[Federal Register Volume 60, Number 110 (Thursday, June 8, 1995)]
[Notices]
[Pages 30280-30284]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-13984]



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DEPARTMENT OF COMMERCE
[C-475-819, C-489-806]


Notice of Initiation of Countervailing Duty Investigations: 
Certain Pasta (``Pasta'') From Italy and Turkey

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

EFFECTIVE DATE: June 8, 1995.

FOR FURTHER INFORMATION CONTACT: Jennifer Yeske (Italy) and Elizabeth 
Graham (Turkey), Office of Countervailing Investigations, U.S. 
Department of Commerce, Room 3099, 14th Street and Constitution Avenue, 
N.W., Washington, DC 20230; telephone (202) 482-0189 and (202) 482-
4105, respectively.

Initiation of Investigations

The 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 effective January 1, 1995 (the Act).

The Petition

    On May 12, 1995, the Department of Commerce (the Department) 
received a petition filed in proper form by Borden Inc., Hershey Foods 
Corp., and Gooch Foods, Inc. (the petitioners), three U.S. producers of 
pasta. Supplements to the petition were filed on May 26, 1995, and May 
31, 1995.
    In accordance with section 701(a) of the Act, petitioners allege 
that manufacturers, producers, or exporters of the subject merchandise 
in Italy and Turkey receive countervailable subsidies.
    The petitioners state that they have standing to file the petition 
because they are interested parties, as defined under section 771(9)(C) 
of the Act.

Determination of Industry Support for the Petition

    Section 702(c) of the Act requires the Department to determine, 
prior to the initiation of an investigation, that a minimum percentage 
of the domestic industry supports a countervailing duty petition. A 
petition meets this requirement if (1) domestic producers or workers 
who support the petition account for at least 25 percent of the total 
production of the domestic like product; and (2) those domestic 
producers or workers who support the petition account for more than 50 
percent of the production of the domestic like product produced by that 
portion of the industry expressing support for, or opposition to, the 
petition.
    A review of the production data provided in the petition and other 
information readily available to the Department indicates that the 
petitioners account for more than 25 percent of the total production of 
the domestic like product and for more than 50 percent of that produced 
by companies expressing support for, or opposition to, the petition. 
The Department received no expressions of opposition to the petition 
from any interested party. Accordingly, the Department determines that 
this petition is supported by the domestic industry.

Injury Test

    Because Italy and Turkey are ``Subsidies Agreement Countries'' 
within the meaning of section 701(b) of the Act, Title VII of the Act 
applies to this investigation. Accordingly, the U.S. International 
Trade Commission (``ITC'') must determine whether imports of the 
subject merchandise from Italy and Turkey materially injure, or 
threaten material injury to, a U.S. industry.

Scope of the Investigation

    The Department has inherent authority to redefine and clarify the 
scope of an investigation, as set forth in a petition, whenever it 
determines that the petition language is overly broad, or 
insufficiently specific to allow proper [[Page 30281]] investigation, 
or in any other way defective. See NTN Bearing Corp. v. United States, 
747 F. Supp. 726 (CIT 1990). We revised the petitioners' proposed scope 
to eliminate channel of trade as a scope criterion in order to ensure 
that it would be clear and administrable.
    The scope of these investigations 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 these investigations 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 subheadings are provided for convenience 
and customs purposes, our written description of the scope of this 
proceeding is dispositive.
Allegation of Subsidies

    Section 702(b) of the Act requires the Department to initiate a 
countervailing duty proceeding whenever an interested party files a 
petition, on behalf of an industry, that (1) alleges the elements 
necessary for an imposition of a duty under section 701(a), and (2) is 
accompanied by information reasonably available to petitioners 
supporting the allegations.

Initiation of Countervailing Duty Investigations

    The Department has examined the petition on pasta from Italy and 
Turkey and found that it complies with the requirements of section 
702(b) of the Act. Therefore, in accordance with section 702(b) of the 
Act, we are initiating countervailing duty investigations to determine 
whether manufacturers, producers, or exporters of pasta from Italy and 
Turkey receive subsidies.

A. Italy

    We are including in our investigation the following programs 
alleged in the petition to have provided subsidies to producers of the 
subject merchandise in Italy:

 1. Law 675/77--Capital Grants
 2. Law 675/77--VAT Reductions
 3. Laws 227/77, 394/81, and 304/90--Preferential Export Financing and 
Export Promotion
 4. Law 64/86--Industrial Investment Development Assistance
 5. ILOR & IRPEG Tax Exemptions
 6. Law 345/92--Social Security Exemptions
 7. Law 1329/65--Interest Contributions Under the Sabatini Law
 8. Law 181--Urban Redevelopment Packages
 9. Pasta Export Restitution Program
 10. European Regional Development Fund (``ERDF'') Aid
 11. European Social Fund (``ESF'') Aid
 12. Miscellaneous EU Subsidies

    We are not including in our investigation the following programs 
alleged to be benefitting producers of the subject merchandise in 
Italy:

1. Law 675/77--Interest Contributions on Bank Loans, Interest Grants 
for Loans Financed by IRI Bond Issues, Ministry of Industry Mortgage 
Loans, and Personnel Retraining Grants

    Law 675 has been investigated and found countervailable in prior 
investigations, i.e., Final Affirmative Countervailing Duty 
Determination: Certain Steel from Italy (58 FR 37327, July 9, 1993 
(``Certain Steel'') and Final Affirmative Countervailing Duty 
Determination: Grain-Oriented Electrical Steel from Italy (59 FR 18357, 
April 18, 1994) (``GOES''). However, the determination of 
countervailability in those cases was based on a finding that the 
automobile and steel industries were dominant users of Law 675 
benefits. In Certain Steel, the Department verified that the steel and 
automobile industries together accounted for 66 percent of the total 
assistance provided under Law 675. The remaining portion of the 
benefits provided under this law were spread among nine other 
industries. Petitioners have noted that the agro-food industry is one 
of the other nine industries which received benefits. However, 
petitioners have not provided any basis to believe or suspect that the 
pasta industry, in particular, was a dominant user; nor have they 
provided any other basis to believe that benefits under this program 
are specific to the pasta industry. For these reasons, we are not 
including the above-named portions of Law 675 in our 
investigation.1

    \1\ Two types of benefits under this program, (i.e., Capital 
Grants and VAT Reductions) were found in GOES to be available only 
in the Mezzogiorno region of Italy, making them regionally specific. 
Therefore, we have included those benefits under Law 675 in our 
investigation, as indicated above.
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2. Law 796/76--Exchange Rate Guarantee Program

    Law 796 provides exchange rate guarantees on foreign currency loans 
obtained under ECSC Article 54 and/or the Council of European 
Resettlement (``CER'') Fund. This program has been investigated in the 
past and has been found countervailable on the basis of dominant use by 
the steel industry (see, Preliminary Affirmative Countervailing Duty 
Determination: Oil Country Tubular Goods From Italy, (59 FR 61870)). In 
that case, the information provided by the GOI showed that the steel 
industry received 25 percent of the benefits under this program. 
Petitioners have alleged that because CER loans are available to 
agriculture, tourism, and handicraft, pasta producers may have received 
benefits under this program. However, petitioners have not provided any 
basis to believe or suspect that the pasta industry, in particular, was 
a dominant user; nor have they provided any other bases to believe that 
benefits under this program are specific to the pasta industry. 
Moreover, in accordance with section 355.43(b)(8) of our Countervailing 
Duties: Notice of Proposed Rulemaking and Request for Public Comments, 
54 FR 23366 (May 31, 1989) (Proposed Regulations), a program cannot be 
found specific solely on the basis of being limited to agriculture. 
Therefore, we are not including this program in our investigation.
    Although the Department has withdrawn the Proposed Regulations, 
references to the Proposed Regulations are provided for further 
explanation of the Department's CVD practice.

3. Council of Europe Resettlement (``CER'') Loans

    In their discussion of the Exchange Rate Guarantee program, 
petitioners request that the Department initiate an investigation of 
CER loans independent of the Exchange Rate Guarantee program to 
determine whether CER funds are provided at preferential rates or 
otherwise provide a benefit to recipient companies. However, 
petitioners have neither provided evidence that CER loans are provided 
at preferential rates nor provided evidence that these loans are 
specific to the pasta industry. For these reasons, we are not including 
CER loans in our investigation.
4. Law 46/82--Research and Development Grants

    This program was found to be not countervailable in GOES, because 
benefits under the program are not [[Page 30282]] limited to a specific 
enterprise or industry or group of enterprises or industries. 
Petitioners acknowledge this finding, but argue that there is no 
indication that the Department considered a 1985 amendment to Law 46/
82. Specifically, Article 14 of the law was amended at that time to 
authorize government assistance for several additional agricultural 
and/or industrial purposes. Innovations in pasta production is one of 
the newly enumerated purposes. Petitioners also claim that under 
Article 14 pasta may have received a disproportionate share of the 
benefits.
    Petitioners have not provided a sufficient basis to believe that 
the program has changed since the determination of non-
countervailability in GOES. Because the period of investigation for 
GOES was 1992, the Department's specificity analysis did take into 
account any changes to Law 46/82 made in 1985. In addition, petitioners 
have not provided a sufficient basis to believe that pasta received a 
disproportionate share of the benefits under this program. Therefore, 
we are not including Law 46/82 grants in our investigation.

5. Miscellaneous Italian Government Subsidies

    Petitioners have reviewed the annual reports of four Italian pasta 
producers and noted numerous references to items such as ``subsidies'' 
which petitioners were unable to link to any alleged programs. 
Petitioners recognize that many of these items might be covered by 
programs which have been alleged; however, they request that we 
investigate them under a separate program of Miscellaneous Italian 
Government Subsidies.
    The allegation does not provide a basis for investigating these as 
subsidy programs. However, to the extent that our investigation 
includes the four relevant producers as respondents, we will make 
appropriate inquiries about the items in question.

6. European Investment Bank (``EIB'') Loans

    Petitioners allege that Italian pasta producers may have received 
countervailable loans from the EIB.
    These loans have been investigated in past investigations and, most 
recently, were found not countervailable in the Final Affirmative 
Countervailing Duty Determinations: Certain Steel Products From Belgium 
(58 FR 37273, 37285, July 9, 1993). In that case the Department found 
at verification that the EIB provides loans to numerous sectors in all 
parts of the various EU countries. However, petitioners have not 
addressed this finding. Petitioners have neither alleged that the 
circumstances have changed nor that pasta producers may have received a 
disproportionate share of the benefits provided by this program. For 
these reasons, we are not including EIB loans in our investigation.

7. European Agriculture Fund (``EAGGF'') Aid

    The EAGGF is a Structural Fund initiative similar to the ERDF and 
the ESF. However, while the ERDF and ESF have been investigated 
previously, the EAGGF has not. Petitioners allege that because these 
funds are allocated specifically to agriculture, pasta producers may 
have received benefits.
    However, petitioners have provided no information regarding the 
types of benefits available under this program. In addition, section 
355.43(b)(8) of our Proposed Regulations, which reflects our past 
practice, states that a program cannot be found specific solely on the 
basis of being limited to agriculture. For these reasons, we are not 
including EAGGF aid in our investigation.

B. Turkey

    We are including in our investigation the following programs 
alleged in the petition to have provided subsidies to producers of the 
subject merchandise in Turkey:

 1. The Support and Price Stabilization Fund
 2. Payments for Exports Shipped on Turkish Ships
 3. Export Promotion Program
 4. Pre-Shipment Export Loans
 5. Export Credit Program
 6. Tax Exemption for Export Earnings/Advance Refunds of Tax Savings
 7. Export Credit Through Foreign Trade Corporate Companies Rediscount 
Credit Facility
 8. Normal Foreign Currency Export Loans
 9. Performance Foreign Currency Export Loans
10. Export Credit Insurance
11. Regional Subsidy Programs
     a. Investment Allowances
     b. Mass Housing Fund Levy Exemptions
     c. Customs Duty Exemption
     d. Rebate of VAT on Domestic Goods
     e. Postponement of VAT on Imported Goods
     f. Additional Refunds of VAT
     g. Other Tax Exemptions
     h. Payment of Certain Obligations of Firms Undertaking Large 
Investments
     i. Corporate Tax Deferral
     j. Subsidized Turkish Lira Credit Facilities
     k. Subsidized Credit for Proportion of Fixed Expenditures
     l. Subsidized Credit in Foreign Currency
     m. Land Allocation
 12. General Incentives Program
     a. Exemptions from Customs Duties
     b. Investment Allowances
     c. Employee Tax Exemptions
     d. Investment Financing Fund
    e. Building Construction Licensing Charge Immunity
    f. Tax, Duty and Charge Exemptions
    g. Foreign-Exchange Allocation
    h. Other Tax, Duty and Charge Exemptions
    i. Interest Spread Return
    j. Deferment of VAT on Machinery and Equipment
    k. Incentive Premium on Domestically Obtained Goods
    l. Incentive Credit for Investment Goods Manufacturers
    m. Wharfage Exemption
    n. Authorization to Seek Foreign Financing
    o. Interest Rebates on Export Financing
13. Exemption from Mass Housing Fund Levy (Duty Exemptions)

    We are not including in our investigation the following programs 
alleged to be benefitting producers of the subject merchandise in 
Turkey:

1. Direct Payments to Exporters of Wheat Products to Compensate for 
High Domestic Input Prices; Resource Utilization Support Fund; 
Preferential Export Financing

    Petitioners have asked the Department to investigate three programs 
which, based on all evidence, were terminated prior to 1994. 
Petitioners argue that the Government of Turkey (``GOT'') has a 
practice of revoking and reinstituting programs, and as such, the 
Department should investigate whether these programs were available in 
1994.
    Petitioners' assertion that the GOT revokes and reinstitutes 
programs is based solely on the revision of the Export Tax Rebate and 
Supplemental Tax Rebate Programs described in Final Affirmative 
Countervailing Duty Determination: Acetylsalicylic Acid (Aspirin) from 
Turkey (52 FR 24404, July 1, 1987) (``Aspirin''). We do not believe 
this action provides a sufficient basis for us to conclude that the 
Turkish government has reinstated the programs at issue here. 
Therefore, we are not including these three programs in our 
investigation.

2. Direct Payments to Exporters of Wheat Products Based on Tonnage 
Exported

    Petitioners allege that in December 1994, the GOT introduced a 
program to [[Page 30283]] encourage exports of wheat flour. This 
program provides exporters of wheat flour $35 per ton, for up to 20 
percent of the total value of the exports. Petitioners assert that 
because the program is available for one wheat product, wheat flour, it 
is likely to be provided also for other wheat-based products.
    Petitioners based their allegation on information contained in the 
1995 Annual Report of Grain and Feed, prepared by the American Embassy 
in Ankara. This publication provides no evidence that pasta producers 
are eligible for benefits under this program. Therefore, we are not 
including this program in our investigation.

3. Rebates of Various Taxes Upon Exportation

    Petitioners allege that the GOT imposes a three percent customs 
duty on imported durum wheat, a raw material used in the production of 
pasta. Manufacturers are allowed to claim duty drawback from the 
Customs and Excise Authority for customs duties levied on raw materials 
which are used in the manufacture of exported goods and packaging 
materials. Petitioners allege that this drawback may be the same 
program that was found countervailable in both Aspirin and Pipe and 
Tube. Petitioners acknowledge that during the 1980's the GOT reduced 
the rebate rates in line with current economic policies. However, 
petitioners assert that there is a lack of correlation between the 
taxes actually paid and amounts rebated, and therefore, the Department 
should investigate this program.
    Although petitioners' public summary of its market research 
describes this program as a duty drawback program, petitioners' other 
sources refer to an export tax rebate program. To the extent that this 
is an export tax rebate, we note that one of the publications 
petitioners used to support their allegation indicates that tax rebate 
rates for exports were reduced during the 1980's, and in 1989 the rates 
were reduced to zero. In fact, we determined the export tax rebate 
program to be terminated for exports of aspirin to the United States in 
Aspirin. Moreover, because the Pipe and Tube and Aspirin investigations 
involved tax rebates, not duty drawback, we have no reason to believe 
or suspect that these programs are related.
    Finally, to the extent that this is a duty drawback program, we do 
not consider duty drawback on inputs consumed in production of the 
exported product to be countervailable subsidies unless excessive. We 
have no basis to believe or suspect that the duty drawback is 
excessive. For the foregoing reasons, we are not including this program 
in our investigation.

4. Supplemental Tax Rebates

    Petitioners allege that the GOT provides supplemental tax rebates 
to exporters that have annual exports of more than $2 million, with the 
rate of rebate increasing as the value of a company's annual exports 
increases. These supplemental tax rebates are provided in addition to 
the export tax rebates described in 3. above.
    This program was found countervailable in Aspirin. However, we also 
determined in Aspirin that the program had been terminated for exports 
of aspirin to the United States. Further, as indicated above, one of 
petitioners' sources indicates that tax rebate rates for exports were 
reduced to zero in 1989. Given these circumstances, and given that we 
treated the Supplemental Tax Rebate program as related to the Export 
Tax Rebate program (discussed immediately above), petitioners have not 
provided a sufficient basis to believe that the Supplemental Tax Rebate 
program remains in existence. On this basis, we are not including this 
program in our investigation.

5. Foreign Exchange Risk Insurance Scheme

    Petitioners allege that in 1984 the GOT established the Foreign 
Exchange Risk Insurance Scheme to encourage domestic producers to 
obtain financing for the importation of capital goods. This scheme 
allegedly provided insurance against foreign exchange losses which was 
not otherwise available in the market.
    Because the program is aimed at importation of capital equipment, 
it does not appear to be limited to exporters or any industry or group 
of industries in particular. Since petitioners have provided no 
information which indicates that this program provides benefits to a 
specific enterprise or industry or group of enterprises or industries, 
we are not including this program in our investigation.

6. Provision of Wheat to Beslen

    Petitioners assert that the GOT, through the Soil Crops Corporation 
(``TMO''), became a joint venture partner in pasta producer Beslen 
Makarna Gida Sanayi ve Ticaret (``Beslen''). In return for providing 
the company with a quantity of its durum wheat, TMO was given a 45 
percent equity stake in the company. Petitioners request that the 
Department investigate this arrangement to determine whether the 
provision of durum wheat by TMO constitutes an equity infusion into an 
unequityworthy company. If the Department treats Beslen as 
equityworthy, petitioners request that the Department investigate 
whether the equity stake obtained by TMO was adequate remuneration for 
the quantity of wheat provided under the arrangement.
    Petitioners have provided no basis for considering this transaction 
to involve a subsidy. Petitioners have simply asked the Department to 
investigate whether TMO made an equity infusion into an unequityworthy 
company, without providing any evidence that the government's 
investment was inconsistent with the usual investment practices of 
private investors, including the practice regarding the provision of 
risk capital in Turkey. Similarly, petitioners have asked the 
Department to investigate whether TMO paid adequate remuneration, 
without providing any evidence regarding this matter. Because 
petitioners have not provided sufficient evidence to support their 
allegations, we are not including the provision of wheat to Beslen in 
our investigation.

7. Aid From the European Union

    Petitioners assert that Turkey is an associate member of the EU, 
and as such, is eligible for aid from the EU. Petitioners have provided 
the 1993 European Investment Bank Annual Report which lists amounts for 
loans and grant aid going to Turkey (as well as Syria, Egypt, Lebanon, 
and other Mediterranean countries).
    We have established that Turkey is an associate member of the EU. 
However, associate members of the EU are not part of the customs union 
known as the EU. Benefits conferred upon Turkish products from entities 
outside Turkey do not constitute subsidies within the meaning of 
sections 701(a) and 771(3) of the Act (see also General Issues Appendix 
to Final Affirmative Countervailing Duty Determination: Certain Steel 
Products from Austria (58 FR 37217, 37233, July 9, 1993) (``General 
Issues Appendix'')). On this basis, we are not including EU aid in our 
investigation.

8. Exemption From Mass Housing Fund Levy (Duty Drawback)

    The GOT imposes a Mass Housing Fund levy on the importation of 
certain raw materials and finished or semifinished goods. For wheat, 
this levy amounted to $100 per metric ton. Petitioners have analyzed 
this part of the program as a duty drawback scheme. [[Page 30284]] 
    Duty drawback on inputs consumed in the production process of 
exported products is not a subsidy, unless excessive. (See Agreement on 
Subsidies and Countervailing Measures, Annex I, item i of the 
Illustrative List). Because petitioners have not alleged that the duty 
drawback is excessive, we are not including the Mass Housing Fund Duty 
Drawback in our investigation. As noted earlier, however, we are 
initiating an investigation of the Mass Housing Fund Levy program which 
provides duty exemptions for pasta producers when importing durum 
wheat, regardless of whether the pasta is sold domestically or 
exported.

9. Employee Wage and Salary Tax Exemption (GIP/Regional Subsidies 
Programs)

    Employees working in facilities constructed in First or Second 
Priority areas or in priority industries are partially exempt from 
income tax on their wages and salaries.
    Section 355.44(j) of our Proposed Regulations (see also General 
Issues Appendix) states that the provision by a government of financial 
assistance to workers confers a countervailable benefit to the extent 
that such assistance relieves a firm of an obligation which it would 
normally incur. Since there is no indication that this program provides 
benefits to the employer and not the employee, we are not including 
this program in our investigation.

Creditworthiness

    Petitioners assert that the Department should investigate whether 
the pasta producers in Turkey are creditworthy. Petitioners claim there 
is a lack of financial information available about the producers but 
that their analysis shows that Turkish producers are selling below cost 
in their home market. The existence of dumping margins based on a 
comparison of U.S. prices with the producers' cost of production shows 
that they are also not covering their costs in their largest export 
market.
    The Department does not consider the creditworthiness of a firm 
absent a specific allegation by the petitioner which is supported by 
information establishing a reasonable basis to believe or suspect that 
the firm is uncreditworthy. This information would normally cover three 
years prior to the year in which the company is alleged to be 
uncreditworthy. Because petitioners have not provided sufficient 
evidence of the Turkish pasta producers' uncreditworthiness, we are not 
including a creditworthiness analysis in our investigation at this 
time.

Distribution of Copies of the Petition

    In accordance with section 702(b)(4)(A)(i) of the Act, copies of 
the public version of the petition have been provided to the 
representatives of Italy and Turkey. We will attempt to provide copies 
of the public version of the petition to all the exporters named in the 
petition.

ITC Notification

    Pursuant to section 702(d) of the Act, we have notified the ITC of 
these initiations.

Preliminary Determination by the ITC

    The ITC will determine by June 26, 1995, whether there is a 
reasonable indication that an industry in the United States is being 
materially injured, or is threatened with material injury, by reason of 
imports from Italy and Turkey of pasta. Any ITC determination which is 
negative will result in the investigations being terminated; otherwise, 
the investigations will proceed according to statutory and regulatory 
time limits.
    This notice is published pursuant to 702(c)(2) of the Act.

    Dated: June 1, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 95-13984 Filed 6-7-95; 8:45 am]
BILLING CODE 3510-DS-P