[Federal Register Volume 64, Number 69 (Monday, April 12, 1999)]
[Notices]
[Pages 17618-17624]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-9050]


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DEPARTMENT OF COMMERCE

International Trade Administration
[C-475-819]


Certain Pasta from Italy: Preliminary Results of 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 January 1, 1997, through December 31, 1997. We have 
preliminarily determined that certain producers/exporters have received 
net subsidies during the period of review. If the final results remain 
the same as these preliminary results, we will instruct the Customs 
Service to assess countervailing duties as detailed in the preliminary 
results of review. Interested parties are invited to comment on these 
preliminary results.

EFFECTIVE DATE: April 12, 1999.

FOR FURTHER INFORMATION CONTACT: Vincent Kane, Sally Hastings, or 
Suresh Maniam, 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, 482-3464 or 482-0176, 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. On July 1, 1998, the Department published a 
notice of ``Opportunity to Request Administrative Review'' (63 FR 
35909) of this countervailing duty order. We received timely requests 
for review and we initiated the review, covering the period January 1, 
1997, to December 31, 1997, on August 27, 1998 (63 FR 45796), and 
September 9, 1998 (63 FR 48188). In accordance with 19 CFR 351.213(b), 
this review of the order covers the following producers or exporters of 
the subject merchandise for which a review was specifically requested: 
Audisio Industrie Alimentari S.p.A. (``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''); Pastificio Fabianelli S.p.A. (``Fabianelli''); and Pastificio 
Riscossa F.lli Mastromauro S.r.L. (``Riscossa''). This review covers 26 
programs.
    On September 15, 1998, 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. The 
following seven companies which had requested to be included in this 
review withdrew their request on the noted dates: De Gi Ma S.r.L. and 
Pastificio Laporta S.a.s. on September 23, 1998; Industrie Alimentari 
Molisane S.r.L. and Pastificio Antonio Pallante S.r.L. on October 6, 
1998; Pastificio Maltagliati S.p.A. on October 28, 1998; La Molisana 
Industrie Alimentari S.p.A. on November 4, 1998; and Petrini S.p.A. on 
November 5, 1998.
    We received responses to our questionnaires and issued supplemental 
questionnaires throughout the period November 1998 through February 
1999. Responses to supplemental questionnaires were received in March 
1999.
    The Department is conducting this administrative review in 
accordance with section 751(a) of the Tariff Act of 1930, as amended by 
the Uruguay Round Agreements Act (``URAA''), effective January 1, 1995 
(``the Act'').

Applicable Statute and Regulations

    Unless otherwise indicated, all citations to the statute are 
references to the provisions of the Act. In addition, unless otherwise 
indicated, all citations to the Department's regulations are to the 
regulations codified at 19 CFR Part 351 (1998).

Scope of Review

    Imports covered by this review are shipments of certain non-egg dry 
pasta in packages of five pounds (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

[[Page 17619]]

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 Mediterraneo Di 
Certificazione (``IMC''), by Bioagricoop Scrl, by QC&I International 
Services, or by Ecocert Italia.
    The merchandise subject to 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, the written description of the merchandise 
subject to the order is dispositive.

Scope Rulings

    (1) On August 25, 1997, the Department issued a scope ruling that 
multicolored pasta, imported in kitchen display bottles of decorative 
glass that are sealed with cork or paraffin and bound with raffia, is 
excluded from the scope of the antidumping and countervailing duty 
orders (see Memorandum from Edward Easton to Richard Moreland, dated 
August 25, 1997).
    (2) On July 30, 1998, the Department issued a scope ruling, finding 
that multipacks consisting of six one-pound packages of pasta that are 
shrink-wrapped into a single package are within the scope of the 
antidumping and countervailing duty orders. (See letter from Susan H. 
Kuhbach, Acting Deputy Assistant Secretary for Import Administration, 
to Barbara P. Sidari, Vice President, Joseph A. Sidari Company, Inc., 
dated July 30, 1998.)
    (3) On October 26, 1998, we initiated a scope inquiry to determine 
whether a package weighing over five pounds as a result of industry 
packing tolerances may be within the scope of the antidumping and 
countervailing duty orders. A preliminary scope ruling was issued (see 
Memorandum from John Brinkmann to Richard Moreland, dated March 24, 
1999).

Period of Review

    The period of review (``POR'') for which we are measuring subsidies 
is from January 1, 1997, through December 31, 1997.

Subsidies Valuation Information

    Benchmarks for Long-term Loans and Discount Rates: The companies 
under review did not takeout 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, for years prior to 
1995, 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 1995 through 1997, 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. We continued to use the same mark-up as 
in Certain Pasta From Italy: Final Results of Countervailing Duty 
Review, 63 FR 43905, 43906 (August 17, 1998) (``Pasta First Review''), 
but we will examine at verification whether that mark-up includes fees, 
commissions and other expenses.
    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 (``CIT'' or ``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 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. However, for non-recurring subsidies received prior to 
the POR and which have already been countervailed based on an 
allocation period established in earlier segments of this proceeding, 
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 10 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.
    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 (May 28, 
1992); Final Affirmative Countervailing Duty Determination: Industrial 
Phosphoric Acid from Israel, 52 FR 25447 (July 7, 1987); Final 
Affirmative Countervailing Duty Determination: Certain Pasta from 
Italy, 61 FR 30288, at 30292 (June 14, 1996) (``Pasta from Italy'').) 
Where appropriate, we have also included sales of semolina in 
calculating the ad valorem subsidy rate. However, for those companies 
where the mill is separately incorporated from the producer of the 
subject merchandise, we have not included subsidies for the milling 
operations in our calculations.

Changes in Ownership

    One of the companies under review, Delverde/Tamma, purchased an 
existing pasta factory from an unaffiliated 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. 
Consistent with our practice in Pasta First Review, 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.

[[Page 17620]]

Affiliated Parties

    In Pasta First Review, we found that Delverde S.r.L. (``Delverde'') 
and Tamma Industrie Alimentari, S.r.L. (``Tamma'') warrant treatment as 
a single company with a combined rate due to the level of affiliation 
between the two companies. In this review, the respondents have 
provided no new information which would warrant a reconsideration of 
this determination. 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 Preliminarily Determined to Confer Subsidies

A. Industrial Development Grants
1. Law 64/86 Benefits
    Law 64/86 provided assistance to promote industrial development in 
the Mezzogiorno (south of Italy). 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 abrogated Law 64/86 and replaced it 
with Law 488/92 (see 2, below). This decision became effective in 1993. 
Projects approved prior to 1993, however, were authorized to receive 
grant amounts after 1993. Delverde/Tamma and Riscossa benefitted from 
industrial development grants under Law 64/86 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 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) 
of the Act. 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 independent development 
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. Therefore, 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 the 
POR by its sales in the POR. Thus, we determine the countervailable 
subsidy for these grants to be 2.18 percent ad valorem for Delverde/
Tamma and 0.74 percent ad valorem for Riscossa.
2. Law 488/92 Benefits
    In 1986, the EU initiated an investigation of the GOI's regional 
subsidy practices. As a result of this investigation, the GOI changed 
the regions eligible for regional subsidies to include depressed areas 
in central and northern Italy in addition to the Mezzogiorno. After 
this change, the areas eligible for regional subsidies are the same as 
those classified as Objective 1, Objective 2, and Objective 5(b) areas 
by the EU (see III., below). The new policy was given legislative form 
in Law 488/92 under which Italian companies in the eligible areas may 
apply for industrial development grants. (Loans are not provided under 
Law 488/92.) Law 488/92 was previously found countervailable in Final 
Affirmative Countervail Duty Determination: Stainless Steel Plate in 
Coils from Italy, 64 FR 15508, (March 31, 1999).
    In the POR, Delverde/Tamma received grants under Law 488/92 for 
modernization of its pasta factory and warehouse and the production of 
pasta.
    Based on information provided in the responses, we preliminarily 
determine that grants under Law 488/92 provide a direct transfer of 
funds from the GOI bestowing a benefit in the amount of the grant. 
Also, we preliminarily find these grants to be regionally specific 
within the meaning of section 771(5A) of the Act. We, therefore, 
preliminarily determine that these grants provide a countervailable 
subsidy within the meaning of section 771(5) of the Act.
    We have determined that Law 488/92 grants are ``non-recurring'' 
based on the analysis set forth in the Allocation section of the GIA, 
58 FR at 37226. In accordance with our practice, we have allocated 
these grants, which exceeded 0.5 percent of Delverde/Tamma'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 Delverde/Tamma's benefit attributable to 
the POR by the company's sales in the POR. Thus, we preliminarily 
determine the countervailable subsidy for this program to be 0.23 
percent ad valorem for Delverde/Tamma.
B. 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 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 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) of 
the Act. 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) of the Act. 
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, 58 FR 37331 (July 9, 1993).) Because, in this case, the 
recipients of the interest contributions knew, prior to taking out the 
loans, that the GOI would be likely to provide the interest 
contributions, we have allocated the benefit over the life of the loan 
for which the contribution was received. We divided Delverde/Tamma's 
benefit attributable to the POR by the company's sales in the POR. On 
this basis, we preliminarily determine the countervailable subsidy for 
this program to be 0.65 percent ad valorem for Delverde/Tamma.
C. 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

[[Page 17621]]

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 an export 
sales pilot project in the United States prior to the POR.
    Each project funded by Law 304/90 grants 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 benefit attributable to the POR by 
Delverde/Tamma's exports to the United States in the POR. On this 
basis, we preliminarily determine the countervailable subsidy to be 
0.22 percent ad valorem for Delverde/Tamma.
D. 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 (e.g., Law 183/76, 
Law 30/97 and Sgravi Unico) 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) 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) of the Act 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 Riscossa received social security reductions and 
exemptions during the POR.
    To calculate the countervailable subsidy, we divided each company's 
savings in social security contributions during the POR by that 
company's sales in the POR. On this basis, we preliminarily determine 
the countervailable subsidy from this program to be 0.31 percent ad 
valorem for Delverde/Tamma and 0.37 percent ad valorem for Riscossa.
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. Until July 31, 1995, the differential was 
6.16 percent of base salary after which it was reduced to five percent. 
In 1996, the differential was reduced to four percent and it was 
further reduced to three percent on January 1, 1997.
    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 
companies in southern Italy. In addition, 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.
    Delverde/Tamma and Riscossa 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 the POR by that 
company's sales in the POR. On this basis, we preliminarily determine 
the countervailable subsidy from this program to be 0.07 percent ad 
valorem for Delverde/Tamma and 0.21 percent ad valorem for Riscossa.
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 under Law 407/90 to companies with operations in 
southern Italy were countervailable subsidies within the meaning of 
section 771(5) of the Act. 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, the exemptions 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.
    Delverde/Tamma received the higher level of Law 407/90 deductions 
available to companies located in the Mezzogiorno during the POR.
    To calculate the countervailable subsidy, we divided the amount of 
the

[[Page 17622]]

Law 407/90 exemption which exceeds the amount available in northern 
Italy realized by Delverde/Tamma in the POR by the company's sales 
during the same period. On this basis, we preliminarily determine the 
countervailable subsidy from this program to be 0.00 percent ad valorem 
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 whose employees 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) of the Act 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) of the Act. 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 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 Delverde/Tamma in the POR by the company's sales in 
that year. On this basis, we preliminarily determine the 
countervailable subsidy from this program to be 0.17 percent ad valorem 
for Delverde/Tamma.
E. 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 two private insurance companies, Societa 
Italiana Crediti S.p.A. (``SIAC'') and La Viscontea S.p.A. (``LV''), 
had reinsurance agreements with SACE. Under the reinsurance agreements, 
the companies passed along a fixed percentage (i.e., 30 percent) of 
their export credit insurance premia to SACE. In return, SACE assumed 
that same percentage of risk on export credit insurance policies sold 
by the companies (i.e., SACE would pay 30 percent of any claim for 
which the companies 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 and LV 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.
    Fabianelli 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 
by Fabianelli during the POR for exports to the United States by the 
insurance tax rate and divided the amount by the company's total 
exports to the United States in the POR. On this basis, we 
preliminarily determine the countervailable subsidy from this program 
to be 0.03 percent ad valorem for Fabianelli.
F. 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. Because there was no 
significant price difference between the EU price and the world market 
price on durum wheat in the POR, the restitution payment rate was zero 
during the POR. However, export restitution payments were received in 
the POR for shipments made prior to the POR. Fabianelli, Audisio, and 
Riscossa received export restitution payments during the POR for 
shipments to the United States.
    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, 
the GOI, the EU, and the responding companies did not provide new 
information which would warrant reconsideration of this determination.
    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.

[[Page 17623]]

    To calculate the subsidy, we divided the export restitution 
payments received by each company in the POR on shipments to the United 
States by that company's pasta exports to the United States in the POR. 
On this basis, we preliminarily determine the countervailable subsidy 
from this program to be 0.22 percent ad valorem for Delverde/Tamma, 
0.42 percent ad valorem for Fabianelli, 1.03 percent ad valorem for 
Audisio, and 0.81 percent ad valorem for Riscossa.

III. Program For Which We Need More Information

European Social Fund--Objective 4
    The European Social Fund (``ESF''), one of the Structural Funds of 
the EU, was created under Article 123 of the Treaty of Rome to improve 
employment opportunities for workers and to help raise their living 
standards. There are six different objectives identified by the 
Structural Funds: Objective 1 covers projects located in underdeveloped 
regions: Objective 2 addresses areas in industrial decline; Objective 3 
relates to the employment of persons under 25; Objective 4 funds 
training for employees in companies undergoing industrial changes; 
Objective 5 pertains to agricultural areas; and, Objective 6 pertains 
to regions with very low population (i.e., the far north). The ESF 
provides vocational training and employment aids.
    In Pasta from Italy and Pasta First Review, the Department 
determined that ESF grants were regionally specific and constituted 
countervailable subsidies within the meaning of section 771(5) of the 
Act because such grants were provided to companies located in Objective 
1, Objective 2, and Objective 5(b) regions. During the POR of the 
current review, Audisio received ESF assistance for training activities 
through a provincial body pursuant to EEC Reg. 2081/93 Objective 4. 
According to the responses, the training was funded by the ESF, the GOI 
through its Rotational Fund, and other participants. In the Final 
Affirmative Countervailing Duty Determination: Steel Wire Rod from 
Italy, 63 FR 40474 (July 29, 1998) and Final Affirmative Countervailing 
Duty Determination: Stainless Steel Plate in Coils from Italy, 64 FR 
15508 (March 31, 1999), we altered the manner in which we determine the 
specificity of ESF programs. Therein, we examined the specificity of 
the funding under each Objective separately. However, we do not have 
sufficient information on the record to determine the specificity of 
the Objective 4 funding received by Audisio. Therefore, we have decided 
to seek more information on this program before our final 
determination.

IV. 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. Local Income Tax (``ILOR'') Exemptions
B. VAT Reductions
C. Lump-Sum Interest Payment Under the Sabatini Law for Companies in 
Southern Italy
D. Export Credits Under Law 227/77
E. Capital Grants Under Law 675/77
F. Retraining Grants Under Law 675/77
G. Interest Contributions on Bank Loans Under Law 675/77
H. Interest Grants Financed by IRI Bonds
I. Preferential Financing for Export Promotion Under Law 394/81
J. Corporate Income Tax (``IRPEG'') Exemptions
K. Urban Redevelopment Under Law 181
L. Debt Consolidation Law 341/95
M. Grant Received Pursuant to the Community Initiative Concerning the 
Preparation of Enterprises for the Single Market (``PRISMA'')
N. European Agricultural Guidance and Guarantee Fund (``EAGGF'')
O. European Regional Development Fund (``ERDF'')

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 period January 1, 1997 through December 
31, 1997, we preliminarily determine the net subsidy rates for 
producers/exporters under review to be those specified in the chart 
shown below. 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 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 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 (``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 period January 1, 1997 through December 31, 1997, 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).

[[Page 17624]]



------------------------------------------------------------------------
                                                            Ad valorem
                         Company                               rate
------------------------------------------------------------------------
Delverde, S.r.L.........................................            4.05
Tamma Industrie Alimentari di Capitanata, S.r.L.........            4.05
Audisio Industrie Alimentari S.p.A......................            1.03
Pastificio Fabianelli S.p.A.............................            0.45
Pastificio Riscossa F.lli Mastromauro S.r.L.............            2.13
------------------------------------------------------------------------

Public Comment

    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).
    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 
sections 751(a)(1) and 777(i)(1) of the Act.

    Dated: April 2, 1999.
Richard W. Moreland,
Acting Assistant Secretary for Import Administration.
[FR Doc. 99-9050 Filed 4-9-99; 8:45 am]
BILLING CODE 3510-DS-P