[Federal Register Volume 64, Number 157 (Monday, August 16, 1999)]
[Notices]
[Pages 44489-44496]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-21201]


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DEPARTMENT OF COMMERCE

International Trade Administration
[C-475-819]


Certain Pasta From Italy: Final Results of the Second 
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 12, 1999, the Department of Commerce published in the 
Federal Register its preliminary results of the second administrative 
review of the countervailing duty order on certain pasta from Italy for 
the period January 1, 1997 through December 31, 1997. 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 U.S. Customs Service to assess 
countervailing duties as detailed in the Final Results of Review 
section of this notice.

EFFECTIVE DATE: August 16, 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 1780, 14th Street and Constitution 
Avenue, N.W., Washington, D.C. 20230; telephone (202) 482-2815, 482-
3464 or 482-0176, 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 is conducting this administrative review in 
accordance with section 751(a) of the Act. In addition, unless 
otherwise indicated, all citations to the Department's regulations are 
to the regulations codified at 19 CFR 351 (1998).

Background

    On July 24, 1996, the Department of Commerce (the Department) 
published in the Federal Register (61 FR 38544) the countervailing duty 
order on certain pasta from Italy.
    In accordance with 19 CFR 351.213(b), this review of the order 
covers the producers or exporters of the subject merchandise for which 
a review was specifically requested. They are:

[[Page 44490]]

Audisio Industrie Alimentari S.p.A. (``Audisio''); the affiliated 
companies Delverde SrL, Industrie Alimentari di Capitanata SrL, 
Sangralimenti SrL, and Pietro Rotunno SrL (``Delverde/Tamma''); 
Pastificio Fabianelli S.p.A. (``Fabianelli''); and Pastificio Riscossa 
F.lli Mastromauro SrL (``Riscossa''). The petitioners in this review 
are Borden, Inc., Hershey Foods Corp. and Gooch Foods, Inc. This review 
covers 25 programs.
    Since the publication of the preliminary results of the second 
administrative review of the countervailing duty order on certain pasta 
from Italy on April 12, 1999 (See Certain Pasta from Italy: Preliminary 
Results of Countervailing Duty Administrative Review (64 FR 17618) 
(Preliminary Results), the following events have occurred. On May 4, 
1999, we issued supplementary questionnaires to the Government of Italy 
(``GOI''), the European Union (``EU''), and the Government of the 
Piedmont Region. We received responses to these questionnaires on May 
20, 1999. From May 24 through May 28, 1999, we verified the 
questionnaire responses of Audisio and Fabianelli. On May 12, 1999, 
Riscossa submitted its case brief. On June 22, 1999, petitioners and 
respondents Delverde/Tamma submitted case briefs. Respondents Audisio, 
Delverde/Tamma, and Fabianelli and petitioners filed rebuttal briefs on 
May 29, 1999. The Department did not conduct a hearing in this review 
because none was 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 Associazione Marchigiana 
Agricoltura Biologica (``AMAB''), by Bioagricoop Scrl, or by QC&I 
International Services.
    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.

Scope Rulings

    The Department has issued the following scope rulings to date:
    (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, the Department self-initiated a scope 
inquiry to determine whether a package weighing over five pounds as a 
result of allowable industry tolerances may be within the scope of the 
antidumping and countervailing duty orders. On May 24, 1999 we issued a 
final scope ruling finding that pasta in packages weighing or labeled 
up to (and including) five pounds four ounces is within the scope of 
the antidumping and countervailing duty orders. See Memorandum from 
John Brinkmann to Richard Moreland, dated May 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 take out any long-term, fixed-rate, lira-
denominated loans or other debt obligations which could be used as 
benchmarks in any of the years in which grants were received or 
government loans under review were given. Therefore, we used the Bank 
of Italy reference rate, adjusted upward to reflect the mark-up an 
Italian commercial bank would charge a corporate customer, as the 
benchmark interest rate for long-term loans and as the discount rate 
for years prior to 1995. For the years 1995 through 1997, we used the 
Italian Bankers Association (``ABI'') interest rate increased by the 
average spread charged by banks on loans to commercial customers plus 
an amount for bank charges. 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 
July 31, 1999.
    Allocation Period: In British Steel plc. v. United States, 879 
F.Supp. 1254, 1289 (CIT 1995) (``British Steel I''), the U.S. Court of 
International Trade (the Court) ruled against the allocation 
methodology for non-recurring subsidies that the Department had 
employed for the past decade, which was articulated in the General 
Issues Appendix, appended to the Final Countervailing Duty 
Determination; Certain Steel Products from Austria, 58 FR 37225 (July 
9, 1993) (``GIA''). In accordance with the Court's remand order, the 
Department determined that the most reasonable method of deriving the 
allocation period for 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) 
(``British Steel II''). Accordingly, the Department has applied this 
method to those non-recurring subsidies that were not countervailed in 
the original investigation.
    For non-recurring subsidies received prior to the POR and which 
have already been countervailed based on an allocation period 
established in the investigation, it is neither reasonable nor 
practicable to reallocate those subsidies over a different period of 
time. Therefore, for purposes of these final results, the Department is 
using the original allocation period assigned to each non-recurring 
subsidy countervailed in the original investigation on the basis of the 
allocation period established in the original investigation. 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 not countervailed in the original 
investigation, each company under review submitted an AUL calculation

[[Page 44491]]

based on depreciation and asset values of productive assets reported in 
its financial statements. Each company's AUL was derived by dividing 
the sum of average gross book value of depreciable fixed assets over 
the past ten years by the average depreciation charges over this 
period. We found this calculation to be reasonable and consistent with 
our company-specific AUL objective. We have used these calculated AULs 
for the allocation period for non-recurring subsidies not countervailed 
in the original investigation.

Changes in Ownership

    One of the companies under review, Delverde, purchased an existing 
pasta factory from an unrelated party. The previous owner of the 
purchased factory had received non-recurring countervailable subsidies 
prior to the transfer of ownership, which took place in 1991.
    We have calculated the amount of the prior subsidies that passed 
through to Delverde with the acquisition of the factory, following the 
spin-off methodology described in the Restructuring section of the GIA, 
58 FR at 37265. (For further discussion, see Comment 4 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 Final Affirmative Countervailing Duty Determination: Certain Pasta 
(``Pasta'') from Italy 61 FR 30288, 30290 (June 14, 1996) (Pasta from 
Italy) we have treated Delverde SrL, Tamma Industrie Alimentari, SrL, 
Sangralimenti SrL, and Pietro Rotunno, SrL 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. Industrial Development Grants

1. Law 64/86 Benfits
    Delverde/Tamma and Riscossa benefitted from industrial development 
grants under Law 64/86 during the POR. In the Preliminary Results and 
in Pasta from Italy, we found that this program conferred regionally 
specific, countervailable subsidies on the subject merchandise. Our 
review of the record and our analysis of the comments submitted by 
interested parties, summarized below in Comment 5, have not led us to 
change our findings for Delverde/Tamma and Riscossa. Accordingly, the 
net subsidies for this program have not changed from the Preliminary 
Results and are as follows: Delverde/Tamma 2.18 percent ad valorem and 
Riscossa 0.74 percent ad valorem.
2. Law 488/92 Benefits
    Delverde/Tamma also benefitted from industrial development grants 
under Law 488/92 during the POR. In the Preliminary Results, we found 
that this program conferred regionally specific, countervailable 
subsidies on the subject merchandise. We did not receive any comments 
on this program from interested parties and our review of the record 
has not led us to change our findings for Delverde/Tamma. Accordingly, 
the net subsidy for this program has not changed from the Preliminary 
Results and is as follows: Delverde/Tamma 0.23 percent ad valorem.

B. Industrial Development Loans Under Law 64/86

    Delverde/Tamma received industrial development loans with interest 
contributions from the GOI. In the Preliminary Results and Pasta from 
Italy, we found that this program conferred countervailable subsidies 
on the subject merchandise. We did not receive any comments on this 
program from interested parties and our review of the record has not 
led us to change our findings or calculations from the Preliminary 
Results. Accordingly, the net subsidy for this program remains 
unchanged and is as follows: Delverde/Tamma--0.65 percent ad valorem.

C. 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 Pasta from Italy, we found that this program conferred 
countervailable subsidies on the subject merchandise. We did not 
receive any comments on this program from interested parties and our 
review of the record has not led us to change any findings or 
calculations for Delverde/Tamma. Accordingly, the net subsidy for this 
program remain unchanged from the Preliminary Results and is as 
follows: Delverde/Tamma--0.22 percent.

D. Social Security Reductions and Exemptions

1. Sgravi Benefits
    Delverde/Tamma and Riscossa received countervailable social 
security reductions and exemptions during the POR. In the Preliminary 
Results and Pasta from Italy, we found that this program conferred 
regionally-specific countervailable subsidies on the subject 
merchandise. We did not receive any comments on this program from 
interested parties and our review of the record has not led us to 
change any findings or calculations. Accordingly, the net subsidies for 
this program remain unchanged from the Preliminary Results and are as 
follows: Delverde/Tamma--0.31 percent ad valorem and Riscossa--0.37 
percent ad valorem.
2. Fiscalizzazione Benefits
    Delverde/Tamma and Riscossa received the higher levels of 
fiscalizzazione deductions available to companies located in the 
Mezzogiorno during the POR. In the Preliminary Results and Pasta from 
Italy, we found that this program conferred regionally-specific 
countervailable subsidies on the subject merchandise. We did not 
receive any comments on this program from interested parties and our 
review of the record has not led us to change any findings or 
calculations. Accordingly, the net subsidies for this program remain 
unchanged from the Preliminary Results and are as follows: Delverde/
Tamma--0.07 percent ad valorem and Riscossa--0.21 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 Pasta from Italy, we found that this 
program conferred regionally specific countervailable subsidies on the

[[Page 44492]]

subject merchandise. We did not receive any comments on this program 
from 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 remains unchanged from the Preliminary Results and are as 
follows: Delverde/Tamma--0.00 percent ad valorem.
4. Law 863 Benefits
    Delverde/Tamma received the higher level of Law 863 deductions 
available to companies located in the Mezzogiorno during the POR. In 
the Preliminary Results and Pasta from Italy, we found that this 
program conferred regionally specific countervailable subsidies on the 
subject merchandise. We did not receive any comments on this program 
from interested parties and our review of the record has not led us to 
change our findings or calculations. Accordingly, the net subsidy for 
this program remains unchanged from the Preliminary Results and is as 
follows: Delverde/Tamma 0.17 percent ad valorem.

E. Remission of Taxes on Export Credit Insurance Under Article 33 of 
Law 227/77

    Fabianelli 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 Pasta from Italy, we 
found that this program conferred countervailable subsidies on the 
subject merchandise. We did not receive any comments on this program 
from interested parties and our review of the record has not led us to 
change our findings or calculations. Accordingly, the net subsidy for 
this program remains unchanged from the Preliminary Results and is as 
follows: Fabianelli--0.03 percent ad valorem.

F. European Social Fund

    The European Social Fund (``ESF''), one of the Structural Funds 
operated by the EU, was established to improve workers' opportunities 
through training and to raise workers' standards of living throughout 
the European Community by increasing their employability. 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 restructuring, Objective 5 pertains 
to agricultural areas, and Objective 6 pertains to regions with very 
low population (i.e., the far north).
    During the POI, Audisio received an ESF training grant under 
Objective 4 for the purpose of training its workers to increase 
productivity.
    The Department considers worker training programs to provide a 
countervailable benefit to a company when the company is relieved of an 
obligation it would have otherwise incurred. See Pasta From Italy 61 FR 
at 30294. Since companies normally incur the costs of training to 
enhance the job-related skills of their own employees, we determine 
that this ESF grant relieves Audisio of obligations it would have 
otherwise incurred. Consequently, the ESF grant is a financial 
contribution as described in section 771(5)(D)(i) of the Act which 
provides a benefit to the recipient in the amount of the grant.
    Consistent with prior cases, we have examined the specificity of 
the ESF funding under Objective 4 separately from any funding under 
other objectives. See Final Affirmative Countervailing Duty 
Determination: Steel Wire Rod from Italy 63 FR 40474, 40487 (July 29, 
1998) (Wire Rod from Italy).
    In this case, the Objective 4 grant received by Audisio emanated 
from a regional operational program, which had been set up pursuant to 
the Single Programming Document for Italy, negotiated by the EU, the 
GOI and Italian regional authorities. The funding for this regional 
operational program came from the EU, the GOI and the regional 
government of Piedmont. For the reasons set forth in Wire Rod from 
Italy, we have examined each level separately to determine specificity.
    In the case of Objective 4 funding, the Department has determined 
in past cases that the EU portion of the funding is de jure specific 
because its availability is limited on a regional basis within the EU. 
In this regard, although Objective 4 funding is available throughout 
the Member States, the EU negotiates a separate programming document to 
govern the implementation and administration of the program with each 
Member State. The GOI funding was also determined to be de jure 
specific because eligibility is limited to the center and north of 
Italy (non-Objective 1 regions). See Wire Rod from Italy 63 FR at 
40487. The specificity of the regional funding, meanwhile, has been a 
de facto issue.
    Audisio argues that all of the Objective 4 agreements negotiated 
between the EU and Member States should be considered together. If this 
were done, according to Audisio, the Department by its own admission 
would arguably be unable to determine that the program is de jure 
specific at the EU level. See Final Affirmative Countervailing Duty 
Determination: Stainless Steel Plate in Coils from Italy 64 FR 15508, 
15517 (March 31, 1999) (Plate from Italy).
    While we agree with Audisio that it may be appropriate for the 
Department to revisit its decision in Wire Rod from Italy on this 
issue, this is not the case to do it in. Given the lack of information 
on the use of Objective 4 funds by the EU, the GOI or the Piedmont 
regional government, we must base the specificity determination on 
facts available. In addition, we determine that it is appropriate to 
use adverse facts available because, in our view, information on the 
distribution of benefits by industry and by region could have been 
provided given a reasonable effort by the GOI and the Piedmont regional 
government to do so. See 19 U.S.C. 1677e(b). The EU and the GOI stated 
that they were unable to provide the Department with the industry and 
region distribution information for each Objective 4 grant in Italy 
despite requests in our original questionnaire and a supplementary 
questionnaire. In addition, while the GOI provided a list of grantees 
that received funds under the multiregional operating programs in non-
Objective 1 regions, it did not identify the industry and region of 
such grantees. Although this information may not have been on file with 
the GOI, it was, in our view, information that was readily accessible 
to the GOI and could have been provided to us given a reasonable effort 
on the part of the GOI. Furthermore, the regional government similarly 
refused to cooperate to the best of its ability in this investigation 
despite Department requests. In its supplementary questionnaire 
response, the Piedmont regional government simply indicated that 
certain information was on file at its offices and that we could review 
this information during verification. The regional government made no 
effort to provide the information as requested.
    Therefore, as adverse facts available, we continue to find that the 
aid received by Audisio is specific. Accordingly, we determine that the 
ESF grants received by Audisio are countervailable within the meaning 
of section 771(5) of the Act.
    The Department normally considers the benefits from worker training 
programs to be recurring. See GIA 58 FR at 37255. However, consistent 
with the Department's determination in Wire Rod from Italy 63 FR at 
40488, that these grants relate to specific, individual projects, we 
have treated these grants as non-recurring grants because each required 
separate government approval. Because the amount of funding for

[[Page 44493]]

Audisio's project was less than 0.5 percent of Audisio's sales in the 
year of receipt, which was the POI, we have expensed the grant received 
in the year of receipt. To calculate the benefit from Audisio's ESF 
grant, we divided the grant amount by total sales in the POR because 
the grant benefitted sales of all of the company's products. On this 
basis, we calculated a benefit of 0.04 percent ad valorem.

G. Export Restitution Payments

    Delverde/Tamma, Fabianelli, Audisio and Riscossa received export 
restitution payments during the POR on shipments of subject merchandise 
to the United States. In the Preliminary Results and Pasta from Italy, 
we found that this program conferred countervailable subsidies on the 
subject merchandise. We did not receive any comments on this program 
from interested parties and our review of the record has not led us to 
change any findings or calculations. Accordingly, the net subsidies for 
this program remain unchanged from the Preliminary Results and are as 
follows: Delverde/Tamma 0.22 percent ad valorem, Audisio--1.03 percent 
ad valorem, Riscossa--0.81 percent ad valorem and Fabianelli--0.42 
percent ad valorem.

II. Programs Preliminarily 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. 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'')
    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

    Petitioners claim that ESF aid provided to Audisio is de jure 
specific within the meaning of section 771(5A)(D)(iv) because it is 
limited to enterprises in certain regions. In Wire Rod from Italy at 
40474 the Department determined that ESF aid was de jure specific 
because the European Union (``EU'') negotiates a separate program 
document with each Member State and because GOI funding of Objective 4 
projects is available only in central and northern Italy.
    Further, petitioners claim that Objective 4 aid is de facto 
specific because the GOI and the EU have failed to provide information 
on the distribution of Objective 4 benefits by industry and by region.
    Audisio claims that the Department indicated in Plate from Italy at 
15517 that it is appropriate to consider all the Member States of the 
European Union together and that, therefore, the Department is ``unable 
to determine that the program is de jure specific.'' Additionally, 
Audisio, the EU and the GOI have provided sufficient evidence for the 
Department to determine that the ESF funding received by Audisio during 
this review was not de facto specific.
DOC Position
    We agree with Audisio that it may be appropriate for the Department 
to revisit its previous decision in Wire Rod from Italy regarding the 
de jure specificity of assistance distributed under the ESF Objective 4 
Single Programming Document in Italy, as explained in Plate from Italy. 
However the EU, the GOI and the Piedmont Regional Government failed to 
provide a breakdown of the number of companies by industry and by 
region, which received ESF Objective 4 benefits in 1996 and each of the 
previous three years. In addition, they failed to provide information 
on the amount of benefits received by industry and by region in 1996 
and each of the previous three years. The three governments stated that 
this information was not maintained by the administering agencies 
because region of the country and type of industry were not taken into 
consideration in awarding ESF Objective 4 grants. As explained above, 
however, in our view the information was readily accessible and could 
have been provided to the Department given a reasonable effort on the 
part of the administering agencies. For these reasons, we have found 
that the three governments did not act to the best of their ability to 
comply with our information requests and, on the basis of adverse facts 
available, have determined that the ESF Objective 4 aid is de facto 
specific.

Comment 2

    Petitioners claim that the ``separately incorporated'' test used by 
the Department in Pasta from Italy to determine whether subsidies to 
the mills should be attributed to the production of pasta elevates form 
over substance. In Pasta from Italy, the Department attributed 
subsidies received by semolina mills not only to semolina but also to 
pasta in those instances where the mills and the pasta factories were 
owned and operated by a single corporation. Where the mills and pasta 
factories were owned by affiliated but separately incorporated 
companies, however, the Department determined that it would not 
consider subsidies to mills absent the filing of an upstream subsidy 
allegation.
    Petitioners further claim that the recently published substantive 
countervailing duty regulations reflect a change in the Department's 
policy in this regard. Petitioners quote from the preamble to section 
351.525(b) of the new regulations which states that ``where the input 
and downstream production takes place in separately incorporated 
companies with cross-ownership * * * and the production of the input 
product is primarily dedicated to the production of the downstream 
product, paragraph (b)(6)(iv) requires the Department to attribute the 
subsidies received by the input producer to the combined sales of the 
input and downstream products (excluding the sales between the two 
corporations).'' (See Countervailing Duties: Final Rule, 63 FR 65,401.)
    Petitioners claim that Tamma/Delverde meet the cross-ownership 
provision and that subsidies to Tamma's mill should be attributed to 
both Tamma and Delverde.
    Delverde claims that the Department has consistently included Law 
64 grants benefitting Tamma's semolina mill in its calculation of the 
Delverde/Tamma subsidy rate. The Department has ``collapsed'' the two 
companies since the original investigation. See Pasta from Italy. 
Consequently, the Department has in each of the previous proceedings 
attributed to Delverde subsidies that benefitted Tamma's semolina mill. 
The Department has done so on the basis of the fact that

[[Page 44494]]

Tamma's semolina mill is not separately incorporated. It is simply an 
operating unit of the Tamma corporation.
DOC Position
    We agree with Delverde. In Pasta from Italy, we did not countervail 
subsidies to affiliated mills that were separately incorporated, 
indicating that we would not consider such subsidies absent an upstream 
allegation. However, in Delverde's case, the Department collapsed 
Delverde and Tamma treating the two as one company because of stock 
ownership between the companies and common board members. Moreover, 
because Tamma's mill was not separately incorporated from Tamma's pasta 
production operation, subsidies to Tamma's mill were included as 
subsidies to Tamma's pasta. As a result, subsidies to Tamma's mill were 
viewed as benefitting both Tamma and Delverde and were allocated over 
the combined sales of both companies excluding intercompany sales. In 
both the preliminary and final results of this review, we have done the 
same.

Comment 3

    Petitioners claim that there is no evidence on the record of this 
review regarding the countervailability or non-countervailability of 
Sabatini benefits to companies in northern Italy. In Pasta from Italy, 
the Department found that Sabatini benefits to companies in the North 
were widely distributed by industry and by region and, therefore, were 
not specific. Petitioners argue, however, that the finding in the 
original investigation that Sabatini benefits in northern Italy were 
not specific is insufficient to support such a finding in later 
periods. In addition, petitioners claim that it is unfair for the 
Department to require them to provide information indicating that 
Sabatini benefits in the North may no longer be provided on a non-
specific basis before the Department will again examine the question of 
specificity. Petitioners maintain that the GOI is in the best position 
to provide the relevant information and because it has not done so, the 
Department should countervail Sabatini benefits received by companies 
in the North.
    Fabianelli claims that it does not qualify for the special 
concessionary rate available to companies in southern Italy because its 
only production facilities are located in Castiglion Fiorentino, which 
is not in the southern Italy. Further, Fabianelli claims that the 
Department did not refer to the Sabatini Law in its Preliminary Results 
because benefits to companies in the North are no longer an issue.
DOC Position
    In the original investigation, Sabatini Law benefits were found to 
be widely distributed and to benefit many companies representing a 
broad cross section of industries throughout Italy. In the original 
investigation, we found that during the years 1988 through 1993, 
assistance under the program was distributed over 19 sectors and that 
benefits to the food producing industry amounted to only 4.9 percent of 
all benefits granted, which did not represent a disproportionately 
large share of benefits. Given this compelling evidence of non-
specificity of benefits to pasta production, the Department sees no 
reason to re-open the question of specificity absent information that 
changes have occurred. 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 
Determination: Extruded Rubber Thread from Malaysia, 56 FR 67276, 67280 
(December 30, 1991).

Comment 4

    Delverde maintains that the change of ownership provision contained 
in the Uruguay Round Agreements Act requires the Department to analyze 
the facts in each change of ownership situation in order to determine 
whether and to what extent subsidies received by the original owner are 
passed through to the new owner. The change of ownership provision 
recognizes that an arm's length sale of an enterprise or an asset does 
not require a determination by the Department that a past 
countervailable subsidy received by the enterprise no longer continues 
to be countervailable. However, the change in ownership provision 
plainly does not preclude such a conclusion. For this reason, the 
Department must carefully analyze the facts of each change of ownership 
situation.
    According to Delverde, the Department's ``privatization/
restructuring'' methodology as described in the GIA does not provide 
for an analysis of the facts of each change of ownership separately and 
on its own merits. Rather, this methodology presumes as a matter of law 
that subsidies travel from the seller to the buyer in all 
circumstances. Only the amount of the subsidies that passes through 
varies as determined by the gamma calculation depending on the facts in 
each case.
    In Delverde's view careful analysis of the facts in this case will 
show that the preliminary results in this administrative review fail to 
meet the post-URAA requirement that the Department find both a 
financial contribution to and a benefit conferred on current 
production. Delverde purchased MI.BI in an arm's length transaction at 
a purchase price established by an independent, court-ordered 
appraiser. Consequently, prior subsidies received by MI.BA did not 
benefit Delverde; they simply increased the profit realized by MI.BA 
upon the sale of its pasta factory.
    Petitioners claim that the change in ownership provision contained 
in section 251(a) of the URAA, amending section 771(5) of the Tariff 
Act of 1930, reiterated and formally codified the Department's 
practice, affirmed by the CAFC on no less than five occasions, that an 
arm's length sale of a firm or asset does not automatically extinguish 
previously bestowed countervailable subsidies. (See, e.g, Saarstahl AG 
v. United States, 78 F. 3d 1539, 1544 (Fed. Cir. 1996)).
    In addition, according to petitioners, the URAA statutory 
definitions of ``benefit'' and ``financial contribution'' do not 
require any different agency scrutiny or lead to any different 
conclusions in examining the countervailability of subsidies following 
a change of ownership than was true under pre-URAA law. This is clear 
from the SAA's plain statement that this benefit standard merely 
reflects the longstanding Commerce standard and does not inject a new 
requirement into the law. (See SAA at 925-928.) Petitioners claim that 
Delverde is seeking to superimpose on the statute the requirement that 
there be a beneficial competitive effect on the acquiring company's 
operations when the change in ownership occurred as a result of the 
original subsidy. This ``effect'' requirement, however, has been 
rejected by the Court in pre-URAA cases and the new statute expressly 
states that no beneficial ``effect'' of a subsidy is required. (See 19 
U.S.C. 1677(5)(C)).
DOC Position
    We agree with petitioners. The arguments which Delverde raises in 
this comment are addressed fully in the remand determination which the 
Department filed with the CIT on April 2, 1998 in Delverde, Srl. v. 
United States, Consol. Ct. No. 96-08-01997. The CIT later sustained 
that remand determination and upheld the

[[Page 44495]]

Department's methodology in Delverde, Srl. v. United States, 24 F. 
Supp. 2d 314 (CIT 1998).

Comment 5

    Riscossa claims that in calculating the benefit from two Law 64 
grants received by the company, the Department incorrectly 
countervailed the full amount of the benefit received under Law 64 
including both the grant amount and the reduction in interest according 
to the terms of the lease. Riscossa claims that the benefit from the 
interest rate reduction has expired because the leases in question are 
no longer outstanding.
    Petitioners claim that in both the original investigation and the 
Preliminary Results, the Department correctly treated the Law 64 lump-
sum contributions to the leasing companies as grants to Riscossa. In 
its November 9, 1998 questionnaire response, Riscossa describes the 
contributions as grants to the leasing companies, which had the effect 
of lowering Riscossa's lease payments. Riscossa had no repayment 
obligation as a result of these grants as would be the case for a Law 
64 loan. Therefore, the Department should not treat these grants as 
reduced rate loans.
DOC Position
    We agree with petitioners. The GOI made lump-sum payments to 
leasing companies on Riscossa's behalf. We view these payments as 
grants. Since 1984, the Department has allocated non-recurring grants 
such as these over a period corresponding to the average useful life of 
the recipient firm's or the industry's fixed assets. (See Subsidies 
Appendix appended to Final Affirmative Countervailing Duty 
Determination and Countervailing Duty Order: Cold-Rolled Carbon Steel 
Flat-Rolled Products from Argentina 49 FR 18006, 18018). We do not, as 
Riscossa suggests, look to how the recipient uses the funds received 
from the government. Therefore, the fact that Riscossa used its grants 
to reduce its payments under two lease agreements, which have since 
expired, is not relevant to our calculations. Therefore, as in the 
original investigation, the Department has allocated the grants over 12 
years.

Comment 6

    Petitioners claim the Department should use the ABI rate as a 
benchmark rate for long-term loans. They claim that in the Preliminary 
Results, the Department used an average interest rate reported by the 
Bank of Italy based on a survey of 114 Italian banks. In addition, 
petitioners claim that a spread of 2.275 percent should be added to the 
ABI rate because this has been Department practice in the last three 
investigations of Italian products. See Wire Rod from Italy 63 FR at 
40476-40477; Plate from Italy 64 FR at 15510-15511; and Final 
Affirmative Countervailing Duty Determination: Stainless Steel Sheet 
and Strip from Italy 64 FR 30624, 30626-30627 (June 8, 1999).
DOC Position
    In the Preliminary Results, in the section on Benchmarks for Long-
term Loans and Discount Rates, we explained that 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 banks for our benchmark interest rate. 
This explanation was not correct. In our calculations, we actually used 
the ABI rate plus a spread of 2.275 percent as the benchmark interest 
rate following the practice in the three earlier cases cited above by 
petitioners. In these final results, we have also used this benchmark 
in our subsidy calculations and have correctly described it in the 
Subsidies Valuation section of this notice. We also used this benchmark 
in the first administrative review of the Pasta from Italy order 
because in Wire Rod from Italy, based on information obtained during 
verification, the Department determined that the ABI rate is the most 
suitable benchmark for long-term financing to Italian companies.
    We note that during verification in this review, we obtained 
information from a commercial bank confirming the fact that the ABI 
rate was appropriate for establishing a benchmark interest rate. (See 
June 16, 1999 Memorandum to the File: Meeting with Commercial Bank 
Officers.) In addition, information from the bank officers regarding 
the typical spread plus charges which are added to the ABI rate served 
to confirm the spread which was added in calculating a benchmark in the 
earlier investigations.
    The ABI rate for 1997, as reported in our discussion with officers 
of the commercial bank, was lower than that reported in the Bank of 
Italy's February 1998 Economic Bulletin. The ABI rate in the Economic 
Bulletin, however, corresponded closely with the 1997 lending rates 
published for Italy in the International Monetary Fund's June 1999 
International Financial Statistics. Therefore, we used the ABI rate as 
published in the Economic Bulletin plus a spread as the appropriate 
benchmark interest rate for this review.

Comment 7

    Petitioners claim that in its subsidy calculation, the Department 
has used a longer, company-specific AUL of 15 years to allocate non-
recurring subsidies received well before the current period of review. 
They claim that the 12-year period used in the original investigation 
should apply to these earlier subsidies.
DOC Response
    We have continued to use 12 years as the allocation period for 
those non-recurring subsidies countervailed in the original 
investigation. As we explained in the first Pasta from Italy review, it 
is neither reasonable nor practicable to reallocate these subsidies 
over a different time period. 63 FR 43905, 43906 (August 17, 1998) For 
all other non-recurring subsidies, however, whether received during the 
current POR or prior to the current POR, we have used a company-
specific AUL for allocation purposes.
    As indicated in the section entitled ``Allocation Period,'' the 
Department is applying the Court's decision in British Steel II and 
calculating company-specific allocation periods based on the average 
useful life of each respondent's physical assets. Thus, for subsidies 
not previously allocated over a particular allocation period, we are 
using company-specific AULs. (See Final Affirmative Countervailing Duty 
Determination: Stainless Steel Sheet and Strip in Coils from France 64 
FR 30774, 30778 (June 8, 1999).)

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

                            Ad Valorem Rates
------------------------------------------------------------------------
                                                               01/01/97
                     Producer/exporter                       through  12/
                                                                31/97
------------------------------------------------------------------------
Delverde/Tamma.............................................         4.05
Audisio Industrie Alimentari di Capitanata S.p.A...........         1.03
Pastificio Fabianelli S.p.A................................         0.49
Pastificio Riscossa F.lli Mastromauro SrL..................         2.13
------------------------------------------------------------------------

    We will instruct the U.S. Customs Service (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

[[Page 44496]]

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.
    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. 
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 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), or those 
established in Certain Pasta from Italy: Final Results of 
Countervailing Duty Administrative Review (63 FR 43905, August 17, 
1998), whichever notice provides 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 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).
    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 351.301. 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 9, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-21201 Filed 8-13-99; 8:45 am]
BILLING CODE 3510-DS-P