[Federal Register Volume 63, Number 169 (Tuesday, September 1, 1998)]
[Notices]
[Pages 46411-46414]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23510]


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DEPARTMENT OF COMMERCE

International Trade Administration
[C-475-819]


Certain Pasta From Italy: Preliminary Results of New Shipper 
Countervailing Duty Administrative Review

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

ACTION: Notice of Preliminary Results of New Shipper Countervailing 
Duty Administrative Review.

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SUMMARY: The Department of Commerce is conducting a new shipper 
administrative review of the countervailing duty order on certain pasta 
from Italy. We preliminarily determine the net subsidy to be 1.14 
percent ad valorem for CO.R.EX. S.r.L. for the period January 1, 1997 
through December 31, 1997. 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 section of this notice.
    Interested parties are invited to comment on these preliminary 
results.

EFFECTIVE DATE: September 1, 1998.

FOR FURTHER INFORMATION CONTACT: Javier Barrientos, Todd Hansen, or 
Vincent Kane, Office of AD/CVD Enforcement, Group I, Import 
Administration, U.S. Department of Commerce, Room 3099, 14th Street and 
Constitution Avenue, N.W., Washington, D.C. 20230; telephone (202) 482-
4207, 482-1276, or 482-2815, 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. 
All other references are to the Department of Commerce's (the 
Department) 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 23, 1996, the Department published in the Federal Register 
(61 FR 38544) the countervailing duty order on certain pasta from 
Italy.
    On January 16, 1998, the Department received a request from 
CO.R.EX. S.r.L. (``CO.R.EX.'') for a new shipper review of the 
countervailing duty order on certain pasta from Italy pursuant to 
section 751(a)(2)(B) of the Tariff Act of 1930, as amended (``the 
Act''), and in accordance with 19 CFR 351.214(b) of the Department's 
regulations.
    On February 25, 1998, we initiated a new shipper review for the 
period January 1, 1997 through December 31, 1997 (63 FR 10590). The 
review covers an exporter of the subject merchandise, CO.R.EX., and 
CO.R.EX.'s subcontractor. (CO.R.EX. does not produce pasta but has a 
subcontractor produce pasta for it from semolina supplied by CO.R.EX.) 
Also, this review covers 24 programs.
    Responses from CO.R.EX. and its subcontractor were received on 
April 20, 1998, and supplementary responses were received on May 29, 
June 16, and August 14, 1998.

Scope of the 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

[[Page 46412]]

certificate issued by the Instituto 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 
orders. (See July 30, 1998 letter from Susan H. Kuhbach, Acting Deputy 
Assistant Secretary for Import Administration to Barbara P. Sidari, 
Vice President, Joseph A. Sidari Company, Inc.)

Period of Review

    The period of review (``POR'') for which we are measuring subsidies 
is calendar year 1997.

Subsidies Valuation Information

    Benchmark for Long-term Loans and Discount Rate: 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 investigation were given. In the Final 
Affirmative Countervailing Duty Determination; Certain Stainless Steel 
Wire Rod from Italy, 63 FR 87,077 (July 29, 1998), the Department 
determined, based on information gathered during verification, that the 
Italian ABI prime rate is the most suitable benchmark for long-term 
financing to Italian companies. Therefore, we used the Italian ABI 
prime rate increased by the average spread over the ABI prime rate 
charged by banks on loans to commercial customers as the benchmark for 
long-term loans and the discount rate.
    Allocation Period: In British Steel plc. v. United States, 879 
F.Supp. 1254, 1289 (CIT 1955), 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). Accordingly, the Department has applied this method to 
determine the appropriate allocation period in this review.
    Consistent with our approach in the investigation segment of this 
proceeding, Final Affirmative Countervailing Duty Determination: 
Certain Pasta (``Pasta'') from Italy (61 FR 30288, June 14, 1996) 
(``Pasta from Italy''), we determined that the Law 64/86 grant received 
by CO.R.EX.'s subcontractor was non-recurring. For purposes of 
allocating the Law 64/86 grant, CO.R.EX.'s subcontractor submitted an 
AUL calculation based on depreciation and asset values of productive 
assets reported in its financial statements. This 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. In this manner, an AUL of 22 
years was calculated for CO.R.EX.'s subcontractor. We have used this 
calculated AUL for the allocation period for the Law 64/86 industrial 
development grant, the only non-recurring subsidy received by 
respondents.

I. Programs Previously Determined to Confer Subsidies

A. 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 close to being 
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. 
CO.R.EX.'s subcontractor benefitted from an industrial development 
grant during 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 
Government of Italy (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 new shipper 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 37225. In the current new shipper review, we have 
found no reason to depart from this treatment.
    In accordance with our past practice, we have allocated the grant, 
which exceeded 0.5 percent of 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 CO.R.EX.'s 
subcontractor in the POR by its pasta sales. We then attributed a 
portion of this subsidy to CO.R.EX.'s sales of pasta based on 
processing fees paid by CO.R.EX to its subcontractor. Thus, we 
determine the countervailable subsidy for this program to be 0.18 
percent ad valorem in the POR for CO.R.EX.

B. 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

[[Page 46413]]

of 10 years, provided that employment levels showed an increase over a 
base period.
    CO.R.EX.'s subcontractor received Sgravi reductions and exemptions 
during the POR.
    In Pasta from Italy, the Department determined that the social 
security reductions and exemptions were countervailable subsidies 
within the meaning of section 771(5) of the Act. 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.
    To calculate the countervailable subsidy, we divided the total 
savings in social security contributions realized by CO.R.EX.'s 
subcontractor during the POR by its total sales during the same period. 
We then attributed a portion of this subsidy to CO.R.EX. based on 
processing fees paid by CO.R.EX. to its subcontractor. On this basis, 
we calculated the countervailable subsidy from this program to be 0.01 
percent ad valorem in 1997 for CO.R.EX.
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 3.00 
percent of base salary.
    CO.R.EX.'s subcontractor received the higher level of 
Fiscalizzazione deductions available to companies located in the 
Mezzogiorno during the POR.
    In Pasta from Italy, the Department determined that the 
Fiscalizzazione reductions were countervailable subsidies within the 
meaning of section 771(5) of the Act 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.
    To calculate the countervailable subsidy, we divided the excess 
Fiscalizzazione deductions realized by CO.R.EX.'s subcontractor in the 
POR by its total sales. We then attributed a portion of the 
subcontractor's subsidy to CO.R.EX. based on processing fees paid by 
CO.R.EX. to its subcontractor. On this basis, we calculated the 
countervailable subsidy from this program for CO.R.EX. to be 0.06 
percent ad valorem in the POR.
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.
    During the POR, CO.R.EX. and its subcontractor received the higher 
level of Law 407 exemptions available to companies located in the 
Mezzogiorno.
    In Pasta from Italy, the Department determined that the 100 percent 
exemption provided to companies with operations in southern Italy under 
Law 407 was a countervailable subsidy within the meaning of section 
771(5). The 100 percent exemption 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, it was 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.
    To calculate the countervailable subsidy rate, we divided the 
amount of the Law 407 exemptions realized by CO.R.EX. in excess of the 
amount available in northern Italy by CO.R.EX.'s sales. We also divided 
the amount of the Law 407 exemptions realized by CO.R.EX.'s 
subcontractor in the POR in excess of the amount available in northern 
Italy by CO.R.EX.'s subcontractor's sales. We then attributed a portion 
of the subcontractor's subsidy to CO.R.EX. based on processing fees 
paid by CO.R.EX. to its subcontractor. On this basis, we calculated the 
countervailable subsidy from this program to be 0.06 percent ad valorem 
in the POR for CO.R.EX.
4. Law 863 Benefits
    Law 863 provides for a reduction of social security payments of 25 
percent for companies in northern Italy that hire employees who are 
participating in a training program. Companies in southern Italy 
receive a 100 percent reduction in social security payments for such 
employees.
    CO.R.EX.'s subcontractor received the higher level of Law 863 
reductions available to companies located in the Mezzogiorno during the 
POR.
    In Pasta from Italy, the Department determined that the 100 percent 
reduction for companies with operations in the South were 
countervailable subsidies within the meaning of section 771(5) of the 
Act to the extent that they exceeded the reductions for companies in 
the North. 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 are 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.
    To calculate the countervailable subsidy, we divided the amount of 
the Law 863 reductions realized by CO.R.EX.'s subcontractor during the 
POR in excess of the amount available in northern Italy by its total 
sales during the same period. We then attributed a portion of this 
subsidy to CO.R.EX. based on processing fees paid by CO.R.EX. to its 
subcontractor. On this basis, we calculated the countervailable subsidy 
from this program to be 0.03 percent ad valorem in 1997 for CO.R.EX.

III. Programs Determined To Confer Subsidies in This Review

A. Debt Consolidation Law 341/95
    The Ministry of Industry, in accordance with the provisions of Law 
341/95, provides interest contributions on medium-term debt 
consolidation loans to small- and medium-sized companies located in 
depressed areas. The interest rate on these loans is set at the Bank of 
Italy's reference rate with the GOI's interest contributions serving to 
reduce this rate.
    CO.R.EX. obtained a Law 341 loan in 1996 and received interest 
contributions on the loan during the POR.
    We preliminarily determine that the loan and interest contributions 
under

[[Page 46414]]

Law 341 are 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 interest paid at the 
benchmark rate and interest paid by CO.R.EX. after accounting for the 
GOI's interest contributions. Also, they were found to be regionally 
specific within the meaning of section 771(5A).
    Because the loan received by CO.R.EX. is a long-term loan with a 
variable interest rate and we did not have a variable benchmark rate, 
we treated it as a series of short-term loans and calculated the 
interest savings during the POR to be the sum of the interest 
contributions received on the loan during the POR and the difference in 
interest on the loan as calculated at the reference rate and at the 
benchmark rate. On this basis, we determine the countervailable subsidy 
for this program to be 0.80 percent ad valorem during the POR.

IV. Programs Preliminarily Determined To Be Not Used

    We preliminarily determine that CO.R.EX. and its subcontractor 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
K. Local Income Tax (ILOR) Exemptions
L. Industrial Development Loans Under Law 64/86
M. Export Marketing Grants Under Law 304/90
N. Lump-Sum Interest Payment Under the Sabatini Law for Companies in 
Southern Italy
O. Remission of Taxes on Export Credit Insurance under Article 33 of 
Law 227/77
P. European Social Fund
Q. European Regional Development Fund
R. Export Restitution Payments

Preliminary Results of Review

    For the period January 1, 1997 through December 31, 1997, we 
preliminarily determine the net subsidy for CO.R.EX. to be 1.14 percent 
ad valorem. If the final results of this review remain the same as 
these preliminary results, the Department will instruct the U.S. 
Customs Service to assess countervailing duties at this net subsidy 
rate on all entries of the subject merchandise from CO.R.EX. entered on 
or after January 1, 1997 and on or before December 31, 1997.
    The Department also intends to instruct the U.S. Customs Service to 
collect a cash deposit of estimated countervailing duties of 1.14 
percent of the f.o.b. invoice value on all shipments of the subject 
merchandise from CO.R.EX. entered, or withdrawn from warehouse, for 
consumption on or after the date of publication of the final results of 
this new shipper review. The cash deposit rates for all other 
producers/exporters remain unchanged from the last completed 
administrative review (see Final Results of Countervailing Duty 
Administrative Review: Certain Pasta from Italy (63 FR 35665, August 
14, 1998).)

Public Comment

    Parties to this proceeding may request disclosure of the 
calculation methodology within five days of publication of this notice 
and interested parties may request a hearing no later than 30 days 
after the date of publication. Interested parties may submit written 
arguments in case briefs on these preliminary results within 30 days of 
the date of publication of these preliminary results. 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 
written arguments 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 are due.
    The Department will publish the final results of this new shipper 
review, including the results of its analysis of issues raised in any 
case or rebuttal brief or at a hearing.
    This administrative review and notice are in accordance with 
section 751(a)(2)(B) of the Act and 19 CFR 351.214.

    Dated: August 24, 1998.
Joseph A. Spetrini,
Acting Assistant Secretary for Import Administration.
[FR Doc. 98-23510 Filed 8-31-98; 8:45 am]
BILLING CODE 3510-DS-P