[Federal Register Volume 69, Number 146 (Friday, July 30, 2004)]
[Notices]
[Pages 45676-45686]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-17419]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-475-819]


Certain Pasta from Italy: Preliminary Results and Partial 
Rescission of the Seventh Countervailing Duty Administrative Review

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

ACTION: Notice of preliminary results and partial rescission of 
countervailing duty administrative review.

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SUMMARY: The Department of Commerce is conducting an administrative 
review of the countervailing duty order on certain pasta from Italy for 
the period of January 1, 2002 through December 31, 2002. We 
preliminarily find that certain producers/exporters under review 
received countervailable subsidies during the period of review. If the 
final results remain the same as these preliminary results, we will 
instruct U.S. Customs and Border Protection to assess countervailing 
duties as detailed in the ``Preliminary Results of Review'' section of 
this notice.
    We are also rescinding the review for Pastificio Antonio Pallante 
S.r.1. in accordance with 19 CFR 351.213(d)(3).
    Interested parties are invited to comment on these preliminary 
results (see the ``Public Comment'' section of this notice).

DATES: Effective Date: August 30, 2004.

FOR FURTHER INFORMATION CONTACT: Melani Miller, Andrew Smith, or Nathan 
Halat, Office of Antidumping/Countervailing Duty Enforcement, Group 1, 
Import Administration, U.S. Department of Commerce, Room 3099, 14th 
Street and Constitution Avenue, NW., Washington, DC 20230; telephone 
(202) 482-0116, (202) 482-1276, and (202) 482-5256, respectively.

SUPPLEMENTARY INFORMATION:

Case History

    On July 24, 1996, the Department of Commerce (``the Department'') 
published a countervailing duty order on certain pasta (``pasta'' or 
``subject merchandise'') from Italy. See Notice of Countervailing Duty 
Order and Amended Final Affirmative Countervailing Duty Determination: 
Certain Pasta From Italy, 61 FR 38544 (July 24, 1996). On July 2, 2003, 
the Department published a notice of ``Opportunity to Request 
Administrative Review'' of this countervailing duty order for calendar 
year 2002. See Antidumping or Countervailing Duty Order, Finding, or 
Suspended Investigation; Opportunity to Request Administrative Review, 
68 FR 39511 (July 2, 2003). On July 31, 2003, we received requests for 
review from the following six producers/exporters of Italian pasta: 
Pastificio Fratelli Pagani S.p.A. (``Pagani''), Pastificio Antonio 
Pallante S.r.l. (``Pallante''), Pastificio Corticella S.p.A. 
(``Corticella'')/Pastificio Combattenti S.p.A. (``Combattenti'') 
(collectively, ``Corticella/Combattenti''), Pasta Zara S.p.A. (``Pasta 
Zara'')/Pasta Zara 2 S.p.A. (``Pasta Zara 2'') \1\ (collectively 
``Pasta Zara/Pasta Zara2''), Pasta Lensi S.r.l. (``Lensi''),\2\ and 
Pastificio Carmine Russo S.p.A. (``Russo'')/Pastificio Di Nola S.p.A. 
(``Di Nola'') (collectively, ``Russo/Di Nola''). In accordance with 19 
CFR 351.221(c)(1)(i), we published a notice of initiation of the review 
on August 22, 2003. See Initiation of Antidumping and Countervailing 
Duty Administrative Reviews and Request for Revocation in Part, 68 FR 
50750 (August 22, 2003).
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    \1\ During the first part of the period of review (calendar year 
2002) (``POR''), Pasta Zara 2 was named Societa per Azioni Pasta 
Giulia S.p.A.; on September 9, 2002, the company changed its name to 
Pasta Zara 2.
    \2\ Lensi is the successor in interest to IAPC Italia S.r.l. See 
Notice of Final Results of Antidumping and Countervailing Duty 
Changed Circumstances Reviews: Certain Pasta from Italy, 68 FR 41553 
(July 14, 2003).
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    On October 21, 2003 and December 1, 2003, we issued countervailing 
duty questionnaires to the Commission of the European Union (``EC''), 
the Government of Italy (``GOI''), Pagani, Pallante, Corticella/
Combattenti, Pasts Zara/Pasta Zara 2, Lensi, and Russo/Di Nola. We 
received responses to our questionnaires in November and December 2003 
and January 2004. We issued supplemental questionnaires to the 
respondents in January, February, March, May, and June 2004, and 
received responses to our supplemental questionnaires in February, 
March, May, and June 2004.
    On October 23, 2003, Pallante withdrew its request for review. As 
discussed in the ``Partial Rescission'' section, below, we are 
rescinding this administrative review for Pallante.
    On March 17, 2004, we published a notice extending the time limit 
for the preliminary results until July 30, 2004. See Certain Pasta from 
Italy: Notice of Extension of Time Limit for Preliminary Results of 
Countervailing Duty Administrative Review, 69 FR 12642 (March 17, 
2004).

Partial Rescission

    The Department's regulations at 19 CFR 351.213(d)(1) provide that 
the Department will rescind an administrative review, in whole or in 
part, if a party that requested a review withdraws the request within 
90 days of the date of publication of the notice of initiation of the 
requested review. Pallante withdrew its request for an administrative 
review on October 23, 2003, which is within the 90-day deadline. No 
other party requested a review of Pallante's sales. Therefore, because 
this withdrawal request was timely filed, we are rescinding this review 
with respect to Pallante in accordance with 19 CFR 351.213(d)(1). We 
will instruct U.S. Customs and

[[Page 45677]]

Border Protection (``Customs'') to liquidate any entries from Pallante 
during the POR and to assess countervasiling duties at the rate that 
was applied at the time of entry.

Scope of the Review

    Imports covered by this review are shipments of certain non-egg dry 
pasta in packages of five pounds (2.27 kilograms) or less, whether or 
not enriched or fortified or containing milk or other optional 
ingredients such as chopped vegetables, vegetable purees, milk, gluten, 
diastases, vitamins, coloring and flavorings, and up to two percent egg 
white. The pasta covered by this scope is typically sold in the retail 
market, in fiberboard or cardboard cartons, or polyethylene or 
polypropylene bats of varying dimensions.
    Excluded from the scope of this review are refrigerated, frozen, or 
canned pastas, as well as all forms of egg pasta, with the exception of 
non-egg dry pasta containing up to two percent egg white. Also excluded 
are imports of organic pasta from Italy that are accompanied by the 
appropriate certificate issued by the Instituto Mediterraneo Di 
Certificazione, Bioagricoop S.r.l., QC&I International Services, 
Ecocert Italia, Consorzio per il Controllo dei Prodotti Biologici, 
Associazione Italiana per l'Agricoltura Biologica, or Codex S.r.L.
    The merchandise subject to review is currently classifiable under 
item 1902.19.20 of the Harmonized Tariff Schedule of the United States 
(``HTSUS''). Although the HTSUS subheading is provided for convenience 
and customs purposes, the written description of the merchandise 
subject to the order is dispositive.

Scope Rulings

    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, which is on file in the Department's Central Records 
Unit (``CRU'') in Room B-099 of the main Department building.
    (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 to Barbara P. Sidari, dated July 30, 1998, which is available 
in the CRU.
    (3) On October 23, 1997, the petitioners filed an application 
requesting that the Department initiate an anti-circumvention 
investigation of Barilla S.r.L. (``Barilla''), an Italian producer and 
exporter of pasta. The Department initiated the investigation on 
December 8, 1997. See Initiation of Anti-Circumvention Inquiry on 
Antidumping Duty Order on Certain Pasta From Italy, 62 FR 65673 
(December 15, 1997). On October 5, 1998, the Department issued its 
final determination that, pursuant to section 781(a) of the Tariff Act 
of 1930, as amended by the Uruguay Round Agreements Act (``URAA'') 
effective January 1, 1995 (``the Act''), circumvention of the 
antidumping order on pasta from Italy was occurring by reason of 
exports of bulk pasta from Italy produced by Barilla which subsequently 
were repackaged in the United States into packages of five pounds or 
less for sale in the United States. See Anti-Circumvention Inquiry of 
the Antidumping Duty Order on Certain Pasta from Italy: Affirmative 
Final Determination of Circumvention of the Antidumping Duty Order, 63 
FR 54672 (October 13, 1998).
    (4) 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 is within the scope of the 
antidumping and countervailing duty orders. On May 24, 1999, we issued 
a final scope ruling finding that, effective October 26, 1998, 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, which is available in the CRU.
    (5) On April 27, 2000, the Department self-initiated an anti-
circumvention inquiry to determine whether Pagani's importation of 
pasta in bulk and subsequent repackaging in the United States into 
packages of five pounds or less constitutes circumvention with respect 
to the antidumping and countervailing duty orders on pasta from Italy 
pursuant to section 781(a) of the Act and 19 CFR 351.225(b). See 
Certain Pasta from Italy: Notice of Initiation of Anti-circumvention 
Inquiry of the Antidumping and Countervailing Duty Orders, 65 FR 26179 
(May 5, 2000). On September 19, 2003, we published an affirmative 
finding of the anti-circumvention inquiry. See Anti-Circumvention 
Inquiry of the Antidumping and Countervailing Duty Orders on Certain 
Pasta from Italy: Affirmative Final Determinations of Circumvention of 
Antidumping and Countervailing Duty Orders, 68 FR 54888 (September 19, 
2003).

Period of Review

    The period for which we are measuring subsidies is January 1, 2002 
through December 31, 2002.

Changes in Ownership

    Effective June 30, 2003, the Department adopted a new methodology 
for analyzing privatizations in the countervailing duty context. See 
Notice of Final Modification of Agency Practice Under Section 123 of 
the Uruguay Round Agreements Act, 68 FR 37125 (June 23, 2003) 
(``Modification Notice'').\3\ The Department's new methodology is based 
on a rebuttable ``baseline'' presumption that non-recurring, allocable 
subsidies continue to benefit the subsidy recipient throughout the 
allocation period (which normally corresponds to the average useful 
life (``AUL'') of the recipient's assets). However, an interested party 
may rebut this baseline presumption by demonstrating that, during the 
allocation period, a change in ownership occurred in which the former 
owner sold all or substantially all of a company or its assets, 
retaining no control of the company or its assets, and that the sale 
was an arm's-length transaction for fair market value.
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    \3\ The Modification Notice explicitly addresses full 
privatizations, but notes that the Department would not make a 
decision at that time as to whether the new methodology would also 
be applied to other types of ownership changes and factual 
scenarios, such as partial privatizations or private-to-private 
sales. See 68 FR at 37136. We have now determined to apply the new 
methodology to full, private-to-private sales of a company (or its 
assets) as well. Among other reasons, we note that our prior ``same 
person'' methodology used for analyzing changes in ownership such as 
private-to-private sales has been found unlawful by the Court of 
Appeals for the Federal Circuit in Allegheny Ludlum Corp. v. United 
States, 367 F.3d 1339 (Fed. Cir. 2004).
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    In considering whether the evidence presented demonstrates that the 
transaction was conducted at arm's length, we will be guided by the 
definition of an arm's-length transaction included in the Statement of 
Administrative Action accompanying the URAA, H.R. Doc. No. 103-316 
(1994), which defines an arm's-length transaction as a transaction 
negotiated between unrelated parties, each acting in its own interest, 
or between related parties such that the terms of the

[[Page 45678]]

transaction are those that would exist if the transaction had been 
negotiated between unrelated parties. Id. at 928.
    In analyzing whether the transaction was for fair market value, the 
basic question is whether the full amount that the company or its 
assets (including the value of any subsidy benefits) were actually 
worth under the prevailing market conditions was paid, and paid through 
monetary or equivalent compensation. In making this determination, the 
Department will normally examine whether the seller acted in a manner 
consistent with the normal sales practices of private, commercial 
sellers in that country. Where an arm's-length sale occurs between 
purely private parties, we would normally expect the private seller to 
act in a manner consistent with the normal sales practices of private, 
commercial sellers in that country. With regard to a government-to-
private transaction, however, where we cannot make that same 
assumption, a primary consideration in this regard normally will be 
whether the government failed to maximize its return on what it sold, 
indicating that the purchaser paid less for the company or assets than 
it otherwise would have had the government acted in a manner consistent 
with the normal sales practices of private, commercial sellers in that 
country.
    If we determine that the evidence presented does not demonstrate 
that the change in ownership was at arm's length for fair market value, 
the baseline presumption will not be rebutted and we will find that the 
unamortized amount of any pre-sale subsidy benefit continues to be 
countervailable. Otherwise, if it is demonstrated that the change in 
ownership was at arm's length for fair market value, any pre-sale 
subsidies will be presumed to be extinguished in their entirety and, 
therefore, non-countervailable.
    A party can, however, obviate this presumption of extinguishment by 
demonstrating that, at the time of the change in ownership, the broader 
market conditions necessary for the transaction price to reflect fairly 
and accurately the subsidy benefit were not present, or were severely 
distorted by government action (or, where appropriate, inaction). In 
other words, even if we find that the sales price was at ``market 
value,'' parties can demonstrate that the broader market conditions 
were severely distorted by the government and that the transaction 
price was meaningfully different from what it would otherwise have been 
absent the distortive government action.
    Where a party demonstrates that these broader market conditions 
were severely distorted by government action and that the transaction 
price was meaningfully different from what it would otherwise have been 
absent the distortive government action, the baseline presumption will 
not be rebutted and the unamortized amount of any non-recurring pre-
sale subsidy benefit will continue to be countervailable. Where a party 
does not make such a demonstration with regard to an arm's-length sale 
for fair market value, we will find all non-recurring pre-sale 
subsidies to be extinguished by the sale and, therefore, to be non-
countervailable.
    In the instant proceeding, Russo/Di Nola, Corticella/Combattenti, 
and Pasta Zara/Pasta Zara 2 underwent changes in ownership during the 
applicable period. Neither Corticella/Combattenti nor Pasta Zara/Pasta 
Zara 2 challenged the Department's baseline presumption that non-
recurring subsidies continue to benefit the recipient over the 
allocation period. Thus, we preliminarily find for these respondents 
that any unallocated benefits from non-recurring subsidies received 
prior to their changes in ownership continue to be countervailable.
    Regarding Russo/Di Nola, Di Nola was a family-owned and operated 
company until 1998, when it was purchased by another company (whose 
name is proprietary). In December 2001, Carmine Russo S.p.A. di 
Cicciano (``Cicciano''), which also had been a family-owned and -
operated business, was purchased by Di Nola. At the time of the sale, 
Cicciano ceased to exist and the newly acquired company was legally 
reconstituted as Russo. In 2003, after the POR in this proceeding, the 
shares of Di Nola were fully absorbed into Russo and the two companies 
became a single corporate entity.
    With regard to the Di Nola change in ownership in 1998, Russo/Di 
Nola reports that Di Nola did not receive any non-recurring subsidies 
prior to its purchase in 1998. Thus, we preliminarily find that we need 
not perform a change-in-ownership analysis for this transaction because 
Di Nola did not receive any subsidies prior to this change in 
ownership.
    As for the Cicciano change in ownership, Russo/Di Nola reports that 
benefits under three programs were received by Cicciano prior to the 
change in ownership in 2001: Industrial Development Grants Under Law 
488/92, Industrial Development Grants Under Law 64/86, and European 
Regional Development Fund (``ERDF'') Grants. According to Russo/Di 
Nola, the subsidies received by Cicciano were extinguished by the 
openly-negotiated, arm's-length sale of most of Cicciano's shares and 
all of its assets and, thus, none of these benefits are countervailable 
with respect to Russo/Di Nola under the Department's new change-in-
ownership methodology.
    As noted above, the first step in our new change-in-ownership 
methodology is to determine whether the former owner sold all or 
substantially all of a company or its assets, retaining no control of 
the company or its assets. Based on record information, almost all of 
the outstanding shares of Cicciano were sold to Di Nola, and most of 
the former shareholders divested themselves of all ownership and 
operational control of the company (the exact numbers are proprietary). 
As noted above, Cicciano's name was formally changed to Russo and the 
company was legally registered with the appropriate authorities as a 
new entity. Thus, based on the information on the record, we 
preliminarily find that the former owner sold all or substantially all 
of Cicciano and its assets, retaining no control of the company or its 
assets.
    Thus, we next examined whether the sale was an arm's-length 
transaction for fair market value. According to record information, the 
transaction was negotiated between unrelated, privately-owned parties. 
There is no record evidence of any pre-existing relationship or 
affiliation between Cicciano and Di Nola or any company in Di Nola's 
corporate group of companies. According to the share purchase 
agreement, the shares were valued by external independent auditors. An 
internal feasibility analysis and market study, as well as an external 
independent asset valuation study and a due diligence analysis, were 
also conducted of Cicciano by the purchasing entity to determine the 
company's financial status, brand strength, marketability, and asset 
value. After negotiations, the parties agreed to an all-cash share 
purchase in which almost all of the shares of Cicciano were purchased 
by Di Nola.
    Based on the above information, we preliminarily find that the sale 
of Cicciano was an arm's-length transaction negotiated between 
unrelated parties, each acting in its own interest. As noted above, 
where an arm's-length sale occurs between purely parties, we would 
normally expect the private seller to act in a manner consistent with 
the normal sales practices of private, commercial sellers in that 
country. Because this transaction occurred between purely private 
parties, we also preliminarily find that this translation was conducted 
for fair

[[Page 45679]]

market value. Consequently, we preliminarily determine that any 
subsidies received by Cicciano prior to its change in ownership; are 
presumed to be extinguished in their entirety and, therefore, non-
countervailable.

Subsidies Valuation Information

Allocation Period

    Pursuant to 19 CFR 351.524(b), non-recurring subsidies are 
allocated over a period corresponding to the AUL of the renewable 
physical assets used to produce the subject merchandise. Section 
351.524(d)(2) of the Department's regulations creates a rebuttable 
presumption that the AUL will be taken from the U.S. Internal Revenue 
Service's 1977 Class Life Asset Depreciation Range System (``IRS 
Tables''). For pasta, the IRS Tables prescribe an AUL of 12 years. None 
of the responding companies or interested parties disputed this 
allocation period. Therefore, we have used the 12-year allocation 
period for all respondents.

Attribution of Subsidies

    The Department's regulations at 19 CFR 351.525(b)(6) direct that 
the Department will attribute subsidies received by certain affiliated 
companies to the combined sales of those companies. Based on our review 
of the responses, we find that ``cross-ownership'' exists with respect 
to certain companies, as described below, and we have attributed 
subsidies accordingly.
    Lensi: Lensi has no affiliated companies located in Italy and has, 
therefore, responded only on its own behalf.
    Russo/Di Nola: Russo has responded on behalf of itself and Di Nola, 
both of whom manufacture the subject merchandise in the same group of 
companies. We preliminarily find that cross-ownership exists between 
Russo and Di Nola in accordance with 19 CFR 351.525(b)(6)(i) and (ii) 
are, thus, attributing any subsidies received by Russo and Di Nola to 
the combined sales of both companies.
    Corticella/Combattenti: Corticella and Combattenti are both 
producers of subject merchandise and are owned by the same holding 
company, Euricom S.p.A. (``Euricom''), and companies in the Euricom 
group, Euricom group companies own 100 percent of Combattenti and 70 
percent of Corticella. Other Euricom group companies are also involved 
in the production and distribution of subject merchandise. 
Specifically, one group company (whose name is proprietary), receives a 
commission on some of Corticella's home market sales. Also, Euricom 
group company Molini Certosa S.p.A. (``Certosa'') mills durum and non-
durum wheat, some of which is an input for subject merchandise produced 
by Corticella and Combattenti. Additionally, Cooperative Lomellina 
Cerealicoltori (``CLC'') provides conversion services for both 
Combattenti and Corticella. CLC is not part of the Euricom group and 
Euricom is not a member of CLC, but a relative of Euricom's majority 
shareholder is a CLC cooperative member.
    We preliminarily determine that cross-ownership does not exist with 
regard to CLC consistent with 19 CFR 351.525(b)(6)(vi). Therefore, we 
are not including subsidies received by CLC or CLC's sales in our 
subsidy calculations. With regard to the euricom group company that 
receives a commission on some of Corticella's home market sales, 
although cross-ownership may exist, the company does not meet any of 
the criteria stipulated in 19 CFR 351.525(b)(6)(ii) through (iv). 
Moreover, because Corticella/Combattenti has reported that this company 
acts as a selling agent only on Corticella's home market sales and not 
on its exports, 19 CFR 351.525(c) does not apply. Thus, we are also not 
including subsidies received by this company or this company's sales in 
our subsidy calculations.
    With regard to Corticella and Combattenti, we preliminarily find 
that they each meet the criteria stipulated in 19 CFR 
351.525(b)(6)(ii). As for Certosa, Corticella/Combattenti has argued 
that it does not have to report on behalf of Certosa because Certosa 
does not meet any of the criteria listed in 19 CFR 351.525(b)(6), 
including 19 CFR 351.525(b)(6)(iv). Specifically, citing to the Notice 
of Final Affirmative Countervailing Duty Determination: Polyethylene 
Terephthalate Film, Sheet, and Strip (PET Film) from India, 67 FR 34905 
(May 16, 2002) and the accompanying Issues and Decision memorandum at 
comment 15 (``Pet Film from India''), Corticella/Combattenti argues 
that, because Certosa's production is not ``dedicated almost 
exclusively'' to semolina (the input product for pasta) because it also 
mills soft wheat, 19 CFR 351.525(b)(6)(iv) does not apply. (Pagani 
makes an identical argument with regard to its affiliated durum and 
soft wheat milling operation, Molina di Rovato S.p.A. (``Rovato'').)
    We disagree with Corticalla/Combattenti and Pagani's interpretation 
of PET Film from India and find that 19 CFR 351.525(b)(6)(iv) is 
applicable to both Corticalla/Combattenti and Pagani in regard to their 
affiliated milling operations. According to 19 CFR 351.525(b)(6)(iv), 
if there is cross-ownership between an input supplier and a downstream 
producer, and production of the input product is primarily dedicated to 
production of the downstream product, the Department will attribute 
subsidies received by the input producer to the combined sales of the 
input and downstream products produced by both corporations (excluding 
the sales between the two corporations). The issue in question is not 
the different types of products the input supplier produces and in what 
overall proportions, but whether the input supplier is producing a 
product that is primarily dedicated to the production of the subject 
merchandise. So, for example, in this instance, the issue at hand is 
whether the input (semolina) is being produced primarily for pasta (the 
subject merchandise), and not whether the supplier mill's production is 
divided between different products (durum and soft wheat).
    For all the reasons above, we are preliminarily treating 
Corticella, Combattenti, Euricom, and Certosa as a single respondent. 
However, Combattenti/Corticella has reported that Euricom and Certosa 
did not receive any POR subsidies. Thus, we are attributing any 
subsidies received to the combined sales of Corticella and Combattenti.
    Pagani: Pagani is a producer of the subject merchandise. Rovato is 
an affiliated durum and soft wheat milling operation that sells some of 
the semolina that it mills from durum wheat to Pagani for use in its 
production of the subject merchandise. Both companies are owned by 
Alimco Srl. (``Alimco''), which is a holding company. During the POR, 
all three companies shared a common president and board members. Also, 
Riccardi Srl. (``Riccardi'') is an affiliated agent through whom Pagani 
sold pasta for sales to certain pasta customers.
    With regard to Riccardi, although cross-ownership may exist, the 
company does not itself meet any of the criteria stipulated in 19 CFR 
351.525(b)(6). Moreover, Pagani has reported that Riccardi did not 
receive any subsidies; thus, 19 CFR 351.525(c) is not applicable. 
Therefore, we are not including subsidies received by Riccardi or 
Riccardi's sales in our subsidy calculations.
    As for Alimco and Rovato, based on record information and on 19 CFR 
351.525(b)(6)(iii) and (iv), respectively (see also above discussion 
under ``Attribution of Subsidies'' for Corticella/Combattenti), we are 
treating Alimco, Rovato, and Pagani as a single

[[Page 45680]]

respondent. Pagani has reported that neither Alimco nor Rovato received 
any subsidy benefits during the POR. Thus, we are attributing any 
subsidies received to Pagani's sales only.
    Pasta Zara/Pasta Zara 2: Pasta Zara and its affiliate Pasta Zara 2 
are both producers of the subject merchandise. As discussed in the July 
22, 2004 memorandum to Susan Kuhback entitled ``Pasta Zara S.p.A.--
Attribution Issues'' (which is on file in the Department's CRU), we 
have determined that cross-ownership exits with regard to Pasta Zara 
and Pasta Zara 2 in accordance with 19 CFR 351.525(b)(6)(vi). 
Therefore, we are treating Pasta Zara, Pasta Zara 2, and Pasta Zara's 
parent company (whole name is proprietary) as a single entity in 
accordance with 19 CFR 351.525(b)(6)(ii) and (iii). Pasta Zara/Pasta 
Zara 2 has reported that Pasta Zara's parent company had no POR sales 
and received no POR subsidies. Thus, we are attributing any subsidies 
received to the combined sales of Pasta Zara and Pasta Zara 2.

Discount Rates and Benchmarks for Loans

    Pursuant to 19 CFR 351.524(d)(3)(i)(B), we used the national 
average cost of long-term fixed-rate loans as discount rates for 
allocating non-recurring benefits over time because none of the 
companies for which we need such discount rates took any loans in the 
years in which the government agreed to provide the subsidies in 
question.
    For benchmark rates, in accordance with 19 CFR 351.505(a), we used 
the actual cost of comparable borrowing by a company as a loan 
benchmark, when available. According to 19 CFR 351.505(a)(2), a 
comparable commercial loan is defined as one that, when compared to the 
loan being examined, has similarities in the structure of the loan 
(e.g., fixed interest rate v. variable interest rate), the maturity of 
the loan (e.g., short-term v. long-term), and the currency in which the 
loan is denominated. In instances where no applicable company-specific 
comparable commercial loans were available, we used a national average 
interest rate for comparable commercial loans as allowed under 19 CFR 
351.505(a)(3)(ii).
    Where we relied on national average interest rates, for years prior 
to 1995, we used the Bank of Italy reference rate adjusted upward to 
reflect the mark-up an Italian commercial bank would charge a corporate 
customer, consisted with past practice in this proceeding. For 
subsidies received in 1995 and later, we used the Italian Bankers' 
Association interest rate, increased by the average spread charged by 
banks on loans to commercial customers plus an amount for bank charges.

Analysis of Programs

I. Programs Preliminarily Determined To Confer Subsidies During the POR

A. Export Marketing Grants Under Law 304/90
    Under Law 304/90, the GOI provided grants to promote the sale of 
Italian food and agricultural products in foreign markets. The grants 
were given for pilot projects aimed at developing links and integrating 
marketing efforts between Italian food producers and foreign 
distributors. The emphasis was on assisting small- and medium-sized 
enterprises (``SMEs'').
    Corticella received a grant under this program in 1993 to assist it 
in establishing a sales office and network in the United States. No 
other respondent covered by this review received benefits under this 
program during the POR.
    In the Final Affirmative Countervailing Duty Determination: Certain 
Pasta from Italy, 61 FR 30288 (June 14, 1996) (``Pasta 
Investigation''), the Department determined that these exports 
marketing grants confer a countervailable subsidy within the meaning of 
section 771(5) of the Act. They are a direct transfer of funds from the 
GOI bestowing a benefit in the amount of the grant. Also, these grants 
were found to be specific within the meaning of section 771(5A)(B) of 
the Act because their receipt was contingent upon exportation. In this 
review, neither the GOI nor the responding companies have provided new 
information which would warrant reconsideration of our determination 
that these grants confer a countervailable subsidy.
    Also in Pasta Investigation, the Department treated export 
marketing grants as non-recurring. No new information has been placed 
on the record of this review that would cause us to depart from this 
treatment.
    Because the amount of the grant that was approved by the GOI 
exceeded 0.5 percent of Corticella's exports to the United States in 
the year of approval, we used the grant methodology described in 19 CFR 
351.524(d) to allocate the benefit over time. We divided the benefit 
attributable to the POR by the value of the companies' total exports to 
the United States in the POR.
    On this basis, we preliminarily determine the countervailable 
subsidy from the Law 304/90 export marketing grants to be 0.09 percent 
ad valorem for Corticella/Combattenti.
B. Industrial Development Grants Under Law 488/92
    In 1986, the European Union (``EU'') initiated an investigation of 
the GOI's regional subsidy practices. As a result of this 
investigation, the GOI changed the regions eligible for regional 
subsidies to include depressed areas in central and northern Italy in 
addition to the Mezzogiorno (southern Italy). After this change, the 
areas eligible for regional subsidies are the same as those classified 
as Objective 1, Objective 2, and Objective 5(b) areas by the EU.\4\ The 
new policy was given legislative form in Law 488/92 under which Italian 
companies in the eligible sectors (manufacturing, mining, and certain 
business services) may apply for industrial development grants. (Loans 
are not provided under Law 488/92.)
---------------------------------------------------------------------------

    \4\ Objective 1 covers projects located in underdeveloped 
regions; Objective 2 addresses areas in industrial decline; and 
Objective 5 pertains to agricultural areas.
---------------------------------------------------------------------------

    Law 488/92 grants are made only after a preliminary examination by 
a bank authorized by the Ministry of Industry. On the basis of this 
preliminary examination, the Ministry of Industry ranks the companies 
applying for grants. The ranking is based on indicators such as the 
amount of capital the company will contribute from its own funds, the 
number of jobs created, regional priorities, etc. Grants are then made 
based on this ranking.
    Russo/Di Nola is the only respondent in this proceeding that 
reported receiving grants under Law 488/92 which could potentially 
confer a benefit during the POR. Specifically, Russo's predecessor 
company, Cicciano, received three separate grants through this program. 
For the two grants approved in 1996, Cicciano received all of the 
payments under these grants prior to the change in ownership. For the 
one grant approved in 1997, most of the payments to Cicciano were made 
prior to Cicciano's purchase by Di Nola; however, part of the payment 
was made subsequent to the change in ownership in December 2001.
    In past reviews in this proceeding, we found grants made through 
this program to be countervailable. See, e.g., Certain Pasta from 
Italy: Final Results of the Second Countervailing Duty Administrative 
Review, 64 FR 44489, 44490-91 (August 16, 1999) (``Pasta Second 
Review''). Pursuant to section 771(5) of the Act, the grants are a 
direct transfer of funds from the GOI bestowing a benefit in the amount 
of the

[[Page 45681]]

grant. Also, these grants were found to be regionally specific within 
the meaning of section 771(5A)(D)(iv) of the Act. In this review, 
neither the GOI nor the responding companies have provided new 
information which would warrant reconsideration of our determination 
that these grants are countervailable subsidies.
    With regard to the benefits under this program received prior to 
Cicciano's change in ownership, as discussed above in the ``Changes In 
Ownership'' section, we preliminarily find that any pre-sale subsidies 
received by Cicciano are non-countervailable during the POR.
    As for the benefits provided subsequent to the change in ownership, 
in the Pasta Second Review, the Department treated industrial 
development grants under Law 488/92 as non-recurring. No new 
information has been placed on the record of this review that would 
cause us to depart from this treatment.
    Because the amount of the grant that was approved by the GOI 
exceeded 0.5 percent of the reported total sales in the year of 
approval, we used the grant methodology described in 19 CFR 351.524(d) 
to allocate the post-change-in-ownership benefit over time. We divided 
the benefit attributable to the POR by the value of Russo/Di Nola's 
total sales in the POR.
    On this basis, we preliminarily determine the countervailable 
subsidy from the Law 488/92 industrial development grants to be 0.04 
percent ad valorem for Russo/Di Nola.
C. Industrial Development Loans Under Law 64/86
    In addition to the Law 64/86 industrial development grants 
discussed below, Law 64/86 also provided reduced rate industrial 
development loans with interest contributions paid by the GOI on loans 
taken by companies constructing new plants or expanding or modernizing 
existing plants in the Mezzogiorno. As discussed below in the 
``Industrial Development Grants Under Law 64/86'' section, pasta 
companies were eligible for interest contributions to expand existing 
plants, but not to establish new plants. The fixed interest rates on 
these long-term loans were set at the reference rate with the GOI's 
interest contributions serving to reduce this rate. Although Law 64/86 
was abrogated in 1992 (effective 1993), projects approved prior to 1993 
were authorized to receive interest subsidies after 1993.
    Russo's predecessor, Cicciano, had a Law 64/86 industrial 
development loan outstanding during the POR. No other respondent in 
this proceeding had Law 64/86 loans outstanding during the POR.
    In the Pasta Investigation, the Department determined that Law 64/
86 loans confer a countervailable subsidy within the meaning of section 
771(5) of the Act. They are a direct transfer of funds from the GOI 
providing a benefit in the amount of the difference between the 
benchmark interest rate and the interest rate paid by the companies 
after accounting for the GOI's interest contributions. Also, these 
loans were found to be regionally specific within the meaning of 
section 771(5A)(D)(iv) of the Act. In this review, neither the GOI nor 
the responding companies have provided new information which would 
warrant reconsideration of our determination that these loans confer a 
countervailable subsidy.
    In accordance with 19 CFR 351.505(c)(2), we calculated the benefit 
for the POR by computing the difference between the Payments Russo made 
on its Law 64/86 loan during the POR and the payments Russo would have 
made on the benchmark loan. We divided the benefit received by Russo by 
Russo/Di Nola's total sales in the POR.
    On this basis, we preliminarily determine the countervailable 
subsidy from the Law 64/86 industrial development loans to be 0.03 
percent ad valorem for Russo/Di Nola.
D. European Regional Development Fund Grants
    The ERDF is one of the EC's Structural Funds. It was created 
pursuant to the authority in Article 130 of the Treaty of Rome to 
reduce regional disparities in socio-economic performance within the 
EC. The ERDF program provides grants to companies located within 
regions which meet the criteria of Objective 1 (underdeveloped 
regions), Objective 2 (declining industrial regions), or Objective 5(b) 
(declining agricultural regions) under the Structural Funds.
    Russo/Cicciano is the only respondent in this proceeding that 
reported receiving grants under the ERDF which could potentially confer 
a benefit during the POR. Specifically, Russo's predecessor company, 
Cicciano, was approved for an ERDF grant in 1999. Most of the payments 
to Cicciano as part of this grant were made prior to Cicciano's 
purchase by Di Nola; however, some payments were received subsequent to 
the change in ownership in December 2001.
    In the Pasta Investigation, the Department determined that ERDF 
grants confer a countervailable subsidy within the meaning of section 
771(5) of the Act. They are a direct transfer of funds bestowing a 
benefit in the amount of the grant. Also, these grants were found to be 
regionally specific within the meaning of section 771(5A)(D)(iv) of the 
Act. In this review, neither the EU, the GOI, nor the responding 
companies have provided new information which would warrant 
reconsideration of our determination that ERDF grants are 
countervailable subsidies.
    With regard to the benefits under this program received prior to 
Cicciano's change in ownership, as discussed above in the ``Changes In 
Ownership'' section, we preliminarily find that any pre-sale subsidies 
received by Cicciano are non-countervailable during the POR.
    As for the benefits provided subsequent to the change in ownership, 
in the Pasta Investigation, the Department treated ERDF grants as non-
recurring. No new information has been placed on the record of this 
review that would cause us to depart from this treatment.
    Because the amount of the grant that was approved exceeded 0.5 
percent of the reported total sales in the year of approval, we used 
the grant methodology described in 19 CFR 351.524(d) to allocate the 
post-change-in-ownership benefit over time. We divided the benefit 
attributable to the POR by the value of Russo/Di Nola's total sales in 
the POR.
    On this basis, we preliminarily determine the countervailable 
subsidy from the ERDF grant to be 0.01 percent ad valorem for Russo/Di 
Nola.
E. Law 236/93 Training Grants
    Under Law 236/93, which is administered by the regional governments 
but funded by the GOI, grants are provided to Italian companies for 
worker training.
    Pagani received a grant under this program during the POR. Its 
grant application was approved in 1999, and tranches of the grant were 
disbursed in 2000, 2001, and 2002.
    In Certain Pasta from Italy: Final Results of the Third 
Countervailing Duty Administrative Review, 66 FR 11269 (February 23, 
2001) (``Pasta Third Review''), the Department determined that Law 236/
93 training grants confer a countervailable subsidy within the meaning 
of section 771(5) of the Act. They are a direct transfer of funds from 
the GOI bestowing a benefit in the amount of the grant. Also, because 
the GOI and the regional government of Abruzzo did not provide adequate 
information about the distribution of grants under this program, we 
determined that Law 236/93 training grants were specific within the 
meaning of section 771(5A) of the Act. In this

[[Page 45682]]

review, neither the GOI nor any other party has provided sufficient 
information that would warrant reconsideration of or change our past 
determination that these grants are countervailable subsidies.
    Consistent with 19 CFR 351.524(c)(1) and our treatment of this 
grant in the Pasta Third Review, the Department is treating this worker 
training subsidy as a recurring benefit. Therefore, to calculate the 
countervailable subsidy, we divided the amount received by Pagani in 
the POR by the companies' total sales in the POR.
    On this basis, we preliminarily determine the countervailable 
subsidy for this program to be 0.06 percent ad valorem for Pagani.
F. Law 1329/65 Interest Contributions (Sabatini Law) (Formerly Lump-Sum 
Interest Payment Under the Sabatini Law for Companies in Southern 
Italy)
    The Sabatini Law was enacted in 1965 to encourage the purchase of 
machine tools and production machinery. It provides, inter alia, for 
one-time, lump-sum interest contributions from the Mediocredito 
Centrale toward interest owed on loans taken out to purchase these 
types of equipment.
    Paasta Zara, Pagani, and Russo/Di Nola reported they received 
interest contributions under the Sabatini Law.
    With respect to Pasta Zara and Pagani, in the Pasta Investigation, 
the Department concluded that the benefits provided in northern Italy 
under this program were not specific and, therefore, not 
countervailable. No party in this proceeding has challenged this past 
finding. Thus, we preliminarily find that any benefits provided to 
Pagani and Pasta Zara are not countervailable because these companies 
are located in northern Italy.
    As for Russo/Di Nola, because the concessionary rate for companies 
is southern Italy was lower than the interest rate available to users 
of the program in northern Italy, the Department in the Pasta 
Investigation determined that the Sabatini Law interest contributions 
to companies in southern Italy were countervailable subsidies within 
the meaning of section 771(5) of the Act. They were a direct transfer 
of funds from the GOI providing a benefit in the amount of the 
difference between the benchmark interest rate and the interest rate 
paid by the companies. In addition, they were regionally specific 
within the meaning of section 771(5A)(D)(iv) of the Act. In this 
review, neither the GOI nor the responding companies have provided new 
information which would warrant reconsideration of our determination 
that benefits provided under this program in southern Italy confer a 
countervailable subsidy.
    The Department also determined in the Pasta Investigation and in 
subsequent reviews of this order that companies were able to anticipate 
the interest contributions at the time the loans were taken out. 
Consequently, in accordance with 19 CFR 351.508(c)(2) and 19 CFR 
351.505(c)(2), any benefit would be countervailed in the year of 
receipt. See also Certain Pasta from Italy: Preliminary Results and 
Partial Rescission of Countervailing Duty Administrative Review, 66 FR 
40987 (August 6, 2001) (unchanged in Certain Pasta from Italy: Final 
Results of the Fourth Countervailing Duty Administrative Review, 66 FR 
64214 (December 12, 2001) and Certain Pasta from Italy: Amended Final 
Results of the Fourth Countervailing Duty Administrative Review, 67 FR 
59 (January 2, 2002)). No new information has been placed on the record 
of this review that would cause us to depart from this practice.
    In the instant proceeding Russo/Di Nola reported that Di Nola 
received interest contributions under this program during the POR. To 
calculate the countervailable subsidy for these interest contributions 
that were received during the POR, we divided the amount received by 
Russo/Di Nola in the POR by Russo/Di Nola's total sales in the POR.
    On this basis, we preliminarily determine the countervailable 
subsidy for this program to be 0.08 percent ad valorem for Russo/Di 
Nola.
G. Development Grants Under Law 30 of 1984
    Law 30 of 1984 was enacted by the Regional Government of Friuli-
Venezia Giulia to provide one-time development grants to companies for 
investments in industrial projects, including the construction of new 
plants and modernization or expansion of existing plants. Eligible 
companies can receive a grant amounting to 20 percent of the cost of 
the investment, with the grant not to exceed 1,000,000,000 lire. Only 
companies located in certain parts of the Friuli-Venezia Giulia region 
are eligible to receive benefits under this program in accordance with 
article 87, paragraph 3, letter c of the EC Treaty.
    Pasta Zara 2 received a grant under this program during the POR for 
consultancy costs for company start-up and preparation of contracts 
relative to the purchase of plant equipment. No other respondent in 
this proceeding reported receiving POR benefits under this program.
    In the Final Affirmative Countervailing Duty Determination: Certain 
Cut-to-Length Carbon-Quality Steel Plate from Italy, 64 FR 73244, 73255 
(December 29, 1999) (``CTL Plate from Italy''), the Department 
determined that these grants confer a countervailable subsidy within 
the meaning of section 771(5) of the Act. Specifically, they are a 
financial contribution as defined in section 771(5)(D)(i) of the Act in 
the form of a direct transfer of funds from the GOI bestowing a benefit 
in the amount of the grant. Also, these grants were found to be 
specific within the meaning of section 771(5A)(D)(iv) of the act 
because eligibility for the grants was limited to certain geographical 
areas within the Friuli-Venezia Giulia region. In this review, neither 
the GOI nor the responding companies have provided new information 
which would warrant reconsideration of our determination that these 
grants confer a countervailable subsidy.
    Also in CTL Plate from Italy, the Department treated grants under 
this program as non-recurring. No new information has been placed on 
the record of this review that would cause us to depart from this 
treatment.
    Pursuant to 19 CFR 351.524(b)(2), the Department will normally 
expense non-recurring benefits provided under a particular subsidy 
program to the year in which benefits are received if the total amount 
approved under the program is less than 0.5 percent of relevant sales 
during the year in which the subsidy was approved. Because the amount 
of the development grant approved by the GOI for Pasta Zara 2 under 
this program was less than 0.5 percent of Pasta Zara 2's sales in the 
year in which the grant was approved, we allocated the entire amount of 
the grant to the POR (the year in which the grant was received) in 
accordance with 19 CFR 351.524(b)(2). We divided the full amount of the 
grant by the value of the companies' total sales in the POR.
    On this basis, we preliminarily determine the countervailable 
subsidy from the Law 30/84 development grants to be 0.02 percent ad 
valorem for Pasta Zara/Pasta Zara 2.
H. Social Security Reductions and Exemptions--Sgravi
    Italian law allows companies, particularly those located in the 
Mezzogiorno, to use a variety of exemptions and reductions (``sgravi'') 
of the payroll contributions that employers make to the Italian social 
security system for health care benefits, pensions, etc. The sgravi 
benefits are regulated by a complex set of laws and

[[Page 45683]]

regulations, and are sometimes linked to conditions such as creating 
more jobs. We have found in past proceedings that the benefits under 
some of these laws (e.g., Laws 183/76 and 449/97) are available only to 
companies located in the Mezzogiorno and other disadvantaged regions. 
Other laws (e.g., Laws 407/90 and 863/84) provide benefits to companies 
all over Italy, but the level of benefits is higher for companies in 
the south than for companies in other parts of the country.
    The various laws identified as having provided sgravi benefits 
during the POR are the following: Law 407/90 (Pagani, Lensi, and 
Corticella), Law 223/91 (Combattenti, Pagani, Lensi, and Pasta Zara/
Pasta Zara 2), Law 337/90 (Corticella), Law 56/87 (Pasta Zara), and Law 
25/55 (Pasta Zara).
    In the Pasta Investigation and subsequent reviews, the Department 
determined that the various forms of social security reductions and 
exemptions confer countervailable subsidies within the meaning of 
section 771(5) of the Act. They represent revenue foregone by the GOI 
bestowing a benefit in the amount of the savings received by the 
companies. Also, they were found to be regionally specific within the 
meaning of section 771(5A)(D)(iv) of the Act because they were limited 
to companies in the Mezzogiorno or because the higher levels of 
benefits were limited to companies in the Mezzogiorno.
    In the instant review, no party in this proceeding challenged our 
past determinations that sgravi benefits were not countervailable for 
companies located outside of the Mezzogiorno. Therefore, because 
Pagani, Lensi, and Pasta Zara/Pasta Zara 2 are not located in the 
Mezzogiorno, we preliminarily find that these three companies did not 
receive any countervailable subsidies under this program during the 
POR.
    Additionally, neither the GOI nor the responding companies 
challenged our past determinations that most sgravi benefits for 
companies in southern Italy confer a countervailable subsidy. However, 
Corticella/Combattenti, which is located in the Mezzogiorno, has 
claimed that benefits under the three sgravi laws through which it 
received benefits during the POR (Law 407/90, Law 223/91, and Law 337/
90) are not specific. Specifically, Corticella/Combattenti claim that 
benefits under these three laws are not countervailable because they 
are generally available throughout Italy.
    Based on a review of record evidence in the instant proceeding, we 
preliminarily find, consistent with our past determinations, that 
benefits under these three laws are specific within the meaning of 
section 771(5A) of the Act and, thus, confer countervailable subsidies. 
Contrary to Corticella/Combattenti's claims, no party in this 
proceeding has provided sufficient information with regard to laws 407/
90 and 223/91 which would warrant reconsideration of our past 
determinations that these laws are regionally specific within the 
meaning of section 771(5A)(D)(iv) of the Act. As for law 337/90, record 
information also shows that this law is regionally specific within the 
meaning of section 771(5A)(D)(iv) of the Act because the higher levels 
of benefits were limited to companies in the Mezzogiorno and to 
handicraft enterprises.
    In accordance with 19 CFR 351.524(c) and consistent with our 
methodology in the Pasta Investigation and in subsequent reviews of 
this order, we have treated social security reductions and exemptions 
as recurring benefits. To calculate the countervailable subsidy, we 
divided Corticella/Combattenti's savings in social security 
contributions during the POR by the companies' total sales in the POR.
    On this basis, we preliminarily determine the countevailable 
subsidy from the sgravi program to be 0.01 percent ad valorem for 
Corticella/Combattenti.
I. Law 908/55
    The GOI created the Fondo di Rotzaione Iniziative Economiche 
(Rotational Fund for Economic Initiatives) (``FRIE'') through Law 908 
of October 18, 1955 in order to promote economic initiatives within the 
territory of Trieste and the province of Gorizia in the Friuli-Venezia 
Giulia region. The fund provides reduced-interest loans for the 
construction, re-activation, transformation, modernization, 
improvement, and industrial development of industrial plants and 
handicraft companies in the above-noted areas. Companies who receive 
long-term, variable rate loans under this program receive an interest 
rate equal to 50 percent of the 6-month Euro Interbank Offered Rate.
    Pasta Zara 2 was the only respondent in this proceeding who 
reported having outstanding Law 908/55 loans during the POR. 
Specifically, Pasta Zara 2 had two long-term, variable rate FRIE loans 
that were outstanding during the POR whose loan terms were established 
in 1999 and 2001.
    We preliminarily find that these loans are a direct transfer of 
funds from the GOI within the meaning of section 771(5)(D)(i) of the 
Act. Also, the loans are regionally specific within the meaning of 
section 771(5A)(D)(iv) of the Act. Finally, we preliminarily determine 
that a benefit exists pursuant to section 771(5)(E)(ii) of the Act. 
According to 19 CFR 351.505(a)(5), in order to determine whether long-
term variable interest rate loans confer a benefit, the Department 
first compares the benchmark interest rate to the rate on the 
government-provided loan for the year in which the government loan 
terms were established. According to 19 CFR 351.505(a)(5)(i), if the 
comparison shows that the origination-year interest rate on the 
government-provided loan was lower than the for the origination-year 
interest rate on the benchmark loan, the Department will examine that 
loan in the POR to measure the benefit. Based on a comparison of the 
origination year interests rates of the 908/55 loans and the benchmark 
loans, we found that the government loan rates were lower than the 
benchmark rates in both instances. Thus, we preliminarily find that a 
benefit was conferred through these loans within the meaning of section 
771(5)(E)(ii) of the Act as described in 19 CFR 351.505(a)(5) and that 
these loans constitute coutervailable subsidies pursuant to section 
771(5) of the Act.
    In accordance with 19 CFR 351.505(c)(4), we calculated the benefit 
for the POR by computing the difference between the payments Pasta Zara 
2 made on their Law 908/55 loans during the POR and the payments Pasta 
Zara 2 would have made on the benchmark loan. We then divided the 
benefit received by the companies' total sales in the POR.
    On this basis, we preliminarily determine the countervailable 
subsidy from the Law 908/55 loans to be 2.74 percent ad valorem for 
Pasta Zara/Pasta Zara 2.

II. Program Preliminarily Determined To Be Not Countervailable

European Economic Commission (``ECC'') Decision 94/217
    Under EEC Decision 94/217, SMEs could receive onetime interest 
contributions on European Investment Bank (``EIB'') loans for 
investments that led to the creation of new jobs. The program was 
intended to provide assistance to SMEs in the EC by lowering the 
interest rates on EIB loans for these companies. The loans under this 
program were limited to ECU 30,000 times the number of jobs created, 
and interest contribution payments were in total limited to ten percent 
of the size of the loan (equal to two percent per year on the five-year 
loans that were required under this program). In order

[[Page 45684]]

to receive the interest contributions, companies were required to 
submit a certification relating to the creation of jobs, and the 
financial institutions acting as intermediaries were required to 
certify that the loans had been made and were in repayment. Once these 
certifications were received, the EIB agent institution would forward 
the EIB interest contribution to the beneficiary via its financial 
intermediary. The application deadline for applying for benefits under 
this program was December 15, 1995, and all payments under this program 
were finalized by the end of 1997.
    Pasta Zara is the only respondent in this proceeding that reported 
receiving interest contributions under EEC Decision 94/217.
    According to record information, any SME in the EC was eligible to 
apply for loans under these programs and to receive the associated 
interest contributions. The interest contributions were not export 
subsidies or import substitution subsidies according to sections 
771(5A)(A) and (B) of the Act. Nor were the interest contributions 
specific according to the criteria stipulated in sections 
771(5A)(D)(i), (ii), or (iv) of the Act. Finally, according to record 
information, thousands of SMEs within the EC received benefits under 
this program in many different industries. According to data on the 
sectoral distribution of benefits under this program, the metal working 
and mechanical engineering industries (20.6 percent) and the private 
and public sector services industries (11.3 percent) received the most 
benefits under this program, with the foodstuffs industry (which would 
include the pasta industry) ranked third with 8.9 percent of the 
benefits and the rubber and plastic processing industry ranked fourth 
with 6.6 percent of the benefits. Based on this information, we 
preliminary find that the pasta industry was not a predominant user of 
this program and did not receive a disproportionately large amount of 
the benefits under this program. Thus, the program is not de facto 
specific according to section 771(5A)(D)(iii) of the Act. Based on the 
above analysis, we find that this program is not specific as defined in 
section 771(5A) of the Act, and thus, not countervailable.

111. Programs Preliminarily Determined to Not Confer Subsidies During 
the POR

A. Industrial Development Grants Under Law 64/86
    Law 64/86 provided assistance to promote development in the 
Mezzogiorno. Grants were awarded to companies constructing new plants 
or expanding or modernizing existing plants. Pasta companies were 
eligible for grants to expand existing plants but not to establish new 
plants because the market for pasta was deemed to be close to 
saturated. Grants were made only after a private credit institution, 
chosen by the applicant, made a positive assessment of the project. (As 
noted above, loans were also provided under Law 64/86.) In 1992, the 
Italian Parliament abrogated Law 64/86 and replaced it with Law 488/92 
(see above). This decision became effective in 1993. However, companies 
whose projects had been approved prior to 1993 were authorized to 
continue receiving grants under Law 64/86 after 1993.
    Russo/Di Nola is the only respondent in this proceeding that 
reported receiving grants under Law 64/86 which could potentially 
confer a benefit during the POR. Specifically, Cicciano received a 
grant under this program in 1998 for the general modernization and 
technical reorganization of the Cicciano plant used in the production 
of cookies, pasta, and flour.
    In past reviews in this proceeding, we found grants made through 
this program to be countervailable. See, e.g., Pasta Investigation. 
However, the grant under this program was received by Cicciano prior to 
its purchase by Di Nola in December 2001. Thus, as discussed above in 
the ``Changes In Ownership'' section, we preliminarily find that any 
pre-sale subsidies received by Cicciano as part of this program are 
extinguished in their entirety and, therefore, provide no 
countervailable benefit to Russo/Di Nola during the POR.
B. Brescia Chamber of Commerce Training Grants
    The Chamber of Commerce of Brescia provided training grants during 
2002 and 2003 to companies in the province of Brescia for the 
professional training of entrepreneurs, directors, and employees. The 
goal of these grants was to improve economic, social, and productive 
development in the province.
    Lensi was the only respondent in this proceeding that reported 
receiving grants under this program during the POR.
    In situations where any benefit to the subject merchandise would be 
so small that there would be no impact on the overall subsidy rate, 
regardless of a determination of countervailability, it may not be 
necessary to determine whether benefits conferred under these programs 
to the subject merchandise are ocuntervailable. (See, e.g. Live Cattle 
From Canada; Final Negative Countervailing Duty Determination, 64 FR 
57040, 57055 (October 22, 1999) (``Cattle from Canada'').) In this 
instance, any benefit to the subject merchandise resulting from this 
grant would be so small that there would be no impact on the overall 
subsidy rate, regardless of a determination of countervailability. 
Thus, consistent with our past practice, we do not consider it 
necessary to determine whether benefits conferred thereunder to the 
subject merchandise are countervailable.
C. Law 317/91 Benefits for Innovative Investments
    Law 317/91 allows for a capital contribution or a tax credit up to 
a maximum amount of Euro 232,405.60 to small and medium-sized 
industrial, commercial, and service companies for innovative 
investments. Pasta Zara has stated that it received tax benefits under 
this law in 1994 but that no benefits were received in the POR. No 
other respondent reporting receiving POR benefits from this program.
    Pursuant to 19 CFR 351.524(c)(1), the Department normally considers 
tax programs to provide recurring benefits. Because neither Pasta Zara 
nor its affiliates received tax benefits under Law 317/91 during the 
POR, we preliminarily determine that this program did not confer a 
countervailable subsidy in the POR.
D. Tremonti Law 489/94 (Formerly Law Decree 357/94)
    Tremonti Law 489/94 allowed for a deduction from taxable income of 
50 percent of the difference between investments in new plant and 
equipment compared to the average investment rate for the preceding 
five years. Pasta Zara has stated that one of its affiliates received 
tax benefits under this law in 1995 but that no benefits were received 
in the POR. No other respondent reporting receiving POR benefits from 
this program.
    Pursuant to 19 CFR 351.524(c)(1), the Department normally considers 
tax programs to provide recurring benefits. Because neither Pasta Zara 
nor its affiliates received tax benefits under Law 489/94 during the 
POR, we preliminarily determine that this program did not confer a 
countervailable subsidy in the POR.
E. Ministerial Decree 87/02
    Ministerial Decree Number 87 (February 25, 2002), in accordance 
with Law 193 of June 22, 2000, allows companies that hire or have 
training programs for prisoners to benefit from a monthly tax credit 
amounting to 516.46 Euros for every prisoner recruited. Pasta

[[Page 45685]]

Zara was the only respondent in this proceeding that reported receiving 
tax credits under this program during the POR.
    In situations where any benefit to the subject merchandise would be 
so small that there would be no impact on the overall subsidy rate, 
regardless of a determination of countervailability, it may not be 
necessary to determine whether benefits conferred under these programs 
to the subject merchandise are countervailable. (See, e.g., Cattle from 
Canada.) In this instance, any benefit to the subject merchandise 
resulting from this grant would be so small that there would be no 
impact on the overall subsidy rate, regardless of a determination of 
countervailability. Thus, consistent with our past practice, we do not 
consider it necessary to determine whether benefits conferred 
thereunder to the subject merchandise are countervailable.
Law 10/91 Grants to Fund Energy Conservation
    Under Law 10/91, the GOI provides funds for the development of 
energy-conserving technology. Law 10/91 authorized grants based on 
applications submitted in 1991 and 1992. Pasta Zara was the only 
respondent that reported receiving benefits under this program. 
Specifically, Pasta Zara reported that it received a grant through this 
program in 1993 in order to purchase new boilers for its facility.
    Pursuant to 19 CFR 351.524(b)(2), the Department will normally 
expense non-recurring benefits provided under a particular subsidy 
program to the year in which benefits are received if the total amount 
approved under the program is less than 0.5 percent of relevant sales 
during the year in which the subsidy was approved. Because the amount 
of the energy savings grant approved by the GOI for Pasta Zara under 
this program was less than 0.5 percent of Pasta Zara's sales in the 
year in which the grant was approved, this grant would be expensed 
prior to the POR in accordance with 19 CFR 351.524(b)(2). Thus, no 
countervailable benefit was provided to Pasta Zara/Pasta Zara 2 during 
the POR under this program.

IV. Programs Preliminarily Determine Not To Have Been Used During the 
POR

    We examined the following programs and preliminarily determine that 
the producers and/or exporters of the subject merchandise under review 
did not apply for or receive benefits under these programs. during the 
POR:
    A. Law 341/95 Interest Contributions on Debt Consolidation Loans 
(Formerly Debt Consolidation Law 341/95)
    B. Regional Tax Exemptions Under IRAP
    C. Corporate Income Tax (IRPEG) Exemptions
    D. Export Restitution Payments
    F. Export Credits Under Law 227/77
    G. Capital Grants Under Law 675/77
    H. Retraining Grants Under Law 675/77
    I. Interest Contributions on Bank Loans Under Law 675/77
    J. Interest Grants Financed by IRI Bonds
    K. Preferential Financing for Export Promotion Under Law 394/81
    L. Urban Redevelopment Under Law 181
    M. Grant Received Pursuant to the Community Initiative Concerning 
the Preparation of Enterprises for the Single Market (PRISMA)
    N. Industrial Development Grants under Law 183/76
    O. Interest Subsidiaries Under Law 598/94
    P. Duty-Free Import Rights
    Q. Remission of Taxes on Export Credit Insurance Under Article 33 
of Law 227/77
    R. European Social Fund Grants
    S. Law 113/86 Training Grants
    T. European Agricultural Guidance and Guarantee Fund

Preliminary Results of Review

    In accordance with 19 CFR 351.221(b)(4)(i), we calculated an 
individual subsidy rate for each producer/exporter covered by this 
administrative review. For the period January 1, 2002 through December 
31, 2002, we preliminarily determine the net subsidy rates for 
producers/exporters under review to be those specified in the chart 
shown below.

------------------------------------------------------------------------
             Producer/exporter                    Net subsidy rate
------------------------------------------------------------------------
Pastificio Fratelli Pagani S.p.A..........  0.06 percent (de minimis)
Pastificio Corticella S.p.A./Pastificio     0.10 percent (de minimis)
 Combattenti S.p.A.
Pasta Zara S.p.A./Pasta Zara 2 S.p.A/       2.76 percent
 Societa per Azioni Pasta Giulia S.p.A.
Pasta Lensi S.r.l.........................  0.00 percent (de minimis)
Pastificio Carmine Russo S.p.A./Pastificio  0.16 percent (de minimis)
 Di Nola S.p.A.
------------------------------------------------------------------------

    The calculations will be disclosed to the interested parties in 
accordance with 19 CFR 351.224(b).
    If the final results of this review remain the same as these 
preliminary results, the Department intends to instruct Customs to 
assess countervailing duties at these net subsidy rates. The Department 
will issue appropriate instructions directly to Customs within 15 days 
of publication of the final results of this review. The Department also 
intends to instruct Customs to collect cash deposits of estimated 
countervailing duties at these rates on the f.o.b. value of all 
shipments of the subject merchandise from the producers/exporters under 
review that are entered, or withdrawn from warehouse, for consumption 
on or after the date of publication of the final results of this 
administrative review.
    For all other companies that were not reviewed (except Barilla G. e 
R.F.lli S.p.A. and Gruppo Agricoltura Sana S.r.L., which are excluded 
from the order), the Department has directed Customs to assess 
countervailing duties on all entries between January 1, 2002 and 
December 31, 2002 at the rates in effect at the time of entry.
    For all non-reviewed firms, we will instruct Customs to collect 
cash deposits of estimated countervailing duties at the most recent 
company-specific or all others rate applicable to the company. These 
rates shall apply to all non-reviewed companies until a review of a 
company assigned these rates is requested.

Public Comment

    Interested parties may submit written arguments in case briefs 
within 30 days of the date of publication of this notice. Rebuttal 
briefs, limited to issues raised in case briefs, may be filed not later 
than five days after the date of filing the case briefs. Parties who 
submit briefs in this proceeding should provide a summary of the 
arguments not to exceed five pages and a table of statutes, 
regulations, and cases cited. Copies of case briefs and rebuttal briefs 
must be served on interested parties in accordance with 19 CFR 
351.303(f).
    Interested parties may request a hearing within 30 days after the 
date of publication of this notice. Any hearing, if requested, will be 
held two days after the scheduled date for submission of rebuttal 
briefs.
    The Department will publish a notice of the final results of this 
administrative review within 120 days from the publication of these 
preliminary results.
    We are issuing and publishing these results in accordance with 
sections 751(a)(1) and 777(i)(1) of the Act.


[[Page 45686]]


    Dated: July 26, 2004.
James J. Jochum,
Assistant Secretary for Import Administration.
[FR Doc. 04-17419 Filed 7-29-04; 8:45 am]
BILLING CODE 3510-DS-M