[Federal Register Volume 63, Number 158 (Monday, August 17, 1998)]
[Notices]
[Pages 43905-43912]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-22063]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-475-819]
Certain Pasta From Italy: Final Results of Countervailing Duty
Administrative Review
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
ACTION: Notice of final results of countervailing duty administrative
review.
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SUMMARY: On April 9, 1998, the Department of Commerce published in the
Federal Register its preliminary results of the 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 Final Results of Review section of this
notice. We will instruct the Customs Service (Customs) to assess
countervailing duties as detailed in the Final Results of Review
section of this notice.
EFFECTIVE DATE: August 17, 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.
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 of Commerce (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 Duties; Final Rule 62 FR
27296 (May 19, 1997), unless otherwise indicated
Background
On July 24, 1996, the Department published in the Federal Register
(61 FR 38544) the countervailing duty order on certain pasta from
Italy.
In accordance with section 351.213(b) of our regulations, this
review of the countervailing duty order covers the producers/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 di
Capitanata, 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). The petitioners in this
review are Borden, Inc., Hershey Foods Corp. and Gooch Foods, Inc. This
review covers 23 programs.
Since the publication of the preliminary results on April 9, 1998
(see Certain Pasta from Italy; Preliminary Results of Countervailing
Duty Administrative Review (63 FR 17372) (Preliminary Results), the
following events have occurred: on May 11, 1998, petitioners and
respondents Delverde/Tamma and La Molisana submitted case briefs; on
May 12, 1998, Delverde/Tamma also submitted an addendum to the case
brief, i.e., a Table of Authorities; and, on May 18, 1998, respondents
Audisio, Delverde/Tamma, La Molisana, Petrini and petitioners filed
rebuttal briefs on May 18, 1998. The Department did not conduct a
hearing in this review because one was not requested.
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 Instituto
[[Page 43906]]
Mediterraneo Di Certificazione, 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.
Furthermore, on July 30, 1998, the Department issued a scope ruling
that multipacks consisting of six one-pound packages of pasta, which
are shrinked wrapped into a single package, are within the scope of the
order.
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 company under review.
(For further discussion, see Comments 1 and 5 below.)
Subsidies Valuation Information
Benchmarks for Long-term Loans and Discount Rates: The companies
under review did not take out 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. In
the Preliminary Results, we used as our benchmark for 1995 and 1996,
the average long-term interest rate available in Italy based upon a
survey of 114 Italian banks reported by the Banca d'Italia , the
Italian central bank. However, in the Final Affirmative Countervailing
Duty Determination; Certain Stainless Steel Wire Rod from Italy, 63 FR
40474, 40477, (July 29, 1998) (SSWR from Italy), the Department
determined, based on information gathered during verification, that the
Italian Interbank Rate (ABI) is the most suitable benchmark for long-
term financing to Italian companies. Accordingly, we have changed the
1995 and 1996 benchmark interest rates used in these final results.
Specifically, consistent with SSWR from Italy, we have used the ABI
interest rate for 1995 and 1996 increased by the average spread charged
by banks on loans to commercial customers. For a further discussion of
the interest rates used in these final results. See Memorandum to File
from Team, ``Calculation Memorandum for Final Results--Interest
Rates,'' dated August 7, 1998.
Allocation Period: In British Steel plc. v. United States, 879
F.Supp. 1254, 1289 (CIT 1995), 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 non-recurring 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).
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 final 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 that were not countervailed in the
original investigation, each company under review submitted an AUL
calculation based on depreciation and value 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 from Italy (61 FR 30288, 30292) (Pasta
from Italy)). This practice was upheld by the Court in Delverde S.r.L.
v. United States, 989 F. Supp. 218 (CIT 1997) (Delverde). 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/Tamma, 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/Tamma with the acquisition of the factory,
following the spin-off methodology described in the Restructuring
section of the GIA, 58 FR at 37265. (For further discussion, see
Comment 4 below.)
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 affiliated companies, including one
which produced pasta. All but one of these affiliated companies were
wholly-owned by members of the Petrini family prior to their
acquisition by Petrini; the remaining company was majority-
[[Page 43907]]
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 whether these subsidies,
specifically loans and grants pursuant to Law 64/86, should be
considered tied or untied. We have determined that the subsidies in
question are tied to the production of products other than pasta. For a
detailed discussion of this issue, please see Comment 2 below.
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 the Preliminary Results, and consistent with our determination
in the original investigation, we have treated Delverde S.r.L., Tamma
Industrie Alimentari, S.r.L., Sangralimenti S.r.L., and Pietro Rotunno,
S.r.L. as a single company with a combined rate. We did not receive any
comments on this treatment from the interested parties, and our review
of the record has not led us to change this determination.
Analysis of Programs
I. Programs Previously Determined to Confer Subsidies
A. Local Income Tax (ILOR) Exemptions
Delverde/Tamma claimed an ILOR tax exemption on income tax returns
filed during the POR. In the Preliminary Results and in the original
investigation, we found that this program conferred countervailable
subsidies on the subject merchandise. We did not receive any comments
on this program from the interested parties, and our review of the
record has not led us to change our findings or calculations.
Accordingly, the net subsidies for this program remain unchanged from
the Preliminary Results and are as follows: Delverde/Tamma in 1995-0.01
percent ad valorem and in 1996-0.01 percent ad valorem.
B. Industrial Development Grants Under Law 64/86
La Molisana and Delverde/Tamma benefitted from industrial
development grants during the POR. In the Preliminary Results and in
the original investigation, we found that this program conferred
countervailable subsidies on the subject merchandise. Our review of the
record and our analysis of the comments submitted by the interested
parties, summarized below in Comment 2, have not led us to change our
findings for Delverde/Tamma and Petrini. We did, however, change our
calculations for Delverde/Tamma and La Molisana from the Preliminary
Results because we reassessed the 1995 and 1996 benchmark interest
rates as described in the Subsidies Valuation Information section
above. In addition, we further changed our calculations for La
Molisana. For a discussion of these changes, see the Department's
Position in Comment 6 below, which explains our modification of the net
subsidy calculations for La Molisana. Accordingly, the net subsidies
for this program have changed from the Preliminary Results and are as
follows: La Molisana in 1995-0.76 percent ad valorem and in 1996-1.17
percent ad valorem and Delverde/Tamma in 1995-2.25 percent ad valorem
and in 1996-2.47 percent ad valorem.
C. Industrial Development Loans Under Law 64/86
Delverde/Tamma and La Molisana received industrial development
loans with interest contributions from the Government of Italy (GOI).
In the Preliminary Results and in the original investigation, we found
that this program conferred countervailable subsidies on the subject
merchandise. Our review of the record and our analysis of the comment
submitted by petitioners, summarized below in Comment 2, have not led
us to change our findings or calculations from the Preliminary Results.
Accordingly, the net subsidies for this program remain unchanged and
are as follows: La Molisana in 1995-0.36 percent ad valorem and in
1996-0.24 percent ad valorem and Delverde/Tamma in 1995-0.71 percent ad
valorem and in 1996-0.64 percent ad valorem.
D. Export Marketing Grants Under Law 304/90
Delverde/Tamma received a grant under this program for a market
development project in the United States. In the Preliminary Results
and in the original investigation, we found that this program conferred
countervailable subsidies on the subject merchandise. We did not
receive any comments on this program from the interested parties, and
our review of the record has not led us to change our findings. We did,
however, change our calculations for Delverde/Tamma from the
Preliminary Results because we reassessed the 1995 and 1996 benchmark
interest rates as described in the Subsidies Valuation Information
section above. Accordingly, the net subsidies for this program have
changed from the Preliminary Results and are as follows: Delverde/Tamma
in 1995-0.13 percent ad valorem and in 1996-0.35 percent ad valorem.
E. Lump-Sum Interest Payment Under the Sabatini Law for Companies in
Southern Italy
In the Preliminary Results and in the original investigation, we
found that benefits to operations in the Mezzogiorno under this program
conferred countervailable subsidies on the subject merchandise. Our
review of the record and our analysis of the comments submitted by the
interested parties, summarized below in Comments 3 and 5, have not led
us to change our findings or calculations for La Molisana. Accordingly,
the net subsidy for this program remains unchanged from the Preliminary
Results and is as follows: for La Molisana in 1995-0.05 percent ad
valorem.
F. Social Security Reductions and Exemptions
1. Sgravi benefits. Delverde/Tamma and La Molisana received
countervailable social security reductions and exemptions during the
POR. In the Preliminary Results and in the original investigation, we
found that
[[Page 43908]]
this program conferred countervailable subsidies on the subject
merchandise. We did not receive any comments on this program from the
interested parties, and our review of the record has not led us to
change our findings or calculations. Accordingly, the net subsidies for
this program remain unchanged from the Preliminary Results and are as
follows: Delverde/Tamma in 1995-1.23 percent ad valorem and in 1996-
0.91 percent ad valorem and La Molisana in 1995-0.90 percent ad valorem
and in 1996-0.70 percent ad valorem.
2. Fiscalizzazione benefits. Delverde/Tamma and La Molisana
received the higher levels of fiscalizzazione deductions available to
companies located in the Mezzogiorno during the POR. In the Preliminary
Results and in the original investigation, we found that this program
conferred countervailable subsidies on the subject merchandise. We did
not receive any comments on this program from the interested parties,
and our review of the record has not led us to change our findings or
calculations. Accordingly, the net subsidies for this program remain
unchanged from the Preliminary Results and are as follows: Delverde/
Tamma in 1995-0.44 percent ad valorem and in 1996-0.20 percent ad
valorem and La Molisana in 1995-0.64 percent ad valorem and in 1996-
0.38 percent ad valorem.
3. Law 407/90 benefits. Delverde/Tamma received the higher level of
Law 407 deductions available to companies located in the Mezzogiorno
during the POR. In the Preliminary Results and in the original
investigation, we found that this program conferred countervailable
subsidies on the subject merchandise. We did not receive any comments
on this program from the interested parties, and our review of the
record has not led us to change our findings or calculations.
Accordingly, the net subsidies for this program remain unchanged from
the Preliminary Results and are as follows: Delverde/Tamma in 1995-0.00
percent ad valorem and in 1996-0.00 percent ad valorem.
4. Law 863 Benefits. Delverde/Tamma and La Molisana received the
higher level of Law 863 deductions available to companies located in
the Mezzogiorno during the POR. In the Preliminary Results and in the
original investigation, we found that this program conferred
countervailable subsidies on the subject merchandise. We did not
receive any comments on this program from the interested parties, and
our review of the record has not led us to change our findings or
calculations. Accordingly, the net subsidies for this program remain
unchanged from the Preliminary Results and are as follows: Delverde/
Tamma in 1995--0.05 percent ad valorem and in 1996--0.11 percent ad
valorem and La Molisana in 1996--0.03 ad valorem.
G. Remission of Taxes on Export Credit Insurance Under Article 33 of
Law 227/77
La Molisana obtained export credit insurance under this program for
its exports to the United States and, therefore, was exempted from the
insurance tax. In the Preliminary Results and in the original
investigation, we found that this program conferred countervailable
subsidies on the subject merchandise. We did not receive any comments
on this program from the interested parties, and our review of the
record has not led us to change our findings or calculations.
Accordingly, the net subsidies for this program remain unchanged from
the Preliminary Results and are as follows: La Molisana in 1995--0.04
percent ad valorem and in 1996--0.04 percent ad valorem.
H. European Social Fund
Delverde/Tamma received European Social Fund grants. In the
Preliminary Results and in the original investigation, we found that
this program conferred countervailable subsidies on the subject
merchandise. We did not receive any comments on this program from the
interested parties, and our review of the record has not led us to
change our findings or calculations. Accordingly, the net subsidies for
this program remain unchanged from the Preliminary Results and are as
follows: for Delverde/Tamma in 1995--0.04 percent ad valorem.
I. Export Restitution Payments
Delverde/Tamma, La Molisana, Audisio and Petrini received export
restitution payments during the POR on shipments of subject merchandise
to the United States. In the Preliminary Results and in the original
investigation, we found that this program conferred countervailable
subsidies on the subject merchandise. We did not receive any comments
on this program from the interested parties, and our review of the
record has not led us to change our findings or calculations.
Accordingly, the net subsidies for this program remain unchanged from
the Preliminary Results and are as follows: Delverde/Tamma in 1995--
0.23 ad valorem and in 1996--0.19 percent ad valorem, La Molisana in
1995--0.08 percent ad valorem and in 1996--0.07 percent ad valorem,
Petrini in 1995--2.27 percent ad valorem and in 1996--0.00 percent ad
valorem, and Audisio in 1995--7.78 percent ad valorem and in 1996--0.00
percent ad valorem.
J. Grant Received Pursuant to the Community Initiative Concerning the
Preparation of Enterprises for the Single Market (PRISMA)
La Molisana received a PRISMA grant in 1996. In the Preliminary
Results, we determined that this program conferred a countervailable
subsidy because the grant represented a transfer of funds from the
administering government, provided a benefit in the amount of the
grant, and was limited to firms located in a designated geographic
region. We did not receive any comments on this program from the
interested parties, and our review of the record has not led us to
change our findings or calculations. Therefore, we find this program to
be a countervailable subsidy within the meaning of section 771(5) of
the Act. Accordingly, the net subsidies for this program remain
unchanged from the Preliminary Results and are as follows: La Molisana
in 1995--0.00 percent ad valorem and in 1996--0.10 percent ad valorem.
II. Programs Determined To Be Not Used
In the Preliminary Results, we determined that the producers and/or
exporters of the subject merchandise did not apply for or receive
benefits under the following 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
We did not receive any comments on these programs from the
interested parties, and our review of the record has not led us to
change our findings from the Preliminary Results.
Analysis of Comments
Comment 1: Assessment Rate
The petitioners argue that the Department should calculate a single
countervailing duty rate for the entire POR based on the average of
each company's rates for 1995 and 1996. The petitioners, citing to
Certain Cut-to-Length Carbon Steel Plate from Sweden: Final Results of
Countervailing Duty Administrative Review, 61 FR 5381
[[Page 43909]]
(August 24, 1995) (Plate from Sweden), state that the Department has
exercised its discretion in previous administrative reviews and
calculated a single countervailing duty rate where the POR was more
than 12 months. The petitioners also cite to Fresh Cut Roses from
Israel: Final Results of Administrative Review of Countervailing Duty
Order, 48 FR 36635 (August 12, 1983) (Roses from Israel) and Certain
Hot-Rolled Lead and Bismuth Carbon Steel Products From the United
Kingdom; Final Results of Countervailing Duty Administrative Review, 62
FR 53306 (October 14, 1997) (UK Bar--1995) as examples of other cases
where the Department has calculated assessment rates for periods that
were not calendar years.
The petitioners note that the Department calculated subsidy rates
of zero for calendar year 1996 for respondents Petrini and Audisio,
while these respondents' subsidy rates for 1995 were 2.27 and 7.78
percent, respectively. The petitioners contend that because of the
Department's methodological decision, Petrini and Audisio are able to
avoid paying countervailing duties on all entries of subject
merchandise that occurred during 1996 and will have deposit rates set
at zero for future entries. Petitioners argue that a single rate for
each respondent for the entire review period results in a better
measure of subsidization for the period from October 17, 1995 through
December 31, 1996, i.e., the POR.
The petitioners further argue that calculating a single rate for
each respondent would be more administratively feasible and would
minimize potential confusion for Customs officials and interested
parties.
Respondent Delverde/Tamma argues that with their proposed
methodology, petitioners are simply seeking to offset the fact that the
respondents were subsidized at lower rates in 1996 than in 1995.
Delverde/Tamma notes that, unsurprisingly, there were more entries of
pasta during the eight months in 1996 than during the two and one-half
months during 1995 when entries of subject merchandise were subject to
suspension of liquidation. Thus, Deleverde/Tamma notes, the methodology
recommended by the petitioners would result in excessive countervailing
duties being assessed on POR entries. Further, petitioners' proposed
methodology would result in higher deposit rates for estimated
countervailing duties than the known rate of subsidization in 1996.
Accordingly, Delverde/Tamma argues that the petitioners' proposed
methodology is punitive, and hampers the respondent's ability to
compete by forcing the respondent to deposit more duties than the
current rate of subsidization.
Respondents Audisio, Petrini and La Molisana argue that the
petitioners are trying to characterize as ``Department practice'' a few
exceptions in past cases with unique circumstances. Audisio, Petrini
and La Molisana note that in Plate from Sweden, the Department
calculated a single rate for calendar year 1993, and applied this rate
to entries from December 7, 1992 through December 31, 1993. The
respondents note that in Plate from Sweden the portion of the POR that
fell into calendar year in 1992 was only three weeks, so the Department
applied the 1993 rate to these 1992 entries. Audisio, Petrini and La
Molisana argue that if the Department were to follow the precedent of
Plate from Sweden in the instant review, the rate for 1996 (i.e., zero
for Petrini and Audisio) would also apply to 1995 entries.
Audisio, Petrini and La Molisana further note that the other cases
cited by the petitioners involved unique circumstances. In Roses from
Israel, the Department explained that it used the growing season for
roses rather than a calendar year and UK Bar-1995 involved the unusual
situation where a previously spun-off subsidiary was reacquired during
the POR.
Petrini and Audisio cite to Carbon Black from Mexico; Final Results
of Countervailing Duty Administrative Review, 55 FR 51745 (December 17,
1990), Carbon Steel Wire Rod from Malaysia; Final Results of
Countervailing Duty Administrative Reviews, 56 FR 41649 (August 22,
1991), and Carbon Steel Butt-Weld Pipe Fittings from Thailand; Final
Results of Countervailing Duty Administrative Review, 57 FR 5248
(February 13, 1992) as just a few examples of numerous past first
reviews where the Department calculated separate CVD rates for periods
spanning more than one calendar year and then used only the latter rate
as the cash deposit rate for subsequent entries.
Audisio, Petrini and La Molisana further argue that the
petitioners' contention that a blended rate would be more
administratively feasible is insupportable, as the Department has
already calculated two rates and Customs is fully capable of assessing
duties based on the entry date. Petrini and Audisio note that Customs
does not have any exceptional difficulty in administering liquidation
instructions for antidumping administrative reviews where duties vary
entry-by-entry.
Department's Position: Section 351.213 (e)(2)(ii) of the
Department's regulations state that in a first administrative review,
the POR will cover imports ``during the period from the date of
suspension of liquidation under this part . . . to the end of the most
recently completed calendar or fiscal year. . . .'' There is no
indication in the regulations that where the review period in a first
review covers more than one year, the Department will calculate a
single rate to cover the entire period or two separate rates for each
calendar year falling in the POR. In the cases cited by Petrini and
Audisio, as well as several other first reviews (see, e.g., Certain
Apparel From Argentina; Final Results of Countervailing Duty
Administrative Review, 53 FR 1053 (January 15, 1988)) the Department
has calculated separate rates for each calendar year. In certain
exceptional circumstances, such as Plate from Sweden and Pure and Alloy
Magnesium From Canada: Final Results of the First (1992) Countervailing
Duty Administrative Reviews, 62 FR 13857 (March 24, 1997) where the
review period fell into two calendar years and the portion falling in
the first calendar year was only a few weeks, the Department did not
calculate a rate for the first calendar year and liquidated all entries
at the rate calculated for the second calendar year.
In the review at hand, 10 weeks of the POR fall in the first
calendar year. Additionally, the differences in rates between the two
calendar years are significant for certain respondents. Accordingly, we
have followed our normal practice and calculated two different
assessment rates. The deposit rate is the rate calculated for the most
recently completed calendar year included in the POR, i.e, 1996. Given
the information collected, there is no additional administrative burden
to the Department in calculating two rates. Also, since this is our
normal practice for countervailing duty proceedings, Customs should
have little difficulty following our assessment instructions.
Comment 2: Attribution of Subsidies Received by Petrini
The petitioners maintain that the Department's practice of
attributing subsidies where there is cross-ownership requires the
attribution of Law 64 grants and loans to all of Petrini's production
including pasta production. According to the petitioners, the fact that
the restructuring of these companies was preliminarily found by the
Department to have no effect on the countervailability of previously
[[Page 43910]]
bestowed subsidies indicates that the various companies of the Petrini
group are both cross-owned and closely related companies. Because of
this cross-ownership and high degree of relationship, the Petitioners
argue that subsidies should be attributed to all of Petrini's
production, regardless of whether these subsidies were bestowed on a
particular facility in a particular region. The petitioners assert that
the fact that Petrini prepared consolidated financial statements
requires the Department to attribute subsidies received in the South,
whether tied or untied, to the company as a whole. The petitioners
further assert that the Department should choose attribution over
``tying'' in situations involving cross-ownership.
Petrini, in rebuttal, asserts that all of its subsidies are tied to
either subject pasta or non-subject products, but not to both. The
respondent cites section 351.524(b)(5)(i) of the Department's proposed
rules stipulating that where a subsidy is tied to production of a
particular product, the subsidy will be attributed to that product.
Petrini contends that all of its Law 64 subsidies are clearly tied to
non-subject merchandise.
Petrini refers to the one exception to the Department's treatment
of tied subsides which arises when a company producing an input to one
of its products receives a subsidy tied to the input. (See section
351.524(b)(5)(ii) of the Department's proposed regulations.) In this
case, the subsidy is attributed to both the input and the final
product. Petrini states that the record clearly shows that its
companies in the Mezzogiorno do not produce inputs for the subject
merchandise and, in addition, are separately incorporated companies.
Petrini asserts that the Department attributes input subsides to the
input and the final product only when both are produced by the same
company.
Petrini notes that section 351.524(b)(6)(i) provides that the
Department will attribute a subsidy received by a company and tied to a
particular product to that product produced by the company and by any
other company sharing cross-ownership with that company. Petrini states
that none of the former companies that were merged into Petrini
produced pasta.
Finally, Petrini maintains that no loans were provided or financial
transactions conducted between any of the former companies and Petrini.
Department's Position: The Department will normally attribute a
subsidy received by a corporation to the products produced by that
corporation. Hence, for example, if corporation A receives a subsidy,
then that subsidy will normally be attributed to the production of
corporation A. In cases where a subsidy is tied to the production of a
particular product, however, the Department attributes the subsidy to
that product rather than to all of the products produced by a company.
(See e.g. Industrial Nitrocellulose from France; Final Results of
Countervailing Duty Administrative Review, 52 FR 833, 834 (January 9,
1987)).
Law 64 grants and loans are typically provided for plant
construction and the purchase of equipment dedicated to the production
of specific products. Applications and award documents clearly describe
the type of plant and equipment to be purchased with Law 64 funds. To
ensure that these grants and loans are used as intended, the GOI audits
the use of Law 64 benefits. Thus, we conclude that Law 64 benefits
normally are tied to specific products.
The approval documents for the Law 64 grants and loans in question
show that they were tied at the point of bestowal to the production of
non-subject merchandise which is not connected in any way to subject
merchandise. Consequently, they do not benefit, either directly or
indirectly, Petrini's pasta production.
Comment 3: Sabatini Law--Specificity
In the original investigation, the Department concluded that
benefits provided in northern Italy under the Sabatini Law were not
specific and, therefore, not countervailable. In its Preliminary
Results, the Department found that petitioners had provided no new
information which would warrant reconsideration of this determination.
Petitioners claim that they should not be required to provide the
information which would warrant a reconsideration of the determination.
They maintain that this type of information is not available to them
and that the Department should require the GOI to supply the
information, which would enable the Department to determine whether
Sabatini Law benefits in the North during the POR continued to be non-
specific or whether a disproportionate share was received by pasta
companies. Because the GOI failed to supply this information, the
petitioners maintain that the Department should find Sabatini benefits
to be specific to the pasta industry in the North and should
countervail the lump sum payments received by Audisio and Petrini under
this program.
Petrini claims that the Department's practice regarding programs
found to be not countervailable has been to re-examine these programs
only if new information warrants such re-examination.
Department's Position: We agree with Petrini. In the original
investigation, Sabatini Law benefits were found to be widely
distributed and benefitting many companies representing a broad cross
section of industries throughout Italy. Absent information that changes
have occurred which would significantly alter this benefit distribution
pattern, the Department sees no compelling reason to re-open the
question of specificity. The Department has consistently followed this
practice regarding programs previously found not countervailable. See,
e.g., Preliminary Countervailing Duty Determinations and Alignment of
final Countervailing Duty Determinations with Final Antidumping Duty
Determinations: Certain Steel Products from Belgium, 57 FR 57750, 57758
(December 7, 1992) and Preliminary Affirmative Countervailing Duty
Determinations: Extruded Rubber Thread from Malaysia, 56 FR 67276,
67280 (December 30, 1991).
Comment 4: Privatization
Respondent Delverde/Tamma argues that the formula used by the
Department for reallocating benefits upon change of ownership in the
Preliminary Results, has been held unlawful by the Court in Delverde.
Delverde/Tamma notes that the Court in Delverde found that the
Department had failed to follow the instructions on page 258 of the
Statement of Administrative Action (SAA) that the Department ``must
exercise the discretion {afforded to it by new section 771(5)(F) of the
Act} carefully through its consideration of the facts of each case.''
According to Delverde/Tamma, the Department's automatic application of
its spin-off methodology to allocate subsidies received by the previous
owner of Delverde/Tamma's pasta factory to Delverde/Tamma in this
review is contrary to these instructions in the SAA.
Delverde/Tamma argues that it purchased the pasta factory at arm's
length and at fair market value from an unrelated private party.
Accordingly, Delverde/Tamma argues, it did not benefit from the
subsidies received by the previous owners. Delverde/Tamma further
contends that the definition of ``benefit'' resulting from the URAA
amendments requires that the financial contribution accrues to a person
(meaning a commercial entity) who receives funds from the government,
rather than the merchandise. Delverde/
[[Page 43911]]
Tamma argues that because the previous owners of Delverde's pasta
factory received the subsidy grants, the benefit cannot be attributed
to pasta produced by Delverde/Tamma.
The petitioners note that the Court's opinion in Delverde is not
final and, therefore, is not binding. Further, the petitioners note
that the Department has continued to follow the GIA methodology in
other cases subsequent to the issuance of the Court's opinion in
Delverde. The petitioners argue that Delverde/Tamma is incorrect in its
assertion that the Department must change its methodology, citing to
Certain Hot-Rolled Lead and Bismuth Carbon Steel Products From the
United Kingdom; Final Results of Countervailing Duty Administrative
Review, 63 FR 18367, 18371 (April 15, 1998) (UK Bar--1996) where, in
reply to a similar argument, the Department stated:
In its opinion in Delverde, the CIT did not overturn the
Department's methodology. It only directed the Department, on
remand, to provide a fuller explanation of its methodology and how
it applied it to the facts of the change of ownership transaction at
issue. While the CIT did present its views regarding many of the
issues that it wanted the Department to address when explaining its
methodology, it did not, however, order the Department to adopt any
of its views.
The petitioners further note that Delverde/Tamma has provided no
new information concerning its change of ownership. Accordingly, there
is no basis for the Department to reexamine its decision in Pasta from
Italy. The petitioners argue that the Department must continue to apply
the restructuring methodology outlined in the GIA to determine the
amount of subsidies that passed through to Delverde/Tamma following its
purchase of the pasta factory from the previous owners.
Department's Position: As we explained in UK Bar--1996, we
continued to follow the methodology applied in the investigation and
provided the CIT with the full explanations that it had requested in
the remand redetermination in Delverde filed on April 2, 1998. Thus,
for these final results, the Department similarly has not made any
changes to its methodology based on the Delverde opinion. The arguments
which Delverde/Tamma raises in this comment are addressed fully in the
April 2, 1998 remand determination and we stand by our response
therein.
Comment 5: Sabatini Loan
La Molisana argues that the Department should not have included
benefits from a Sabatini loan that was repaid in August 1995, as there
was no cash-flow effect during the POR. La Molisana, citing to Final
Negative Countervailing Duty Determination: Certain Laminated Hardwood
Flooring from Canada, 62 FR 5201, 5210 (February 4, 1997), notes that
it is the Department's practice to countervail benefits from long-term
loans as having occurred at the time the firm would be scheduled to
make a payment on the benchmark loan. Because La Molisana's Sabatini
loan was not outstanding on October 17, 1995 (i.e., the beginning of
the POR), La Molisana argues that there was no benefit from this loan
during the POR.
Petitioners argue that La Molisana is mistaken, and that it has
ignored the fact that the Department has used the firm's total annual
sales for calendar year 1995 to allocate benefits. The petitioners note
that in virtually every instance where the Department allocates
benefits from non-recurring grants and long-term loans, it does so on a
yearly basis. The petitioners assert that many subsidies do not result
in a cash-flow effect in each month of the POR, but it would not be
practicable for the Department to allocate benefits from programs on a
less-than-annual basis.
Department's Position: When calculating a subsidy rate, the
Department measures subsidies for an entire year. The Department uses
annual figures because firms tend to close their books at the end of a
year, enabling a verifiable cut-off date. See Fabricated Automotive
Glass From Mexico; Final Results of Countervailing Duty Administrative
Review, 51 FR 44652, 44654 (December 11, 1986). Additionally, the
proposition of tracing benefits to specific entries of merchandise is
not practicable. Where a firm receives a grant in December, for
example, the benefit from that grant is still applied to entries
throughout the year, including those entries made prior to the receipt
of the grant. See, e.g., Final Affirmative Countervailing Duty
Determinations; Certain Carbon Steel Products from France, 47 FR 39332,
39343 (September 7, 1982):
We compute benefits received by a firm during a period of time
(in this case the [1981] calendar year) and apply them to the total
value of sales for the same period. We do not make adjustments for
the fact that a particular benefit was received earlier or later in
the year for which we are measuring subsidization. Throughout these
steel determinations we have not tied any subsidy to any time period
shorter than a year. * * * Any other approach would not only be
unnecessary as a matter of law, it would be administratively
impossible, given the information and the time available.
See, also, Final Affirmative Countervailing Duty Determination; Certain
Agricultural Tillage Tools From Brazil, 50 FR 34525, 34534 (August 26,
1985).
Similarly, where a loan is repaid in the middle of a respondent's
accounting year, the Department applies the allocated benefit amount
from that loan to all entries during that year. Accordingly, we have
included allocated benefits from the grant equivalent calculated for La
Molisana's Sabatini loan in our calculation of La Molisana's subsidy
rate for calendar year 1995.
Comment 6: Calculation of Benefit for Industrial Development Grant
Received in 1996
La Molisana comments that the Department erred when it calculated a
benefit in 1995 from an Industrial Development Grant that was not
received until 1996. La Molisana notes that this error can be corrected
by excluding the benefit amount calculated for 1995 from the
calculation of La Molisana's subsidy rate for that year.
The petitioners argue that the Department did not err in its
calculation of the benefit amount, but erred in allocating the benefit
for 1996 to 1995. The petitioners argue that the Department should not
delete the 1995 benefit amount as suggested by La Molisana, but should
apply this amount to 1996 instead of 1995. The petitioners argue that
applying the smaller amount of benefit for 1996 shown in the
preliminary calculations would result in an understatement of the
benefit for 1996.
Department's Position: We agree with La Molisana that we erred in
our calculations by applying a benefit to 1995 sales for a grant that
was received in 1996. Contrary to the petitioners' assertion, we had
correctly calculated the 1996 benefit amount, although this amount has
changed slightly due to the change in the discount rate, as described
in the Benchmarks for Long-term Loans and Discount Rates section of
this notice, supra.
Final 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 determine the net subsidy rates
for producers/exporters under review to be those specified in the chart
shown below. (In
[[Page 43912]]
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.)
Ad Valorem Rate
------------------------------------------------------------------------
01/01/96 to 02/
10/17/95 to 12/ 13/96 and 07/
Producer/exporter 31/95 24/96 to 12/31/
96
------------------------------------------------------------------------
Delverde, S.r.L......................... 5.09 4.88
La Molisana Alimentari S.p.A............ 2.83 2.73
Tamma Industrie Alimentari di
Capitanata, S.r.L...................... 5.09 4.88
Petrini S.p.A........................... 2.27 0.00
Audisio Industrie Alimentari S.r.L...... 7.78 0.00
------------------------------------------------------------------------
We will instruct Customs to assess countervailing duties as
indicated above. The Department will also instruct Customs to collect
cash deposits of estimated countervailing duties in the percentage
detailed above of the f.o.b. invoice prices on 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. 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 in effect at the time of entry of the subject merchandise and cash
deposits must continue to be collected at the previously ordered rate.
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 this
review.
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 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 completed. 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 this order is the cash deposit rate in
effect at the time of entry, except for Barilla and Gruppo (which were
excluded from the order during the original investigation).
This notice serves as a reminder to parties subject to
administrative protective order (APO) of their responsibility
concerning the disposition of proprietary information disclosed under
APO in accordance with 19 CFR 355.34(d). Timely written notification of
return or destruction of APO materials or conversion to judicial
protective order is hereby requested. Failure to comply with the
regulations and the terms of an APO is a sanctionable violation.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)).
Dated: August 7, 1998.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 98-22063 Filed 8-14-98; 8:45 am]
BILLING CODE 3510-DS-P