99-816

64 FR 44489
NOTICES

DEPARTMENT OF COMMERCE

International Trade Administration

[C-475-819]

Certain Pasta From Italy: Final Results of the Second Countervailing Duty
Administrative Review

Monday, August 16, 1999

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

ACTION: Notice of final results of countervailing duty administrative review.

SUMMARY: On April 12, 1999, the Department of Commerce published in the Federal Register its
preliminary results of the second administrative review of the countervailing duty order on
certain pasta from Italy for the period January 1, 1997 through December 31, 1997. For
information on the net subsidy for each reviewed company, as well as for all non-reviewed
companies, see the Final Results of Review section of this notice. We will instruct the U.S. Customs
Service to assess countervailing duties as detailed in the Final Results of Review section of
this notice.

EFFECTIVE DATE: August 16, 1999.

FOR FURTHER INFORMATION CONTACT: Vincent Kane, Sally Hastings or Suresh Maniam, AD/CVD
Enforcement, Group I, Office 1, Import Administration, U.S. Department of Commerce, Room 1780,
14th Street and Constitution Avenue, N.W., Washington, D.C. 20230; telephone (202) 482-2815,
482-3464 or 482-0176, 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
(the Act). The Department
is conducting this administrative review in accordance with section 751(a) of the Act. In addition,
unless otherwise indicated, all citations to the Department's regulations are to the regulations
codified at 19 CFR 351 (1998).

Background

On July 24, 1996, the Department of Commerce (the Department) published in the Federal Register
(61 FR 38544) the countervailing duty order on certain pasta from Italy.
In accordance with 19 CFR 351.213(b), this review of the order covers the producers or exporters of
the subject merchandise for which a review was specifically requested. They are:

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Audisio Industrie Alimentari S.p.A. ("Audisio"); the affiliated companies Delverde SrL, Industrie
Alimentari di Capitanata SrL, Sangralimenti SrL, and Pietro Rotunno SrL ("Delverde/Tamma");
Pastificio Fabianelli S.p.A. ("Fabianelli"); and Pastificio Riscossa F.lli Mastromauro SrL ("Riscossa").
The petitioners in this review are Borden, Inc., Hershey Foods Corp. and Gooch Foods, Inc. This
review covers 25 programs.
Since the publication of the preliminary results of the second administrative review of the
countervailing duty order on certain pasta from Italy on April 12, 1999 (See Certain Pasta
from Italy: Preliminary Results of Countervailing
Duty Administrative Review (64 FR 17618) (Preliminary Results), the following events have
occurred. On May 4, 1999, we issued supplementary questionnaires to the Government of Italy ("
GOI"), the European Union ("EU"), and the Government of the Piedmont Region. We received
responses to these questionnaires on May 20, 1999. From May 24 through May 28, 1999, we verified
the questionnaire responses of Audisio and Fabianelli. On May 12, 1999, Riscossa submitted its case
brief. On June 22, 1999, petitioners and respondents Delverde/Tamma submitted case briefs.
Respondents Audisio, Delverde/Tamma, and Fabianelli and petitioners filed rebuttal briefs on May
29, 1999. The Department did not conduct a hearing in this review because none was requested.

Scope of 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
certificate issued by the Associazione Marchigiana Agricoltura Biologica ("AMAB"), by Bioagricoop
Scrl, or by QC&I International Services.
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.

Scope Rulings

The Department has issued the following scope rulings to date:
(1) On August 25, 1997, the Department issued a scope ruling that multicolored pasta, imported in
kitchen display bottles of decorative glass that are sealed with cork or paraffin and bound with raffia,
is excluded from the scope of the antidumping and countervailing duty orders. See
Memorandum from Edward Easton to Richard Moreland, dated August 25, 1997.
(2) On July 30, 1998, the Department issued a scope ruling, finding that multipacks consisting of six
one-pound packages of pasta that are shrink-
wrapped into a single package are within the scope of the antidumping and countervailing duty
orders. See letter from Susan H. Kuhbach, Acting Deputy Assistant Secretary for Import
Administration, to Barbara P. Sidari, Vice President, Joseph A. Sidari Company, Inc., dated July 30,
1998.
(3) On October 26, 1998, the Department self-initiated a scope inquiry to determine whether a
package weighing over five pounds as a result of allowable industry tolerances may be within the
scope of the antidumping and countervailing duty orders. On May 24, 1999 we issued a final
scope ruling finding that pasta in packages weighing or labeled up to (and including) five pounds four
ounces is within the scope of the antidumping and countervailing duty orders. See
Memorandum from John Brinkmann to Richard Moreland, dated May 24, 1999.

Period of Review

The period of review (POR) for which we are measuring subsidies is from January 1, 1997 through
December 31, 1997.

Subsidies Valuation Information

Benchmarks for Long-term Loans and Discount Rates: The companies under review
did not take out any long-term, fixed-rate, lira-denominated loans or other debt obligations which
could be used as benchmarks in any of the years in which grants were received or government loans
under review were given. Therefore, we used the Bank of Italy reference rate, adjusted upward to
reflect the mark- up an Italian commercial bank would charge a corporate customer, as the
benchmark interest rate for long-term loans and as the discount rate for years prior to 1995. For the
years 1995 through 1997, we used the Italian Bankers Association ("ABI") interest rate increased by
the average spread charged by banks on loans to commercial customers plus an amount for bank
charges. For a further discussion of the interest rates used in these final results, see Memorandum to
File from Team, "Calculation Memorandum for Final Results-- Interest Rates," dated July 31, 1999.
Allocation Period: In British Steel plc. v. United States, 879 F.Supp. 1254, 1289 (CIT 1995)
("British Steel I"), 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 non-recurring 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)
("British Steel II"). Accordingly, the Department has applied this method to those non-recurring
subsidies that were not countervailed in the original investigation.
For non-recurring subsidies received prior to the POR and which have already been countervailed
based on an allocation period established in the investigation, it is neither reasonable nor
practicable to reallocate those subsidies over a different period of time. Therefore, for purposes of
these final results, the Department is using the original allocation period assigned to each
non-recurring subsidy countervailed in the original investigation on the basis of the allocation
period established in the original investigation. This conforms with our approach in Certain Carbon
Steel Products from Sweden; Final Results of Countervailing Duty Administrative Review,
62 FR 16549 (April 7, 1997).
For non-recurring subsidies not countervailed in the original investigation, each company under
review submitted an AUL calculation

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based on depreciation and asset values of productive assets reported in its financial statements.
Each company's 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. We have used these calculated
AULs for the allocation period for non-recurring subsidies not countervailed in the original
investigation.

Changes in Ownership

One of the companies under review, Delverde, purchased an existing pasta factory from an unrelated
party. The previous owner of the purchased factory had received non-recurring countervailable
subsidies prior to the transfer of ownership, which took place in 1991.
We have calculated the amount of the prior subsidies that passed through to Delverde with the
acquisition of the factory, following the spin-off methodology described in the Restructuring section
of the GIA, 58 FR at 37265. (For further discussion, see Comment 4 below.)

Affiliated Parties

In the present review, we have examined several affiliated companies (within the meaning of section
771(33) of the Act) whose relationship may be sufficient to warrant treatment as a single company.
In the countervailing duty questionnaire, consistent with our past practice, the Department
defined companies as sufficiently related where one company owns 20 percent or more of the other
company, or where companies prepare consolidated financial statements. The Department also
stated that companies may be considered sufficiently related where there are common directors or
one company performs services for the other company. According to the questionnaire, such
companies that produce the subject merchandise or that have engaged in certain financial
transactions with the company subject to review are required to respond.
In the Preliminary Results, and consistent with our determination in Final Affirmative
Countervailing Duty Determination: Certain Pasta ("Pasta") from Italy 61 FR 30288,
30290 (June 14, 1996) (Pasta from Italy) we have treated Delverde SrL, Tamma Industrie
Alimentari, SrL, Sangralimenti SrL, and Pietro Rotunno, SrL as a single company with a combined
rate. We did not receive any comments on this treatment from the interested parties, and our review
of the record has not led us to change this determination.

Analysis of Programs

I. Programs Previously Determined To Confer Subsidies

A. Industrial Development Grants

1. Law 64/86 Benfits

Delverde/Tamma and Riscossa benefitted from industrial development grants under Law 64/86
during the POR. In the Preliminary Results and in Pasta from Italy, we found that this program
conferred regionally specific, countervailable subsidies on the subject merchandise. Our review of
the record and our analysis of the comments submitted by interested parties, summarized below in
Comment 5, have not led us to change our findings for Delverde/Tamma and Riscossa. Accordingly,
the net subsidies for this program have not changed from the Preliminary Results and are as follows:
Delverde/Tamma 2.18 percent ad valorem and Riscossa 0.74 percent ad valorem.

2. Law 488/92 Benefits

Delverde/Tamma also benefitted from industrial development grants under Law 488/92 during the
POR. In the Preliminary Results, we found that this program conferred regionally specific,
countervailable subsidies on the subject merchandise. We did not receive any comments on this
program from interested parties and our review of the record has not led us to change our findings
for Delverde/Tamma. Accordingly, the net subsidy for this program has not changed from the
Preliminary Results and is as follows: Delverde/Tamma 0.23 percent ad valorem.

B. Industrial Development Loans Under Law 64/86

Delverde/Tamma received industrial development loans with interest contributions from the GOI.
In the Preliminary Results and Pasta from Italy, we found that this program conferred
countervailable subsidies on the subject merchandise. We did not receive any comments on this
program from interested parties and our review of the record has not led us to change our findings
or calculations from the Preliminary Results. Accordingly, the net subsidy for this program remains
unchanged and is as follows: Delverde/Tamma--0.65 percent ad valorem.

C. Export Marketing Grants Under Law 304/90

Delverde/Tamma received a grant under this program for a market development project in the
United States. In the Preliminary Results and Pasta from Italy, we found that this program
conferred countervailable subsidies on the subject merchandise. We did not receive any comments
on this program from interested parties and our review of the record has not led us to change any
findings or calculations for Delverde/Tamma. Accordingly, the net subsidy for
this program remain unchanged from the Preliminary Results and is as follows:
Delverde/Tamma--0.22 percent.

D. Social Security Reductions and Exemptions

1. Sgravi Benefits

Delverde/Tamma and Riscossa received countervailable social security reductions and exemptions
during the POR. In the Preliminary Results and Pasta from Italy, we found that this program
conferred regionally-specific countervailable subsidies on the subject merchandise. We did not
receive any comments on this program from interested parties and our review of the record has not
led us to change any findings or calculations. Accordingly, the net subsidies for this program remain
unchanged from the Preliminary Results and are as follows: Delverde/Tamma--0.31 percent ad
valorem and Riscossa--0.37 percent ad valorem.

2. Fiscalizzazione Benefits

Delverde/Tamma and Riscossa received the higher levels of fiscalizzazione deductions available to
companies located in the Mezzogiorno during the POR.
In the Preliminary Results and Pasta from Italy, we found that this program conferred
regionally-specific countervailable subsidies on the subject merchandise. We did not receive any
comments on this program from interested parties and our review of the record has not led us to
change any findings or calculations. Accordingly, the net subsidies for this program remain
unchanged from the Preliminary Results and are as follows: Delverde/Tamma--0.07 percent ad
valorem and Riscossa--0.21 percent ad valorem.

3. Law 407/90 Benefits

Delverde/Tamma received the higher level of Law 407 deductions available to companies located in
the Mezzogiorno during the POR. In the Preliminary Results and Pasta from Italy, we found that
this program conferred regionally specific countervailable subsidies on the

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subject merchandise. We did not receive any comments on this program from interested parties and
our review of the record has not led us to change our findings or calculations. Accordingly, the net
subsidies for this program remains unchanged from the Preliminary Results and are as follows:
Delverde/Tamma--0.00 percent ad valorem.

4. Law 863 Benefits

Delverde/Tamma received the higher level of Law 863 deductions available to companies located in
the Mezzogiorno during the POR. In the Preliminary Results and Pasta from Italy, we found that
this program conferred regionally specific countervailable subsidies on the subject merchandise. We
did not receive any comments on this program from interested parties and our review of the record
has not led us to change our findings or calculations. Accordingly, the net subsidy for this program
remains unchanged from the Preliminary Results and is as follows: Delverde/Tamma 0.17 percent ad
valorem.

E. Remission of Taxes on Export Credit Insurance Under Article 33 of Law 227/77

Fabianelli obtained export credit insurance under this program for its exports to the United States
and, therefore, was exempted from the insurance tax. In the Preliminary Results and Pasta from
Italy, we found that this program conferred countervailable subsidies on the subject
merchandise. We did not receive any comments on this program from interested parties and our
review of the record has not led us to change our findings or calculations. Accordingly, the net
subsidy for this program remains unchanged from the Preliminary Results and is as follows:
Fabianelli--0.03 percent ad valorem.

F. European Social Fund

The European Social Fund ("ESF"), one of the Structural Funds operated by the EU, was established to
improve workers' opportunities through training and to raise workers' standards of living
throughout the European Community by increasing their employability. There are six different
objectives identified by the Structural Funds: Objective 1 covers projects located in underdeveloped
regions, Objective 2 addresses areas in industrial decline, Objective 3 relates to the employment of
persons under 25, Objective 4 funds training for employees in companies undergoing restructuring,
Objective 5 pertains to agricultural areas, and Objective 6 pertains to regions with very low
population (i.e., the far north).
During the POI, Audisio received an ESF training grant under Objective 4 for the purpose of training
its workers to increase productivity.
The Department considers worker training programs to provide a countervailable benefit to a
company when the company is relieved of an obligation it would have otherwise incurred. See Pasta
From Italy 61 FR at 30294. Since companies normally incur the costs of training to enhance the
job-related skills of their own employees, we determine that this ESF grant relieves Audisio of
obligations it would have otherwise incurred. Consequently, the ESF grant is a financial
contribution as described in section 771(5)(D)(i) of the Act which provides a benefit to the recipient
in the amount of the grant.
Consistent with prior cases, we have examined the specificity of the ESF funding under Objective 4
separately from any funding under other objectives. See Final Affirmative Countervailing Duty
Determination: Steel Wire Rod from Italy 63 FR 40474, 40487 (July 29, 1998) (Wire Rod
from Italy).
In this case, the Objective 4 grant received by Audisio emanated from a regional operational
program, which had been set up pursuant to the Single Programming Document for Italy,
negotiated by the EU, the GOI and Italian regional authorities. The funding for this regional
operational program came from the EU, the GOI and the regional government of Piedmont. For the
reasons set forth in Wire Rod from Italy, we have examined each level separately to determine
specificity.
In the case of Objective 4 funding, the Department has determined in past cases that the EU portion
of the funding is de jure specific because its availability is limited on a regional basis within the EU.
In this regard, although Objective 4 funding is available throughout the Member States, the EU
negotiates a separate programming document to govern the implementation and administration of
the program with each Member State. The GOI funding was also determined to be de jure specific
because eligibility is limited to the center and north of Italy (non-Objective 1 regions). See Wire
Rod from Italy 63 FR at
40487. The specificity of the regional funding, meanwhile, has been a de facto issue.
Audisio argues that all of the Objective 4 agreements negotiated between the EU and Member States
should be considered together. If this were done, according to Audisio, the Department by its own
admission would arguably be unable to determine that the program is de jure specific at the EU level.
See Final Affirmative Countervailing Duty Determination: Stainless Steel Plate in Coils
from Italy 64 FR 15508, 15517 (March 31, 1999) (Plate from Italy).
While we agree with Audisio that it may be appropriate for the Department to revisit its decision in
Wire Rod from Italy on this issue, this is not the case to do it in. Given the lack of information on
the use of Objective 4 funds by the EU, the GOI or the Piedmont regional government, we must base
the specificity determination on facts available. In addition, we determine that it is appropriate to
use adverse facts available because, in our view, information on the distribution of benefits by
industry and by region could have been provided given a reasonable effort by the GOI and the
Piedmont regional government to do so. See 19 U.S.C. 1677e(b). The EU and the GOI stated that they
were unable to provide the Department with the industry and region distribution information for
each Objective 4 grant in Italy despite requests in our original questionnaire and a
supplementary questionnaire. In addition, while the GOI provided a list of grantees that received
funds under
the multiregional operating programs in non-Objective 1 regions, it did not identify the industry and
region of such grantees. Although this information may not have been on file with the GOI, it was, in
our view, information that was readily accessible to the GOI and could have been provided to us
given a reasonable effort on the part of the GOI. Furthermore, the regional government similarly
refused to cooperate to the best of its ability in this investigation despite Department requests. In its
supplementary questionnaire response, the Piedmont regional government simply indicated that
certain information was on file at its offices and that we could review this information during
verification. The regional government made no effort to provide the information as requested.
Therefore, as adverse facts available, we continue to find that the aid received by Audisio is specific.
Accordingly, we determine that the ESF grants received by Audisio are countervailable within the
meaning of section 771(5) of the Act.
The Department normally considers the benefits from worker training programs to be recurring. See
GIA 58 FR at 37255. However, consistent with the Department's determination in Wire Rod from
Italy 63 FR at 40488, that these grants relate to specific, individual projects, we have treated
these grants as non-recurring grants because each required separate government approval. Because
the amount of funding for

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Audisio's project was less than
0.5 percent of Audisio's sales in the year of receipt, which was the POI, we have expensed the grant
received in the year of receipt. To calculate the benefit from Audisio's ESF grant, we divided the
grant amount by total sales in the POR because the grant benefitted sales of all of the company's
products. On this basis, we calculated a benefit of 0.04 percent ad valorem.

G. Export Restitution Payments

Delverde/Tamma, Fabianelli, Audisio and Riscossa received export restitution payments during the
POR on shipments of subject merchandise to the United States. In the Preliminary Results and Pasta
from Italy, we found that this program conferred countervailable subsidies on the subject
merchandise. We did not receive any comments on this program from interested parties and our
review of the record has not led us to change any findings or calculations. Accordingly, the net
subsidies for this program remain unchanged from the Preliminary Results and are as follows:
Delverde/Tamma 0.22 percent ad valorem, Audisio--1.03 percent ad valorem, Riscossa--0.81
percent ad valorem and Fabianelli--0.42 percent ad valorem.

II. Programs Preliminarily Determined To Be Not Used

In the Preliminary Results, we determined that the producers and/or exporters of the subject
merchandise did not apply for or receive benefits under the following programs during the POR:
A. Local Income Tax ("ILOR") Exemptions
B. VAT Reductions
C. Lump-Sum Interest Payment Under the Sabatini Law for Companies in Southern Italy
D. Export Credits Under Law 227/77
E. Capital Grants Under Law 675/77
F. Retraining Grants Under Law 675/77
G. Interest Contributions on Bank Loans Under Law 675/77
H. Interest Grants Financed by IRI Bonds
I. Preferential Financing for Export Promotion Under Law 394/81
J. Corporate Income Tax ("IRPEG") Exemptions
K. Urban Redevelopment Under Law 181
L. Debt Consolidation Law 341/95
M. Grant Received Pursuant to the Community Initiative Concerning the Preparation of Enterprises
for the Single Market ("PRISMA")
N. European Agricultural Guidance and Guarantee Fund ("EAGGF")
O. European Regional Development Fund ("ERDF")
We did not receive any comments on these programs from the interested parties,
and our review of the record has not led us to change our findings from the Preliminary Results.

Analysis of Comments

Comment 1

Petitioners claim that ESF aid provided to Audisio is de jure specific within the meaning of section
771(5A)(D)(iv) because it is limited to enterprises in certain regions. In Wire Rod from Italy at
40474 the Department determined that ESF aid was de jure specific because the European Union
("EU") negotiates a separate program document with each Member State and because GOI funding of
Objective 4 projects is available only in central and northern Italy.
Further, petitioners claim that Objective 4 aid is de facto specific because the GOI and the EU have
failed to provide information on the distribution of Objective 4 benefits by industry and by region.
Audisio claims that the Department indicated in Plate from Italy at 15517 that it is appropriate
to consider all the Member States of the European Union together and that, therefore, the
Department is "unable to determine that the program is de jure specific." Additionally, Audisio, the
EU and the GOI have provided sufficient evidence for the Department to determine that the ESF
funding received by Audisio during this review was not de facto specific.

DOC Position

We agree with Audisio that it may be appropriate for the Department to revisit its previous decision
in Wire Rod from Italy regarding the de jure specificity of assistance distributed under the ESF
Objective 4 Single Programming Document in Italy, as explained in Plate from Italy.
However the EU, the GOI and the Piedmont Regional Government failed to provide a breakdown of
the number of companies by industry and by region, which received ESF Objective 4 benefits in 1996
and each of the previous three years. In addition, they failed to provide information on the amount
of benefits received by industry and by region in 1996 and each of the previous three years. The
three governments stated that this information was not maintained by the administering agencies
because region of the country and type of industry were not taken into consideration in awarding
ESF Objective 4 grants. As explained above, however, in our view the information was readily
accessible and could have been provided to the Department given a reasonable effort on the part of
the administering agencies. For these reasons, we have found that the three governments did not act
to the best of their ability to comply with our information requests and, on the basis of adverse facts
available, have determined that the ESF Objective 4 aid is de facto specific.

Comment 2

Petitioners claim that the "separately incorporated" test used by the Department in Pasta from
Italy to determine whether subsidies to the mills should be attributed to the production of pasta
elevates form over substance. In Pasta from Italy, the Department attributed subsidies received
by semolina mills not only to semolina but also to pasta in those instances where the mills and the
pasta factories were owned and operated by a single corporation. Where the mills and pasta factories
were owned by affiliated but separately incorporated companies, however, the Department
determined that it would not consider subsidies to mills absent the filing of an upstream subsidy
allegation.
Petitioners further claim that the recently published substantive countervailing duty
regulations reflect a change in the Department's policy in this regard. Petitioners quote from the
preamble to section 351.525(b) of the new regulations which states that "where the input and
downstream production takes place in separately incorporated companies with cross-ownership * *
* and the production of the input product is primarily dedicated to the production of the
downstream product, paragraph (b)(6)(iv) requires the Department to
attribute the subsidies received by the input producer to the combined sales of the input and
downstream products (excluding the sales between the two corporations)." (See Countervailing
Duties: Final Rule, 63 FR 65,401.)
Petitioners claim that Tamma/Delverde meet the cross-ownership provision and that subsidies to
Tamma's mill should be attributed to both Tamma and Delverde.
Delverde claims that the Department has consistently included Law 64 grants benefitting Tamma's
semolina mill in its calculation of the Delverde/Tamma subsidy rate. The Department has "collapsed"
the two companies since the original investigation. See Pasta from Italy. Consequently, the
Department has in each of the previous proceedings attributed to Delverde subsidies that benefitted
Tamma's semolina mill. The Department has done so on the basis of the fact that

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Tamma's semolina mill is not separately incorporated. It is simply an operating unit of the Tamma
corporation.

DOC Position

We agree with Delverde. In Pasta from Italy, we did not countervail subsidies to affiliated mills
that were separately incorporated, indicating that we would not consider such subsidies absent an
upstream allegation. However, in Delverde's case, the Department collapsed Delverde and Tamma
treating the two as one company because of stock ownership between the
companies and common board members. Moreover, because Tamma's mill was not separately
incorporated from Tamma's pasta production operation, subsidies to Tamma's mill were included as
subsidies to Tamma's pasta. As a result, subsidies to Tamma's mill were viewed as benefitting both
Tamma and Delverde and were allocated over the combined sales of both companies excluding
intercompany sales. In both the preliminary and final results of this review, we have done the same.

Comment 3

Petitioners claim that there is no evidence on the record of this review regarding the
countervailability or non-countervailability of Sabatini benefits to companies in northern Italy.
In Pasta from Italy, the Department found that Sabatini benefits to companies in the North were
widely distributed by industry and by region and, therefore, were not specific. Petitioners argue,
however, that the finding in the original investigation that Sabatini benefits in northern Italy
were not specific is insufficient to support such a finding in later periods. In addition, petitioners
claim that it is unfair for the Department to require them to provide information indicating that
Sabatini benefits in the North may no longer be provided on a non-specific basis before the
Department will again examine the question of specificity. Petitioners
maintain that the GOI is in the best position to provide the relevant information and because it has
not done so, the Department should countervail Sabatini benefits received by companies in the
North.
Fabianelli claims that it does not qualify for the special concessionary rate available to companies in
southern Italy because its only production facilities are located in Castiglion Fiorentino, which is
not in the southern Italy. Further, Fabianelli claims that the Department did not refer to the
Sabatini Law in its Preliminary Results because benefits to companies in the North are no longer an
issue.

DOC Position

In the original investigation, Sabatini Law benefits were found to be widely distributed and to benefit
many companies representing a broad cross section of industries throughout Italy. In the
original investigation, we found that during the years 1988 through 1993, assistance under the
program was distributed over 19 sectors and that benefits to the food producing industry amounted
to only 4.9 percent of all benefits granted, which did not represent a disproportionately large share
of benefits. Given this compelling evidence of non-specificity of benefits to pasta production, the
Department sees no reason to re-open the question of specificity absent information that changes
have occurred. The Department has consistently followed this practice regarding programs previously
found not countervailable. See, e.g., Preliminary Countervailing Duty Determinations and
Alignment of Final Countervailing Duty Determinations with Final Antidumping Duty
Determinations: Certain Steel Products from Belgium, 57 FR 57750, 57758 (December 7, 1992)
and Preliminary Affirmative Countervailing Duty Determination: Extruded Rubber Thread
from Malaysia, 56 FR 67276, 67280 (December 30, 1991).

Comment 4

Delverde maintains that the change of ownership provision contained in the Uruguay Round
Agreements Act requires the Department to analyze the facts in each change of ownership situation
in order to determine whether and to what extent subsidies received by the original owner are
passed through to the new owner. The change of ownership provision recognizes that an arm's length
sale of an enterprise or an asset does not require a determination by the Department that a past
countervailable subsidy received by the enterprise no longer continues to be countervailable.
However, the change in ownership provision plainly does not preclude such a conclusion. For this
reason, the Department must carefully analyze the facts of each change of ownership situation.
According to Delverde, the Department's "privatization/restructuring"
methodology as described in the GIA does not provide for an analysis of the facts of each change of
ownership separately and on its own merits. Rather, this methodology presumes as a matter of law
that subsidies travel from the seller to the buyer in all circumstances. Only the amount of the
subsidies that passes through varies as determined by the gamma calculation depending on the facts
in each case.
In Delverde's view careful analysis of the facts in this case will show that the preliminary results in
this administrative review fail to meet the post- URAA requirement that the Department find both a
financial contribution to and a benefit conferred on current production. Delverde purchased MI.BI
in an arm's length transaction at a purchase price established by an independent, court-ordered
appraiser. Consequently, prior subsidies received by MI.BA did not benefit Delverde; they simply
increased the profit realized by MI.BA upon the sale of its pasta factory.
Petitioners claim that the change in ownership provision contained in section 251(a) of the URAA,
amending section 771(5) of the Tariff Act of 1930, reiterated and formally codified the Department's
practice, affirmed by the CAFC on no less than five occasions, that an arm's length sale of a firm or
asset does not automatically extinguish previously bestowed countervailable subsidies. (See, e.g,
Saarstahl AG v. United States, 78 F. 3d 1539, 1544 (Fed. Cir. 1996)).

In addition, according to petitioners, the URAA statutory definitions of "benefit" and "financial
contribution" do not require any different agency scrutiny or lead to any different conclusions in
examining the countervailability of subsidies following a change of ownership than was true under
pre-URAA law. This is clear from the SAA's plain statement that this benefit standard merely reflects
the longstanding Commerce standard and does not inject a new requirement into the law. (See SAA
at 925-928.) Petitioners claim that Delverde is seeking to superimpose on the statute the
requirement that there be a beneficial competitive effect on the acquiring company's operations
when the change in ownership occurred as a result of the original subsidy. This "effect" requirement,
however, has been rejected by the Court in pre-URAA cases and the new statute expressly states that
no beneficial "effect" of a subsidy is required. (See 19 U.S.C. 1677(5)(C)).

DOC Position

We agree with petitioners. The arguments which Delverde raises in this comment are addressed fully
in the remand determination which the Department filed with the CIT on April 2, 1998 in Delverde,
Srl. v. United States, Consol. Ct. No. 96-08-01997. The CIT later sustained that remand
determination and upheld the

*44495

Department's methodology in Delverde, Srl. v. United States, 24 F. Supp. 2d 314 (CIT 1998).

Comment 5

Riscossa claims that in calculating the benefit from two Law 64 grants received by the company, the
Department incorrectly countervailed the full amount of the benefit received under Law 64
including both the grant amount and the reduction in interest according to the terms of the lease.
Riscossa claims that the benefit from the interest rate reduction has expired because the leases in
question are no longer outstanding.
Petitioners claim that in both the original investigation and the Preliminary Results, the Department
correctly treated the Law 64 lump-sum contributions to the leasing companies as grants to Riscossa.
In its November 9, 1998 questionnaire response, Riscossa describes the contributions as grants to
the leasing companies, which had the effect of lowering Riscossa's lease payments. Riscossa had no
repayment obligation as a result of these grants as would be the case for a Law 64 loan. Therefore,
the Department should not treat these grants as reduced rate loans.

DOC Position

We agree with petitioners. The GOI made lump-sum payments to leasing companies on Riscossa's
behalf. We view these payments as grants. Since 1984, the Department has allocated non-recurring
grants such as these over a period corresponding to the average useful life of the recipient firm's or
the industry's fixed assets. (See Subsidies Appendix appended to Final Affirmative
Countervailing Duty Determination and Countervailing Duty Order: Cold-Rolled
Carbon Steel Flat-Rolled Products from Argentina 49 FR 18006, 18018). We do not, as Riscossa
suggests, look to how the recipient uses the funds received from the government. Therefore, the fact
that Riscossa used its grants to reduce its payments under two lease agreements, which have since
expired, is not relevant to our calculations. Therefore, as in the original investigation, the
Department has allocated the grants over 12 years.

Comment 6

Petitioners claim the Department should use the ABI rate as a benchmark rate for long-term loans.
They claim that in the Preliminary Results, the Department used an average interest rate reported by
the Bank of Italy based on a survey of 114 Italian banks. In addition, petitioners claim that a
spread of 2.275 percent should be added to the ABI rate because this has been Department practice
in the last three investigations of Italian products. See Wire Rod
from Italy 63 FR at 40476-40477; Plate from Italy 64 FR at 15510-15511; and Final
Affirmative Countervailing Duty Determination: Stainless Steel Sheet and Strip from
Italy 64 FR 30624, 30626-30627 (June 8, 1999).

DOC Position

In the Preliminary Results, in the section on Benchmarks for Long-term Loans and Discount Rates,
we explained that we used the average interest rate on medium-and long-term loans as reported by
the Bank of Italy based on a survey of 114 banks for our benchmark interest rate. This
explanation was not correct. In our calculations, we actually used the ABI rate plus a spread of
2.275 percent as the benchmark interest rate following the practice in the three earlier cases cited
above by petitioners. In these final results, we have also used this benchmark in our subsidy
calculations and have correctly described it in the Subsidies Valuation section of this notice. We also
used this benchmark in the first administrative review of the Pasta from Italy order because in
Wire Rod from Italy, based on information obtained during verification, the Department
determined that the ABI rate is the most suitable benchmark for long-term financing to Italian
companies.
We note that during verification in this review, we obtained information from a commercial bank
confirming the fact that the ABI rate was appropriate for
establishing a benchmark interest rate. (See June 16, 1999 Memorandum to the File: Meeting with
Commercial Bank Officers.) In addition, information from the bank officers regarding the typical
spread plus charges which are added to the ABI rate served to confirm the spread which was added
in calculating a benchmark in the earlier investigations.
The ABI rate for 1997, as reported in our discussion with officers of the commercial bank, was lower
than that reported in the Bank of Italy's February 1998 Economic Bulletin. The ABI rate in the
Economic Bulletin, however, corresponded closely with the 1997 lending rates published for Italy
in the International Monetary Fund's June 1999 International Financial Statistics. Therefore, we
used the ABI rate as published in the Economic Bulletin plus a spread as the appropriate benchmark
interest rate for this review.

Comment 7

Petitioners claim that in its subsidy calculation, the Department has used a longer, company-specific
AUL of 15 years to allocate non-recurring subsidies received well before the current period of
review. They claim that the 12-year period used in the original investigation should apply to these
earlier subsidies.

DOC Response

We have continued to use 12 years as the allocation period for those non- recurring subsidies
countervailed in the original investigation. As we explained in the first Pasta from Italy review, it
is neither reasonable nor practicable to reallocate these subsidies over a different time period. 63 FR
43905, 43906 (August 17, 1998) For all other non-recurring subsidies, however, whether received
during the current POR or prior to the current POR, we have used a company-specific AUL for
allocation purposes.
As indicated in the section entitled "Allocation Period," the Department is applying the Court's
decision in British Steel II and calculating company- specific allocation periods based on the
average useful life of each respondent's physical assets. Thus, for subsidies not previously allocated
over a particular allocation period, we are using company-specific AULs. (See Final Affirmative
Countervailing Duty Determination: Stainless Steel Sheet and Strip in Coils from France
64 FR 30774, 30778 (June 8, 1999).)

Final Results of Review

In accordance with 19 CFR 351.221(b)(4)(i), we calculated an individual subsidy rate for each
producer/exporter subject to this administrative review.
For the period January 1, 1997 through December 31, 1997, we determine the net subsidy rates for
producers/exporters under review to be those specified in the chart shown below.

Ad Valorem Rates
------------------------------------------------------------------------------
Producer/exporter 01/01/97 through 12/31/97
------------------------------------------------------------------------------
Delverde/Tamma .......................................................... 4.05
Audisio Industrie Alimentari di Capitanata S.p.A ........................ 1.03
Pastificio Fabianelli S.p.A ............................................. 0.49
Pastificio Riscossa F.lli Mastromauro SrL ............................... 2.13
------------------------------------------------------------------------------

We will instruct the U.S. Customs Service (Customs) to assess countervailing duties as
indicated above. The Department will also instruct Customs to collect cash deposits of estimated
countervailing duties in the percentage detailed above of the f.o.b. invoice prices on all
*44496

shipments of the subject merchandise from the producers/exporters under review, entered, or
withdrawn from warehouse, for consumption on or after the date of publication of the final results of
this administrative review.

Pursuant to 19 CFR 351.212(c), for all companies for which a review was not requested, duties must
be assessed at the cash deposit rate in effect at the time of entry of the subject merchandise and cash
deposits must continue to be collected at the previously ordered rate. Therefore, the cash deposit
rates for all companies except those covered by this review will be unchanged by the results of this
review.
We will instruct Customs to continue to collect cash deposits for non-reviewed companies, except
Barilla G. e R. F.lli S.p.A. ("Barilla") and Gruppo Agricoltura Sana S.r.L. ("Gruppo") (which were
excluded from the order during the investigation), at the most recent rate applicable to the
company. Accordingly, the cash deposit rates that will be applied to non-reviewed companies
covered by this order are those established in the Notice of Countervailing Duty Order and
Amended Final Affirmative Countervailing Duty Determination: Certain Pasta from Italy
(61 FR 38544, July 24, 1996), or those established in Certain Pasta from Italy: Final Results of
Countervailing Duty Administrative Review (63 FR 43905, August 17, 1998), whichever
notice provides the most recently published countervailing duty rates for companies not
reviewed in this administrative review. These rates shall apply to all non- reviewed companies until
a review of a company assigned these rates is completed. In addition, for the period January 1, 1997
through December 31, 1997, the assessment rates applicable to all non-reviewed companies covered
by these orders are the cash deposit rates in effect at the time of entry, except for Barilla and Gruppo
(which were excluded from the order during the original investigation).
This notice serves as a reminder to parties subject to administrative protective order ("APO") of their
responsibility concerning the disposition of proprietary information disclosed under APO in
accordance with 19 CFR 351.301. Timely written notification of return or destruction of APO
materials or conversion to judicial protective order is hereby requested. Failure to comply with the
regulations and the terms of an APO is a sanctionable violation.
This administrative review and notice are in accordance with section 751(a)(1) of the Act (19 U.S.C.
1675(a)(1)).
Dated: August 9, 1999.

Robert S. LaRussa,

Assistant Secretary for Import Administration.

[FR Doc. 99-21201 Filed 8-13-99; 8:45 am]

BILLING CODE 3510-DS-P