[Federal Register Volume 63, Number 68 (Thursday, April 9, 1998)]
[Notices]
[Pages 17372-17379]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-9434]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-475-819]
Certain Pasta From Italy: Preliminary Results of the First
Countervailing Duty Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of Preliminary Results of Countervailing Duty
Administrative Review.
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SUMMARY: The Department of Commerce is conducting an administrative
review of the countervailing duty order on certain pasta from Italy for
the period October 17, 1995 through December 31, 1996. For information
on the net subsidy for each reviewed company, as well as for all non-
reviewed companies, see the Preliminary Results of Review section of
this notice. If the final results remain the same as these preliminary
results, we will instruct the U.S. Customs Service to assess
countervailing duties as detailed in the Preliminary Results of Review.
Interested parties are invited to comment on these preliminary results.
(See, Public Comment section of this notice.)
EFFECTIVE DATE: April 9, 1998.
FOR FURTHER INFORMATION CONTACT: Vincent Kane or Todd Hansen, AD/CVD
Enforcement, Group I, Office 1, Import Administration, U.S. Department
of Commerce, Room 3099, 14th Street and Constitution Avenue, N.W.,
Washington, D.C. 20230; telephone (202) 482-2815 or 482-1276,
respectively.
Background
On July 24, 1996, the Department of Commerce (the Department)
published in the Federal Register (61 FR 38544) the countervailing duty
order on 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: Audisio Industrie
Alimentari S.r.L (``Audisio''); the affiliated companies Delverde
S.r.L., Tamma Industrie Alimentari, S.r.L., Sangralimenti S.r.L., and
Pietro Rotunno, S.r.L. (``Delverde/Tamma''); La Molisana Industrie
Alimentari S.p.A. (``La Molisana''); and Petrini S.p.A. (``Petrini'').
Also, this review covers 24 programs.
Since the publication of the notice of initiation of this review in
the Federal Register (62 FR 45621, August 28, 1997), the following
events have occurred.
On September 29, 1997, we issued countervailing duty questionnaires
to the Government of Italy (``GOI''), the Commission of the European
Union (``EU''), and the above-named companies under review. On October
14, 1997, F.lli De Cecco di Filippo Fara S. Martino S.p.A., a company
which had requested to be included in the review, withdrew its request.
Similarly, on November 14, 1997, Industria Alimentari Colavita, S.p.A.,
another company which had requested to be included in the review,
withdrew its request. We received responses to our questionnaires and
issued additional questionnaires throughout the period of November 1997
through March 1998.
In January and February of 1998, we received comments from
petitioners on the company and GOI responses. Among the comments was a
request that the Department examine an energy savings grant received by
Petrini pursuant to Law 308/82. In a supplementary questionnaire to
Petrini, we requested further information on this grant. Subsequent to
issuing this questionnaire, however, it became evident that the program
in question had already been found not countervailable by the
Department. See, Final Affirmative Countervailing Duty Determinations:
Certain Steel Products from Italy, 58 FR 37327 (``Certain Steel from
Italy''). Therefore, we have not included this grant in our review.
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
Agricultura Biologica (``AMAB''), by Bioagricoop Scrl, or by QC&I
International Services. Furthermore, multicolored pasta imported in
kitchen display bottles of decorative glass, which are sealed with cork
or paraffin and bound with raffia, is excluded from the scope of this
review.
The merchandise under review is currently classifiable under item
1902.19.20 of the Harmonized Tariff Schedule of the United States
(``HTSUS''). Although the HTSUS subheading is provided for convenience
and customs purposes, our written description of the scope of this
review is dispositive.
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. All other references are
to the Department's regulations at 19 CFR Part 351 et. seq. Antidumping
Duties; Countervailing
[[Page 17373]]
Duties; Final Rule, 62 FR 27296, May 19, 1997, unless otherwise
indicated.
Period of Review
The period of review (``POR'') for which we are measuring subsidies
is from October 17, 1995 through December 31, 1996. Because it is the
Department's practice to calculate subsidy rates on an annual basis, we
calculated a 1995 rate and a 1996 rate for each of the companies under
review. We note, however, that the rates calculated for 1995 will be
applicable only to entries, or withdrawals from warehouse, for
consumption made on and after October 17, 1995, through the end of
1995.
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 1995 and 1996, 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 Italian banks.
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 nonrecurring subsidies is a company-specific
average useful life (``AUL'') of non-renewable physical assets. This
remand determination was affirmed by the Court on June 4, 1996. See,
British Steel plc. v. United States, 929 F.Supp 426, 439 (CIT 1996)
(``British Steel II''). Accordingly, the Department has applied this
method to those non-recurring subsidies that were not countervailed in
the 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 preliminary results, the
Department is using the original allocation period assigned to each
non-recurring subsidy received prior to the POR. 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 received during the POR, each company
under review submitted an AUL calculation 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 received during the POR and those
non-recurring subsidies received prior to the POR, which were not
countervailed in the investigation.
Benefits to Mills: In cases where semolina (the input product to
pasta) and the subject merchandise were produced within a single
corporate entity, the Department has found that subsidies to the input
product benefit total sales of the corporation, including sales of the
subject merchandise, without conducting an upstream subsidy analysis.
(See, e.g., Final Affirmative Countervailing Duty Determination:
Certain Softwood Lumber Products from Canada (57 FR 22570); Final
Affirmative Countervailing Duty Determination: Industrial Phosphoric
Acid from Israel (52 FR 25447); Final Affirmative Countervailing Duty
Determination: Certain Pasta (``Pasta'') from Italy) 61 FR 30288,
30292) (``Pasta from Italy'')). In accordance with our past practice,
where the companies under review purchase their semolina from a
separately incorporated company, whether or not they are affiliated, we
have not included subsidies to the mill in our calculations. However,
for those companies where the mill is not separately incorporated from
the producer of the subject merchandise, we have included subsidies for
the milling operations in our calculations. Where appropriate, we have
also included sales of semolina in calculating the ad valorem subsidy
rate.
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.
Petrini, another of the companies under review, is controlled by
two members of the Petrini family, who hold a majority-ownership
interest in the company. During the period 1988 through 1994, Petrini
acquired and absorbed a number of related companies, including one
which produced pasta. All but one of these companies were wholly-owned
by members of the Petrini family prior to their acquisition by Petrini;
the remaining company was majority-owned by the Petrini family. Prior
to the ownership restructurings, several of these companies, other than
the pasta company, received non-recurring countervailable subsidies.
The Department does not consider internal corporate restructurings
that transfer or shuffle assets among related parties to constitute a
``sale'' for purposes of evaluating the extent to which subsidies pass
from one party to another. (See, the Restructuring section of the GIA,
58 FR at 37266.) Therefore, we did not apply the methodology from the
Restructuring section of the GIA to these subsidies. Instead, we have
attributed all of the non-recurring subsidies received prior to the
restructurings to Petrini, the only remaining corporate entity.
To determine whether the benefit of any of these subsidies extended
to the subject merchandise, we examined the extent to which these
subsidies should be considered tied or untied.
The subsidies in question were loans and grants pursuant to Law 64/
86, the Industrial Development Law, which benefits companies located in
the South of Italy (the Mezzogiorno). In past cases, as well as the
present review, we have found Law 64 grants and loans to be tied to the
production of particular products. (See, Pasta from Italy, 61 FR at
30292.) In fact, the grants and loans are provided only after companies
have committed funds for investment in
[[Page 17374]]
facilities to produce a particular product or products. Law 64
applications and awards indicate clearly the level of investment
required of the recipient, the portion to be provided by the
government, and a clear statement of the purpose of the investment.
Follow-up audits by the GOI serve to ensure that funds have been used
as claimed.
The Law 64 grants and loans received by certain Petrini family
companies were for the production of products other than pasta or the
inputs to pasta. In fact, Petrini's only pasta production and flour
mill facilities are located in the North and did not qualify for Law 64
benefits.
Under these circumstances, we consider the subsidies in question to
be tied to the production of products other than pasta. Accordingly, we
preliminarily conclude that these subsidies did not confer a benefit on
the subject merchandise.
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 accordance with this practice, we have determined that Delverde
and Tamma warrant treatment as a single company with a combined rate.
Although Tamma holds less than a 20 percent direct ownership interest
in the Delverde group, there is a substantial indirect ownership
relationship between Tamma and Delverde. In addition, the same
individual is the president of Tamma, Delverde, and Delverde's parent
company. Therefore, we calculated a single countervailing duty rate for
these companies by dividing their combined subsidy benefits by their
combined sales.
Analysis of Programs
I. Programs Previously Determined to Confer Subsidies
A. Local Income Tax (``ILOR'') Exemptions
Companies located in the Mezzogiorno may receive a complete
exemption for a period of 10 years from the ILOR on profits deriving
from new plant and equipment or from plant expansion and improvement
under Presidential Decree 218 of March 6, 1978. In addition, otherwise
non-qualifying profits which are reinvested in plant or equipment may
receive an exemption from the ILOR for the year of reinvestment. The
provision for ILOR exemptions expired on December 31, 1993, but
companies which were approved for the exemptions prior to this date may
continue to benefit from the exemption until the expiration of the 10-
year benefit period approved for each company.
Delverde/Tamma claimed an ILOR tax exemption on income tax returns
filed during the POR.
In Pasta from Italy, the Department determined that the ILOR
exemptions were subsidies within the meaning of section 771(5) of the
Act, as the tax exemptions represented revenue foregone by the GOI and
conferred tax savings on the companies. Also, they were regionally
specific within the meaning of section 771(5A) because they were
limited to companies located in the Mezzogiorno. In this review,
neither the GOI nor the responding companies provided new information
which would warrant reconsideration of this determination.
To calculate the countervailable subsidy, we divided the tax
savings in each year of the POR by the company's total sales in each
year. On this basis, we determine the countervailable subsidy from this
program for Delverde/Tamma to be 0.01 percent for Delverde/Tamma in
1995 and 0.01 percent ad valorem in 1996.
B. Industrial Development Grants Under Law 64/86
Law 64/86 provided assistance to promote industrial development in
the Mezzogiorno. Grants were awarded to companies constructing new
plants or expanding or modernizing existing plants. Pasta companies
were eligible for grants to expand existing plants but not to establish
new plants, because the market for pasta was deemed to be close to
saturated. Grants were made only after a private credit institution
chosen by the applicant made a positive assessment of the project.
In 1992, the Italian Parliament decided to abrogate Law 64/86. This
decision became effective in 1993. Projects approved prior to 1993,
however, were authorized to receive grant amounts after 1993. La
Molisana and Delverde/Tamma benefitted from industrial development
grants during to the POR.
In Pasta from Italy, the Department determined that these grants
provide a countervailable subsidy within the meaning of section 771(5)
of the Act. They provided a direct transfer of funds from the GOI
bestowing a benefit in the amount of the grant. Also, these grants were
found to be regionally specific within the meaning of section 771(5A).
In this review, neither the GOI nor the responding companies provided
new information which would warrant reconsideration of this
determination.
In Pasta from Italy, the Department treated these grants as ``non-
recurring'' based on the analysis set forth in the Allocation section
of the GIA, 58 FR at 37226. In the current review, we have found no
reason to depart from this treatment.
In accordance with our past practice, we have allocated those
grants, which exceeded 0.5 percent of a company's sales in the year of
receipt, over time. (See, GIA at 58 FR 37226.)
To calculate the countervailable subsidy, we used our standard
grant methodology. We divided the benefit attributable to each company
in each year of the POR by its sales in each year. Thus, we determine
the countervailable subsidy for this program to be 1.37 percent ad
valorem in 1995 and 1.11 percent ad valorem in 1996 for La Molisana and
2.25 percent ad valorem in 1995 and 2.25 percent ad valorem in 1996 for
Delverde/Tamma.
As noted in the ``Change of Ownership'' section above, certain of
the Petrini family-owned companies received Law 64 grants prior to
their acquisition and absorption by Petrini, which we found to be tied
to the production of products other than pasta. After the acquisition
and absorption of these companies, Petrini itself received several Law
64 grants. Once again, we found these grants to be tied to products
other than pasta.
C. Industrial Development Loans Under Law 64/86
Law 64/86 also provided reduced rate industrial development loans
with interest contributions to companies constructing new plants or
expanding or modernizing existing plants in the Mezzogiorno. The
interest rate on these loans was set at the reference rate, with the
GOI's interest contributions serving
[[Page 17375]]
to reduce this rate. For the reasons discussed above, pasta companies
were eligible for interest contributions to expand existing plants but
not to establish new plants.
Delverde/Tamma and La Molisana received industrial development
loans with interest contributions from the GOI. These loans were
outstanding during the POR.
In Pasta from Italy, the Department determined that these loans
were countervailable subsidies within the meaning of section 771(5).
They were a direct transfer of funds from the GOI providing a benefit
in the amount of the difference between the benchmark interest rate and
the interest rate paid by the companies after accounting for the GOI's
interest contributions. Also, they were found to be regionally specific
within the meaning of section 771(5A). In this review, neither the GOI
nor the responding companies provided new information which would
warrant reconsideration of this determination.
It is the Department's practice to measure the benefit conferred by
interest rebates using our loan methodology if the company knew in
advance that the government was likely to pay or rebate interest on the
loan at the time the loan was taken out. (See, e.g., Certain Steel from
Italy). Because, in this case, the recipients of the interest
contributions knew, prior to taking out the loans, that the GOI likely
would provide the interest contributions, we have allocated the benefit
over the life of the loan for which the contribution was received. We
divided the benefit attributable to each year of the POR for each
company by its sales in each year. On this basis, we determine the
countervailable subsidy for this program to be 0.36 percent ad valorem
in 1995 and 0.24 percent ad valorem in 1996 for La Molisana and 0.71
percent ad valorem in 1995 and 0.64 percent ad valorem in 1996 for
Delverde/Tamma.
D. Export Marketing Grants under Law 304/90
To increase market share in non-EU markets, Law 304/90 provides
grants to encourage enterprises operating in the food and agricultural
sectors to carry out pilot projects aimed at developing links between
Italian producers and foreign distributors and improving services in
those markets. Emphasis is placed on assisting small- and medium-sized
producers.
In Pasta from Italy, the Department determined that the export
marketing grants under Law 304 provided countervailable subsidies
within the meaning of section 771(5) of the Act. The grants were a
direct transfer of funds from the GOI providing a benefit in the amount
of the grant. The grants were also found to be specific because their
receipt was contingent upon anticipated exportation. In this review,
neither the GOI nor the responding companies provided new information
which would warrant reconsideration of this determination.
Delverde/Tamma received a grant under this program for a market
development project in the United States prior to the POR.
Each project funded by a grant requires a separate application and
approval, and the projects represent one-time events in that they
involve an effort to establish warehouses, sales offices, and a selling
network in new overseas markets. Therefore, in Pasta from Italy, the
Department treated the grant received under this program as ``non-
recurring'' based on the analysis set forth in the Allocation section
of the GIA, 58 FR at 37226. Further, the Department found that the
grant exceeded 0.5 percent of Delverde/Tamma's exports to the United
States in the year it was received. Therefore, in accordance with our
past practice, we allocated the benefits of this grant over time. In
this review, neither the GOI nor the responding companies provided new
information which would warrant reconsideration of this determination.
To calculate the countervailable subsidy, we used our standard
grant methodology. We divided the benefits attributable to each year of
the POR by Delverde/Tamma's exports to the United States in each year.
On this basis, we determine the countervailable subsidy to be 0.13
percent ad valorem in 1995 and 0.35 percent ad valorem in 1996 for
Delverde/Tamma.
E. Lump-Sum Interest Payment Under the Sabatini Law for Companies in
Southern Italy
The Sabatini Law was enacted in 1965 to encourage the purchase of
machine tools and production machinery. It provides for a deferral of
up to five years of payments due on installment contracts for the
purchase of such equipment and for a one-time, lump-sum interest
contribution from Mediocredito Centrale toward the interest owed on
these contracts. The amount of the interest contribution is equal to
the present value of the difference between the payment stream over the
life of the contract based on the reference rate and the payment stream
over the life of the contract based on a concessionary rate. The
concessionary rate for companies located in the Mezzogiorno is the
reference rate less eight percentage points. The concessionary rate for
companies located outside the Mezzogiorno is the reference rate less
five percentage points.
Audisio and Petrini received interest contributions under the
Sabatini Law for loans outstanding during the POR, which were related
to the production of pasta and inputs to pasta in the North. Petrini
also received other interest contributions in both northern and
southern Italy, but these benefits were tied to non-subject
merchandise. In addition, La Molisana received an interest contribution
at the concessionary rate available in the Mezzogiorno for a loan still
outstanding during the first year of the POR, which was related to
pasta production.
With respect to the benefits provided in northern Italy, the
Department, in Pasta from Italy, analyzed whether the program was
specific ``in law or in fact,'' within the meaning of section
771(5A)(D)(i) and (iii). The Department concluded that these benefits
were not specific and, therefore, not countervailable. In this review,
the petitioner provided no new information which would warrant
reconsideration of this determination.
Because the concessionary rate for companies in southern Italy was
lower than the interest rate available to users of the program in
northern Italy, however, the Department in Pasta from Italy determined
that the Sabatini Law interest contributions to companies in southern
Italy were countervailable subsidies within the meaning of section
771(5). They were a direct transfer of funds from the GOI providing a
benefit in the amount of the difference between the benchmark interest
rate and the interest rate paid by the companies. In addition, they
were regionally specific within the meaning of section 771(5A). In this
review, neither the GOI nor the responding companies provided new
information which would warrant reconsideration of this determination.
As stated earlier (see, Industrial Development Loans section,
above), when a company knows in advance that the government is likely
to pay or rebate interest on a loan, we will measure the benefit
conferred by that rebate using our loan methodology. Because La
Molisana knew, prior to taking out the loan at issue here, that it
would receive the interest contribution, we have allocated the benefit
over the life of the loan for which the contribution was received. We
divided the benefit attributable to each year of the POR by La
Molisana's sales in each year. Thus, we determine the countervailable
subsidy for this program to be 0.05 percent ad valorem in 1995 and 0.00
[[Page 17376]]
percent ad valorem in 1996 for La Molisana.
F. Social Security Reductions and Exemptions
1. Sgravi Benefits. Pursuant to Law 1089 of October 25, 1968,
companies located in the Mezzogiorno were granted a 10 percent
reduction in social security contributions for all employees on the
payroll as of September 1, 1968, as well as those hired thereafter.
Subsequent laws authorized companies located in the Mezzogiorno to take
additional reductions in social security contributions for employees
hired during later periods, provided that the new hires represented a
net increase in the employment level of the company. The additional
reductions ranged from 10 to 20 percentage points. Further, for
employees hired during the period July 1, 1976 to November 30, 1991,
companies located in the Mezzogiorno were granted a full exemption from
social security contributions for a period of 10 years, provided that
employment levels showed an increase over a base period.
In Pasta from Italy, the Department determined that the social
security reductions and exemptions were countervailable subsidies
within the meaning of section 771(5). They represented revenue foregone
by the GOI and they conferred a benefit in the amount of the savings
received by the companies. Also, they were found to be specific within
the meaning of section 771(5A) because they are limited to companies
located in the Mezzogiorno. In this review, neither the GOI nor the
responding companies provided new information which would warrant
reconsideration of this determination.
Delverde/Tamma and La Molisana received social security reductions
and exemptions during the POR.
To calculate the countervailable subsidy, we divided the savings in
social security contributions by each company during each year of the
POR by that company's sales in each year. On this basis, we calculated
the countervailable subsidy from this program to be 1.23 percent ad
valorem in 1995 and 0.91 percent ad valorem in 1996 for Delverde/Tamma
and 0.90 percent ad valorem in 1995 and 0.70 percent ad valorem in 1996
for La Molisana.
One respondent, Petrini, produces animal feed, chickens and eggs in
southern Italy. All of Petrini's facilities related to pasta production
and inputs thereto are located in the North. Petrini did not receive
countervailable social security benefits with regard to any of its
operations in the North. However, Petrini did receive social security
benefits available to companies operating in the Mezzogiorno for its
operations there.
We determine that the social security benefits received by
Petrini's operations in southern Italy were tied to the production and
sale of animal feed and other animal products. Therefore, for purposes
of these preliminary results, we have not included these social
security benefits in our calculation of the ad valorem subsidy rate
applicable to Petrini.
2. Fiscalizzazione Benefits. In addition to the sgravi deductions
described above, the GOI provides Social Security benefits of another
type, called ``fiscalizzazione.'' Fiscalizzazione is a nationwide
measure which provides a reduction of certain social security payments
related to health care or insurance. The program provides an equivalent
level of deductions throughout Italy for contributions related to
tuberculosis, orphans, and pensions. However, the program provides a
higher deduction from contributions to the National Health Insurance
system for manufacturing enterprises located in southern Italy compared
to those located in northern Italy. During the POR, the differential
was 6.16 percent of base salary until July 31, 1995, when it was
reduced to five percent. On January 1, 1996, it was further reduced to
four percent.
In Pasta from Italy, the Department determined that the
fiscalizzazione reductions were countervailable subsidies within the
meaning of section 771(5) for companies with operations in southern
Italy. They represented revenue foregone by the GOI and conferred a
benefit in the amount of the greater savings accruing to the companies
in southern Italy. In addition, they were found to be regionally
specific within the meaning of section 771(5A). In this review, neither
the GOI nor the responding companies provided new information which
would warrant reconsideration of this determination.
Delverde/Tamma and La Molisana received the higher levels of
fiscalizzazione deductions available to companies located in the
Mezzogiorno during the POR.
To calculate the countervailable subsidy, we divided the excess
fiscalizzazione deductions realized by each company in each year of the
POR by its sales in each year. On this basis, we calculated the
countervailable subsidy from this program to be 0.44 percent ad valorem
in 1995 and 0.20 percent ad valorem in 1996 for Delverde/Tamma and 0.64
percent ad valorem in 1995 and 0.38 percent ad valorem in 1996 for La
Molisana.
3. Law 407/90 Benefits. Law 407/90 grants a two-year exemption from
social security taxes when a company hires a worker who has been
previously unemployed for a period of two years or more. A 100 percent
exemption was allowed for companies in southern Italy. However,
companies located in northern Italy received only a 50 percent
exemption.
In Pasta from Italy, the Department determined that the 100 percent
exemptions provided to companies with operations in southern Italy
under Law 407 were countervailable subsidies within the meaning of
section 771(5). They represented revenue foregone by the GOI and
conferred a benefit in the amount of the greater savings accruing to
the companies in southern Italy. In addition, they were found to be
regionally specific within the meaning of section 771(5A). In this
review, neither the GOI nor the responding companies provided new
information which would warrant reconsideration of this determination.
Delverde/Tamma received the higher level of Law 407 deductions
available to companies located in the Mezzogiorno during the POR.
To calculate the countervailable subsidy rate, we divided the
amount of the Law 407 exemption which exceeds the amount available in
northern Italy realized by Delverde/Tamma in each year of the POR by
that company's sales during the same period. On this basis, we
calculated the countervailable subsidy from this program to be 0.00
percent ad valorem in 1995 and 0.00 percent ad valorem in 1996 for
Delverde/Tamma.
4. Law 863 Benefits. Law 863 provides for a reduction of social
security payments of 25 percent for companies in northern Italy for
employees who are participating in a training program. Companies in
southern Italy receive a 100 percent reduction in social security
payments for such employees.
In Pasta from Italy, the Department determined that Law 863
reductions were countervailable subsidies within the meaning of section
771(5) for companies with operations in southern Italy. They
represented revenue foregone by the GOI and confer a benefit in the
amount of the greater savings accruing to the companies in southern
Italy. In addition, they were found to be regionally specific within
the meaning of section 771(5A). In this review, neither the GOI nor the
responding companies provided new information which would warrant
reconsideration of this determination.
[[Page 17377]]
Delverde/Tamma and La Molisana received the higher level of Law 863
deductions available to companies located in the Mezzogiorno during the
POR.
To calculate the countervailable subsidy, we divided the amount of
the Law 863 reductions which exceeds the amount available in northern
Italy realized by each company in each year of the POR by it sales in
that year. On this basis, we calculated the countervailable subsidy
from this program to be 0.05 percent ad valorem in 1995 and 0.11
percent ad valorem in 1996 for Delverde/Tamma and 0.03 percent for La
Molisana.
G. Remission of Taxes on Export Credit Insurance Under Article 33 of
Law 227/77
The Special Section for Export Credit Insurance (``SACE'') was
created under Article 2 of Law 227/77 as the branch of the GOI
responsible for the administration of government export credit
insurance and guarantee programs. Pursuant to Article 3 of Law 227/77,
SACE insures and reinsures political, catastrophic, economic,
commercial and exchange-rate risks which Italian operators are exposed
to in their foreign activities.
During the POR, only one private insurance company, Societa
Italiana Crediti S.p.A. (``SIAC''), had a reinsurance agreement with
SACE. Under the reinsurance agreement, SIAC passed along a fixed
percentage (i.e., 45 percent) of its export credit insurance premia to
SACE. In return, SACE assumed that same percentage of risk on export
credit insurance policies sold by SIAC (i.e., SACE would pay 45 percent
of any claim for which SIAC would become liable).
Article 33 of Law 227/77 provides for the remission of insurance
taxes on policies directly insured or reinsured with SACE. For
reinsurance policies, this remission of insurance taxes applied not
only to the portion of the risk covered by SACE, but also the remaining
portion covered by the private insurance company. As a result, export
credit insurance policies sold by SIAC during the POR were totally
exempt from the insurance tax by virtue of its reinsurance agreement
with SACE. Export credit insurance policies sold by other private
insurance companies, however, were not exempt from the insurance tax.
The insurance tax rate was 12.5 percent of premia paid.
In Pasta from Italy, we determined that the exemption from the
insurance tax for policies directly insured or reinsured with SACE was
a countervailable subsidy within the meaning of section 771(5) of the
Act. The exemption represents revenue foregone by the GOI and confers
tax savings on the companies. Also, because export credit insurance was
available only to exporters and was by its nature contingent upon
export performance, we found the remission of taxes on export credit
insurance to be specific within the meaning of section 771(5A) of the
Act. In this review, neither the GOI nor the responding companies
provided new information which would warrant reconsideration of this
determination.
La Molisana obtained export credit insurance from SIAC for its
exports to the United States and, therefore, was exempted from the
insurance tax. To calculate the benefit, we multiplied the premia paid
during each year of the POR for exports to the United States by the
insurance tax rate and divided the amount by total exports to the
United States in each year. We calculated a countervailable subsidy
rate of 0.04 percent ad valorem in 1995 and 0.04 percent ad valorem in
1996 for La Molisana.
H. European Social Fund
The ESF is one of the Structural Funds operated by the EU. The ESF
was created under Article 123 of the Treaty of Rome in order to improve
employment opportunities for workers and to help raise their living
standards. The ESF provides principally vocational training and
employment aids. ESF aid is generally provided directly to public
institutions or non-commercial enterprises. However, it can also be
provided directly to a company, as long as it is located in an
Objective 1, Objective 2, or Objective 5(b) region. Objective 1 regions
are those regions whose development and structural adjustment has been
identified by the EU as lagging behind. Objective 2 regions are
frontier regions seriously affected by industrial decline. Objective
5(b) regions are rural regions in need of development. The ESF provides
grants to companies located in such regions in order to train current
employees for new jobs or to hire new employees.
Delverde/Tamma received ESF grants.
In Pasta from Italy, the Department determined that ESF grants were
countervailable subsidies within the meaning of section 771(5) of the
Act. The Department considers worker assistance programs to be
countervailable when a company is relieved of an obligation it would
otherwise have incurred. (See, GIA 58 FR at 37255.) In addition to
providing funds for training programs which may or may not relieve
companies of an obligation, ESF funds were available to aid companies
in hiring new employees. Because a company is normally obligated to
meet its hiring needs without assistance from the government, ESF funds
clearly relieved companies of an obligation. Thus, the grants were a
direct transfer of funds providing a benefit in the amount of the
grant. Also, because ESF assistance to individual companies is limited
to companies located in Objective 1, Objective 2, and Objective 5(b)
regions, they were found to be regionally specific within the meaning
of section 771(5A) of the Act. In this review, neither the GOI nor the
responding companies provided new information which would warrant
reconsideration of this determination.
Because a separate application is required for each grant and
because grants are awarded for specific projects, we have found the
grants to be non-recurring. We determined that the grants received by
Delverde/Tamma were less than 0.5 percent of the companies' sales in
1995, the year of receipt. Therefore, in accordance with past practice,
we expensed these non-recurring grants to the year of receipt. On this
basis, we calculated a countervailable subsidy rate of 0.04 percent ad
valorem for Delverde/Tamma in 1995.
I. Export Restitution Payments
Since 1962, the EU has operated a subsidy program which provides
restitution payments to EU pasta exporters based on the durum wheat
content of their exported pasta products. Generally, under this
program, a restitution payment is available to any EU exporter of pasta
products, regardless of whether the pasta was made with imported wheat
or wheat grown within the EU. The amount of the restitution payment is
calculated by multiplying the prevailing restitution payment rate on
the date of exportation by the weight of the unmilled durum wheat used
to produce the exported pasta. The weight of the unmilled durum wheat
is calculated by applying a conversion factor to the weight of the
pasta. The EU calculates the restitution payment rate, on a monthly
basis, by first computing the difference between the world market price
of durum wheat and an internal EU price and then adding a monthly
increment (in all months except June and July, which are harvest
months). The EU will not normally allow the restitution payment rate to
be higher than the levy that the EU imposes on imported durum wheat, as
such a situation would lead to circular trade.
In 1987, the nature of this program changed with regard to exports
to the
[[Page 17378]]
United States as a result of a settlement reached by the United States
and the EU. This settlement arose out of a GATT panel proceeding,
brought by the United States, in which the panel ruled (in 1983) that
the restitution program violated the EU's GATT obligations and did not
fall within the exception under Item (d) of the Illustrative List of
Export Subsidies.
Under the settlement, the EU agreed to allow the importation of
durum wheat from any non-EU country free of any levy under a system
described in the settlement as ``Inward Processing Relief'' (``IPR'').
Under this system, the EU pasta exporter would not receive a
restitution payment when exporting to the United States pasta products
containing durum wheat imported with IPR. Essentially, a restitution
payment no longer was necessary because no levy had been paid upon
importation of durum wheat in the first place.
As to pasta products containing EU durum wheat or durum wheat that
had been imported without IPR, a restitution payment remained available
for exports to the United States, except that the restitution rate was
reduced, originally by 27.5 percent and later by approximately 35
percent, from the normal level available for exports to all other
countries.
As a further condition of the settlement, the EU agreed to attempt
to balance its exports to the United States equally between pasta
products containing durum wheat imported with IPR, on the one hand, and
pasta products containing EU durum wheat or durum wheat imported
without IPR, on the other hand. The goal was for 50 percent of the EU's
pasta exports to the United States to contain durum wheat imported with
IPR (for which the exporter had paid world market price, free of any
levy, and had received no restitution payments), while the remaining 50
percent of the EU's pasta exports to the United States would contain EU
durum wheat or durum wheat imported without IPR (for which the exporter
could receive reduced restitution payments). In all other respects, the
program remained unchanged.
In Pasta from Italy, the Department determined that export
restitution payments were countervailable subsidies within the meaning
of section 771(5) of the Act. Each payment represented a direct
transfer of funds from the EU providing a benefit in the amount of the
payment. The restitution payments were found to be specific because
their receipt is contingent upon export performance. In this review,
neither the GOI, the EU nor the responding companies provided new
information which would warrant reconsideration of this determination.
Delverde/Tamma, La Molisana, Audisio and Petrini received export
restitution payments during the POR on shipments to the United States.
In accordance with our normal practice of recognizing subsidy
benefits when there is a cash-flow effect, we have calculated the
subsidy rate for export restitution benefits based on the amount
actually received during the POR. Export restitution benefits are not
``automatic'' in that their receipt is not certain until an application
has been filed. The amounts received, while generally quite close to
the amounts requested, do not always equal the amount indicated by the
company on its request form. Thus, we have calculated the subsidy rate
for export restitution benefits based on the amount actually received
during the POR.
To calculate the subsidy, we divided the export restitution
payments received in each year of the POR on shipments to the United
States by the company's sales of pasta for export to the United States
in each year. We calculated a countervailable subsidy under this
program of 0.23 percent ad valorem in 1995 and 0.19 percent ad valorem
in 1996 for Delverde/Tamma, 0.08 percent ad valorem in 1995 and 0.07
percent ad valorem in 1996 for La Molisana, 2.27 percent ad valorem in
1995 and 0.00 percent ad valorem in 1996 for Petrini, and 7.78 percent
ad valorem in 1995 and 0.00 percent ad valorem in 1996 for Audisio.
II. Program Preliminarily Determined to Confer a Subsidy: Grant
Received Pursuant to the Community Initiative Concerning the
Preparation of Enterprises for the Single Market (PRISMA)
PRISMA, a program funded by the European Structural Fund, seeks to
contribute to the creation of a single EU market by improving
standardization and quality control procedures, and seeks to assist
small- and medium-sized enterprises in Objective 1 regions to adapt to
a single EU market and increased competition.
La Molisana received a PRISMA grant in 1996.
We preliminarily find that PRISMA grants constitute countervailable
subsidies within the meaning of section 771(5) of the Act. The grants
represent a transfer of funds from the administering government and
provide a benefit in the amount of the grant. Further, we preliminarily
find that they are specific within the meaning of section 771(5A)
because they are limited to firms located in designated geographic
regions.
Because the grant received by La Molisana was less than 0.5 percent
of the company's sales in 1996, the year of receipt, we have allocated
the entire grant to that year. To calculate the countervailable
subsidy, we divided the benefit received by La Molisana's sales in
1996, the year of receipt. On this basis, we determine the
countervailable subsidy for this program to be 0.00 percent ad valorem
in 1995 and 0.10 percent ad valorem in 1996 for La Molisana.
III. Programs Preliminarily Determined to Be Not Used
We examined the following programs and preliminarily determine that
the producers and/or exporters of the subject merchandise did not apply
for nor receive benefits under these programs during the POR:
A. VAT Reductions
B. Export Credits Under Law 227/77
C. Capital Grants Under Law 675/77
D. Retraining Grants Under Law 675/77
E. Interest Contributions on Bank Loans Under Law 675/77
F. Interest Grants Financed by IRI Bonds
G. Preferential Financing for Export Promotion Under Law 394/81
H. Corporate Income Tax (``IRPEG'') Exemptions
I. European Agricultural Guidance and Guarantee Fund
J. Urban Redevelopment Under Law 181
Preliminary 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 periods October 17, 1995, through
December 31, 1995, January 1, 1996, through February 13, 1996, and July
24, 1996, through December 31, 1996, we preliminarily determine the net
subsidy rates for producers/exporters under review to be those
specified in the chart shown below. (In accordance with section 703(d)
of the Act, countervailing duties will not be assessed on entries made
during the period February 14, 1996, through July 23, 1996.) If the
final results of this review remain the same as these preliminary
results, the Department intends to instruct customs to assess
countervailing duties at these net subsidy rates.
The Department also intends to instruct Customs to collect cash
deposits of estimated countervailing duties at these rates on the
f.o.b. value
[[Page 17379]]
of all 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.
Because the URAA replaced the general rule in favor of a country-
wide rate with a general rule in favor of individual rates for
investigated and reviewed companies, the procedures for establishing
countervailing duty rates, including those for non-reviewed companies,
are now essentially the same as those in antidumping cases, except as
provided for in section 777A(e)(2)(B) of the Act. The requested reviews
will normally cover only those companies specifically named. See 19 CFR
351.213(b). 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, and cash deposits must continue to be collected, at the rate
previously ordered. As such, the countervailing duty cash deposit rate
applicable to a company can no longer change, except pursuant to a
request for a review of that company. See, Federal-Mogul Corporation
and The Torrington Company v. United States, 822 F.Supp. 782 (CIT 1993)
and Floral Trade Council v. United States, 822 F.Supp. 766 (CIT 1993)
(interpreting 19 CFR 353.22(e), the antidumping regulation on automatic
assessment, which is identical to 19 CFR 355.22(g), the predecessor to
19 CFR 351.212(c)). Therefore, the cash deposit rates for all companies
except those covered by this review will be unchanged by the results of
these reviews.
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 company-specific or country-wide 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 (``Pasta'') from Italy
(61 FR 38544, July 24, 1996), 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
requested. In addition, for the periods from October 17, 1995, through
February 13, 1996, and from July 24, 1996, through December 31, 1996,
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).
------------------------------------------------------------------------
Ad valorem rate
-------------------------------
01/01/96 to 02/
Company 10/17/95 to 12/ 13/96 and 07/
31/95 24/96 to 12/31/
96
------------------------------------------------------------------------
Delverde, S.r.l......................... 5.09 4.66
La Molisana Alimentari S.p.A............ 3.44 2.67
Tamma Industrie Alimentari di Capitanata 5.09 4.66
Petrini................................. 2.27 0.00
Audisio................................. 7.78 0.00
------------------------------------------------------------------------
Public Comment
Parties to this proceeding may request disclosure of the
calculation methodology and interested parties may request a hearing
not later than 30 days after the date of publication of this notice.
Interested parties may submit written arguments in case briefs on these
preliminary results within 30 days of the date of publication. Rebuttal
briefs, limited to arguments raised in case briefs, may be submitted
five days after the time limit for filing the case brief. Parties who
submit an argument in this proceeding are requested to submit with the
argument (1) a statement of the issue, and (2) a brief summary of the
argument. Any hearing, if requested, will be held two days after the
scheduled date for submission of rebuttal briefs. Copies of case briefs
and rebuttal briefs must be served on interested parties in accordance
with 19 CFR 351.303(f).
Representatives of parties to the proceeding may request disclosure
of proprietary information under administrative protective order no
later than 10 days after the representative's client or employer
becomes a party to the proceeding, but in no event later than the date
the case briefs, under 19 CFR 351.309(c)(ii), are due.
The Department will publish the final results of this
administrative review, including the results of its analysis of issues
raised in any case or rebuttal briefs or at a hearing.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)).
Dated: April 2, 1998.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 98-9434 Filed 4-8-98; 8:45 am]
BILLING CODE 3510-DS-P