63 FR 46411


                                    NOTICES

                            DEPARTMENT OF COMMERCE

                       International Trade Administration

                                  [C-475-819]

      Certain Pasta From Italy: Preliminary Results of New Shipper Countervailing
                           Duty Administrative Review

                            Tuesday, September 1, 1998

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AGENCY: Import Administration, International Trade Administration, Department of
Commerce.

ACTION: Notice of Preliminary Results of New Shipper Countervailing Duty Administrative
Review.

SUMMARY: The Department of Commerce is conducting a new shipper administrative review of the 
  countervailing duty order on certain pasta from Italy. We preliminarily determine the net
subsidy to be 1.14 percent ad valorem for CO.R.EX. S.r.L. for the period January 1, 1997 through
December 31, 1997. If the final results remain the same as these preliminary results, we will instruct
the U.S. Customs Service to assess countervailing duties as detailed in the Preliminary Results
of Review section of this notice.

Interested parties are invited to comment on these preliminary results.

EFFECTIVE DATE: September 1, 1998.

FOR FURTHER INFORMATION CONTACT: Javier Barrientos, Todd Hansen, or Vincent Kane, Office of
AD/CVD Enforcement, Group I, Import Administration, U.S. Department of Commerce, Room 3099,
14th Street and Constitution Avenue, N.W., Washington, D.C. 20230; telephone (202) 482-4207,
482-1276, or 482-2815, respectively.

Applicable Statute

Unless otherwise indicated, all citations to the statute are references to the provisions of the Tariff
Act of 1930, as amended by the Uruguay Round Agreements Act ("URAA"), effective January 1,
1995. All other references are to the Department of Commerce's (the Department) regulations at 19
CFR Part 351 et. seq., Antidumping duties: Countervailing Duties; Final Rule, 62 FR 27296,
May 19, 1997, unless otherwise indicated.

Background

On July 23, 1996, the Department published in the Federal Register (61 FR 38544) the
  countervailing duty order on certain pasta from Italy.
On January 16, 1998, the Department received a request from CO.R.EX. S.r.L. ("CO.R.EX.") for a new
shipper review of the countervailing duty order on certain pasta from Italy pursuant to
section 751(a)(2)(B) of the Tariff Act of 1930, as amended ("the Act"), and in accordance with 19 CFR
351.214(b) of the Department's regulations.
On February 25, 1998, we initiated a new shipper review for the period January 1, 1997 through
December 31, 1997 (63 FR 10590). The review covers an exporter of the subject merchandise,
CO.R.EX., and CO.R.EX.'s subcontractor. (CO.R.EX. does not produce pasta but has a subcontractor
produce pasta for it from semolina supplied by CO.R.EX.) Also, this review covers 24 programs.

Responses from CO.R.EX. and its subcontractor were received on April 20, 1998, and supplementary
responses were received on May 29, June 16, and August 14, 1998.

Scope of the Review

The merchandise under review consists of certain non-egg dry pasta in packages of five pounds (or
2.27 kilograms) or less, whether or not enriched or fortified or containing milk or other optional
ingredients such as chopped vegetables, vegetable purees, milk, gluten, diastases, vitamins, coloring
and flavorings, and up to two percent egg white. The pasta covered by this scope is typically sold in
the retail market, in fiberboard or cardboard cartons or polyethylene or polypropylene bags, of
varying dimensions.
Excluded from the scope of this review are refrigerated, frozen, or canned pastas, as well as all forms
of egg pasta, with the exception of non-egg dry pasta containing up to two percent egg white. Also
excluded are imports of organic pasta from Italy that are accompanied by the appropriate

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certificate issued by the Instituto Mediterraneo Di Certificazione, by Bioagricoop Scrl, or by QC&I
International Services. Furthermore, multicolored pasta imported in kitchen display bottles of
decorative glass, which are sealed with cork or paraffin and bound with raffia, is excluded from the
scope of this review.
The merchandise under review is currently classifiable under item 1902.19.20 of the Harmonized
Tariff Schedule of the United States (HTSUS). Although the HTSUS subheading is provided for
convenience and customs purposes, our written description of the scope of this review is
dispositive.
Furthermore, on July 30, 1998, the Department issued a scope ruling that multipacks consisting of
six one-pound packages of pasta, which are shrinked wrapped into a single package, are within the
scope of the orders. (See July 30, 1998 letter from Susan H. Kuhbach, Acting Deputy Assistant
Secretary for Import Administration to Barbara P. Sidari, Vice President, Joseph A. Sidari Company,
Inc.)

Period of Review

The period of review ("POR") for which we are measuring subsidies is calendar year 1997.

Subsidies Valuation Information

Benchmark for Long-term Loans and Discount Rate: The companies under review did not take out
any long-term, fixed-rate, lira-denominated loans or other 
debt obligations which could be used as benchmarks in any of the years in which grants were
received or government loans under investigation were given. In the Final Affirmative
  Countervailing Duty Determination; Certain Stainless Steel Wire Rod from Italy, 63
FR 87,077 (July 29, 1998), the Department determined, based on information gathered during
verification, that the Italian ABI prime rate is the most suitable benchmark for long-term financing
to Italian companies. Therefore, we used the Italian ABI prime rate increased by the average spread
over the ABI prime rate charged by banks on loans to commercial customers as the benchmark for
long-term loans and the discount rate.
Allocation Period: In British Steel plc. v. United States, 879 F.Supp. 1254, 1289 (CIT 1955), the
U.S. Court of International Trade (the Court) ruled against the allocation methodology for
non-recurring subsidies that the Department had employed for the past decade, which was
articulated in the General Issues Appendix, appended to the Final Countervailing Duty
Determination; Certain Steel Products from Austria, 58 FR 37225 (July 9, 1993) ("GIA"). In
accordance with the Court's remand order, the Department determined that the most reasonable
method of deriving the allocation period for nonrecurring subsidies is a company-specific average
useful life ("AUL") of non-renewable physical assets. This remand determination was affirmed by the
Court on June 4, 1996. See British Steel plc v. United States, 929 F.Supp 
426, 439 (CIT 1996). Accordingly, the Department has applied this method to determine the
appropriate allocation period in this review.
Consistent with our approach in the investigation segment of this proceeding, Final Affirmative
  Countervailing Duty Determination: Certain Pasta ("Pasta") from Italy (61 FR 30288, June
14, 1996) ("Pasta from Italy"), we determined that the Law 64/86 grant received by CO.R.EX.'s
subcontractor was non-recurring. For purposes of allocating the Law 64/86 grant, CO.R.EX.'s
subcontractor submitted an AUL calculation based on depreciation and asset values of productive
assets reported in its financial statements. This AUL was derived by dividing the sum of average
gross book value of depreciable fixed assets over the past ten years by the average depreciation
charges over this period. We found this calculation to be reasonable and consistent with our
company-specific AUL objective. In this manner, an AUL of 22 years was calculated for CO.R.EX.'s
subcontractor. We have used this calculated AUL for the allocation period for the Law 64/86
industrial development grant, the only non-recurring subsidy received by respondents.

I. Programs Previously Determined to Confer Subsidies 

A. Industrial Development Grants Under Law 64/86

Law 64/86 provided assistance to promote industrial development in the Mezzogiorno. Grants were
awarded to companies constructing new plants or expanding or modernizing existing plants. Pasta
companies were eligible for grants to expand existing plants but not to establish new plants, because
the market for pasta was deemed close to being saturated. Grants were made only after a private
credit institution chosen by the applicant made a positive assessment of the project.
In 1992, the Italian Parliament decided to abrogate Law 64/86. This decision became effective in
1993. Projects approved prior to 1993, however, were authorized to receive grant amounts after
1993. CO.R.EX.'s subcontractor benefitted from an industrial development grant during the POR.
In Pasta from Italy, the Department determined that these grants provide a countervailable
subsidy within the meaning of section 771(5) of the Act. They provided a direct transfer of funds
from the Government of Italy (GOI), bestowing a benefit in the amount of the grant. Also, these
grants were found to be regionally specific within the meaning of section 771(5A). In this new
shipper review, neither the GOI nor the responding companies provided new information which
would warrant reconsideration of this determination.
In Pasta from Italy, the Department treated these grants as "non-recurring" based on the analysis
set forth in the Allocation section of the GIA, 58 FR at 37225. In the current new shipper review, we
have found no reason to depart from this treatment.
In accordance with our past practice, we have allocated the grant, which exceeded 0.5 percent of
sales in the year of receipt, over time. (See GIA at 58 FR 37226.)
To calculate the countervailable subsidy, we used our standard grant methodology. We divided the
benefit attributable to CO.R.EX.'s subcontractor in the POR by its pasta sales. We then attributed a
portion of this subsidy to CO.R.EX.'s sales of pasta based on processing fees paid by CO.R.EX to its
subcontractor. Thus, we determine the countervailable subsidy for this program to be 0.18 percent
ad valorem in the POR for CO.R.EX.

B. Social Security Reductions and Exemptions 

1. Sgravi Benefits

Pursuant to Law 1089 of October 25, 1968, companies located in the Mezzogiorno were granted a 10
percent reduction in social security contributions for all employees on the payroll as of September
1, 1968, as well as those hired thereafter. Subsequent laws authorized companies located in the
Mezzogiorno to take additional reductions in social security contributions for employees hired
during later periods, provided that the new hires represented a 
net increase in the employment level of the company. The additional reductions ranged from 10 to
20 percentage points. Further, for employees hired during the period July 1, 1976 to November 30,
1991, companies located in the Mezzogiorno were granted a full exemption from social security
contributions for a period 

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of 10 years, provided that employment levels showed an increase over a base period.
CO.R.EX.'s subcontractor received Sgravi reductions and exemptions during the POR.
In Pasta from Italy, the Department determined that the social security reductions and
exemptions were countervailable subsidies within the meaning of section 771(5) of the Act. They
represented revenue foregone by the GOI and they conferred a benefit in the amount of the savings
received by the companies. Also, they were found to be specific within the meaning of section
771(5A) because they are limited to companies located in the Mezzogiorno. In this review, neither
the GOI nor the responding companies provided new information which would warrant
reconsideration of this determination.
To calculate the countervailable subsidy, we divided the total savings in social security
contributions realized by CO.R.EX.'s subcontractor during the POR by its total sales during the same
period. We then attributed a portion of this subsidy to CO.R.EX. based on processing fees paid by
CO.R.EX. to its subcontractor. On this basis, we calculated the countervailable subsidy from 
this program to be 0.01 percent ad valorem in 1997 for CO.R.EX.

2. Fiscalizzazione Benefits

In addition to the Sgravi deductions described above, the GOI provides Social Security benefits of
another type, called "Fiscalizzazione." Fiscalizzazione is a nationwide measure which provides a
reduction of certain social security payments related to health care or insurance. The program
provides an equivalent level of deductions throughout Italy for contributions related to
tuberculosis, orphans, and pensions. However, the program provides a higher deduction from
contributions to the National Health Insurance system for manufacturing enterprises located in
southern Italy compared to those located in northern Italy. During the POR, the differential
was 3.00 percent of base salary.
CO.R.EX.'s subcontractor received the higher level of Fiscalizzazione deductions available to
companies located in the Mezzogiorno during the POR.
In Pasta from Italy, the Department determined that the Fiscalizzazione reductions were
countervailable subsidies within the meaning of section 771(5) of the Act for companies with
operations in southern Italy. They represented revenue foregone by the GOI and conferred a
benefit in the amount of the greater savings accruing to the companies in southern Italy. In
addition, they 
were found to be regionally specific within the meaning of section 771(5A). In this review, neither
the GOI nor the responding companies provided new information which would warrant
reconsideration of this determination.
To calculate the countervailable subsidy, we divided the excess Fiscalizzazione deductions realized
by CO.R.EX.'s subcontractor in the POR by its total sales. We then attributed a portion of the
subcontractor's subsidy to CO.R.EX. based on processing fees paid by CO.R.EX. to its subcontractor.
On this basis, we calculated the countervailable subsidy from this program for CO.R.EX. to be 0.06
percent ad valorem in the POR.

3. Law 407/90 Benefits

Law 407/90 grants a two-year exemption from social security taxes when a company hires a worker
who has been previously unemployed for a period of two years or more. A 100 percent exemption
was allowed for companies in southern Italy. However, companies located in northern Italy
received only a 50 percent exemption.
During the POR, CO.R.EX. and its subcontractor received the higher level of Law 407 exemptions
available to companies located in the Mezzogiorno.
In Pasta from Italy, the Department determined that the 100 percent exemption provided to
companies with operations in southern Italy under Law 407 was a 
countervailable subsidy within the meaning of section 771(5). The 100 percent exemption
represented revenue foregone by the GOI and conferred a benefit in the amount of the greater
savings accruing to the companies in southern Italy. In addition, it was found to be regionally
specific within the meaning of section 771(5A). In this review, neither the GOI nor the responding
companies provided new information which would warrant reconsideration of this determination.
To calculate the countervailable subsidy rate, we divided the amount of the Law 407 exemptions
realized by CO.R.EX. in excess of the amount available in northern Italy by CO.R.EX.'s sales. We
also divided the amount of the Law 407 exemptions realized by CO.R.EX.'s subcontractor in the POR
in excess of the amount available in northern Italy by CO.R.EX.'s subcontractor's sales. We then
attributed a portion of the subcontractor's subsidy to CO.R.EX. based on processing fees paid by
CO.R.EX. to its subcontractor. On this basis, we calculated the countervailable subsidy from this
program to be 0.06 percent ad valorem in the POR for CO.R.EX.

4. Law 863 Benefits

Law 863 provides for a reduction of social security payments of 25 percent for companies in
northern Italy that hire employees who are participating in a 
training program. Companies in southern Italy receive a 100 percent reduction in social
security payments for such employees.
CO.R.EX.'s subcontractor received the higher level of Law 863 reductions available to companies
located in the Mezzogiorno during the POR.
In Pasta from Italy, the Department determined that the 100 percent reduction for companies
with operations in the South were countervailable subsidies within the meaning of section 771(5) of
the Act to the extent that they exceeded the reductions for companies in the North. They
represented revenue foregone by the GOI and confer a benefit in the amount of the greater savings
accruing to the companies in southern Italy. In addition, they are regionally specific within the
meaning of section 771(5A). In this review, neither the GOI nor the responding companies provided
new information which would warrant reconsideration of this determination.
To calculate the countervailable subsidy, we divided the amount of the Law 863 reductions realized
by CO.R.EX.'s subcontractor during the POR in excess of the amount available in northern Italy
by its total sales during the same period. We then attributed a portion of this subsidy to CO.R.EX.
based on processing fees paid by CO.R.EX. to its subcontractor. On this basis, we calculated the
countervailable subsidy from this program to be 0.03 percent ad valorem in 1997 for CO.R.EX.

III. Programs Determined To Confer Subsidies in This Review 

A. Debt Consolidation Law 341/95

The Ministry of Industry, in accordance with the provisions of Law 341/95, provides interest
contributions on medium-term debt consolidation loans to small- and medium-sized companies
located in depressed areas. The interest rate on these loans is set at the Bank of Italy's reference
rate with the GOI's interest contributions serving to reduce this rate.
CO.R.EX. obtained a Law 341 loan in 1996 and received interest contributions on the loan during the
POR.
We preliminarily determine that the loan and interest contributions under 

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Law 341 are countervailable subsidies within the meaning of section 771(5). They were a direct
transfer of funds from the GOI providing a benefit in the amount of the difference between interest
paid at the benchmark rate and interest paid by CO.R.EX. after accounting for the GOI's interest
contributions. Also, they were found to be regionally specific within the meaning of section 771(5A).
Because the loan received by CO.R.EX. is a long-term loan with a variable interest rate and we did not
have a variable benchmark rate, we treated it as a series of short-term loans and calculated the
interest savings during the POR 
to be the sum of the interest contributions received on the loan during the POR and the difference in
interest on the loan as calculated at the reference rate and at the benchmark rate. On this basis, we
determine the countervailable subsidy for this program to be 0.80 percent ad valorem during the
POR.

IV. Programs Preliminarily Determined To Be Not Used 

We preliminarily determine that CO.R.EX. and its subcontractor did not apply for or receive benefits
under the following programs during the POR:
A. VAT Reductions
B. Export Credits Under Law 227/77
C. Capital Grants Under Law 675/77
D. Retraining Grants Under Law 675/77
E. Interest Contributions on Bank Loans Under Law 675/77
F. Interest Grants Financed by IRI Bonds
G. Preferential Financing for Export Promotion Under Law 394/81
H. Corporate Income Tax (IRPEG) Exemptions
I. European Agricultural Guidance and Guarantee Fund
J. Urban Redevelopment Under Law 181
K. Local Income Tax (ILOR) Exemptions
L. Industrial Development Loans Under Law 64/86
M. Export Marketing Grants Under Law 304/90
N. Lump-Sum Interest Payment Under the Sabatini Law for Companies in Southern Italy
O. Remission of Taxes on Export Credit Insurance under Article 33 of Law 227/77
P. European Social Fund
Q. European Regional Development Fund
R. Export Restitution Payments

Preliminary Results of Review 

For the period January 1, 1997 through December 31, 1997, we preliminarily determine the net
subsidy for CO.R.EX. to be 1.14 percent ad valorem. If the final results of this review remain the same
as these preliminary results, the Department will instruct the U.S. Customs Service to assess
  countervailing duties at this net subsidy rate on all entries of the subject merchandise from
CO.R.EX. entered on or after January 1, 1997 and on or before December 31, 1997.
The Department also intends to instruct the U.S. Customs Service to collect a cash deposit of
estimated countervailing duties of 1.14 percent of the f.o.b. invoice value on all shipments of
the subject merchandise from CO.R.EX. 
entered, or withdrawn from warehouse, for consumption on or after the date of publication of the
final results of this new shipper review. The cash deposit rates for all other producers/exporters
remain unchanged from the last completed administrative review (see Final Results of
  Countervailing Duty Administrative Review: Certain Pasta from Italy (63 FR 35665,
August 14, 1998).)

Public Comment 

Parties to this proceeding may request disclosure of the calculation methodology within five days of
publication of this notice and interested parties may request a hearing no later than 30 days after the
date of publication. Interested parties may submit written arguments in case briefs on these
preliminary results within 30 days of the date of publication of these preliminary results. Rebuttal
briefs, limited to arguments raised in case briefs, may be submitted five days after the time limit for
filing the case brief. Parties who submit written arguments in this proceeding are requested to
submit with the argument (1) a statement of the issue and (2) a brief summary of the argument. Any
hearing, if requested, will be held two days after the scheduled date for submission of rebuttal briefs.
Copies of case briefs and rebuttal briefs must be served on interested parties in accordance 
with 19 CFR 351.303(f).
Representatives of parties to the proceeding may request disclosure of proprietary information
under administrative protective order no later than 10 days after the representative's client or
employer becomes a party to the proceeding, but in no event later than the date the case briefs are
due.
The Department will publish the final results of this new shipper review, including the results of its
analysis of issues raised in any case or rebuttal brief or at a hearing.
This administrative review and notice are in accordance with section 751(a)(2)(B) of the Act and 19
CFR 351.214.
Dated: August 24, 1998.

Joseph A. Spetrini,

Acting Assistant Secretary for Import Administration.

[FR Doc. 98-23510 Filed 8-31-98; 8:45 am]

BILLING CODE 3510-DS-P