[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