(Cite as: 60 FR 53747)

NOTICES

DEPARTMENT OF COMMERCE

[C-489-806]

Preliminary Affirmative Countervailing Duty Determination: Certain Pasta

("Pasta") From Turkey

Tuesday, October 17, 1995

*53747 AGENCY: Import Administration, International Trade Administration, Department of Commerce.

EFFECTIVE DATE: October 17, 1995.

FOR FURTHER INFORMATION CONTACT: Elizabeth Graham or Kristin Mowry, Office of Countervailing Investigations, Import Administration, U.S. Department of Commerce, Room 3099, 14th Street and Constitution Avenue, N.W., Washington, D.C. 20230; telephone (202) 482-4105 and 482-3798, respectively.

PRELIMINARY DETERMINATION: The Department preliminarily determines that countervailable subsidies are being provided to manufacturers, producers, or exporters of pasta in Turkey. For information on the countervailing duty rates, please see the Suspension of Liquidation section of this notice.

Case History

Since the publication of the notice of initiation in the Federal Register (60 FR 30280, June 8, 1995), the following events have occurred.

Based on volume and value information provided by the GOT on June 14, 1995, we selected as respondents in this investigation the four largest exporters to the United States. These companies are: Aytac Dis Ticaret (Aytac), Filiz Gida Sanayii ve Ticaret A.S. (Filiz), Makarnacilik ve Ticaret T.A.S. (Maktas), and Oba Makarnacilik Sanayi ve Ticaret (Oba). On June 22, 1995, we issued countervailing duty questionnaires to the Government of Turkey ("GOT") and the above-named companies, concerning programs included in the initiation of this investigation. On August 21, 1995, Aytac, Filiz, and Maktas filed responses. Oba failed to respond to our questionnaire.

In its response, Aytac explained that it is in the meat packing business and is not a producer/exporter of pasta. During 1994, Maktas agreed to let Aytac act as the exporter of record for certain of Maktas' sales of pasta to the United States. However, Aytac transferred its rights to benefits with respect to those exports to Maktas. Based on this information, we have not calculated an individual countervailing duty rate for Aytac. If this company exports to the United States, it will be subject to the all others rate.

On August 28, 1995, the GOT responded to our questionnaire. We issued supplementary questionnaires to the respondent companies and the GOT in August and September. We received responses to the company and GOT supplementary questionnaires in September and October.

On July 5, 1995, we postponed the preliminary determination in this investigation until October 10, 1995 (60 FR 35899, July 12, 1995).

Scope of Investigation

The product covered by this investigation is 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 *53748 this investigation 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 investigation 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.

The merchandise under investigation is currently classifiable under subheading 1902.19.20 of the Harmonized Tariff Schedule of the United States (HTS). Although the HTS subheading is provided for convenience and customs purposes, our written description of the scope of this proceeding is dispositive.

On August 24, 1995, petitioners requested that we expand the scope to cover all imports of non-egg dry pasta for the retail and the food service markets. We have determined that the scope should not be expanded. According to the Department's past practice, products which were excluded at the petition stage are not generally added to the scope later in the investigatory process. In addition, expanding the scope would raise numerous issues such as industry support, and the lack of a preliminary ITC determination concerning the expanded scope. For a discussion of this decision, see Memorandum to Susan G. Esserman, Assistant Secretary for Import Administration dated October 10, 1995, on file in this case in the Central Records Unit.

On September 27, 1995, Spruce Foods, an importer of organic pasta from Italy, requested that organic pasta certified by the European Union under EEC Regulation 2092/91 be excluded from the scope of this investigation. Because this request was made so late, we are unable to consider it for purposes of this preliminary determination. However, we will address this issue in our final determination.

The Applicable Statute and Regulations

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 effective January 1, 1995 (the Act). References to the Countervailing Duties: Notice of Proposed Rulemaking and Request for Public Comments, 54 FR 23366 (May 31, 1989) (Proposed Regulations), which have been withdrawn, are provided solely for further explanation of the Department's CVD practice.

Injury Test

Because Turkey is a "Subsidies Agreement Country" within the meaning of section 701(b) of the Act, the U.S. International Trade Commission ("ITC") is required to determine whether imports of pasta from Turkey materially injure, or threaten material injury to, a U.S. industry. On July 10, 1995, the ITC published its preliminary determination finding that there is a reasonable indication that an industry in the United States is being materially injured or threatened with material injury by reason of imports from Turkey of the subject merchandise (60 FR 35563).

Petitioners

The petition in this investigation was filed by Borden, Inc., Hershey Foods Corp., and Gooch Foods, Inc.

Subsidies Valuation Information

Period of Investigation: The period for which we are measuring subsidies ("the POI") is calendar year 1994. Short-term loan benchmark: The GOT stated that there is no predominant source of short-term financing in Turkey and that it does not maintain statistics concerning short-term interest rates. Based on our review of the Annual Report of the Central Bank of Turkey, we could not identify any short-term commercial interest rates. Therefore, we used as the short-term benchmark, the weighted-average short-term interest-rate paid by Maktas on its commercial loans. We have preliminarily determined that these rates provide the best measure of what Maktas would pay on comparable commercial loans obtained on the market. (The other companies being investigated did not use the short-term loan program.)

Due to an average inflation rate in Turkey of 91 percent during the POI, interest rates have fluctuated significantly. Hence, we have calculated monthly benchmarks. (See 355.44(b)(3)/(iii) of the Proposed Regulations.)

Facts Available

Section 776(a)(2)(A) of the Act requires the Department to use the facts available "if an interested party or any other person withholds information that has been requested by the administering authority or the Commission under this title." One of the companies included in this investigation, Oba, did not respond to our questionnaire. Section 776(b) of the Act provides that the administering authority may use an inference that is adverse to the interests of such a party in selecting from among the facts otherwise available. Such adverse inference may include reliance on information derived from: (1) The petition, (2) a final determination in the investigation under this title, (3) any previous review under section 751 or determination under section 753, or (4) any other information placed on the record. Because petitioners did not provide subsidy rates in the petition, we were unable to use the petition as a source for facts available. Therefore, we have used as the facts available for Oba the sum of the highest rate calculated for each program used by Filiz or Maktas.

Based upon our analysis of the petition and the responses to our questionnaires, we determine the following:

I. Programs Preliminarily Determined To Be Countervailable

A. Pre-Shipment Export Loans

The Export Credit Bank of Turkey (Turk Eximbank) provides short-term pre- shipment export loans to exporters through intermediary commercial banks. The program was commenced in March 1989 in order to meet the financing needs of exporters and overseas contractors. Loans are made available to certified exporters who commit to a certain value of exports within a specified time period. Generally, loans are extended for a period of three to nine months, covering between 10 and 100 percent of the FOB value of the committed export value. During the POI, the food sector (including pasta) was eligible for pre- shipment export loans amounting to 70 percent of the committed FOB value of exports, for a maximum of 180 days. These loans were denominated in Turkish lira (TL).

We have determined that these loans provide a countervailable subsidy within the meaning of section 771(5) of the Act. The loans are a direct transfer of funds from the GOT. They provide a benefit because the interest rate paid on these loans is less than the amount the recipient would pay on a comparable commercial loan. Finally, the loans are specific because their receipt is contingent upon export performance.

Of the exporters investigated, only Maktas received pre-shipment export loans during the POI. We calculated the countervailable subsidy as the difference between actual interest paid on loans for shipments to the United States during the POI and the interest that would have been paid using the benchmark interest rate. This difference was divided by Maktas' total exports to the United States during the POI. On this basis, we preliminarily determine the countervailable subsidy from this *53749 program to be 5.97 percent ad valorem for Maktas.

B. Tax Exemption Based on Export Earnings

Corporate Tax Law 3946, dated December 25, 1993, provided that companies exporting industrial products in excess of U.S.$250,000 or the equivalent were entitled to deduct five percent of total export revenues from taxable profit.

We have determined that this tax exemption is a countervailable subsidy within the meaning of section 771(5) of the Act. The exemption represents revenue forgone by the GOT and provides a benefit in the amount of the tax saving to the company. Also, the subsidy is specific because its receipt is contingent upon export performance. Of the exporters investigated, only Maktas claimed this tax exemption on the tax return it filed in 1994.

To calculate the countervailable subsidy, we divided the tax savings realized during the POI by the company's export sales during the POI. On this basis, we determine the countervailable subsidy from this program to be 0.56 percent ad valorem for Maktas.

The GOT has stated that the program was terminated as of January 1, 1994. However, it has not provided the decree terminating this program. Although our normal practice is to adjust the countervailing duty deposit rate to reflect program-wide changes that occur prior to our preliminary determination (see, section 355.50 of the Proposed Regulations), we have not done so in this instance because we have no evidence of the termination. We will attempt to verify both the program's termination and whether companies are able to receive residual benefits.

C. Pasta Export Grants

During 1994, the Central Bank of Turkey provided cash grants and government promissory notes or bonds to exporters of pasta. According to the GOT, the purpose of the program was to develop Turkey's export potential. In order to receive the grants, exporters were required to submit applications (including proof of exportation and payment from the customer) to the local office of the Central Bank. The exporter received a specified percentage of the FOB U.S. dollar price, subject to a cap.

We have determined that these export grants are countervailable subsidies within the meaning of section 771(5) of the Act. The grants are a direct transfer of funds from the GOT providing a benefit in the amount of the grant. Also, the grants are specific because their receipt is contingent upon export performance.

Since pasta exporters are able to calculate the precise U.S. dollar benefit for each export at the moment the transaction is made, respondents have argued that the benefit from the grants should be calculated on the basis of when they are earned rather than when they are received. (See e.g., Final Affirmative Countervailing Duty Determination: Certain Steel Wire Nails from New Zealand, 52 FR 37196, 37197, October 5, 1987.) We have adopted this approach for the preliminary determination. However, although the U.S. dollar amount is known at the time of export, the amount the exporter will actually receive in TL is not certain until the time of receipt because it is subject to fluctuations in the exchange rate. This suggests that it may be more appropriate to calculate the benefits as they are received, rather than earned. We will consider this issue further for the final determination. We will also consider whether the delay in the actual receipt of the export grants should lead us to reduce their value.

To calculate the countervailable subsidy based on the data available for this preliminary determination, we divided the total amount of grants earned on exports to the United States (denominated in U.S. dollars) by the total exports to the United States denominated in U.S. dollars. On this basis, we determine the countervailable subsidy from this program to be 14.72 percent ad valorem for Filiz and 13.27 percent ad valorem for Maktas.

While the GOT has stated that this program was terminated for pasta exports made on or after January 1, 1995, a notice in the Turkish Official Gazette dated September 29, 1995, indicates that this program may have been reinstated. Therefore, although our normal practice is to adjust the countervailing duty deposit rate to reflect program-wide changes that occur prior to our preliminary determination (see, section 355.50 of the Proposed Regulations), we have not done so in this instance. We will examine the possible reinstatement of this program at verification.

D. Incentive Premium on Domestically Obtained Goods

Companies holding investment incentive certificates under the General Incentives Program (see below) are eligible for a cash grant equal to the amount of VAT paid on locally-sourced machinery and equipment. Imported machinery and equipment is subject to the VAT and is not eligible for the cash grant.

We have determined that these incentive premiums are countervailable subsidies within the meaning of section 771(5) of the Act. The grants are a direct transfer of funds from the GOT, providing a benefit in the amount of the grant. Also, they are specific because their receipt is contingent upon the use of domestic goods over imported goods. Filiz received incentive premiums during the POI.

To calculate the countervailable subsidy, we divided the grants received by Filiz during the POI by the total value of the company's sales during the POI. On this basis, we determine the countervailable subsidy to be 0.00 percent ad valorem for Filiz.

II. Program for Which We Need More Information

The September 29, 1995 edition of the Turkish Official Gazette states that the GOT will provide a transportation subsidy of 35 dollars per metric ton for pasta shipped to North America, whether or not the pasta is transported on Turkish ships. We intend to collect information on this program prior to verification so that it can be addressed in our final determination.

III. Program Preliminarily Determined To Be Not Countervailable

General Incentives Program (GIP) for Companies Meeting the Higher Investment Threshold

The GIP is designed to promote investments consistent with the development objectives of the GOT. The goals of the GIP are to eliminate the unbalanced development of different regions and to support investments in the sectors where the country is lacking such investment. The sectors and regions targeted by the GIP are generally selected by the Undersecretariat of the Treasury (UT). The UT is also responsible for issuing investment incentive certificates under the GIP.

Investment incentive certificates are issued when a proposed investment project meets the criteria and financial thresholds set by the Council of Ministers. These criteria include: (1) The project provides international competitiveness; (2) the project incorporates appropriate advanced technology; and (3) the project satisfies at least a minimum of economic capacity or scale determined on a sectoral basis. Each application for an investment incentive certificate must be accompanied by a feasibility study and detailed financial projection. The GOT stated that approximately 99 percent of applications for investment incentive certificates are approved. Those *53750 applications which are rejected are generally revised, resubmitted, and eventually obtain approval.

For purposes of the GIP, Turkey is divided into four types of regions: (1) Developed; (2) normal; (3) priority regions of the second degree; and (4) priority regions of the first degree. The level of investment needed to obtain an investment incentive certificate for the priority regions is lower than the level needed for normal and developed regions (i.e., the minimum investment requirement during 1994 in priority regions was 1 billion TL and the minimum investment in normal and developed regions was 5 billion TL). Beyond that, however, the GOT has stated that all certificate holders are eligible for the same benefits, regardless of their region or sector. The GOT also stated that the GIP is generally available to all sectors of the Turkish economy and all geographic areas of Turkey, and that certificates are not granted based on governmental discretion.

Filiz, located in a normal region, used the following benefits under the GIP: Customs Duty Exemptions, Resource Utilization Support Fund Grants, VAT Deferrals, Investment Allowances, and Incentive Premiums on Domestically- Obtained Goods. Maktas, located in a developed region, used only the Incentive Premiums on Domestically-Obtained Goods benefits.

As Filiz and Maktas are located in regions which do not benefit from the reduced investment requirement, we determine that the assistance they have received is not specific to a region. (See section 771(5A)(D)(iv) of the Act.) Instead, we have examined whether assistance under the GIP is specific "as a matter of fact," as described in section 771(5A)(D)(iii) of the Act.

Section 771(5A)(D)(iii) of the Act provides the following four factors to be examined with respect to de facto specificity: (1) The number of enterprises, industries or groups thereof which actually use a subsidy; (2) predominant use of a subsidy by an enterprise, industry, or group; (3) the receipt of disproportionately large amounts of a subsidy by an enterprise, industry, or group; and (4) the manner in which the authority providing a subsidy has exercised discretion in its decision to grant the subsidy. The GOT has provided statistics for the period 1991-1994 concerning the awarding of investment incentive certificates to the various sectors of the economy. These statistics indicate that during the POI, thirty-three industries, within the agriculture, mining, manufacturing, energy, and services sectors, received investment incentive certificates. We consider this distribution of industries sufficiently broad. During the POI, the food and beverages industry received 7.5 percent of the investment incentive certificates issued. During the same period, the textiles and clothing industry received 24.6 percent and the transportation industry received 14.8 percent of the investment incentive certificates issued. Each of the thirty-three other industries each accounted for 4.8 percent or less of the total investment incentive certificates issued. The statistics for the period 1991-1993 indicate a similar distribution of investment incentive certificates.

Based on this distribution of certificates (including the fact that pasta accounts for a fraction of the certificates issued to the food and beverage industry), we determine that the pasta industry was neither a dominant user of the program nor did it receive a disproportionate amount of the investment incentive certificates. Absent a finding of dominant or disproportionate use, the fact that a foreign authority administering a subsidy program may have exercised discretion in selecting the recipients of the subsidy is insufficient for a finding of de facto specificity. Furthermore, the GOT has stated that the certificates are not granted based on governmental discretion. We have no evidence to the contrary. Therefore, we preliminarily determine that the GIP (with the exception of the Incentive Premium on Domestically Obtained Goods, discussed above) does not confer countervailable subsidies to producers in Turkey who meet the higher investment threshold.

IV. Programs Preliminarily Determined To Be Not Used

As discussed above, none of the producers under investigation was located in a region subject to lower investment thresholds under the GIP. Therefore, we are treating the GIP as it applies to companies meeting the lower investment threshold versus "not used."

Verification

In accordance with section 782(i) of the Act, we will verify the information submitted by respondents prior to making our final determination.

Suspension of Liquidation

In accordance with section 703(d)(1)(A)(i) of the Act, we have calculated an individual subsidy rate for each company investigated. For companies not investigated, we have determined an all others rate by weighting individual company subsidy rates by each company's exports of the subject merchandise to the United States, if available, or pasta exports to the United States. The all others rate does not include zero and de minimis rates or any rates based solely on the facts available.

In accordance with section 703(d) of the Act, we are directing the U.S. Customs Service to suspend liquidation of all entries of pasta from Turkey which are entered or withdrawn from warehouse, for consumption, on or after the date of the publication of this notice in the Federal Register, and to require a cash deposit or bond for such entries of the merchandise in the amounts indicated below. This suspension will remain in effect until further notice.

-----------------------------

  Company     Ad valorem rate

-----------------------------

Filiz ................. 14.72

Maktas ................ 19.80

Oba ................... 21.25

All Others ............ 17.92

-----------------------------

*53751 ITC Notification

In accordance with section 703(f) of the Act, we will notify the ITC of our determination. In addition, we are making available to the ITC all nonprivileged and nonproprietary information relating to this investigation. We will allow the ITC access to all privileged and business proprietary information in our files, provided the ITC confirms that it will not disclose such information, either publicly or under an administrative protective order, without the written consent of the Deputy Assistant Secretary for Investigations, Import Administration.

If our final determination is affirmative, the ITC will make its final determination within 45 days after the Department makes its final determination.

Public Comment

In accordance with section 355.38 of the Commerce Department regulations, we will hold a public hearing, if requested, to afford interested parties an opportunity to comment on this preliminary determination. The hearing will be held on December 4, 1995, at 1 p.m. at the U.S. Department of Commerce, Room 1617M4, 14th Street and Constitution Avenue, NW., Washington, DC 20230. Individuals who wish to request a hearing must submit a written request within ten days of the publication of this notice in the Federal Register to the Assistant Secretary for Import Administration, U.S. Department of Commerce, room B099, 14th Street and Constitution Avenue, NW., Washington, DC 20230. Parties should confirm by telephone the time, date, and place of the hearing 48 hours before the scheduled time.

Requests should contain: (1) The party's name, address, and telephone number; (2) the number of participants; (3) the reason for attending; and (4) a list of the issues to be discussed. In addition, ten copies of the business proprietary version and five copies of the nonproprietary version of the case briefs must be submitted to the Assistant Secretary no later than November 24, 1995. Ten copies of the business proprietary version and five copies of the nonproprietary version of the rebuttal briefs must be submitted to the Assistant Secretary no later than November 30, 1995. Briefs should include a summary of the issues of no more than five pages. An interested party may make an affirmative presentation only on arguments included in that party's case or rebuttal briefs. Written arguments should be submitted in accordance with section 355.38 of the Commerce Department regulations and will be considered if received within the time limits specified above.

This determination is published pursuant to section 703(f) of the Act (19 U.S.C. 1671b(f)).

Dated: October 10, 1995.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 95-25751 Filed 10-16-95; 8:45 am]

BILLING CODE 3510-DS-P