we should not exclude public sector financing in
calculating a benchmark interest rate for short-term loans, because government
ownership of a company does not mean that the company is
subsidized. Therefore, they argue that such financing should be included in our
benchmark, absent verified information that it is not given on commercial terms.
DOC Position: Since no respondent company received a countervailable short- term
loan, this issue is moot with regard to a short-term banchmark. Since the long-term
interest rates provided by the GOI for the stone-processing industries included
short-term rates and the GOI could not separate out purely long-term rates, we
examined long-term commercial interest rates in Italy published by Morgan
Guaranty (World Financial Markets), by the International Monetary Fund, and by
the Organization for Economic Cooperation and Development. In each case, the
long-term interest rates reported by these organizations were lower than those
reported by the GOI. Therefore, we used the rates provided by the GOI in lieu of
appropriate company-specific long-term benchmarks for the respondent companies
for which we calculated benefits (for sub-loans under the EC's NCI; see Section
III.D.).
Comment 6: Petitioner supports the Department's preliminary determination on the
countervailability of the program allowing for reductions in social security
payments for companies located in the Mezzogiorno.
Respondent companies argue that benefits received by Henraux under this program
for employees at storage yards in the Mezzogiorno are not countervailable, because
they do not benefit the production or exportation of
the subject merchandise to the United States. Respondent companies contend that
the Department confirmed during verification that all granite sold through
Henraux's storage yards in the Mezzorgiorno is sold to Italian customers, citing the
Henraux verification report at pages two and nine. As further support for this
argument, respondents cite the Department's Final Affirmative Countervailing
Duty Determination: Porcelain-On-Steel Cooking Ware from Mexico (51 FR
36447, October 10, 1986) (Mexican Cooking Ware), in which the Department
concluded that low-interest loans to finance consumer goods manufactured in
Mexico did not provide countervailable subsidies because they did not benefit the
production or exportation of the subject merchandise to the United States. They
also cite Industrial Nitrocellulose from France: Final Results of Countervailing
Duty Administrative Review (52 FR 833, 836, January 9, 1987) which states that
"benefits tied solely to the domestic sales of a product are not countervailable."
The GOI contends that, in accordance with the Department's policy and practice,
reductions in social security payments for firms located in the Mezzogiorno is not a
regional subsidy. As in the Department's determination concerning a labor
assistance program in its Final Affirmative Countervailing Duty
Determination: Certain Steel Products from the Federal Republic of Germany (47 FR
39345, September 7, 1982) (German Steel), the Mezzorgiorno programs are
structured to increase overall employment in this historically
underdeveloped area--not to target a specific region or industry. Further, the GOI
argures that the Department mistakenly has defined the Mezzogiorno as a "region."
The Mezzogiorno is not a region, they argue, because it includes more than the
geographic south.
DOC Position: We disagree with respondents' assertion that social security payment
reductions benefit only domestic sales. In Mexican Cooking War, we investigated
the Fomex frontier program, which finances the production, inventory, purchase
and sale of consumer goods manufactured in border zones, as well as consumer
products produced elsewhere and sold in border zones. "Border zones" are regions
20 kilometers wide, parallel to the U.S.-Mexican borderline, and certain other "free
zones" within Mexico. We verified that the loans under this program were tied by law
to sales of products within Mexico.
In the current investigation, social security reductions for companies located in the
Mezzorgiorno are not tied by law to domestic sales. There is no requirement in the
program that benefits go to facilities which carry out domestic sales exclusively.
Absent such an absolute link between benefits provided and domestic sales carried
out, we cannot determine that no benefits are conferred on the production or
export of granite destined for the United States. All sales may benefit equally from
the social security reductions. Nothing prohibits a company from exporting granite
from its facilities in the Mezzogiorno for which the social security reductions have
been provided.
A program is determined to be regional and, therefore, limited when its funding is
authorized by the central government to benefit only certain regions within its
jurisdiction. In German Steel, we found that certain labor assistance programs were
part of a national policy to relieve unemployment and were not limited to specific
regions. Although the Mezzogiorno may include more than the geographic south, as
the GOI argues, it is still a "region" for our purposes. It is a legally recognized area
within Italy, which has been designated to receive certain special benefits not
available elsewhere. Thus, we have determined the program providing social
security payment reductions for companies located in the Mezzogiorno to be
countervailable.
Comment 7: Respondent companies and the GOI contend that the Department
should not have broadened its investigation from seven to seventeen companies
merely because the original seven companies and their related companies each
requested exclusion from any countervailing duty order that might be
issued. Respondent companies argue that by requesting exclusion, the original
seven did not "set themselves on a separate investigative track." Therefore, they
contend that the Department should terminate its investigation with respect to the
ten additional companies.
Respondents further argue that nothing in the Department's regulations or in the
countervailing duty law suggests that a distinction should be made between
companies requesting exclusion and other companies. They argue that section
355.38 of the regulations provides only for exclusion from a countervailing
duty order, not from an investigation. Therefore, respondents contend that, until
an order is issued (if ever), the Department should conduct the investigation in the
same manner as it would if no exclusions had been requested.
Furthermore, respondent companies and the GOI contend that the Department had
presumably deemed the original seven companies as representative, in that the
Department only issued its initial questionnaire to those seven companies. They
assert that the representativeness of the original seven companies, based on 1986
export statistics, is an objective characteristic which cannot be changed by the legal
actions taken by the companies after the commencement of the investigation. As
support for these assertions, respondents cite Fabricas el Carmen, S.A. v. United
States, 672 F. Supp. 1465, 1479 (Ct. Int'l Trade 1987), remand order vacated as
moot, 680 F. Supp. 1577 (1988) (Fabricas), for the proposition that Commerce
erred in excluding those
*27207
companies that had filed timely exclusion requests from its "representative" sample
of the investigated industry used to calculate the country-wide countervailing
duty rate.
Petitioner asserts that the Department's regulations permit an investigation of all
producers of the subject merchandise, without limitation, that the Department has
discretion to decide how many companies to investigate, and that
the Department's regulations make no provision for terminating the investigation of
companies after they have been included in the investigation.
DOC Position: Petitioner correctly states that the Department's regulations permit
an investigation of all producers of the subject merchandise, without limitation, and
that the Department has discretion to decide how many companies to investigate.
While our preference is to examine all manufacturers, producers and exporters of
the subject merchandise in each investigation, this may not be administratively
feasible when there are numerous potential respondents. In such circumstances, we
collect either aggregate data on the industry as a whole, if this is feasible and
verifiable, or we select a representative group upon which to base our
determinations.
We initially requested the GOI to identify the largest manufacturers and exporters
accounting for 60 percent of exports of the subject merchandise to the United States
and to forward copies of the questionnaire to them. Once identified, these
companies requested exclusion. As discussed in our preliminary determination, it is
our policy to select additional companies when companies in our original group
request exclusion. The court in Fabricas addressed the issue of how we calculate
country-wide rates; it did not suggest how we should structure our investigation to
cover as large a group of producers as we find appropriate and administratively
feasible to investigate. In this investigation, we determined it was necessary to
examine a broader
representation of companies which petitioner alleged received countervailable
benefits.
Comment 8: Petitioner argues that only companies which both produce and export
granite should be excluded from any countervailing duty order that may be
issued. Because exporters can easily ship granite products produced by another,
subsidized firm, the inclusion of exporters which do not produce granite is the only
way to ensure that countervailing duties are levied on all subsidized granite
imports.
Respondents argue that the Department should exclude from any
countervailing duty order all companies that have filed timely requests for
exclusion that are either producers or exporters of the subject merchandise.
Respondents cite the Department's regulations, section 355.38: "[a]ny firm which
does not benefit from a subsidy alleged or found to have been granted to other firms
producing or exporting the merchandise subject to the investigation shall, on timely
application therefor, be duly excluded from a Countervailing Duty Order", 19
CFR 355.38 (1987) (emphasis added).
DOC Position: Because our final determination is negative, this issue is moot.
Comment 9: Petitioner argues that depreciation under Article 68 of DPR 597/73
provides benefits (i.e., higher depreciation rates) for specific industries and,
therefore, is countervailable. Because Italy's depreciation schedule
classifications are industry specific rather than asset specific, and because
rates vary across industries, petitioner argues that this tax provision should be
determined to be countervailable. Petitioner further argues that the Department
was unable to verify that a wide variety of industries used all of the tax programs.
Respondent companies and the GOI argue that Italian tax law provisions concerning
accelerated depreciation, revaluation of fixed assets, and capital gains reinvestment
provide no countervailable benefit because they apply generally to all enterprises in
Italy. In support of this contention, respondents cite Bethlehem Steel Corp. v.
United States, 7 CIT 339, 590 F. Supp. 1237, 1245 (Ct. Int'l Trade 1984) ("laws of
taxation are not subsidies to the taxpayer * * * when they present equal
opportunities to reduce the exaction"); and Carlisle Tire & Rubber Co. v. United
States, 5 CIT 229, 564 F. Supp. 834, 839 (Ct. Int'l Trade 1983) (Carlisle) (accelerated
depreciation programs that were generally available to entire business community
in investigated country were not countervailable benefits).
DOC Position: We verified that all the income tax programs under investigation are
available to all Italian firms and that IVA deductions are available to Italian firms in
virtually all industries. Furthermore, we established at verification that these
provisions are widely used and, therefore, have found them to be not
countervailable, including accelerated depreciation under Article 68 of DPR
597/73. By their nature, depreciation rates vary by both
industry and by asset because the useful lives of assets differ among industries and
among types of assets. See, for example, the Class Life Asset Depreciation Range
System (Rev. Proc. 77-10, 1977-1 C.B. 548 (RR-38)). We found nothing unusual in
the Italian depreciation schedules to suggest that they benefit a specific enterprise
or industry or group of enterprises or industries.
Comment 10: Petitioner argues that financing under the Sabatini Law is
countervailable given that different interest rates are available to different regions
in Italy. Furthermore, petitioner argues that a specific group of industries
receives these benefits, i.e., companies which use machine tools and production
machinery valued at over L. 1,000,000. They contend that the evidence of industry
use on the record is insufficient to determine that Sabatini Law financing is not
limited. Petitioner contends that we should consider verification of the Sabatini
program to be inadequate because the GOI refused to allow the verification team to
review documents on the approval process for this program. In addition, petitioner
believes that an extra benefit is conferred on Sabatini Law recipients through the
stamp and registration tax exemption.
Respondent companies and the GOI argue that verified evidence on the record
demonstrates that benefits under the Sabatini Law are available to all Italian
enterprises and that they do not benefit an individual industry or group of
industries or a particular geographic region of Italy. Respondents argue that
benefits under a program are not countervailable simply because minimum
eligibility criteria exist, such as the Sabatini Law requirement that equipment
purchases be valued in excess of L. 1,000,000. In support of this argument they
cite PPG Industries, Inc. v. United States, 662 F. Supp. 258, 266 (CIT 1987) ("the
mere fact that a program contains certain eligibility requirements for participation
does not transform the program into one which has provided a countervailable
benefit") and Carlisle, supra, at 836 note 3 (certain tax benefits are not
countervailable simply because not every company could meet the specified
eligibility criteria).
DOC Position: During this investigation, we reviewed both the laws and regulations
governing various Italian programs as well as the actual availability and receipt of
benefits under such programs. In each instance, we made a factual determination as
to whether benefits were conferred in such a manner as to be properly considered
*27208
limited to a specific industry or group of industries.
We verified that companies throughout Italy are eligible for Sabatini benefits,
although at varying levels. We also verified that the respondent companies which
received Sabatini benefits received the minimum benefit. See section II.D. and DOC
Position on Comment 1. Eligiblity for Sabatini benefits is based on objective and
precise criteria specified in the law and amending
decrees, and we verified that each company which used this program qualified and
was approved for Sabatini Benefits based on these criteria. We saw no evidence that
the GOI exercises discretion or deviates from these criteria in granting Sabatini
benefits. Furthermore, we verified that thousands of companies in virtually every
sector have received Sabatini benefits.
The stamp and registration tax exemption applies to all companies that qualify
under the Sabatini Law. We have determined that the minimum Sabatini benefit is
not countervailable because it is not limited to a specific enterprise or industry, or
group of enterprises or industries. The same holds true for the stamp and
registration tax exemptions provided for under the Sabatini Law.
Comment 11: Petitioner argues that contributions for the purchase of electronic
equipment granted under Law 696 are countervailable due to the Department's
findings at verification that this program targeted manufacturing and mining.
Petitioner asserts that, while it appears that a large number of industrial groups
have benefitted from Law 696, there likely were many more companies deemed
ineligible to receive benefits. Finally, petitioner argues that the Department should
find the program countervailable because we received information during
verification that Law 696 was terminated due to EC objections that Italy was
"engaged in subsidization."
Respondent companies and the GOI argue that verified evidence on the record
demonstrates that benefits under Law 696 are available to all Italian
enterprises and that such benefits do not benefit an individual industry or group of
industries or a particular geographic region of Italy. Furthermore, respondents
argue that the fact that Law 696 benefits are limited to certain small- and
medium-sized companies does not make the benefit countervailable, citing Forged
Undercarriage Components, supra.
DOC Position: At verification, we confirmed that benefits under Law 696 are
available to all small-and medium-sized companies in Italy that purchased
qualifying electronic equipment. We also examined the application and review
process carried out by the Ministry of Industry and Commerce and observed that
the approval and rejection of applications was based solely upon criteria set forth in
the law (i.e., that the company must be a small- or medium-sized enterprise and that
it must actually purchase a piece of electronic equipment). Therefore, we found no
governmental discretion outside the law in the administration of the Law 696
program. Finally, a determination by the EC that a program of an EC member state is
(or is not) a subsidy is not pertinent to the Department's independent determination
as to whether the same program constitutes a countervailable benefit within the
meaning of the Act.
Comment 12: Respondents argue that if benefits under the Sabatini Law, Law 696,
and Law 130 are found to be countervailable, such benefits should be allocated
according to the Department's grant methodology, because they are all provided in
the form of lump sum payments. According to respondents, such
benefits should be allocated over the average useful life of the assets used to
produce the subject merchandise, as set forth in the U.S. Internal Revenue Service
1977 Class Life Asset Depreciation Range System (Rev. 77-10, 1977-1 C.B. 548), or
over ten years for assets used in the production of granite.
Respondent companies argue that to the extent the Department finds
countervailable the benefits provided under Law 696, Law 130, Law 614, or Decree
902 (with respect to northern and central Italy), the contervailing duty rate set
in the final determination must take into account the fact that benefits under these
programs have been discontinued. Respondents cite Final Affirmative
Countervailing Duty Determination and Countervailing Duty Order:
Carbon Steel Wire Rod from Malaysia (53 FR 13303, 13307, April 22, 1988), Certain
Textile Mill Products from Mexico: Final Results of Countervailing Duty
Administrative Review (52 FR 45010, 45012, November 25, 1987), And Final
Affirmative Countervailing Duty Determination: Acetylsalicylic Acid
(Aspirin) from Turkey (52 FR 24494, 24498, July 1, 1987), in support of this
argument.
DOC Position: We have determined that the minimum level of benefits received by
the producers of certain granite products under Law 902, Sabatini Law, Law 696
and Law 130 are not countervailable. Therefore, these issues are moot. Since the
benefit under Law 614 is de minimis, the question of issuing a separate duty deposit
rate is also moot.
Comment 13: Petitioner contends that the provision of preferential
transportation rates under Law 887 is countervailable because it provides a
preferential benefit to a specific group of enterprises or industires. Petitioner bases
this contention on the following conclusions: (1) The preferential transprotation
rates constitute a regional program applicable only to shipments from the Italian
islands to the Italian mainland, and (2) the program is also industry-specific,
providing lower rates only for shipments of raw mineral substances.
Respondent companies and the GOI argue that, because the reduced rail rates
provided by the Italian State Railway are available to any consumer of minerals
transported by rail from the Italian islands to the Italian mainland, these rates do
not constitute countervailable benefits. They further assert that the industries
which consume the minerals that benefit from reduced rail rates are numerous and
diverse. In addition to the Italian stone industry, they cite industries that consume
Sardinian coal (i.e., steel, glass, textile, chemical, and electrical utilities) as
examples of eligible beneficiaries of reduced rates. Respondent cite the Final
Negative Countervailing Duty Determination: Certain Softwood Products
from Canada (48 FR 24159, 24167 (May 31, 1983) as support for this argument,
based on the "legal principle" articulated in that case that a benefit is not
countervailable if it is available to numerous and diverse industries.
Respondent companies also argue that the reduced rail rates do not
confer a countervailable regional subsidy. They state that the only regional element
to the reduced rail rates involves the raw mineral producers and not the consumers.
Therefore, they argue that any regional benefit that may be provided goes only to
the mineral producers (granite quarriers) and not to granite producers subject to
this investigation.
Respondents further point out that reduced rail rates are paid or bestowed on
granite blocks. They argue that, at most, granite producers may receive an
upstream subsidy from this benefit on granite blocks, which are inputs used in the
manufacture or production of the subject merchandise. They assert that any benefit
related to these blocks would have to be analyzed under the upstream subsidy
provision of the contervailing duty law, which requires an allegation of upstream
subsidization by the petitioner.
*27209
DOC Position: Information submitted to us by the GOI prior to and during
verification gave no indication that any respondent company actually received rail
transportation benefits under Law 887 during the review period. Consequently, we
did not press the GOI for extensive data regarding actual use of this program by
Italian industrial groups. At verification, GOI representatives specified four raw
mineral substances which qualify for the 30 percent rail reduction under Law 887:
Oil, clay, marble and granite. The Department received no documented information
from the GOI beyond this list of four substances during the course of this
investigation. We therefore
determine that reduced rail rates under Law 887 are limited to a specific enterprise
or industry, or group of enterprises or industries. See discussion under Section I.A.
Furthermore, we disagree with respondents' argument that transportation benefits
for granite blocks must be analyzed in the upstream subsidies context. The benefits
discovered during company verification clearly were bestowed upon the
respondent companies and not upon upstream input suppliers. Through
examination of rail invoices, it was apparent that these companies paid for the
transport of the granite blocks and, as such, directly benefitted from the reduced
rate for rail transportation from the Italian islands.
Comment 14: Respondent companies argue that if reduced rail rates constitute
countervailable benefits, the appropriate methodology is to calculate a benefit
based on the difference between (1) the cost of commercially available transport
alternatives (e.g., trucking costs) and (2) the price that respondents actually paid as
a result of reduced rates. They argue further that the benefit should be allocated
over the combined sales of granite, travertine and marble sales, because reduced
rates are available for shipment of all minerals from the Italian islands to the
mainland.
DOC Position: We disagree. The benefit is the difference between what the company
would have paid absent the 30 percent rail rate reduction and what it actually paid
given the 30 percent reduction. Furthermore, verified
information shows that the respondent companies benefitted from reduced rail
rates for transport of granite blocks only. We therefore allocated the benefit solely
over the total granite sales of the companies in question.
Comment 15: Petitioner agrees with the Department's preliminary finding that Law
614 local tax concessions are countervailable due to their regional nature, but
disagrees with the calculation methodology. Petitioner argues that the ad valorem
rate for Law 614 benefits should not take into account the effect of the local tax
(ILOR) reduction on the national corporate (IRPEG) tax liability. They argue that
this approach is akin to the granting of an offset against the countervailable local tax
subsidy by reason of the increase in national corporate taxes paid. They contend
that such an offset is not in accordance with section 771(6)(b) of the Act, which
places limitations on allowable offsets. Instead, petitioner argues that the entire
amount of the local tax concession by itself should be measured in the year
received.
Petitioner also argues that "it is the Department's policy to disregard secondary tax
effects on countervailable subsidies," citing Groundfish from Canada, supra, and
argues that the ILOR tax is a national, not a local tax.
Respondents state that they are in agreement with the Department's calculation in
the preliminary determination of the Law 614 benefit to Granitex, taking into
consideration the net impact of the benefit on the company's total corporate income
tax liability. They state that the so-called local ILOR tax
is not comparable to the state income taxes existing in the United States. They asert
that ILOR and IRPEG are merely two elements of a single unified income tax
established by the national Italian government.
DOC Position: We agree with the assessment of respondents that the ILOR tax is a
local tax in name only. ILOR is imposed by the national government and calculated,
as is IRPEG, in the national tax return. The tax incidence at issue in Groundfish from
Canada was highly speculative; it involved a future and uncertain effect that was not
simultaneously nor directly calculable from the tax benefit in question. In contrast,
IRPEG liability bears a simple relationship to ILOR liability and, in fact, cannot be
calculated until ILOR liability is calculated. Therefore, we have calculated the
benefit under Law 614 based on the company's total corporate income tax liability,
including both ILOR and IRPEG. As such, our calculation takes into account the
primary, and not the secondary, tax effects of the program. The offset issue is not
relevant in this situation.
Comment 16: Petitioner submits that the export statistics provided by the GOI are
unreliable and should not be used as part of the calculations for any program found
to be countervailable. Because not all exporters of granite to the United States were
investigated, petitioner further argues that only the sales figures of the companies
under investigation may be used in determining the ad valorem benefit under
specific programs.
DOC Position: Because no export programs have been found to be countervailable,
we have not used export statistics in any of our calculations. In performing our
calculations to determine the ad valorem benefit under specific domestic programs,
we have used only the relevant sales values of the companies under investigation.
Comment 17: Respondents argue that the Department must base calculations of any
countervailing duty rate in this investigation on sales of all respondents, not
just on sales of those that did not request exclusion. They contend that the
Department's general policy is to calculate a single, country-wide
countervailing duty rate, as provided for under section 706(a)(2) of the Act,
which states that a countervailing duty order presumptively applies to all of
the subject merchandise exported from the country under investigation. They
contend that neither the statute nor the existing or proposed regulations require
that the Department remove from its calculation of a country-wide
countervailing duty rate the sates revenues of the companies which
requested exclusion.
Respondents also cite Fabricas, supra, in support of this assertion. They argue that
the facts of Fabricas are similar to this investigation, with both cases involving
hundreds of companies from which a small representative group was selected on
which to base the investigation. In Fabricas, the Court of International Trade (CIT)
held that it was unreasonable for the Department to
exclude certain investigated companies, which did not receive greater than de
minimis benefits, from the sample upon which a representative country-wide rate
might be based.
DOC Position: It is our practice to calculate a country-wide rate which is a
weighted-average rate for all companies whose individual rates are neither de
minimis nor significantly different from the rates of other companies. In this
investigation, no respondent company's individual rate is above de minimis.
Therefore, we have not calculated country-wide rates for those programs
determined to be countervailable.
Comment 18: Respondents state that the only exceptions to the statutory
presumption in favor of calculating a country-wide rate are: (1) If the Department
finds that a "significant differential" exists between the
*27210
subsidies received by the respondent companies, or (2) if one or more of the
companies is a state-owned enterprise. Respondent asserts that none of the
respondent companies in this investigation is owned by the state. They argue that
any potential countervailable subsidies in this investigation are "miniscule" and that,
therefore, it is inconceivable that any significant differential might exist in this
investigation. Respondents further argue that, even if the weighted-average subsidy
for all respondents under investigation were five percent, and the individual
company subsidy amounts were to range from zero to ten percent, the Department
lacks the authority to
calculate more than one countervailing duty rate that would apply to the
subject merchandise, as it would be illogical and unfair to calculate a single,
country-wide rate based only on data for the subsidized companies but that would
apply to all non-excluded companies, including unsubsidized companies.
DOC Position: See DOC Position on Comment 17.
Comment 19: Petitioner points out a number of problems with, or inaccuracies in,
the GOI exclusion certification. Based on these problems, petitioner argues that the
Department should not exclude any of the requesting companies from any
countervailing duty order that may be issued. Petitioner argues that receipt
of countervailable benefits by a company requesting exclusion must lead the
Department to reject the GOI exclusion certification. Furthermore, petitioner states
that all the companies requesting exclusion received loans from the EIB or ECSC
and, therefore, should not be granted exclusion.
Respondents assert that the vast bulk of the information provided to the
Department as part of the exclusion certification was confirmed during verification,
with only minor exceptions. Therefore, they argue that the exclusion requests
should be granted. Respondents further argue that statutory and regulatory
authority does not require government certification as a prerequisite to granting
exclusion, aside from the proposed and as yet unadopted regulations. Absent
specific statutory or regulatory authority,
respondents argue that the Department may not impose an additional requirement
that a request for exclusion may not be granted absent government certification.
Respondents state that even if subsidies have been received by companies
requesting exclusion, the aggregate value of any subsidies is de minimis. Therefore,
the exclusion requests should still be granted.
DOC Position: See discussion under "Exclusion Requests" section.
Comment 20: Respondents argue that the Department should terminate its
investigation of EC-related loan benefits, because the Department did not initiate a
countervailing duty investigation specifically against imports of granite from
the EC. They contend that the Department may not countervail subsidies received
from EC-affiliated organizations in a countervailing duty investigation
involving merchandise from a single EC member state (i.e., Italy), asserting that
the investigation is limited strictly to benefits provided by the GOI or subdivisions
thereof. Respondents further argue that, because the Department calculates a single
countervailing duty rate applying to all imports of the subject merchandise
from a given country, the Department must limit its investigation to subsidies
provided by the country under investigation and its political subdivisions.
Otherwise, respondent companies assert that if the Department were to find that
certain benefits provided by EC organizations confer countervailable subsidies on
producers located in that member state, calculation of the subsidy rate based only
on the benefits
received by companies located in that member state (as opposed to the EC as a
whole) might be distorted.
Petitioner argues that the Department has investigated and countervailed EC
programs in several prior cases against specific EC member states, citing the 1982
steel investigations involving Belgium, France, the Federal Republic of Germany,
Italy, Luxembourg, the Netherlands, and the United Kingdom; and the 1985
table wine investigations involving France, the Federal Republic of Germany, and
Italy. Because the EC is an "association" (within the meaning of 19 U.S.C. 1677(5)
and 19 U.S.C. 1303(a)(1)) of member states, one of which is Italy, subsidies to
Italy from the association may be countervailed under the law.
DOC Position: It is true that the Department has countervailed EC programs in prior
cases against specific EC member states. The most recent example of this is found in
our Final Affirmative Countervailing Duty Determination: Certain Fresh Cut
Flowers From the Netherlands, 52 FR 3301 (February 3, 1987) (Netherlands
Flowers). There, as in previous cases, we examined EC programs alleged by
petitioner to provide subsidies to the subject merchandise produced in a specific
member state. While petitioner in the current investigation did not file an allegation
of EC subsidies, we discovered the programs during the course of verification and,
after soliciting comments from the interested parties, including the EC, we deemed it
appropriate to examine these programs.
Section 771(3) of the Tariff Act of 1930, as amended (the Act) 19 U.S.C. 1677(3)
(1982) defines the term "country" as: "a foreign country, a political subdivision,
dependent territory, or possession of a foreign country, and, except for the purpose
of antidumping proceedings, may include an association of two or more foreign
countries, political subdivisions, dependent territories, or possessions of countries
into a customs union outside the United States." (Emphasis added.) The EC is an
association of two or more countries as provided for under section 771(3).
The Department's general policy of calculating country-wide rates does not prohibit
us from examining EC benefits in this investigation. Nor does it mean that
calculation of a subsidy rate based only on benefits received by companies located
in a single member state (rather than the EC as a whole) would somehow be
distorted. In Netherlands Flowers, we found a joint Government of the Netherlands
(GON) and EC program, Aids for the Creation of Cooperative Organizations, to be
countervailable. We took the benefit from both the EC and the GON to Dutch flower
growers and allocated the total over sales of those same flower growers. There is no
distortion in a methodology which attributes benefits, whether provided by the
national or some other level government, to a specific company or industry in a
specific country, and allocates those benefits over the sales of that specific company
or industry to arrive at the subsidy rate.
Comment 21: Petitioner asserts that there are three subsidies available under the
ECSC loan program: (1) The five percent interest rebate over five years; (2) the
five-year grace period on the loans; and (3) the interest rate on the loans. Petitioner
therefore contends that the Department must calculate the total subsidy value of the
ECSC loan using all three subsidy components.
DOC Position: We agree with petitioner that the five percent interest rebate is
countervailable; but, as discussed in Section I.B., we disagree that any other aspect
of the loans are countervailable with respect to certain granite products.
Comment 22: Petitioner argues that the ECSC conversion loan provided to one of the
respondent companies is
*27211
countervailable, because such loans target a specific enterprise or industry or group
of enterprises or industries. Petitioner alleges that the loans are available only to
firms which hire redundant coal and steel workers, and that they are given only in
specific areas where there are steel mills or coal mines with redundant workers.
Petitioner further alleges that the designation of "priority areas" makes this a
countervailable regional subsidy program. Finally, petitioner contends that the
program is not used by a wide variety of industries throughout the EC. Petitioner
further contends that these loans were found countervailable in Carbon Steel
Products From Belgium (47 FR 39323) (1982)
(Belgian Steel) and are not part of an EC-wide unemployment policy.
Respondents argue that the ECSC loan provides no countervailable benefit because
the loan (1) was provided as part of an EC-wide policy to relieve unemployment, and
(2) was intended to benefit workers in the coal and steel industry, not the granite
industry. Respondents cite previous Department determinations in support of their
contentions: In German Steel, supra, at 39349-50, the Department determined that
a program that was part of a country- wide unemployment policy provided no
countervailable subsidy despite the fact that certain areas received more benefits
under the program than did others. And in Groundfish From Canada, at 10066, the
Department stated that the German Steel determination stands for the proposition
that no countervailable benefit is provided in those instances in which "assistance
provided as part of the national policy to relieve unemployment was provided on
identical terms across [the investigated country]," and "regional designations were
merely for administrative convenience."
DOC Position: As discussed in the verification report, ECSC conversion loans are
available to an individual firm in any industry in any region of a member state if the
firm proposes a project that is capable of being filled by redundant ECSC workers.
The loan can cover up to 50 percent of the investment costs. These loans have in
fact been utilized by firms in a broad range of industries. They are also available to
and have been approved for firms
located in regions that are not considered to be coal and steel areas.
In contrast, the interest rebate for certain ECSC loans is subject to regional
variations based solely on location in particular regions. Because of its location in a
"priority" region, Fratelli Guarda received interest rebates that would not have been
available had the company been located outside a "priority" region. As such, interest
rebates on ECSC conversion loans are not provided on identical terms across all
regions of EC member states, nor are the regional designations used merely for
administrative convenience.
Comment 23: Petitioner argues that the Department should allocate the ECSC loan
benefit over five years, because the interest rebate on the ECSC loan is disbursed in
ten bi-annual payments, beginning January 19, 1986. Petitioner further argues that
the Department should not use an allocation method at all, when the allocation
method by itself causes a de minimis result. Otherwise the remedial effects of the
countervailing duty law will have been made unavailable to the domestic
industry.
Respondents argue that, to the extent that the ECSC loan is determined to confer a
countervailable benefit, the Department should allocate that benefit over the
ten-year life of the loan.
DOC Position: These interest rebates are made only on a portion of the loan and are
made as discreet, bi-annual cash payments over the first five years of a ten year
loan. Therefore, we are expensing each such payment to the period
of receipt, rather than allocating benefits over time. In its accounts, Fratelli Guarda
does not credit the rebates to interest payable on the loan.
Comment 24: Petitioner contends that EIB loans are still countervailable, as
determined in Belgian Steel, because they are limited to specific "unbalanced"
regions in the EC. Petitioner further contends that loans from the EIB's own funds
and NCI loans should be treated as two distinct programs by the Department,
arguing that they are separate programs even though both are administered by the
EIB. As support for this argument, petitioner cites the fact that the EC created a
separate fund when it first created the NCI in 1978, instead of just increasing the
capitalization of the EIB in order to increase lending. Petitioner contends that the
Department has examined programs administered by the same organization or
entity and determined that they constitute separate countervailable subsidies.
Petitioner cites as examples the General Development Agreements and the Special
Recovery Capital Projects programs, Groundfish from Canada at 10048-49.
Respondents contend that the countervailability of NCI loans is a matter of first
impression for the Department. Respondents further contend that the prior finding
on EIB loans in Belgian Steel has no precedential value in determining the
countervailability of NCI loans.
DOC Position: Because of our determination discussed in section III.D., we have not
reached this issue.
Comment 25: Petitioner contends that regional location is a criterion for the
granting of both EIB and NCI loans, that the loans granted for one region are not
"interchangeable" with those granted for another, and that the loans are made at
rates inconsistent with commercial considerations. Petitioner further contends that
"few different companies actually receive EIB and NCI loans" and that there is no
evidence to prove otherwise. In support of this argument, petitioner cites page 12 of
the EC verification report, which lists several industries which EC officials state
received EIB and NCI loans, but which does not provide a breakdown of companies
receiving loans within each industry. For the program to be found not
countervailable, there must be evidence on the record to refute petitioner's
allegation that the loans are provided to a specific group of industries, and that oral
statements by EC officials do not constitute verified evidence. Petitioner contends
that "there is no documentary evidence which supports statements made by EC
officials," and that "[t]he EC officials' statements seem to have been accepted at face
value."
Respondent companies argue that the NCI financing received by certain
respondents provides no countervailable benefit because such financing is available
(1) to all regions of the EC and Italy, (2) to a broad range of industrial sectors,
and (3) on commercial terms specified by the intermediary bank that actually lends
the funds to the ultimate borrower.
DOC Position: Although documentation on the record is incomplete due to the
previously noted time constraints and unusual circumstances governing this aspect
of our investigation, documentary evidence does exist. Among other
documentation, we reviewed industry breakdowns published in annual reports and
policies and procedures discussed in official publications. For the reasons discussed
in Section III.D., we have decided that we should not make a determination on NCI
financing based on an incomplete record.
Comment 26: Respondents contend that all EIB loans are available only for
investment projects (i.e., plant
*27212
modernization or expansion, or the construction of new production facilities). They
further contend that the EIB loan to Giuseppe Furrer (Furrer) provides no
countervailable subsidy toward Furrer's granite exports, because Furrer produces
only marble.
Petitioner argues that, since Furrer exports granite, its operations and facilities are
also involved with granite. Insofar as the company must take possession of the
granite at times, such that it is physically present at the plant, and that company
officials must process paperwork involved in selling and shipping granite, petitioner
argues that the benefit of this loan should be allocated to Furrer's total sales.
DOC Position: Because of our determination discussed in Section III.D., we have not
reached this issue.
Comment 27: Petitioner contends that the Department collected "no useful data"
during verification regarding ECU-denominated loans whose contracts show no
financing from the ECSC or EIB. Absent such verified information, petitioner
contends that the Department must determine that these loans are countervailable
where they are provided at interest rates and on terms inconsistent with
commercial considerations. Petitioner argues that, according to information on the
record, the Department found that ECU-denominated loans to the respondent
companies are at interest rates inconsistent with commercial considerations.
Respondent companies argue that ECU-denominated loans were provided to several
respondent companies entirely on commercial terms from commercial sources and
without the involvement of the EIB or other EC-affiliated institutions. Respondents
contend that ECUs are simply another type of currency in which Italian companies
may borrow. Respondents further contend that EC-related loans to the respondent
companies did not confer any countervailable benefit.
DOC Position: When we examine loan contracts and other documentation and see no
evidence of government action or presence, we do not conclude that we lack
verified information. In this investigation, we are relying upon verified information
to find that ECU-denominated loans that were not disbursed through the ECSC or
EIB involve no countervailable benefits of any kind. We examined loan contracts,
among other documentation, for each loan and did not find any evidence that the EC
or the GOI played any role in negotiating or specifying contractual terms for these
loans. In contrast, contracts for loans financed
by the ECSC or the EIB specifically identify these institutions. We also established to
our satisfaction that commercial banks in EC member states frequently lend in ECUs.
Petitioner has offered no information or documentation that contradicts our
verified information. Finally, because interest payments on these loans are
calculated based on ECUs, Italian lire interest rates are not the appropriate
benchmarks.
Comment 28: Petitioner asserts that its interests have been prejudiced by the
acceptance of the GOI brief commenting on the Department's verification of the
government responses. This brief was filed on June 13, 1988, but petitioner received
it on June 17, 1988, one week after rebuttal briefs were due. Due to untimeliness,
petitioner argues that the Department should not consider this brief. Furthermore,
petitioner objects to the "late filing" by the GOI of eleven exhibits related to
certification and to the Department's procedures in (1) extending normal deadlines
to accomodate the GOI, and (2) not informing petitioner of the process. Petitioner
states that the eleven exhibits must be rejected by the Department and that the
Department should base its final determination regarding certification on the
"properly noticed and conducted verification."
DOC Position: We allowed petitioner an extension of time to respond to the GOI brief
of June 13, 1988. In so doing, we consider that any unfairness was eliminated in the
briefing process. Petitioner filed its rebuttal to the GOI
brief on July 7, 1988. Therefore, we will not reject the GOI brief and have
considered it in making our final determination.
The eleven certification exhibits referred to by petitioner were submitted to the
Department in Washington and were also reviewed by Department officials in Rome.
However, we did not formally accept these documents as verification exhibits and
did not take them into consideration in making our final determination on the
exclusion/certification issue. Our final determination on the exclusion/certification
issue is based solely on information reviewed and obtained during verification in
Italy in April 1988.
Comment 29: Petitioner complains that it was disadvantaged by the following: (1)
Public exhibits to the EC verification report were supplied to petitioner
approximately five hours before initial comments were due; (2) the confidential
version of the EC verification report was not provided to petitioner prior to the
deadline for filing its initial comments; (3) confidential EC verification exhibits were
not provided to petitioner; (4) the Department granted petitioner only 48 hours to
comment on the EC verification report; and (5) respondents had access to
"substantially more" information than petitioner.
DOC Position: Petitioner had equal opportunity to comment and equal access to
information as that afforded respondents. All parties were aware that verification of
the EC response occurred between June 29 and July 1, that the
verification report was completed and sent to all parties on the first business day,
July 5, following the end of verification, and that the final determination, which
could not be extended, was due approximately one a week later on July 13.
Furthermore, petitioner was the first party to observe the public verification
exhibits. Release of the confidential version of the verification report, which
contained only one sentence and several numbers that were not in the public
version and no substantive information not reported in the public version, was
delayed for all parties except the EC. As it was, the EC did not even file a brief, but
chose to provide only factual corrections to the report. In no respect did petitioner
have access to less information than respondents.
Verification
In accordance with section 776(a) of the Act, except where noted in this
determination, we verified the information used in making our final determination.
We followed the standard verification procedures including meeting with
government and company officials, examination of relevant accounting records,
and examination of original source documents of the respondents. Our verification
results are outlined in detail in the public
versions of the verification reports which are on file in the Central Records Unit
(Room B-099) of the Main Commerce Building.
ITC Notification
In accordance with section 705(d) of the Act, we will notify the ITC of our
determination. Since we have determined that only de minimis countervailable
benefits are being provided to manufacturers, producers or exporters in Italy of
certain granite products, the investigation will be terminated upon the publication
of this notice in the Federal Register. Hence, the ITC is not required to make a final
injury determination.
This determination is published pursuant to section 705(d) of the Act (19 U.S.C.
1671d(d)).
*27213
July 13, 1988.
Jan W. Mares,
Assistant Secretary for Import Administration.
[FR Doc. 88-16214 Filed 7-18-88; 8:45 am]
BILLING CODE 3510-DS-M