[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