[Federal Register Volume 60, Number 200 (Tuesday, October 17, 1995)]
[Notices]
[Pages 53747-53751]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-25751]



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DEPARTMENT OF COMMERCE
[C-489-806]


Preliminary Affirmative Countervailing Duty Determination: 
Certain Pasta (``Pasta'') From Turkey

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 

[[Page 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 

[[Page 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 

[[Page 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.''
    Other programs that were not used were:

1. Support and Price Stabilization Fund
2. Payments for Exports on Turkish Ships
3. Advance Refunds of Tax Savings
4. Export Credit Through the Foreign Trade Corporate Companies 
Rediscount Credit Facility
5. Normal Foreign Currency Export Loans
6. Performance Foreign Currency Export Loans
7. Export Credit Insurance
8. Regional Subsidies
    a. Investment Allowances
    b. Mass Housing Fund Levy Exemptions
    c. Customs Duty Exemptions
    d. Rebate of VAT on Domestically-Sourced Machinery and Equipment
    e. Additional Refunds of VAT
    f. Postponement of VAT on Imported Goods
    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
9. Exemption from Mass Housing Fund Levy (Duty Exemptions)

V. Programs Preliminarily Determined To Not Exist

    Based on the information provided in the responses, we 
preliminarily determine that the following programs do not exist.

1. Export Promotion Program
2. Export Credit Program
3. Interest Rebates on Export Financing (GIP)
4. Direct Payments to Exporters of Wheat Products to Compensate for 
High Domestic Input Prices

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.

                                                                        

[[Page 53751]]
------------------------------------------------------------------------
                                                                   Ad   
                           Company                              valorem 
                                                                  rate  
------------------------------------------------------------------------
Filiz........................................................      14.72
Maktas.......................................................      19.80
Oba..........................................................      21.25
All Others...................................................      17.92
------------------------------------------------------------------------



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