E9-12405. Certain Pasta from Italy: Preliminary Results of the 12th (2007) Countervailing Duty Administrative Review

AGENCY:

Import Administration, International Trade Administration, Department of Commerce.

SUMMARY:

The Department of Commerce (“Department”) is conducting an administrative review of the countervailing duty order on certain pasta from Italy for the period January 1, 2007, through December 31, 2007. We preliminarily find that De Matteis Agroalimentare S.p.A. (“De Matteis”) received countervailable subsidies. See the “Preliminary Results of Review” section, below. Interested parties are invited to comment on these preliminary results. See the “Public Comment” section of this notice.

DATES:

Effective Date: May 28, 2009.

FOR FURTHER INFORMATION CONTACT:

Brandon Farlander or Shelly Atkinson, AD/CVD Operations, Office 1, Import Administration, U.S. Department of Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 20230; telephone: [phone] and [phone], respectively.

SUPPLEMENTARY INFORMATION:

Background

On July 24, 1996, 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 11, 2008, the Department published a notice of “Opportunity to Request Administrative Review” of this countervailing duty order for calendar year 2007, the period of review (“POR”). See Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity To Request Administrative Review, 73 FR 39948 (July 11, 2008). On July 28, 2008, we received such a request from F.lli De Cecco di Filippo Fara San Martino S.p.A. (“De Cecco”). On July 31, 2008, we received a request for review from De Matteis. On July 31, 2008, we received a request for review from petitioners New World Pasta Company, American Italian Pasta Company, and Dakota Growers Pasta Company for De Matteis. In accordance with 19 CFR 351.221(c)(1)(i), we published a notice of initiation of this review on August 26, 2008. See Initiation of Antidumping and Countervailing Duty Administrative Reviews, 73 FR 50308 (August 26, 2008).

On September 15, 2008, we issued countervailing duty questionnaires to the Commission of the European Union (“EU”), the Government of Italy (“GOI”), De Matteis, and De Cecco. We received responses to our questionnaires in October and November 2008. On December 22, 2008, De Cecco withdrew its request for review. On January 27, 2009, we rescinded the review with respect to De Cecco. See Certain Pasta From Italy: Notice of Partial Rescission of Twelfth (2007) Countervailing Duty Administrative Review, 74 FR 4734 (January 27, 2009).

We issued supplemental questionnaires to De Matteis and the GOI in December 2008, January 2009, and March 2009, and we received responses to our supplemental questionnaires in December 2008, February 2009, March 2009, and April 2009.

Period of Review

The POR for which we are measuring subsidies is January 1, 2007, through December 31, 2007.

Scope of the Order

Imports covered by the order are shipments of certain non-egg dry pasta in packages of five pounds four ounces or less, whether or not enriched or fortified or containing milk or other optional ingredients such as chopped vegetables, vegetable purees, milk, gluten, diastasis, vitamins, coloring and flavorings, and up to two percent egg white. The pasta covered by the scope of the order 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 the order 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. In addition, based on publicly available information, the Department has determined that, as of August 4, 2004, imports of organic pasta from Italy that are accompanied by the appropriate certificate issued by Bioagricert S.r.l. are also excluded from the order. See Memorandum from Eric B. Greynolds to Melissa G. Skinner, dated August 4, 2004, which is on file in the Department's Central Records Unit (“CRU”) in Room 1117 of the main Department building. In addition, based on publicly available information, the Department has determined that, as of March 13, 2003, imports of organic pasta from Italy that are accompanied by the appropriate certificate issued by Instituto per la Certificazione Etica e Ambientale are also excluded from the order. See Memorandum from Audrey Twyman to Susan Kuhbach, dated February 28, 2006, entitled “Recognition of Instituto per la Certificazione Etica e Ambientale (ICEA) as a Public Authority for Certifying Organic Pasta from Italy” which is on file in the Department's CRU.

The merchandise subject to review is currently classifiable under items 1901.90.90.95 and 1902.19.20 of the Harmonized Tariff Schedule of the United States (“HTSUS”). Although the HTSUS subheadings are 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 finding 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 CRU.

(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 on file in the CRU.

(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 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 on file in the CRU.

(4) On April 27, 2000, the Department self-initiated an anti-circumvention inquiry to determine whether Pastificio Fratelli Pagani S.p.A.'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 Tariff Act of 1930, as amended (“the Act”), and 19 CFR 351.225(b). See Certain Pasta From Italy: Notice of Initiation of Anti-Circumvention Inquiry on 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).

Subsidies Valuation Information

Allocation Period

Pursuant to 19 CFR 351.524(b), benefits from non-recurring subsidies are allocated over a period corresponding to the average useful life (“AUL”) of the renewable physical assets used to produce the subject merchandise. The Department's regulations create 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”). See 19 CFR 351.524(d)(2). For pasta, the IRS Tables prescribe an AUL of 12 years. None of the responding companies or other interested parties objected to this allocation period. Therefore, we have used a 12-year allocation period.

Attribution of Subsidies

Pursuant to 19 CFR 351.525(b)(6), the Department will attribute subsidies received by certain companies to the combined sales of those companies. Based on our review of the responses, we preliminarily find that “cross-ownership” exists with respect to the respondent company. De Matteis has reported that it is affiliated with De Matteis Construzioni S.r.L. (“Construzioni”) by virtue of being 100 percent owned by Construzioni. See De Matteis's October 22, 2008, questionnaire response (“De Matteis's QR”) at 2-3. De Matteis has reported that Construzioni did not receive any subsidies during the POR or AUL period. See generally De Matteis's QR. Therefore, we are attributing De Matteis's subsidies to its sales only.

Discount Rates

For discount rates, the respondent company did not take out any loans in the years in which the GOI agreed to provide the subsidies in question. Therefore, pursuant to 19 CFR 351.524(d)(3)(i)(B), we used the national average cost of long-term, fixed-rate loans to allocate non-recurring benefits over time.

Consistent with past practice in this proceeding, for grants approved in 1995-2004, we used the Italian Bankers' Association (“ABI”) prime interest rate (as reported by the Bank of Italy), increased by the mark-up an Italian commercial bank would charge a corporate customer and an amount for bank charges. See, e.g., Certain Pasta From Italy: Preliminary Results and Partial Rescission of the Eighth Countervailing Duty Administrative Review, 70 FR 17971 (April 8, 2005); unchanged in Certain Pasta from Italy: Final Results of the Eighth Countervailing Duty Administrative Review, 70 FR 37084 (June 28, 2005). The Bank of Italy ceased reporting this rate starting in 2004. Because the ABI prime rate was no longer reported after 2004, for grants approved in 2005-2007, we have used the “Bank Interest Rates on Euro Loans: Outstanding Amounts, Non-Financial Corporations, Loans With Original Maturity More Than Five Years” published by the Bank of Italy and provided by the GOI in its October 22, 2008, questionnaire response (“GOI QR”) at Exhibit 5. We increased this rate by the mark-up and bank charges described above.

Analysis of Programs

I. Programs Preliminarily Determined To Be Countervailable

A. Industrial Development Grants Under Law 64/86

Law 64/86 provided assistance to promote development in the Mezzogiorno (the south of Italy). Grants were awarded to companies constructing new plants or expanding or modernizing existing plants. Pasta companies were eligible for grants to expand existing plants but not to establish new plants because the market for pasta was deemed to be close to saturated. Grants were made only after a private credit institution chosen by the applicant made a positive assessment of the project.

In 1992, the Italian Parliament abrogated Law 64/86 and replaced it with Law 488/92 (see section I.B., below). 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. De Matteis received grants under Law 64/86 that conferred a benefit during the POR.

In the Pasta Investigation,^[1] the Department determined that these 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. See Section 771(5)(D)(i) of the Act; see also 19 CFR 351.504(a). Also, these grants were found to be regionally specific within the meaning of section 771(5A)(D)(iv) of the Act.

As stated in Live Swine from Canada,^[2] “it is well-established that where the Department has determined that a program is * * * countervailable, it is the Department's policy not to re-examine the issue of that program's countervailability in subsequent reviews unless new information or evidence of changed circumstances is submitted which warrants reconsideration.” Also, this policy is reflected in the Department's standard questionnaire used in countervailing duty administrative reviews which states that “absent new information or evidence of changed circumstances, we do not intend to reexamine the countervailability of programs previously found to be countervailable.” ^[3]

In this review, neither the GOI nor the respondent company has provided new information that would warrant reconsideration of our determination that these grants are countervailable subsidies.

In the Pasta Investigation, the Department treated the industrial development 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. Therefore, we have followed the methodology described in 19 CFR 351.524(b)(2), which directs us to allocate over time those non-recurring grants whose total authorized amount exceeds 0.5 percent of the recipient's sales in the year of authorization. Where the total amount authorized is less than 0.5 percent of the recipient's sales in the year of authorization, the benefit is countervailed in full (“expensed”) in the year of receipt. We determine that grants received by De Matteis under Law 64/86 exceeded 0.5 percent of its sales in the year in which the grants were approved.

We used the grant methodology described in 19 CFR 351.524(d) to allocate the benefit from those grants. We divided the benefit received by De Matteis in the POR by its total sales in the POR.

On this basis, we preliminarily determine the countervailable subsidy from the Law 64/86 industrial development grants to be 0.03 percent ad valorem for De Matteis. See Memorandum to the File, “2007 Preliminary Results Calculation Memorandum for De Matteis Agroalimentare S.p.A.,” dated May 21, 2009 (“De Matteis Preliminary Calc Memo”).

B. Industrial Development Grants Under Law 488/92

In 1986, the EU initiated an investigation of the GOI's regional subsidy practices. As a result of this investigation, the GOI changed the regions eligible for regional subsidies to include depressed areas in central and northern Italy in addition to the Mezzogiorno. After this change, the areas eligible for regional subsidies are the same as those classified as Objective 1 (underdeveloped regions), Objective 2 (declining industrial regions), or Objective 5(b) (declining agricultural regions) areas by the EU. 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.

Law 488/92 grants are made only after a preliminary examination by a bank authorized by the Ministry of Industry. On the basis of the findings 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. De Matteis received grants under Law 488/92 that conferred a benefit during the POR.

In the Second Administrative Review,^[4] the Department determined that these 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. See Section 771(5)(D)(i) of the Act; see also 19 CFR 351.504(a). 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 respondent company has provided new information which would warrant reconsideration of our determination that these grants are countervailable subsidies. See Live Swine from Canada, 61 FR at 52420.

In the Second Administrative Review, the Department treated the industrial development 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. Therefore, we have followed the methodology described in 19 CFR 351.524(b)(2) which directs us to allocate over time those non-recurring grants whose total authorized amount exceeds 0.5 percent of the recipient's sales in the year of authorization. We determine that grants received by De Matteis under Law 488/92 exceeded 0.5 percent of its sales in the year in which the grants were approved.

We used the grant methodology described in 19 CFR 351.524(d) to allocate the benefits over time. We divided the benefit received by De Matteis in the POR by its total sales in the POR.

On this basis, we preliminarily determine the countervailable subsidy from the Law 488/92 industrial development grants to be 0.76 percent ad valorem for De Matteis. See De Matteis Preliminary Calc Memo.

C. European Regional Development Fund (“ERDF”) Programma Operativo Plurifondo (“P.O.P.”) Grant

The ERDF is one of the EU'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 EU. The ERDF program provides grants to companies located within regions that meet the criteria, as described above, of Objective 1, Objective 2, or Objective 5(b) under the Structural Funds.

De Matteis received a P.O.P. grant from the Regione Campania in 1998.^[5] The P.O.P. grant was funded by the EU, the GOI, and the Regione Campania.

In the Pasta Investigation, the Department determined that the ERDF P.O.P. grant confers a countervailable subsidy within the meaning of section 771(5) of the Act. It is a direct transfer of funds from the GOI bestowing a benefit in the amount of the grant. See Section 771(5)(D)(i) of the Act; see also 19 CFR 351.504(a). Also, this grant was 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 respondent company has provided new information which would warrant reconsideration of our determination that ERDF grants are countervailable subsidies. See Live Swine from Canada, 61 FR at 52420.

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. In accordance with 19 CFR 351.524(b)(2), we determined that the ERDF P.O.P. grant received by De Matteis exceeded 0.5 percent of its sales in the year in which the grant was approved, as was the case in the Fourth Administrative Review.

We used the grant methodology described in 19 CFR 351.524(d) to allocate the benefits over time. We divided the benefit received by De Matteis in the POR by its total sales in the POR.

On this basis, we preliminarily determine the countervailable subsidy from the ERDF P.O.P. grant to be 0.03 percent ad valorem for De Matteis. See De Matteis Preliminary Calc Memo.

D. Social Security Reductions and Exemptions—Sgravi

Italian law allows companies, particularly those located in the Mezzogiorno, to use a variety of exemptions from and reductions of 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 regulations, and are sometimes linked to conditions such as creating more jobs. We have found in past segments of this proceeding that benefits under some of these laws (e.g., Laws 183/76, 449/97, and 223/91) are available only to companies located in the Mezzogiorno and other disadvantaged regions. Certain 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 Mezzogiorno and other disadvantaged regions than for companies in other parts of the country. Still, other laws provide benefits that are not linked to any region.

In the Pasta Investigation and subsequent reviews, the Department determined that certain types 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. See Section 771(5)(D)(ii) of the Act. 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 in the Pasta Investigation and subsequent reviews that sgravi benefits, generally, were countervailable for companies located within the Mezzogiorno. See Live Swine from Canada, 61 FR at 52420. However, the GOI has submitted information claiming that benefits provided under Articles 8 and 25 of Law 223/91 and Leg. Decree 276/03 should be found not countervailable. See GOI's February 18, 2009 supplemental questionnaire response (“SQR”) at 2-13 and Exhibits n. 2a-2h; see also GOI's March 23, 2009 SQR; see also GOI's April 9, 2009 SQR at 1-2.

The laws under which sgravi benefits were provided during the POR are the following: Law 196/97 and Law 407/90.

(1) Law 196/97 [HD3](1) Law 196/97

Law 196/97 is closely related to Law 863/84. See section IV.A.1 below for a discussion of Law 863/84. Law 196/97 provides additional exemptions for employers in the Mezzogiorno that hire employees under “skilling” contracts on a long-term (or permanent) basis. As discussed below, skilling contracts under Law 863/84 occur when a company hires a worker under a non-renewable contract with a term of 24 months or less and the contract includes an educational or training component.

Law 196/97 permits such employers a total exemption from social security contributions for an additional 12-month period. Benefits from Law 196/97 could only be requested after an employee had participated in a 24-month skilling contract under Law 863/84. As noted below in the discussion of Law 863/84, no new skilling contracts under Law 863/84 could be made after October 31, 2004. However, the last possible date to request exemptions under Law 196/97 was October 31, 2006. Moreover, because the exemption granted under Law 196/97 only lasts for 12 months, benefits were set to expire by October 31, 2007.

In the Fourth Administrative Review, we determined Law 196/97 confers a countervailable subsidy within the meaning of section 771(5) of the Act. The reduction or exemption of taxes is revenue forgone that is otherwise due and is, therefore, a financial contribution within the meaning of section 771(5)(D)(ii) of the Act . The benefit is the amount of the tax savings in accordance with 19 CFR 351.509(a). Additionally, the program is regionally specific within the meaning of section 771(5A)(D)(iv) of the Act because benefits are limited to companies in the Mezzogiorno.

In accordance with 19 CFR 351.524(c) and consistent with our methodology in the Pasta Investigation and in subsequent administrative reviews, we have treated social security reductions and exemptions as recurring benefits. To calculate the countervailable subsidy, we divided De Matteis's savings in social security contributions during the POR by its total sales in the POR.

On this basis, we preliminarily determine the countervailable subsidy from Law 196/97 to be 0.01 percent ad valorem for De Matteis. See De Matteis Preliminary Calc Memo.

Because benefits expired during the POR, we preliminary determine that Law 196/97 has been terminated during the POR and there will be no subsidy benefits from this program after the POR. Further, there is no indication of any substitute or replacement program.

(2) Law 407/90

Law 407/90 grants an exemption from social security taxes for three years when a company hires a worker who (1) has received wage supplementation for a period of at least two years, or (2) has been previously unemployed for a period of two years. A 100-percent exemption is allowed for companies in the Mezzogiorno, while companies located in the rest of Italy receive a 50-percent reduction.

In the Pasta Investigation, we determined Law 407/90 confers a countervailable subsidy within the meaning of section 771(5) of the Act. The reduction or exemption of taxes is revenue forgone that is otherwise due and is, therefore, a financial contribution within the meaning of section 771(5)(D)(ii) of the Act. The benefit is the difference in the amount of the tax savings between companies located in the Mezzogiorno and companies located in the rest of Italy in accordance with 19 CFR 351.509(a). Additionally, the program is regionally specific within the meaning of section 771(5A)(D)(iv) of the Act because higher levels of benefits are limited to companies in the Mezzogiorno.

In accordance with 19 CFR 351.524(c) and consistent with our methodology in the Pasta Investigation and in subsequent administrative reviews, we have treated social security reductions and exemptions as recurring benefits. To calculate the countervailable subsidy for De Matteis, we divided the difference during the POR between the savings for the respondent company located in the Mezzogiorno and the savings a company located in the rest of Italy would have received. This amount was divided by De Matteis's total sales in the POR.

On this basis, we preliminarily determine the countervailable subsidy from Law 407/90 to be 0.01 percent ad valorem for De Matteis. See De Matteis Preliminary Calc Memo.

E. Law 289/02

(1) Article 62—Investments in Disadvantaged Areas

Article 62 of Law 289/02 provides a benefit in the form of a credit towards direct taxes, indirect taxes, or social security contributions. The credit must be used within three years. The law was established to promote investment in disadvantaged areas by providing credits to companies that undertake new investment by purchasing capital goods, equipment, patents, licenses, or “know how.” The granting of new benefits under Article 62 of Law 289/02 expired as of December 31, 2006, but the credits obtained prior to this date may be used in future years.

In the Tenth Administrative Review,^[6] we determined that Article 62 of Law 289/02 confers a countervailable subsidy. The credits are a financial contribution within the meaning of section 771(5)(D)(ii) of the Act because they represent revenue foregone that is otherwise due to the GOI, and a benefit is conferred in the amount of the tax savings in accordance with 19 CFR 351.509(a). Finally, the program is specific within the meaning of 751(5A)(D)(iv) of the Act because it is limited to certain geographical regions in Italy, specifically, the regions of Calabria, Campania, Basilicata, Pugilia, Sicilia, and Sardegna, and certain municipalities in the Abruzzo and Molise regions, and certain municipalities in central and northern Italy. No new information has been placed on the record of this review that would cause us to depart from this treatment. See Live Swine from Canada, 61 FR at 52420.

De Matteis is located in Campania and took advantage of this program. It did so by constructing a new semolina milling facility, including wheat silos, by-product storage silos, semolina silos, and milling equipment. A tax credit for De Matteis was approved in 2005 and a portion was used to reduce the company's income taxes in 2005, 2006, and 2007.

In the Tenth Administrative Review, the Department treated the amount credited against 2005 income as a non-recurring grant in accordance with the criteria in 19 CFR 351.524(c)(2)(i)-(iii). Specifically, the tax credit is exceptional because it was only available for a limited period of time, and was dependent upon companies making specific investments. Further, the tax credit required the GOI's authorization, and was tied to capital assets of the firm. Moreover, in accordance with 19 CFR 351.524(b)(2), we determined that the tax credit received by De Matteis exceeded 0.5 percent of its sales in the year in which the tax credit was approved. Therefore, we treated the portion of the tax credit used to offset income in 2005 as a grant received in that year and allocated the benefit over the AUL using the formula described in 19 CFR 351.524(d).

We have followed the same methodology for the portion of the tax credit used to offset income earned during the POR. Consequently, we divided the benefit received by De Matteis from the 2005, 2006, and 2007 grants in the POR by the company's total sales in the POR. On this basis, we preliminarily determine the countervailable subsidy from Law 289/02, Article 62 to be 0.76 percent ad valorem for De Matteis. See De Matteis Preliminary Calc Memo.

(2) Article 63—Increase in Employment

Article 63 of Law 289/02 provides a benefit in the form of a credit towards direct taxes, indirect taxes, or Social Security contributions. The law was established to promote employment by providing a tax credit to companies that increase the number of employees at the company by hiring new workers to long-term contracts. The monthly credit is 100 euros for a new hire for any company in Italy. If the employee is 45 years old or older, the monthly amount increases to 150 euros. The monthly credit is 300 euros if the company is located in the Mezzogiorno. Under the law, the granting of new credits ceased as of December 31, 2006. There is no limit as to when the credits can be applied as these credits carry over from one year to the next. However, as of 2007, the credits must be used as soon as possible and failure to do so forfeits the portion of the credit that could have been taken during the given year.

In the Tenth Administrative Review, we determined that Article 63 of Law 289/02 confers a countervailable subsidy. The credits are a financial contribution within the meaning of section 771(5)(D)(ii) of the Act because they represent revenue foregone that is otherwise due to the GOI, and a benefit is conferred in the amount of the tax savings in accordance with 19 CFR 351.509(a). Finally, the program is specific within the meaning of 751(5A)(D)(iv) of the Act because the greater benefit amount is limited to certain geographical regions in Italy, specifically, Campania, Basilicata, Puglia, Calabria, Sicilia, Sardegna, Abruzzo, Molise, and the municipalities of Tivoli, Formia, Sora, Cassino, Frosnone, Viterbo, and Massa. No new information has been placed on the record of this review that would cause us to depart from this treatment. See Live Swine from Canada, 61 FR at 52420.

De Matteis is located in Campania and claimed the higher tax credits on the income tax forms filed during the POR.

Consistent with the Tenth Administrative Review, we are treating these benefits as recurring subsidies and attributing the benefit to the year in which the taxes would otherwise have been due, i.e., the year in which the company filed its tax form.^[7] To calculate the countervailable subsidy for De Matteis, we divided the difference during the POR between the savings for the respondent company located in the Mezzogiorno and the savings a company located in the rest of Italy would have received. This amount was divided by De Matteis's total sales in the POR.

On this basis, we preliminarily determine the countervailable subsidy from Law 289/02, Article 63 to be 0.03 percent ad valorem for De Matteis. See De Matteis Preliminary Calc Memo.

F. Law 662/96—Patti Territoriali

The GOI describes Patti Territoriali grants (Law 662/96 Article 2, Paragraph 203, Letter d) as being provided to companies for entrepreneurial initiatives such as new plants, additions, modernization, restructuring, conversion, reactivation, or transfer. To be eligible for these grants companies must be involved in mining, manufacturing, production of thermal or electric power from biomasses, service companies, tourist companies, agricultural, maritime and salt-water fishing businesses, aquaculture enterprises, or their associations.

The Patti Territoriali provides grants to companies located within regions which meet the criteria of Objective 1 or Objective 2 under the Structural Funds or Article 87.3.c. of the Treaty of Rome. A Patti Territoriali is signed between the provincial government and the GOI. Based upon project submissions, the provincial government ranks the projects and selects the projects it considers to be the best. The provincial government submits the detailed plans to the GOI and, if approved, a special authorizing decree is issued for each company specifying the investment required and a schedule of the benefits.

The GOI reported that De Matteis received disbursements from the Patti Territoriali in 2000, 2004, and 2007, from a grant approved on January 29, 1999.

In the Tenth Administrative Review, the Department determined that this grant confers a countervailable subsidy within the meaning of section 771(5) of the Act. It is a direct transfer of funds from the GOI bestowing a benefit in the amount of the grant. See Section 771(5)(D)(i) of the Act; see also 19 CFR 351.504(a). Also, this grant was found to be regionally specific within the meaning of section 771(5A)(D)(iv) of the Act because it is limited to companies located within regions which meet the criteria of Objective 1 or Objective 2 under the Structural Funds or Article 87.3.c. of the Treaty of Rome. In this review, neither the GOI nor the responding company has provided new information which would warrant reconsideration of our determination that these grants are countervailable subsidies. See Live Swine from Canada, 61 FR at 52420.

In the Tenth Administrative Review, the Department treated the Patti Territoriali grant as non-recurring. No new information has been placed on the record of this review that would cause us to depart from this treatment. We have followed the methodology described in 19 CFR 351.524(b)(2) which directs us to allocate over time those non-recurring grants whose total authorized amount exceeds 0.5 percent of the recipient's sales in the year of authorization. We determined that the grant received by De Matteis under Law 662/96 exceeded 0.5 percent of its sales in the year in which the grant was approved.

We used the grant methodology described in 19 CFR 351.524(d) to allocate the benefits over time. We divided the benefit received by De Matteis in the POR by its total sales in the POR.

On this basis, we preliminarily determine the countervailable subsidy from the Patti Territoriali grant to be 0.39 percent ad valorem for De Matteis. See De Matteis Preliminary Calc Memo.

G. Law 662/96—Contratto di Programma

The GOI describes Contratto di Programma (Law 662/96, Article 2, Paragraph 203, Letter e) as an instrument provided for the expansion of existing facilities in regions that meet the criteria of Objective 1 or Objective 2 under the Structural Funds or Article 87.3.c. of the Treaty of Rome. See Memorandum to the File, “Relevant Portions of GOI's Public Questionnaire Responses in the Tenth (2005) Countervailing Duty Administrative Review,” dated March 2, 2009, at 30 (“Program Contracts Memo”); see also GOI's March 23, 2009, SQR. The expenses eligible for these grants are design, study, company land, brickwork, machinery, plants, and equipment. See Program Contracts Memo at 30. There are three types of entities eligible for these grants: (1) Large businesses operating in the industrial sector (mining, manufacturing, construction, production and distribution of power, vapor, and hot water), services, tourism, agriculture, fishing, and aquaculture industries; (2) associations of small and medium businesses operating in one or more of the above-indicated sectors; or (3) representatives of industrial, agricultural, agri-food, and fishing districts in which beneficiaries are small, medium, and large enterprises. Id.

During the first stage, an entity must apply for the grant through the Ministry of Economic Development (“MED”) (formerly the Ministry of Productive Activities) which verifies the technical and economic validity of the proposed project, the entrepreneurship requirements of the proposing party, and the adequacy of the allocated funds. Id. at 32; see also GOI's March 23, 2009, SQR. The MED files a report with the Interministerial Committee for Economic Planning to approve the financial contribution. See Program Contracts Memo at 32. During the second stage, the proposing party provides an Executive Project for the implementation of the Project Plan. See GOI's March 23, 2009, SQR. Following approval, the Contratto di Programma is signed by the entity or entities receiving grants and the GOI. See Program Contracts Memo at 32. The grant is disbursed based on the progress of the work, except for the first installment which is made as an advance payment. Id.

De Matteis received a disbursement from the Contratto di Programma in 2007 as a result of a grant approved on March 27, 2006. See GOI's March 23, 2009, SQR; De Matteis's February 19, 2009, SQR at 5 and Exhibit 1. Under this Contratto di Programma, the GOI agreed to contribute half of the approved amount, while Regione Campania agreed to contribute the other half. See GOI's March 23, 2009, SQR.

We preliminarily determine that this grant confers a countervailable subsidy within the meaning of section 771(5) of the Act. It is a direct transfer of funds from the GOI and Regione Campania bestowing a benefit in the amount of the grant. See Section 771(5)(D)(i) of the Act; see also 19 CFR 351.504(a). Also, this grant is regionally specific within the meaning of section 771(5A)(D)(iv) of the Act because it is limited to companies located within regions which meet the criteria of Objective 1 or Objective 2 under the Structural Funds or Article 87.3.c. of the Treaty of Rome.

On this basis, we preliminarily determine the countervailable subsidy from the Contratto di Programma grant to be 0.46 percent ad valorem for De Matteis. See De Matteis Preliminary Calc Memo.

II. Programs Preliminarily Determined To Be Not Countervailable

A. Social Security Reductions and Exemptions—Sgravi

(1) Law 223/91

Law 223/91 is designed to increase employment by providing benefits to companies that hire unemployed workers on a special mobility list. The mobility list comprises recently fired workers in certain sectors of the economy, but companies in any sector may hire workers off the mobility list.

(a) Article 8, Paragraph 2

Under Law 223/91, Article 8, Paragraph 2, the employer is exempted from social security contributions when a mobility-listed worker is hired under a short-term contract of up to 12 months. The employer receives such benefits for the length of the contract to a maximum of 12 months. But, if the short-term contract is converted to a permanent contract, the employer receives benefits for an additional 12 months.

Seventh Administrative Review,^[8] we determined that Law 223/91 conferred a countervailable subsidy within the meaning of section 771(5) of the Act. The reduction or exemption of taxes was treated as revenue forgone and was, therefore, a financial contribution within the meaning of section 771(5)(D)(ii) of the Act. The benefit was the amount of tax savings in accordance with 19 CFR 351.509(a). Additionally, we found that the program was regionally specific within the meaning of section 771(5A)(D)(iv) of the Act because it was limited to companies in the Mezzogiorno or because the higher levels of benefits were limited to companies in the Mezzogiorno. In the Eleventh Administrative Review,^[9] although we provided the GOI with two opportunities to demonstrate that this program was not countervailable, the GOI did not respond to the industry usage portion of the supplemental questionnaires. Therefore, we found no reason to reconsider our prior finding that benefits under Law 223/91, Article 8, Paragraph 2 are countervailable in the Eleventh Administrative Review.

Based on the GOI's responses in this administrative review, we determine that this program is not specific and, hence, not countervailable. In particular, Article 8, Paragraph 2 evidences no de jure or regional specificity. See GOI QR at Exhibit 24; see also GOI's February 18, 2009 SQR at 2-4, 9-10. Also, we find no evidence of de facto specificity. Information submitted by the GOI shows that, during the POR, there were numerous recipients of the benefits and neither pasta companies nor De Matteis were predominate users or received a disproportionately large share of the benefits. See GOI's February 18, 2009 SQR at Exhibit 2; see also De Matteis Preliminary Calc Memo. Further, during the POR, the benefits provided to “Industry,” the economic sector to which pasta companies belong, were not a disproportionately large amount. Id.

(2) Legislative Decree (“L.D.”) 276/03 (modification to Law 25/55)

L.D. 276/03 is aimed at making the labor market more flexible by providing incentives to companies hiring workers under apprentice contracts that mix work and training components. Specifically, the three categories of employee contracts recognized under this decree are: (1) Working toward completion of compulsory schooling; (2) working toward completion of trade schooling; and (3) high-level training of special skills for a worker. Except for a weekly flat fee paid by the employer on behalf of the employee, the employer receives a total exemption from its social security contribution. The contributions are applied in equal measure across Italy and the decree may be used in all economic sectors.

The GOI stated that L.D. 276/03 is a continuation of Law 25/55,^[10] a program previously found countervailable in the Seventh Administrative Review. Although we provided the GOI with an opportunity to demonstrate that this program was not countervailable in the Eleventh Administrative Review, the GOI did not respond to the industry usage portion of the supplemental questionnaire. Therefore, we found no reason to reconsider our prior finding that benefits under Law 25/55 ^[11] are countervailable in the Eleventh Administrative Review.

Based on the GOI's responses in this administrative review, we determine that this program is not specific and, hence, not countervailable. In particular, Law 25/55 as modified by L.D. 276/03 evidences no de jure or regional specificity. See GOI's February 18, 2009 SQR at 4-9; see also GOI's March 23, 2009 SQR and April 9, 2009 SQR at 1. Also, we find no evidence of de facto specificity. Similar to Law 223/91, Article 8, Paragraph 2, information submitted by the GOI shows that, during the POR, there were numerous recipients of the benefits and neither pasta companies nor De Matteis were predominate users or received a disproportionately large share of the benefits. See GOI's April 9, 2009 SQR at 2; see also De Matteis Preliminary Calc Memo. Further, during the POR, the benefits provided to the “Industry” economic sector were not a disproportionately large amount. Id.

III. Programs Preliminarily Determined To Not Be Used

We examined the following programs and preliminarily determine that the producer and/or exporter of the subject merchandise under review did not apply for or receive benefits under these programs during the POR:

A. Grant Received Pursuant to the Community Initiative Concerning the Preparation of Enterprises for the Single Market (“PRISMA”)

B. European Regional Development Fund (“ERDF”) Programma Operativo Multiregionale (“P.O.M.”) Grant

C. Certain Social Security Reductions and Exemptions—Sgravi (including Law 223/91, Article 8, Paragraph 4 and Article 25, Paragraph 9)

D. Law 236/93 Training Grants

E. Law 1329/65 Interest Contributions (Sabatini Law) (Formerly Lump-Sum Interest Payment Under the Sabatini Law for Companies in Southern Italy)

F. Development Grants Under Law 30 of 1984

G. Law 908/55 Fondo di Rotazione Iniziative Economiche (Revolving Fund for Economic Initiatives) Loans

H. Law 317/91 Benefits for Innovative Investments

I. Brescia Chamber of Commerce Training Grants

J. Ministerial Decree 87/02

K. Law 10/91 Grants to Fund Energy Conservation

L. Export Restitution Payments

M. Export Credits Under Law 227/77

N. Capital Grants Under Law 675/77

O. Retraining Grants Under Law 675/77

P. Interest Contributions on Bank Loans Under Law 675/77

Q. Preferential Financing for Export Promotion Under Law 394/81

R. Urban Redevelopment Under Law 181

S. Industrial Development Grants under Law 183/76

T. Interest Subsidies Under Law 598/94

U. Duty-Free Import Rights

V. European Social Fund Grants

W. Law 113/86 Training Grants

X. European Agricultural Guidance and Guarantee Fund

Y. Law 341/95 Interest Contributions on Debt Consolidation Loans (Formerly Debt Consolidation Law 341/95)

Z. Interest Grants Financed by IRI Bonds

AA. Article 44 of Law 448/01

IV. Programs Preliminarily Determined To Have Been Terminated

A. Social Security Reductions and Exemptions—Sgravi

(1) Law 863/84

Law 863/84 provides social security reductions or exemptions when a company hires a worker under a non-renewable contract with a term of 24 months or less and the contract includes an educational or training component. The GOI refers to these as “skilling” contracts. The employer may receive reductions or exemptions from social security contributions for a period of up to 24 months. Typically, employees hired under these contracts must be no more than 29 years old, but in the Mezzogiorno, the maximum age is 32 years old. Also, a company in the Mezzogiorno is exempted from making social security contributions for employees hired under these skilling contracts, while companies in other areas of Italy receive a 25 percent reduction in social security contributions.

L.D. 276/03 repealed the provision related to skilling contracts by private companies and, as of November 2004, no new skilling contracts could be made. However, for skilling contracts entered into as of October 2004, benefits could be realized for the duration of the two-year period.

Because benefits expired prior to the POR (i.e., October 2006) and because there is no evidence of substitute or replacement programs, we preliminary determine that Law 863/84 has been terminated prior to the POR and there are no subsidy benefits from this program during or after this POR.

V. Previously Terminated Programs

A. Regional Tax Exemptions Under IRAP

B. VAT Reductions Under Laws 64/86 and 675/55

C. Corporate Income Tax (“IRPEG”)

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

E. Export Marketing Grants Under Law 304/90

F. Tremonti Law 383/01

G. Social Security Reductions and Exemptions—Sgravi

(1) Article 44 of Law 448/01

(2) Law 337/90

Preliminary Results of Review

In accordance with 19 CFR 351.221(b)(4)(i), we calculated an individual subsidy rate for De Matteis.

For the period January 1, 2007, through December 31, 2007, we preliminarily find the net subsidy rate for the producer/exporter under review to be that specified in the chart shown below:

Producer/Exporter	Net Subsidy Rate (percent)
De Matteis Agroalimentare S.p.A.	2.48
All-Others Rate	3.85

Assessment Rates

If these preliminary results are adopted in our final results of this review, the Department will instruct U.S. Customs and Border Protection (“CBP”) to assess countervailing duties at these net subsidy rates. The Department will issue appropriate assessment instructions directly to CBP 15 days after publication of the final results of this 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, and Pasta Lensi S.r.l. which was revoked from the order), the Department has directed CBP to assess countervailing duties on all entries between January 1, 2007, and December 31, 2007, at the rates in effect at the time of entry.

Cash Deposit Instructions

The Department also intends to instruct CBP to collect cash deposits of estimated countervailing duties at the ad valorem rates shown above on all shipments of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after the date of publication of these final results of review. For all non-reviewed firms (except Barilla G. e R. F.lli S.p.A., and Gruppo Agricoltura Sana S.r.l., which are excluded from the order, and Pasta Lensi S.r.l. which was revoked from the order), we intend to instruct CBP 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

Pursuant to 19 CFR 351.224(b), the Department will disclose to parties to the proceeding any calculations performed in connection with these preliminary results within five days after the date of the public announcement of this notice.

Pursuant to 19 CFR 351.309(c)(ii), 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 no later than five days after the date of filing the case briefs, in accordance with 19 CFR 351.309(d). 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, pursuant to 19 CFR 351.310(c). 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, in accordance with section 751(a)(3) of the Act.

We are issuing and publishing these results in accordance with sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR 351.221(b)(4).

Dated: May 21, 2009.

Ronald K. Lorentzen,

Acting Assistant Secretary for Import Administration.

Footnotes

1.  Final Affirmative Countervailing Duty Determination: Certain Pasta (“Pasta”) From Italy, 61 FR 30288 (June 14, 1996) (“Pasta Investigation”).

2.  Live Swine from Canada; Final Results of Countervailing Duty Administrative Reviews, 61 FR 52408, 52420 (October 7, 1996).

3.  See Department's September 15, 2008, letter to the Embassy of Italy, at enclosure.

4.  See Certain Pasta From Italy: Preliminary Results of Countervailing Duty Administrative Review, 64 FR 17618 (April 12, 1999) (“Second Administrative Review”); Certain Pasta From Italy: Final Results of the Second Countervailing Duty Administrative Review, 64 FR 44489 (August 16, 1999).

5.  See Certain Pasta From Italy: Preliminary Results and Partial Rescission of Countervailing Duty Administrative Review, 66 FR 40987 (August 6, 2001) (“Fourth Administrative Review”); unchanged in Certain Pasta From Italy: Final Results of the Fourth Countervailing Duty Administrative Review, 66 FR 64214 (December 12, 2001).

6.  See Certain Pasta from Italy: Preliminary Results of the Tenth Countervailing Duty Administrative Review, 72 FR 43616 (August 6, 2007) (“Tenth Administrative Review”); unchanged in Certain Pasta from Italy: Final Results of the Tenth (2005) Countervailing Duty Administrative Review, 73 FR 7251 (February 7, 2008).

7.  See 19 CFR 351.509(b).

8.  See Certain Pasta from Italy: Preliminary Results and Partial Rescission of the Seventh Countervailing Duty Administrative Review, 69 FR 45676, 45683 (July 30, 2004) (“Seventh Administrative Review”); unchanged in Certain Pasta from Italy: Final Results of the Seventh Countervailing Duty Administrative Review, 69 FR 70657 (December 7, 2004).

9.  See Certain Pasta from Italy: Final Results of the Eleventh (2006) Countervailing Duty Administrative Review, 74 FR 5922 (February 3, 2009) (“Eleventh Administrative Review”), and accompanying Issues and Decision Memorandum.

10.  See GOI's April 9, 2009 SQR at 1.

11.  Because the record of the eleventh review was not fully developed, in the final results, we also stated that, alternatively, L.D. 276/03 could be a continuation of another countervailable program, i.e., Law 56/87.