[Federal Register Volume 61, Number 116 (Friday, June 14, 1996)]
[Notices]
[Pages 30288-30309]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14734]
[[Page 30287]]
_______________________________________________________________________
Part II
Department of Commerce
_______________________________________________________________________
International Trade Administration
_______________________________________________________________________
Final Affirmative Countervailing Duty Determination and Final
Determination of Sales at Less Than Fair Value: Certain Pasta From
Italy and Turkey; Notices
Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 /
Notices
[[Page 30288]]
DEPARTMENT OF COMMERCE
International Trade Administration
[C-475-819]
Final Affirmative Countervailing Duty Determination: Certain
Pasta (``Pasta'') From Italy
AGENCY: Import Administration, International Trade Administration,
Department of Commerce.
EFFECTIVE DATE: June 14, 1996.
FOR FURTHER INFORMATION CONTACT: Jennifer Yeske, Vincent Kane, Todd
Hansen, or Cynthia Thirumalai, Office of Countervailing Investigations,
Import Administration, U.S. Department of Commerce, Room 3099, 14th
Street and Constitution Avenue, N.W., Washington, D.C. 20230; telephone
(202) 482-0189, 482-2815, 482-1276, or 482-4087, respectively.
FINAL DETERMINATION: The Department of Commerce (``the Department'')
determines that countervailable subsidies are being provided to
manufacturers, producers, or exporters of pasta in Italy. For
information on the estimated countervailing duty rates, please see the
Suspension of Liquidation section of this notice.
Case History
Since the publication of our preliminary determination in this
investigation on October 17, 1995 (60 FR 53739), the following events
have occurred:
On October 21, 1995, we aligned the date of our final determination
with the date of the final determination in the companion antidumping
duty investigation of certain pasta from Italy (60 FR 54847, October
26, 1995). Subsequently, the final determinations in the antidumping
and countervailing duty investigations were postponed until June 3,
1996 (61 FR 1346, January 13, 1996).
We conducted verification of the countervailing duty questionnaire
responses from October 26 through November 11, 1995.
Three parties, Liguori Pastificio dal 1820, S.p.A, F.lli De Cecco
di Filippo Fara S. Martino S.p.A. (``De Cecco''), and Pastificio
Fratelli Pagani S.p.A (``Pagani''), made untimely submissions
containing factual information. These submissions were returned on
January 29, 1996, March 22, 1996, and April 12, 1996, respectively.
On February 14, 1996, we terminated the suspension of liquidation
of all entries of the subject merchandise entered, or withdrawn from
warehouse, for consumption on or after that date (61 FR 3672, February
1, 1996) (see, Suspension of Liquidation section, below).
Petitioners and respondents filed case briefs on April 2-4 and
rebuttal briefs on April 10-11, 1996. A public hearing was held on
April 15, 1996.
Scope of Investigation
The merchandise under investigation consists of certain non-egg dry
pasta in packages of five pounds (or 2.27 kilograms) or less, whether
or not enriched or fortified or containing milk or other optional
ingredients such as chopped vegetables, vegetable purees, milk, gluten,
diastases, vitamins, coloring and flavorings, and up to two percent egg
white. The pasta covered by this scope is typically sold in the retail
market, in fiberboard or cardboard cartons or polyethylene or
polypropylene bags, of varying dimensions.
Excluded from the scope of this investigation are refrigerated,
frozen, or canned pastas, as well as all forms of egg pasta, with the
exception of non-egg dry pasta containing up to two percent egg white.
Also excluded are imports of organic pasta from Italy that are
accompanied by the appropriate certificate issued by the Associazione
Marchigiana Agricultura Biologica (``AMAB'').
The merchandise under investigation is currently classifiable under
items 1902.19.20 of the Harmonized Tariff Schedule of the United States
(``HTSUS''). Although the HTSUS subheadings are provided for
convenience and customs purposes, our written description of the scope
of this investigation is dispositive.
Exclusion for Certain Organic Pasta
On October 2, 1995, a U.S. importer of Italian pasta requested that
the Department exclude from the scope of this investigation and the
companion antidumping duty investigation pasta certified to be
``organic pasta'' in compliance with European Economic Community
(``EC'') Regulation No. 2092/91. This regulation sets forth a regime of
standards for the cultivation, processing, storage, and transportation
of organic foodstuffs with inspections of farms and processing plants
by EC-approved national certification authorities. In addition to the
description of the EC regime, the request included a copy of a sample
certificate issued by the AMAB and a description, in English, of the
AMAB organization.
On November 9, 1995, petitioners stated that they were willing to
modify the scope of the petition and the investigation to exclude
certified organic pasta of Italian origin if U.S. imports of such pasta
were accompanied by certificates issued pursuant to EC Regulation No.
2092/91.
On November 21, we requested additional data on the EC regulation
from the Section of Agriculture of the Delegation of the European
Commission of the European Union. On December 8, 1995, the European
Commission submitted responses to our inquiries. The information
included a list of seven Italian inspection and certification
authorities (of which AMAB was one) and the statement that EC
Regulation No. 2092/91 ``* * * does not provide for certification of
products intended for export to third countries.'' Although the
Department was not able to fashion an exclusion of organic pasta from
the scope of these investigations in the preliminary determination of
the companion antidumping duty investigation, the Department stated
that if certification procedures similar to those under the EC
regulation were established for exports to the United States, we would
consider an exclusion for organic pasta at that time.
On April 2, 1996, the importer that had originally requested the
exclusion submitted a letter attaching a copy of a decree, with a
translation into English, of the Italian Ministry of Agriculture and
Forestry authorizing AMAB to certify foodstuffs as organic for the
implementation of EC Regulation 2092/91. On April 30, 1996, this
importer forwarded letters (with accompanying translations into
English) from the Director General of the Italian Ministry of
Agriculture and Forestry and from the Director of AMAB. The letter from
the Ministry states that it has authorized AMAB to insure compliance
with organic farming methods and to issue organic certificates since
December of 1992. The letter from the Director of AMAB states that this
organization will take responsibility for its organic pasta
certificates and will supply any necessary documentation to U.S.
authorities. On this basis, we are able to exclude--and do exclude--
imports of organic pasta from Italy that are accompanied by the
appropriate certificate issued by AMAB from the scope of these
investigations.
The Applicable Statute and Regulations
Unless otherwise indicated, all citations to the statute are
references to the provisions of the Tariff Act of 1930, as amended by
the Uruguay Round Agreements Act effective January 1, 1995 (the
``Act''). References to Countervailing Duties: Notice of Proposed
Rulemaking and Request for Public Comments, (54 FR 23366, May
[[Page 30289]]
31, 1989) (``Proposed Regulations''), which have been withdrawn, are
provided solely for further explanation of the Department's
countervailing duty practice.
Petitioners
The petition in this investigation was filed by Borden, Inc.,
Hershey Foods Corp., and Gooch Foods, Inc.
Respondents
Respondent companies in this investigation are Agritalia, S.r.l.
(``Agritalia''); Arrighi S.p.A. Industrie Alimentari (``Arrighi'');
Barilla G. e R. F.lli S.p.A. (``Barilla''); Pastificio Campano, S.p.A.
(``Campano''); F.lli De Cecco di Filippo Fara S. Martino S.p.A.; Molino
e Pastificio De Cecco S.p.A. Pescara (``Pescara''); De Matteis
Agroalimentare S.p.A. (``De Matteis''); La Molisana Alimentari S.p.A.
(``La Molisana''); Delverde, S.r.l. (``Delverde''); Gruppo Agricoltura
Sana S.r.L. (``Gruppo''); Pastificio Guido Ferrara (``Guido Ferrara'');
Industria Alimentare Colavita, S.p.A. (``Indalco''); Isola del Grano
S.r.L. (``Isola''); Italpast S.p.A. (``Italpast''); Italpasta S.r.L.
(``Italpasta''); Labor S.r.l. (``Labor''); Pastificio Riscossa F.lli
Mastromauro S.r.l. (``Riscossa''); and Tamma Industrie Alimentari di
Capitanata (``Tamma'') .
Period of Investigation
The period for which we are measuring subsidies (the ``POI'') is
calendar year 1994.
Subsidies Valuation Information
Benchmarks for Long-term Loans and Discount Rates: With the
exception of Barilla, the companies under investigation did not take
out any long-term, fixed-rate, lira-denominated loans or other debt
obligations which could be used as benchmarks in any of the years in
which grants were received or government loans under investigation were
given. Therefore, we used the Bank of Italy reference rate, adjusted
upward to reflect the mark-up an Italian bank would charge a corporate
customer, as the benchmark interest rate for long-term loans and as the
discount rate. The methodology used to adjust the reference rate was
described in our preliminary determination.
In the case of Barilla, the company reported and we verified that
it had secured fixed-rate obligations during two years of the relevant
period. Therefore, in accordance with section 355.49(b)(2) of the
Proposed Regulations, we used this company-specific benchmark as the
discount rate for Barilla in those years.
Allocation Period: Non-recurring benefits are being allocated over
a 12-year period, the average useful life of physically renewable
assets in the food processing industry (as reported in the Internal
Revenue Service Asset Depreciation Range System).
Benefits to Mills: Several companies under investigation produce
pasta using semolina sourced either internally or from affiliated
mills. In our preliminary determination, we concluded that subsidies to
the production of semolina, a primary input in the manufacture of
pasta, were properly analyzed under the upstream subsidy provision of
the Act (Section 771A).
Petitioners claim that the upstream subsidy provision is applicable
only when the producer of the subject merchandise purchases the input
product from an unrelated company. Petitioners assert that where the
input producer is affiliated with the producer of the subject
merchandise, production is sufficiently integrated that benefits
bestowed upon the manufacture of the input product will necessarily
flow down to the production of the subject merchandise. Petitioners
have not made an upstream subsidy allegation.
Respondents argue that because semolina is an ``input product,''
subsidies to the production of semolina are correctly examined under
the upstream subsidy provision of the statute. Respondents contend that
the language in the upstream subsidy provision of the statute expressly
defines ``upstream subsidies'' in terms of input products and makes no
distinction between purchases from related or unrelated suppliers.
A thorough examination of the Department's past practice reveals a
clear precedent for applying the upstream subsidy provision for
subsidies to the input product where the producer of the input product
is separately incorporated from the producer of the subject
merchandise, regardless of whether the two companies are affiliated
(see, e.g., Final Affirmative Countervailing Duty Determination:
Certain Oil Country Tubular Goods from Austria (60 FR 33534) and
Initiation of Countervailing Duty Investigation; Converted Paper-
related School and Office Supplies from Mexico (49 FR 58347, 58348)).
However, in two cases where the input product and the subject
merchandise are produced within a single corporate entity, the
Department has found that subsidies to the input product benefit total
sales of the corporation, including sales of the subject merchandise,
without conducting an upstream subsidy analysis (see, e.g., Final
Affirmative Countervailing Duty Determination: Certain Softwood Lumber
Products from Canada (``Lumber'') (57 FR 22570) and Final Affirmative
Countervailing Duty Determination: Industrial Phosphoric Acid from
Israel (52 FR 25447)).
Therefore, in accordance with our past practice, where the
companies under investigation purchase their semolina from a separately
incorporated company, whether or not they are affiliated, we have not
included subsidies to the mill in our calculations. However, for those
companies where the mill is not incorporated separately from the
producer of the subject merchandise, we have included subsidies for the
milling operations in our calculations. Where appropriate, we have also
included sales of semolina in calculating the ad valorem rate.
Changes in Ownership
We noted in our preliminary determination that one of the companies
under investigation, Delverde, purchased an existing pasta factory from
an unrelated party. Additionally, Indalco and De Matteis experienced
changes in ownership, and Barilla purchased an existing pasta producer.
With the exception of De Matteis, the previous owners of the purchased
enterprises or factories had received non-recurring countervailable
subsidies prior to the transfer of ownership and during the period
1983-1994.
For our preliminary determination, we calculated the amount of
those prior subsidies that passed through to Delverde with the
acquisition of the factory, following the methodology described in the
Restructuring section of the General Issues Appendix in Final
Affirmative Countervailing Duty Determination: Certain Steel Products
from Austria (58 FR 37217, 37268-69) (``General Issues Appendix''). At
the time of our preliminary determination, we did not have the
information needed to perform this calculation with respect to Indalco
and Barilla.
We noted in our preliminary determination that aspects of the
General Issues Appendix methodology were being reviewed by the Court of
Appeals for the Federal Circuit (``CAFC''), and that we would re-
examine whether the General Issues Appendix methodology is appropriate
for change of ownership transactions in light of facts developed in the
final investigation, ongoing litigation, and section 771(5)(F) of the
Act.
Since the time of our preliminary determination, the CAFC has
issued a ruling supporting our determination in those cases that
subsidies were not
[[Page 30290]]
necessarily extinguished as a result of the sale of an enterprise in an
arm's length transaction. Litigation, however, continues with regard to
certain aspects of our methodology.
For our final determination we have continued to follow the General
Issues Appendix Methodology and applied it to each of the respondents
involved in a change of ownership. We note that Barilla did not provide
the information necessary to analyze Barilla's acquisition of an
existing pasta producer. Without this information we cannot estimate
the portion of the purchase price that can reasonably be attributed to
prior subsidies. Therefore, we have treated all previously bestowed
subsidies as having passed through to the purchaser.
Related Parties
In the present investigation, we have examined several affiliated
companies (within the meaning of section 771(33) of the Act) whose
relationship may be sufficient to warrant treatment as a single
company. In the countervailing duty questionnaire, consistent with our
past practice, the Department defined companies as sufficiently related
where one company owns 20 percent or more of the other company, or
where companies prepare consolidated financial statements. The
Department also stated that companies may be considered sufficiently
related where there are common directors or one company performs
services for the other company. According to the questionnaire, such
companies that produce the subject merchandise or that have engaged in
certain financial transactions with the company under investigation are
required to respond.
In accordance with this practice, we have determined that the
following companies warrant treatment as a single company with a
combined rate: Delverde and Tamma, Arrighi and Italpasta, De Cecco and
Pescara, and De Matteis and Demaservice S.r.L. (``Demaservice'').
In our preliminary determination, we stated that Tamma held less
than a 20 percent ownership interest in the Delverde group. However,
upon reconsideration of the facts of their relationship, we have
concluded that the relationship between Tamma and the Delverde group is
substantially greater than 20 percent. We reach this conclusion by
aggregating the ownership interests of Tamma and Tamma Service, S.r.L,
which is appropriate given their relationship. In addition, the same
individual is the president of Tamma, Delverde, and Delverde's parent
company. Therefore, we have calculated a single countervailing duty
rate for these companies by dividing their combined subsidy benefits by
their combined sales.
In the cases of Arrighi and its affiliated producer, Italpasta, and
De Cecco and its affiliated producer, Pescara, we have found that the
respondents and their respective affiliates should be treated as a
single company based on the extent of common ownership. Therefore, we
have calculated a combined rate for Arrighi and Italpasta using the
methodology described above. For De Cecco and Pescara, because De Cecco
failed to provide subsidy information regarding Pescara, we have
calculated a combined rate using facts available, as described in the
Facts Available section of this notice.
As was noted in our preliminary determination, De Matteis is
related to another company, Demaservice, through common ownership.
Verification confirmed that while Demaservice does not produce the
subject merchandise, it is deeply involved in the operations of De
Matteis. Therefore, we have calculated a single countervailing duty
rate for the two companies as described above.
Facts Available
Section 776(a)(2)(A) of the Act requires the Department to use
facts available if ``an interested party or any other person * * *
withholds information that has been requested by the administering
authority or the Commission under this title.'' Two of the companies
selected to provide responses in this investigation, Italpast and
Labor, did not respond to our countervailing duty questionnaire.
Section 776(b) of the Act permits the administering authority to use an
inference that is adverse to the interests of the non-responding party
in selecting from among the facts otherwise available. Such adverse
inference may include reliance on information derived from: (1) the
petition, (2) a final determination in the investigation under this
title, (3) any previous review under section 751 or determination under
section 753 regarding the country under consideration, or (4) any other
information placed on the record. Because the petition did not include
subsidy rates, we were unable to use the petition as a source for facts
available.
In the absence of verified data concerning benefits received by
Italpast and Labor during the POI, we have determined that rates based
on record data obtained from similarly situated firms constitute the
most appropriate data available. Therefore, we have used the sum of the
highest rates calculated for each program used by any of the companies
as the facts available for Italpast and Labor.
In addition, we have determined that the final margin percentage
for Isola and its affiliated producer, Alce Nero, should also be based
on adverse facts available. At verification, Isola, a producer of
organic pasta, was unable to support the completeness and accuracy of
its response to our questionnaire. In particular, Isola did not
demonstrate that all grants received during the period 1983-1991 were
reported because it did not provide us with company records for that
time. We also found unreported grants during 1992-1994, the period for
which we were able to examine company records. In addition, Isola did
not report receiving reduced-rate loans; however, at verification we
found that during the POI it did have outstanding reduced-rate loans.
Therefore, lacking verified data concerning benefits received by Isola,
we have based its subsidy margin on adverse facts available, applying
the sum of the highest rates calculated for each program for respondent
companies.
Finally, De Cecco failed to include in the related parties section
of its questionnaire response information concerning Pescara, a related
producer of subject merchandise. We have determined that the
relationship between Pescara and De Cecco warrants treating them as one
company, as described in the Related Parties section of this notice.
After verification, De Cecco attempted to submit information into the
record of this investigation concerning Pescara. This information was
returned, however, as it was not filed in a timely manner. We retained
information on the record concerning the relationship of the companies
and the value and volume of sales made by Pescara during the POI.
We have determined that De Cecco's failure to provide a complete
response to the Department's countervailing duty questionnaire calls
for the use of facts available under section 776(a)(2) and (b) of the
Act. We have applied facts available with adverse inferences with
respect to the sales of Pescara relative to the combined sales of
Pescara and De Cecco, adjusted to eliminate intercompany transactions.
Specifically, we calculated an amount of subsidies for each program by
multiplying the highest calculated rate for any of the responding
companies by Pescara's sales, and then adding this amount to De Cecco's
subsidies under that program. This combined amount was
[[Page 30291]]
then divided by the companies' combined adjusted sales data to
calculate the ad valorem rate for De Cecco and Pescara.
Based upon our analysis of the petition and the responses to our
questionnaire, we determine the following:
Claims for ``Green Light'' Subsidy Treatment
Section 771(5B) of the Act describes subsidies that are non-
countervailable, the so-called ``green light'' subsidies. Among these
are subsidies to disadvantaged regions. The GOI and the EC have
requested that certain of their regional subsidies be considered non-
countervailable under the green light provisions of section 771(5B).
In its initial response, the EC requested green light treatment for
the regional aspects of the Structural Funds it administers (i.e., the
European Regional Development Fund (``ERDF''), the European Social Fund
(``ESF''), and the European Agricultural Guidance and Guarantee Fund
(``EAGGF'')). However, the EC also claimed that no companies under
investigation had received assistance under the ESF or the EAGGF
programs, and for this reason, the EC only responded to the green light
section of our questionnaire with respect to the ERDF program. We have
since learned that two companies did, in fact, receive assistance under
the ESF program.
Each of the Structural Funds was established with a different
purpose. The ERDF is tasked with helping to redress the main regional
imbalances in the Community by assisting in the development and
structural adjustment of underdeveloped regions and to help in the
conversion of declining industrial regions. The ESF was set up to
improve the employment opportunities for workers and to help raise
their living standards. The EAGGF assists in financing national
agricultural aid schemes and in developing and diversifying the EC's
rural areas.
The EC has established five priority objectives which govern the
operation of the Structural Funds:
Objective 1: To promote the development and structural adjustment
of the regions whose development is lagging behind;
Objective 2: To convert regions seriously affected by industrial
decline;
Objective 3: To combat long-term unemployment;
Objective 4: To facilitate the occupational integration of young
people;
Objective 5(a): To speed up the adjustment of agricultural
structures; and
Objective 5(b): To promote the development of rural areas.
In a submission made in connection with consultations held on March
11, 1996, the EC restated its claim that all regional aspects of the
Structural Funds merit green light treatment. In this submission, the
EC argued that green light status should not be analyzed separately for
each of the Structural Funds. Instead, the EC argued that each
Structural Fund ``objective'' should be treated as a program for green
light purposes. In other words, the EC focuses on the three regional
objectives under the Structural Funds, i.e., Objective 1, Objective 2,
and Objective 5(b). The EC considers the operation of Objective 1 under
the ERDF, the ESF, and the EAGGF as a distinct and separate aid
program, the operation of Objective 2 under the ERDF and the ESF as
another distinct and separate aid program, and the operation of
Objective 5 (b) under the ERDF, the ESF, and the EAGGF as yet another
distinct and separate aid program.
With respect to the ESF grants bestowed on the companies under
investigation, we do not have the information necessary to make a
determination on whether this assistance is entitled to green light
status. The EC opted not to provide a response to the green light
questionnaire for the ESF. Moreover, there is no evidence on the record
of this case regarding the particular objectives under which the ESF
aid in question was granted.
The only ERDF assistance received by a company under investigation
was granted under Objective 2 of the Structural Funds because the
company was located in a declining industrial region. According to EC
regulation, regions of a certain size which satisfy the following three
criteria may be entitled to Objective 2 status:
(a) the average rate of unemployment recorded over a period of
three years must be above the Community average;
(b) the percentage share of industrial employment to total
employment must have equaled or exceeded the Community average; and
(c) there must have been an observable fall in industrial
employment.
In addition, other types of regions may be accorded Objective 2 status
in certain circumstances. These include smaller, adjacent areas that
satisfy the above three criteria, areas defined by sectoral problems,
and urban areas with serious unemployment or certain other problems.
According to section 771(5B)(C) of the Act, in order for a subsidy
to be non-actionable it must have been provided pursuant to a general
framework of regional development, within which regions must be
considered disadvantaged on the basis of neutral and objective
criteria. These neutral and objective criteria must contain a measure
of economic development which is based on either a per capita income
that does not exceed 85 percent of the national average (in this case
the EC average) or an unemployment rate that is at least 110 percent of
the national average (also the EC average).
Regardless of whether we treat the ERDF itself as the relevant
program or adopt the EC's objective-by-objective approach, we find that
the assistance is not entitled to green light treatment. The Objective
2 criteria, described above, do include the level of unemployment;
however, by requiring unemployment only to exceed the Community
average, the criteria do not satisfy the requirement in our statute (or
the WTO Subsidies Agreement) that unemployment be at least 110 percent
of the national average. Moreover, the information on the record is
insufficient to indicate whether the region in which the sole recipient
of ERDF assistance is located does meet the requirements laid out in
section 771(5B)(C). Therefore, we need not decide whether such
information would be relevant. Finally, several of the various other
possible bases for according a region Objective 2 status do not include
one of the requisite measures of economic development.
For the foregoing reasons, we determine that subsidies received by
the Italian pasta producers under the ERDF and the ESF are
countervailable. Our treatment of these subsidies is discussed further
in the program specific section of this notice.
The GOI has requested that the Department find the following
subsidies to disadvantaged regions to be non-countervailable under
section 771(5B)(C):
ILOR and IRPEG Tax Exemptions under Decree 218 of 1978;
Industrial Development Grants under Law 64 of 1986;
Industrial Development Loans under Law 64 of 1986; and
VAT Reductions on Capital Goods under Law 675 of 1977.
The GOI has maintained a system of ``extraordinary intervention''
in southern Italy since the 1950's. Over time, various laws were passed
relating to the extraordinary intervention in the
[[Page 30292]]
South. Included in these laws were Law 64/86 and its predecessors,
which provided for capital grants and interest contributions to
productive investments in southern Italy, as well as the other programs
for which green light treatment has been requested. In 1986, Law 64/86
was passed in order to consolidate all laws relating to the
extraordinary intervention in the south into one development policy.
Each of the programs for which the GOI has requested green light
treatment can be considered part of Law 64/86 for this reason.
There is no indication that the GOI performed any analysis, using
neutral and objective criteria, in order to select the regions which
would be eligible for assistance. GOI officials admitted at
verification that the first time that a systematic review of the
regions eligible for assistance was applied in Italy was when Law 64/86
was investigated by the EC.
Subsequent to passage of Law 64/86, the EC initiated an
investigation as to whether this law was consistent with the EC's
competition policy rules. The EC competition policy rules contain a
general prohibition against member state aid schemes, with certain
exceptions which include two specific exceptions relating to regional
development. In particular, member states are allowed to provide one
level of aid intensity to regions with a per capita GDP that is less
than or equal to 75 percent of the EC average and another, lower level
of aid intensity to regions with a per capita GDP equal to 85 percent
of the member state average or an unemployment rate equal to 110
percent of the member state average.
In its decision, dated March 2, 1988, the EC found that the
majority of the Italian provinces eligible for assistance under Law 64/
86 met the criteria of the competition policy rules and were entitled
to receive aid at the higher intensity level. However, the decision
also called for a reduction of Law 64/86 benefits for one province and
the elimination of assistance for four additional provinces. The EC
allowed the GOI until 1992 for the complete reduction and elimination
of assistance to these areas.
The EC, the GOI, and certain respondents have argued that the
Department's analysis should recognize that Law 64/86 is part of a
community-wide framework of regional development. We need not reach the
issue of whether the nature of Law 64/86 as a green light subsidy is
governed by a community-wide framework of regional development because
we find that Law 64/86 does not meet the criteria established in the
community-wide framework. First, the EC itself concluded in 1988 that
several regions were ineligible to receive assistance under the
competition policy rules. In fact, Law 64/86 was not fully in
compliance with the competition policy rules until the close of 1992.
All of the Law 64/86 benefits included in this investigation were
received or approved prior to the close of 1992. In addition, the
Abruzzo region has continually been eligible to receive Law 64/86
assistance even though it did not meet the EC criteria (or even the
less stringent criteria in section 771(5B)(c)).
For the foregoing reasons, we determine that benefits provided
under Law 64/86 do not qualify as non-countervailable subsidies. Our
treatment of the individual benefits is discussed below in the program
specific section of this notice.
I. Programs Determined to be Countervailable
A. Local Income Tax (``ILOR'') Exemptions
Companies located in the Mezzogiorno may receive a complete
exemption for a period of 10 years from the ILOR on profits deriving
from new plant and equipment or from plant expansion and improvement
under Presidential Decree 218 of March 6, 1978. In addition, otherwise
non-qualifying profits which are reinvested in plant or equipment may
receive an exemption from the ILOR for the year of reinvestment. The
provision for ILOR exemptions expired on December 31, 1993, but
companies which were approved for the exemptions prior to this date may
continue to benefit from the exemption until the expiration of the 10-
year benefit period approved for each company.
We have determined that these tax exemptions are countervailable
subsidies. They constitute subsidies within the meaning of section
771(5) of the Act, as the tax exemptions represent revenue foregone by
the GOI and confer tax savings on the companies. Also, they are
regionally specific within the meaning of section 771(5A) because they
are limited to companies located in the Mezzogiorno.
Barilla, De Cecco/Pescara, and Delverde/Tamma claimed ILOR tax
exemptions on tax returns filed during the POI.
To calculate the countervailable subsidy for each company, we
divided the tax savings during the POI by the company's sales during
the POI. On this basis, we determine the countervailable subsidy from
this program to be 0.06 percent ad valorem for Barilla, 1.00 percent ad
valorem for De Cecco/Pescara, and 0.05 percent ad valorem for Delverde/
Tamma.
B. Industrial Development Grants Under Law 64/86
Law 64/86 provided assistance to promote industrial 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.
In 1992, the Italian Parliament decided to abrogate Law 64/86. This
decision became effective in 1993. Projects approved prior to 1993,
however, were authorized to receive grant amounts after 1993.
Barilla, De Cecco/Pescara, La Molisana, Delverde/Tamma, Indalco,
and Riscossa received industrial development grants.
We determine that these grants provide 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
grant. Also, these grants are regionally specific, within the meaning
of section 771(5A).
We have treated these grants as ``non-recurring'' based on the
analysis set forth in the Allocation section of the General Issues
Appendix. In accordance with our past practice, we have allocated those
grants, net of any taxes paid, which exceeded 0.5 percent of a
company's sales in the year of receipt over time.
To calculate the countervailable subsidy, we used our standard
grant methodology. We divided the benefit attributable to the POI for
each company by that company's sales in the POI. On this basis, we
determine the countervailable subsidy for this program to be 0.00
percent ad valorem for Barilla, 0.56 percent ad valorem for De Cecco/
Pescara, 0.36 percent ad valorem for La Molisana, 1.86 percent ad
valorem for Delverde/Tamma, 0.58 percent ad valorem for Indalco, and
2.51 percent ad valorem for Riscossa.
C. Industrial Development Loans Under Law 64/86
Law 64/86 also provided reduced rate industrial development loans
with interest contributions to companies constructing new plants or
expanding or modernizing existing plants in the
[[Page 30293]]
Mezzogiorno. The interest rate on these loans was set at the reference
rate, with the GOI's interest contributions serving to reduce this
rate. For the reasons discussed above, pasta companies were eligible
for interest contributions to expand existing plants but not to
establish new plants.
Barilla, De Cecco/Pescara, Delverde/Tamma, Indalco and La Molisana
received industrial development loans with interest contributions from
the GOI.
We determine that these loans are countervailable subsidies within
the meaning of section 771(5). 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, they are
regionally specific within the meaning of section 771(5A).
It is the Department's practice to measure the benefit conferred by
interest rebates using our loan methodology if the company knew in
advance that the government was likely to pay or rebate interest on the
loan at the time the loan was taken out. (See, e.g., Final Affirmative
Countervailing Duty Determinations: Certain Steel Products from Italy,
(58 FR 37327) (``Certain Steel from Italy'').) Because, in this case,
the recipients of the interest contributions knew, prior to taking out
the loans, that the GOI likely would provide the interest
contributions, we have allocated the benefit over the life of the loan
for which the contribution was received. We divided the benefit
attributable to the POI for each company by that company's sales. On
this basis, we determine the countervailable subsidy for this program
to be 0.09 percent ad valorem for Barilla, 0.42 percent ad valorem for
De Cecco/Pescara, 0.80 percent ad valorem for Delverde/Tamma, 0.09
percent ad valorem for Indalco, and 0.42 percent ad valorem for La
Molisana.
D. Export Marketing Grants Under Law 304/90
To increase market share in non-EU markets, Law 304/90 provides
grants to encourage enterprises operating in the food and agricultural
sectors to carry out pilot projects aimed at developing links between
Italian producers and foreign distributors and improving the quality of
services in those markets. Emphasis is placed on assisting small- and
medium-sized producers.
We have determined that the export marketing grants under Law 304
provide countervailable subsidies within the meaning of section 771(5)
of the Act. The grants are a direct transfer of funds from the GOI
providing a benefit in the amount of the grant. The grants are also
specific because their receipt is contingent upon anticipated
exportation.
Delverde/Tamma received a grant under this program for a market
development project in the United States.
Each project funded by a grant requires a separate application and
approval, and the projects represent one-time events in that they
involve an effort to establish warehouses, sales offices, and a selling
network in new overseas markets. Therefore, we have treated the grant
received under this program as ``non-recurring'' based on the analysis
set forth in the Allocation section of the General Issues Appendix.
Further, we have determined that the grant exceeded 0.5 percent of
Delverde/Tamma's exports to the United States in the year it was
received. Therefore, in accordance our past practice, we allocated the
benefits of this grant over time.
To calculate the countervailable subsidy, we used our standard
grant methodology. We divided the benefits attributable to the POI by
the total value of Delverde/Tamma's exports to the United States. On
this basis, we determine the countervailable subsidy to be 0.18 percent
ad valorem for Delverde/Tamma and 0.00 percent ad valorem for De Cecco/
Pescara.
E. Social Security Reductions and Exemptions
1. Sgravi Benefits
Pursuant to Law 1089 of October 25, 1968, companies located in the
Mezzogiorno were granted a 10 percent reduction in social security
contributions for all employees on the payroll as of September 1, 1968,
as well as those hired thereafter. Subsequent laws authorized companies
located in the Mezzogiorno to take additional reductions in social
security contributions for employees hired during later periods,
provided that the new hires represented a net increase in the
employment level of the company. The additional reductions ranged from
10 to 20 percentage points. Further, for employees hired during the
period July 1, 1976 to November 30, 1991, companies located in the
Mezzogiorno were granted a full exemption from social security
contributions for a period of 10 years, provided that employment levels
showed an increase over a base period.
We determine that the social security reductions and exemptions are
countervailable subsidies within the meaning of section 771(5). They
represent revenue foregone by the GOI and they confer a benefit in the
amount of the savings received by the companies. Also, they are
specific within the meaning of section 771(5A) because they are limited
to companies located in the Mezzogiorno.
Barilla, De Cecco/Pescara, Delverde/Tamma, La Molisana, Guido
Ferrara, Campano, De Matteis, Riscossa, and Indalco received social
security reductions and exemptions during the POI.
To calculate the countervailable subsidy, we have divided the total
savings in social security contributions realized by each company
during the POI by that company's sales during the same period. On this
basis, we calculated the countervailable subsidy from this program to
be 0.38 percent ad valorem for Barilla, 0.94 percent ad valorem for De
Cecco/Pescara, 1.40 percent ad valorem for Delverde/Tamma, 2.57 percent
ad valorem for La Molisana, 0.93 percent ad valorem for Guido Ferrara,
1.85 percent ad valorem for Campano, 2.03 percent ad valorem for De
Matteis, 0.95 percent ad valorem for Riscossa, and 1.06 percent ad
valorem for Indalco.
2. Fiscalizzazione Benefits
In addition to the sgravi deductions described above, the GOI
provides Social Security benefits of another type, called
``fiscalizzazione.'' Fiscalizzazione is a nationwide measure which
provides a deduction of certain social security payments related to
health care or insurance. The program provides an equivalent level of
deductions throughout Italy for contributions related to tuberculosis,
orphans, and pensions. However, the program also provides a deduction
from companies' contributions to the National Health Insurance system
which is equal to 3.44 percent of salaries paid in northern Italy and
9.60 percent of salaries paid in southern Italy.
We determine that the fiscalizzazione reductions are
countervailable subsidies within the meaning of section 771(5) for
companies with operations in southern Italy. They represent revenue
foregone by the GOI and confer a benefit in the amount of the greater
savings accruing to the companies in southern Italy. In addition, they
are regionally specific within the meaning of section 771(5A).
Barilla, De Cecco/Pescara, Delverde/Tamma, La Molisana, Guido
Ferrara, Campano, De Matteis, Riscossa, and Indalco received the higher
levels of fiscalizzazione deductions available to
[[Page 30294]]
companies located in the Mezzogiorno during the POI.
To calculate the countervailable subsidy, we have divided the
amount of the excessive fiscalizzazione deductions realized by each
company in the POI by that company's sales during the same period. On
this basis, we calculated the countervailable subsidy from this program
to be 0.11 percent ad valorem for Barilla, 0.53 percent ad valorem for
Campano, 0.38 percent ad valorem for De Cecco/Pescara, 0.40 percent ad
valorem for De Matteis, 0.32 percent ad valorem for Delverde/Tamma,
0.28 percent ad valorem for Guido Ferrara, 0.44 percent ad valorem for
Indalco, 0.71 percent ad valorem for La Molisana, and 0.51 percent ad
valorem for Riscossa.
3. Law 407/90 Benefits
Prior to verification, one of the respondent companies, Agritalia,
informed the Department that it had received benefits under Law 407/90.
Agritalia officials explained that this program grants a two-year
exemption from social security taxes when a company hires a worker who
has been previously unemployed for a period of two years. According to
Agritalia, a 100 percent exemption was allowed for companies in
southern Italy. However, companies located in northern Italy received
only a 50 percent exemption. During verification, two other companies,
Campano and De Matteis, also indicated that they had received benefits
under this program, and a review of documents related to Indalco's
social security payments indicated that Indalco had also received
benefits under this program.
We determine that the 100 percent exemptions provided to companies
with operations in southern Italy under Law 407 are countervailable
subsidies within the meaning of section 771(5). They represent revenue
foregone by the GOI and confer a benefit in the amount of the greater
savings accruing to the companies in southern Italy. In addition, they
are regionally specific within the meaning of section 771(5A).
To calculate the countervailable subsidy, we have divided the
amount of the Law 407 exemption which exceeds the amount available in
northern Italy realized by each company during the POI by that
company's sales during the same period. On this basis, we calculated
the countervailable subsidy from this program to be 0.03 percent ad
valorem for Agritalia, 0.21 percent ad valorem for Campano, 0.02
percent ad valorem for De Cecco/Pescara, 0.04 percent ad valorem for De
Matteis, and 0.01percent ad valorem for Indalco.
4. Law 863 Benefits
One of the respondents, Barilla, reported receiving Law 863
training benefits. According to Barilla, this law provides companies in
northern Italy a 25 percent reduction in social security payments for
employees who are participating in a training program. Companies in
southern Italy receive a 100 percent reduction in social security
payments for such employees.
None of the other responding companies reported receiving benefits
under this program. Additionally, we reviewed the social security
documentation for other responding companies and noted nothing to
indicate that any of the other respondents had claimed benefits under
this program.
We determine that the Law 863 reductions are countervailable
subsidies within the meaning of section 771(5) for companies with
operations in southern Italy. They represent revenue foregone by the
GOI and confer a benefit in the amount of the greater savings accruing
to the companies in southern Italy. In addition, they are regionally
specific within the meaning of section 771(5A).
To calculate the countervailable subsidy, we have divided the
amount of the Law 863 reductions which exceeds the amount available in
northern Italy realized by Barilla during the POI by that company's
sales during the same period. On this basis, we calculated the
countervailable subsidy from this program to be 0.01 percent ad valorem
for Barilla and 0.00 percent ad valorem for De Cecco/Pescara.
F. European Regional Development Fund
The ERDF is one of three Structural Funds operated by the EC. The
ERDF was created pursuant to the authority in Article 130 of the Treaty
of Rome in order to reduce regional disparities in socio-economic
performance within the Community. 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.
Arrighi/Italpasta received an ERDF grant.
We determine that the ERDF grant received by Arrighi/Italpasta
constitutes a countervailable subsidy within the meaning of section
771(5) of the Act. The grant is a direct transfer of funds providing a
benefit in the amount of the grant. Also, ERDF grants are regionally
specific within the meaning of section 771(5A) of the Act.
We view this as a ``non-recurring'' grant based on the analysis set
forth in the Allocation section of the General Issues Appendix. The
grant was received in two disbursements. The first disbursement was
received in 1993 and was less than 0.5 percent of Arrighi/Italpasta's
total sales in that year. Accordingly, this disbursement was expensed
in 1993. The second disbursement was received in 1994 (the POI) and was
also less than 0.5 percent of Arrighi/Italpasta's total sales in that
year. Therefore, in accordance with our past practice, we are
allocating the full amount of this disbursement to the POI.
To calculate the countervailable subsidy, we divided the full
amount of the grant by Arrighi/Italpasta's total sales. On this basis,
we calculated the countervailable subsidy from this program to be 0.19
percent ad valorem for Arrighi/Italpasta and 0.02 percent ad valorem
for De Cecco/Pescara.
G. European Social Fund
The ESF is also one of the Structural Funds operated by the EC. The
ESF was created under Article 123 of the Treaty of Rome in order to
improve employment opportunities for workers and to help raise their
living standards. The ESF principally provides vocational training and
employment aids. At the EC verification, we learned that ESF aid is
generally provided directly to public institutions or non-commercial
enterprises. However, it can also be provided directly to a company,
provided that it is located in an Objective 1, Objective 2, or
Objective 5(b) region. The ESF provides grants to such companies in
order to train current employees for new jobs or to hire new employees.
Barilla and Delverde/Tamma received ESF grants.
As stated in section 355.44(j) of the Proposed Regulations, the
Department considers worker assistance programs to be countervailable
when a company is relieved of an obligation it would otherwise have
incurred. We verified at the EC that in addition to providing funds for
training programs which may or may not relieve companies of an
obligation, ESF funds are available to aid companies in hiring new
employees. Because a company is normally obligated to meet its hiring
needs without assistance from the government, we determine that ESF
funds relieve companies of an obligation. Therefore, we determine that
ESF grants constitute countervailable subsidies within the meaning of
section 771(5) of the Act. The grants are a direct transfer of funds
providing a benefit in the amount of the grant. Also, because ESF
assistance to
[[Page 30295]]
individual companies is limited to companies located in Objective 1,
Objective 2, and Objective 5(b) regions, we have determined that ESF
grants are regionally specific within the meaning of section 771(5A) of
the Act.
In our preliminary determination, we treated ESF grants as
``recurring'' because worker training grants are among the types of
benefits the Department normally expenses in the year of receipt.
However, in light of the GOI verification and comments received by
interested parties, we have determined that ESF grants are ``non-
recurring'' (see Comment 20, below). We also have determined that the
grants received by Barilla and Delverde/Tamma were less than 0.5
percent of each company's respective sales in the year of receipt.
Therefore, in accordance with our past practice, we expensed these non-
recurring grants in the year of receipt. On this basis, we calculated
the countervailable subsidy from this program to be 0.00 percent ad
valorem for Barilla, 0.00 percent ad valorem for Delverde/Tamma, and
0.00 percent ad valorem for De Cecco/Pescara.
H. Export Restitution Payments
Since 1962, the EC has operated a subsidy program which provides
restitution payments to EU pasta exporters based on the durum wheat
content of their exported pasta products.
Generally, under this program, a restitution payment is available
to any EC exporter of pasta products, regardless of whether the pasta
was made with imported wheat or wheat grown within the EC. The amount
of the restitution payment is calculated by multiplying the prevailing
restitution payment rate on the date of exportation by the weight of
the unmilled durum wheat used to produce the exported pasta. The weight
of the unmilled durum wheat is calculated by applying a conversion
factor to the weight of the pasta. The EC calculates the restitution
payment rate, on a monthly basis, by first computing the difference
between the world market price of durum wheat and an internal EC price
and then adding a monthly increment (in all months except June and
July, which are harvest months). The EC normally will not allow the
restitution payment rate to be higher than the levy that the EC imposes
on imported durum wheat, as it would lead to circular trade.
Additionally, under this program, the EC permits a pasta exporter
to purchase a certificate that locks in a restitution payment rate if
the pasta exporter promises to export a certain amount of pasta by a
certain date. The promised export date can be as much as six months
later. Moreover, the pasta exporter is free to sell this certificate to
another pasta exporter. The selling price is determined through
negotiations between the seller and the purchaser and typically will be
dependent on such factors as the amount of time left until the
certificate expires, the purchaser's projected volume of exports, the
restitution payment rate under the certificate, and the current and
expected future restitution payment rates set by the EC. A pasta
exporter that fails to use a certificate by the date set forth in the
certificate must pay a penalty.
In 1987, the nature of this program changed with regard to exports
to the United States as a result of a settlement reached by the United
States and the EC. This settlement arose out of a GATT panel
proceeding, brought by the United States, in which the panel ruled (in
1983) that the restitution program violated the EC's GATT obligations
and did not fall within the exception under Item (d) of the
Illustrative List of Export Subsidies.
Under the settlement, the EC agreed to allow the importation of
durum wheat from any non-EU country free of any levy under a system
described in the settlement as ``Inward Processing Relief'' (``IPR'').
Under this system, the EC pasta exporter would not receive a
restitution payment when exporting to the United States pasta products
containing durum wheat imported with IPR. Essentially, a restitution
payment no longer was necessary because no levy had been paid upon
importation of durum wheat in the first place.
As to pasta products containing EC durum wheat or durum wheat that
had been imported without IPR, a restitution payment remained available
for exports to the United States, except that the restitution rate was
reduced, originally by 27.5 percent and later by approximately 35
percent, from the normal level available for exports to all other
countries.
As a further condition of the settlement, the EC agreed to attempt
to balance its exports to the United States equally between pasta
products containing durum wheat imported with IPR, on the one hand, and
pasta products containing EC durum wheat or durum wheat imported
without IPR, on the other hand. The goal was for 50 percent of the EC's
pasta exports to the United States to contain durum wheat imported with
IPR (for which the exporter had paid world market price, free of any
levy, and had received no restitution payments), while the remaining 50
percent of the EC's pasta exports to the United States would contain EC
durum wheat or durum wheat imported without IPR (for which the exporter
could receive reduced restitution payments). In all other respects, the
program remained unchanged.
We have concluded that the restitution payments made are
countervailable subsidies within the meaning of section 771(5) of the
Act. Each payment represents a direct transfer of funds from the EC
providing a benefit in the amount of the payment. The restitution
payments are specific because their receipt is contingent upon export
performance.
In our preliminary determination, we calculated export restitution
benefits on an earned basis, following the methodology set forth in
Final Affirmative Countervailing Duty Determination and Countervailing
Duty Order; Certain Steel Wire Nails from New Zealand (52 FR 37196,
37197). Based on information available at the time of our preliminary
determination, it appeared that the restitution rate was known at the
time of export and the respondents were confident of receiving
benefits.
In accordance with our normal practice of recognizing subsidy
benefits when there is a cash-flow effect, we have calculated the
subsidy rate for export restitution benefits based on the amount
actually received during the POI for purposes of our final
determination. We learned during verification that export restitution
benefits are not ``automatic'' in that their receipt is not certain
until an application has been filed, at the earliest. Applying for
restitution is voluntary, and not all parties eligible for restitution
always apply for benefits (see, e.g., verification report for the
European Union). We also noted that the amounts received, while
generally quite close to the amounts requested, did not always equal
the amount indicated by the company on its request form. We have
calculated the subsidy rate for export restitution benefits based on
the amount actually received during the POI.
Agritalia, Arrighi/Italpasta, Delverde/Tamma, and Riscossa received
export restitution payments during the POI on shipments to the United
States.
To calculate the countervailable subsidy, we divided the export
restitution payments received during the POI on shipments to the United
States by the company's total export sales to the United States during
the POI. We calculated a countervailable subsidy under this program of
0.42 percent ad valorem for Agritalia, 2.25 percent ad valorem for
Arrighi/Italpasta, 0.02 percent ad valorem for De Cecco/Pescara, 0.94
percent ad valorem for
[[Page 30296]]
Delverde/Tamma, and 2.94 percent ad valorem for Riscossa.
I. 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 for a deferral of
up to five years of payments due on installment contracts for the
purchase of such equipment and for a one-time, lump-sum interest
contribution from Mediocredito Centrale toward the interest owed on
these contracts. The amount of the interest contribution is equal to
the present value of the difference between the payment stream over the
life of the contract based on the reference rate and the payment stream
over the life of the contract based on a concessionary rate. The
concessionary rate for companies located in the Mezzogiorno is the
reference rate less eight percentage points. The concessionary rate for
companies located outside the Mezzogiorno is the reference rate less
five percentage points.
Two companies in northern Italy received interest contributions
under the Sabatini Law for loans which were outstanding during the POI.
In addition, La Molisana received an interest contribution at the
concessionary rate available in the Mezzogiorno for a loan which was
still outstanding during the POI.
With respect to the benefits provided in northern Italy, we
analyzed whether the program is specific ``in law or in fact,'' within
the meaning of section 771(5A)(D)(i) and (iii). Section 771(5A)(D)(iii)
of the Act provides the following four factors to be examined with
respect to de facto specificity: 1) the number of enterprises,
industries or groups thereof which use a subsidy; 2) predominant use of
a subsidy by an enterprise, industry, or group; 3) the receipt of
disproportionately large amounts of a subsidy by an enterprise,
industry, or group; and 4) the manner in which the authority providing
a subsidy has exercised discretion in its decision to grant the
subsidy.
The Sabatini Law, which created the program, contains no
limitations on the types of industries that can apply for assistance.
Further, during the years 1988 through 1993, assistance under the
program was distributed over 19 sectors, representing a wide cross-
section of the economy. On this basis, we concluded that the subsidy
recipients were not limited to a specific industry or group of
industries. We also examined evidence regarding the usage of this
program and found no predominant use by the pasta industry. We next
examined whether a disproportionately large share of benefits was
granted to the pasta industry. We found that on average, benefits to
the food processing industry, which includes the pasta industry,
amounted to 4.9 percent of all benefits granted. Considering the number
and variety of sectors receiving benefits and the range of benefits
over the various sectors, we do not consider the benefits received by
the food processing sector to constitute a disproportionate share of
the benefits distributed under this program. Given our findings that
the number of users is large and that there is no dominant or
disproportionate use of the program by the pasta producers, we do not
reach the issue of whether administrators of the program exercised
discretion in awarding benefits. Thus, for companies located outside
the Mezzogiorno, we determine that interest contributions under the
Sabatini Law are not specific, and not countervailable.
However, because the concessionary rate for companies in southern
Italy is lower than the benchmark interest rate, we determine that the
Sabatini Law interest contributions to companies in southern Italy are
countervailable subsidies within the meaning of section 771(5). 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. In addition, they are regionally
specific within the meaning of section 771(5A).
As stated earlier (see, Industrial Development Loans section,
above), when a company knows in advance that the government is likely
to pay or rebate interest on a loan, the Department will measure the
benefit conferred by that rebate using our loan methodology. Because La
Molisana knew, prior to taking out the loan, that it would receive the
interest contribution, we have allocated the benefit over the life of
the loan for which the contribution was received. We divided the
benefit attributable to the POI by La Molisana's total sales in the
POI. On this basis, we determine the countervailable subsidy for this
program to be 0.06 percent ad valorem for La Molisana and 0.01 percent
ad valorem for De Cecco/Pescara.
J. Remission of Taxes on Export Credit Insurance Under Article 33 of
Law 227/77
The Special Section for Export Credit Insurance (``SACE'') was
created under Article 2 of Law 227/77 as the branch of the GOI
responsible for the administration of government export credit
insurance and guarantee programs. Pursuant to Article 3 of Law 227/77,
SACE insures and reinsures political, catastrophic, economic,
commercial and exchange-rate risks which Italian operators are exposed
to in their foreign activities.
During the POI, only one private insurance company, Societa
Italiana Crediti S.p.A. (``SIAC''), had a reinsurance agreement with
SACE. Under the reinsurance agreement, SIAC passed along a fixed
percentage (i.e., 45 percent) of its export credit insurance premia to
SACE. In return, SACE assumed that same percentage of risk on export
credit insurance policies sold by SIAC (i.e., SACE would pay 45 percent
of any claim for which SIAC would become liable).
Article 33 of Law 227/77 provides for the remission of insurance
taxes on policies directly insured or reinsured with SACE. For
reinsurance policies, this remission of insurance taxes applied not
only to the portion of the risk covered by SACE, but also the remaining
portion covered by the private insurance company. As a result, export
credit insurance policies sold by SIAC during the POI were totally
exempt from the insurance tax by virtue of its reinsurance agreement
with SACE. Export credit insurance policies sold by other private
insurance companies, however, were not exempt from the insurance tax.
The insurance tax rate was 12.5 percent of premia paid.
We determine that the exemption from the insurance tax for policies
directly insured or reinsured with SACE is a countervailable subsidy
within the meaning of section 771(5) of the Act. The exemption
represents revenue foregone by the GOI and confer tax savings on the
companies. Also, because export credit insurance is available only to
exporters and is by its nature contingent upon export performance, we
find the remission of taxes on export credit insurance to be specific
within the meaning of section 771(5A) of the Act.
La Molisana obtained export credit insurance from SIAC for its
exports to the United States. We saw no evidence at verification to
indicate that other responding companies purchased export credit
insurance from SIAC. To calculate the benefit received by La Molisana,
we multiplied the amount of premia paid during the POI for exports to
the United States by the insurance tax rate and divided the amount by
total exports to the United States. We calculated a countervailable
subsidy rate of 0.05 percent ad valorem for La
[[Page 30297]]
Molisana and 0.00 percent ad valorem for De Cecco/Pescara.
II. Program Found To Be Not Countervailable
A. Disaster Relief
Four respondent companies, Barilla, Campano, De Matteis, and Guido
Ferrara, reported receiving disaster relief assistance between the
period 1983-1994 under Law 219/81. Law 219 was enacted following one of
the worst earthquakes to strike Italy in 50 years. Under Law 219, aid
was granted for the repair and reconstruction of residential buildings,
public locations, schools, churches and industries damaged in the
earthquakes of November 1980 and February 1981. Aid to industries was
provided to repair and rebuild facilities, such that the rebuilt
facility would employ the same number of workers as prior to the
disaster. The eligibility criteria for a facility to receive aid under
Law 219 consisted of the following:
It had to be a productive unit (e.g., shopkeepers were
ineligible);
It had to be extant at the time of the earthquake;
It had to have experienced actual damage (i.e., being
located in the applicable area was not sufficient);
The damage had to be more than minor in nature.
The amount of assistance provided was capped by a formula based on the
number of employees at the time of the earthquake and by a set
percentage of project cost.
In the past, the Department has found that disaster relief does not
confer countervailable subsidies where it constituted general
assistance to anyone in affected areas. In Final Affirmative
Countervailing Duty Determinations: Certain Steel Products from Italy
(47 FR 39360 (1982)), in reviewing a similar disaster relief program,
we stated:
Although not all areas would be eligible at any one time,
disaster relief is not selective in the same manner as other
regional programs since there is no predetermination of eligible
areas and no part of the country, and no industry, is excluded in
principle, from participation.
Accordingly, we have determined that, on a de jure basis, the disaster
relief provided under Law 219 was general in nature and available to
all who were affected. Moreover, at verification, we confirmed that aid
under Law 219 was granted to numerous companies in a variety of
industries. Therefore, we have determined this program to be not
countervailable.
III. Programs Determined To Be Not Used
A. VAT Reductions
The responses indicated that certain companies received VAT
reductions under Law 675/77. We have determined that any payments
received under this program are ``recurring,'' as they are not
exceptional and companies can expect to receive them on an ongoing
basis. Moreover, receipt of the VAT reductions is automatic provided
the company is eligible and the proper forms are filed. Such benefits
are among the types of benefits the Department has identified as
normally being expensed in the year of receipt. (See, Allocation
section of the General Issues Appendix.)
Since no payments were received by any investigated companies under
this program during the POI, we are treating the program as ``not
used'' and, consequently, have not analyzed whether it confers a
countervailable subsidy.
B. Export Credits Under Law 227/77
C. Capital Grants Under Law 675/77
D. Retraining Grants Under Law 675/77
E. Interest Contributions on Bank Loans Under Law 675/77
F. Interest Grants Financed by IRI Bonds
G. Preferential Financing for Export Promotion Under Law 394/81
H. Corporate Income Tax (``IRPEG'') Exemptions
I. European Agricultural Guidance and Guarantee Fund
J. Urban Redevelopment Under Law 181
Interested Party Comments
Comment 1: Subsidies bestowed under previous ownership: Respondents
Barilla, Indalco and Delverde argue generally that grants received by
the companies located in the Mezzogiorno (under Law 64/86) were used to
invest in new plant and equipment, and that the investment in new plant
and equipment increased the value of the enterprise. Respondents argue
that this increase in value was fully reflected in the sales price of
the acquired enterprise or its assets because, where a change of
ownership occurred, the sale was a private transaction at arm's length.
Thus, respondents argue, any competitive benefit would have been
included in the sales price of the enterprise, benefiting the previous
owner but not the new owner.
Barilla argues that neither Cagliari (a pasta producer acquired by
Barilla) nor Barilla was a state-owned enterprise and, accordingly,
Barilla's acquisition of Cagliari involved an arms-length transaction
resulting from fair and open negotiations between two purely private
parties. Barilla argues that it paid a market price for Cagliari, and
that this price reflected any remaining economic benefit from any pre-
acquisition grants that Cagliari received. Barilla further argues that
the grants received by Cagliari were received many years ago, and can
have no distortive impact on competition today.
Indalco argues that the assistance the company received under Law
64 was modest and that the company was not being rescued or bailed-out
by the government. Indalco argues that while the language of section
771(5)(F) may indicate that the provision applies both to privatization
of state-owned enterprises and to changes in ownership of private
firms, the legislative history makes it clear that the Congress
intended the provision to address privatization. In support of this
argument, Indalco cites to the Statement of Administrative Action
(``SAA'') at 258 where, referring to section 771(5)(F), the SAA reads:
``The issue of privatization of a state-owned firm can be extremely
complex and multifaceted.''
Delverde cites to Final Affirmative Countervailing Duty
Determination: Oil Country Tubular Goods from Canada (51 FR 15037,
15042) (``OCTG from Canada'') where the assets of a responding company
had been purchased in an arm's length transaction in bankruptcy
liquidation and the Department stated: ``In an arm's length
transaction, such as this one, subsidies, if there are any, are not
passed through.'' Delverde also argues that newly added amendments to
the Act clearly do not compel the Department to reach the conclusion
that subsidies to MI.BA (the previous owner of the pasta factory
purchased by Delverde) passed through to Delverde. Delverde cites
section 771(5)(F) of the Act and emphasizes that the statute indicates
that a change in ownership ``does not by itself require'' a
determination by the Department that subsidies do not pass through.
Delverde argues that the language in the statute indicates that it is
possible for subsidies to not pass through to a new owner when there is
an arm's length transaction.
Delverde further argues that MI.BA and Delverde are both private
entities, and that there has never been any government ownership of the
pasta factories. Delverde argues that, from an economic perspective, it
paid a market price for MI.BA, purchasing the assets of MI.BA at a
price determined by an
[[Page 30298]]
independent appraiser, so it should be irrelevant whether MI.BA had
received any subsidies.
Petitioners first point out that in Saarstahl AG v. United States
(Nos. 94-1457, -1475, Slip Op. (Fed. Cir. Mar. 12, 1996))
(``Saarstahl''), the CAFC sanctioned the Department's position that
``the subsidy survives unless there is evidence that it went elsewhere
or was repaid.'' Petitioners then argue that there is no evidence on
the record that would allow the Department to measure the precise
amount of the benefit that passed through to the current owner or that
remained with the previous owner, and as a result the Department must
countervail the entire amount of the prior subsidies. Petitioners
further argue that since the government was not involved in any of the
transactions, no repayment to the government of any previously bestowed
subsidies could have resulted from the changes in ownership. Finally,
petitioners argue that the type of subsidies bestowed on pasta
production under previous ownership is, for the most part, identical to
the subsidies bestowed on the production of pasta under the current
ownership. Therefore, it would be inconsistent and illogical to
countervail only the subsidies that benefited pasta production received
under current ownership while leaving the remaining portion of the
subsidies received by a facility under its previous owner
uncountervailed.
Petitioners argue that respondents are claiming that asset sales at
arm's length and for fair-market value, by themselves, insulate
previously bestowed subsidies from countervailability. Petitioners
argue that current law clearly establishes that subsidies received
under prior ownership are actionable. With regard to change of
ownership, petitioners point to the SAA, at page 258, which reads:
Section 771(5)(F) is being added to clarify that the sale of a
firm at arm's length does not automatically, and in all cases,
extinguish any prior subsidies conferred. Absent this clarification,
some might argue that all that would be required to eliminate any
countervailing duty liability would be to sell subsidized productive
assets to an unrelated party. Consequently, it is imperative that
the implementing bill correct such an extreme interpretation.
Petitioners contend further that the Department has been careful to
distinguish its findings in OCTG from Canada from other cases where
there have been changes in ownership. Petitioners cite to the General
Issues Appendix, at 37236, where the Department stated:
OCTG from Canada involved a situation where a company had become
defunct and non-operational. Its assets were disposed of through a
bankruptcy proceeding. This is a unique situation not involving the
sale of an ongoing operating company exporting subsidized
merchandise to the United States.
Petitioners additionally argue that the respondent company in OCTG from
Canada was engaged in the manufacture of a different product from the
predecessor company.
Petitioners next argue that the Department's own grant allocation
methodology recognizes that the value of a grant should be spread out
over several years. Petitioners cite to the General Issues Appendix at
37261:
The Department allocates non-recurring subsidies over time in
recognition of the fact that the statutory goal of providing a
remedy against subsidies would be defeated by allocating the
subsidies to a single moment or year. The statutory presumption that
subsidies benefit goods produced by their recipients must, in order
to have the intended effect, be applied over a reasonable period of
time * * *.
Petitioners contend that considering these subsides to be extinguished
when there is a change of ownership is tantamount to circumscribing all
of the subsidies to a single moment in time, a result that is
inconsistent with the Department's practice of allocating non-recurring
subsidies.
DOC Position: We have determined that a portion of the subsidies
bestowed while the enterprise was under previous ownership pass
through, as described in the Change of Ownership section of this
notice.
In Saarstahl, the CAFC stated that ``the statute does not limit
Commerce to countervailing only subsidies that confer a competitive
advantage on merchandise exported to the United States. Nor does the
legislative history say that Commerce was expected to perform any
calculations of competitive advantage.'' (Saarstahl at 245.) The CAFC
then cited to S. Rep. No. 1298, 93d Cong., 2d Sess. 184 (1974), which
states, ``Whenever the Secretary * * * has sufficient evidence to
determine the existence of a bounty or grant, he can and should make
his final determination and impose countervailing duties.''
Respondents argue that a purchaser is indifferent between buying a
previously subsidized enterprise and an enterprise that has not been
subsidized. As noted above, the CAFC in Saarstahl specifically stated
that the Department does not need to demonstrate competitive benefit.
The Department calculates a subsidy rate based upon the countervailable
subsidies to the merchandise. These subsidies do not necessarily lose
their countervailable nature by simple virtue of an arm's length
transaction, as the CAFC in Saarstahl and section 771(5)(F) confirm.
With Saarstahl, the CAFC upheld the Department's position that
subsidies were not necessarily extinguished as a result of the
privatization of a state-owned enterprise through an arm's length
transaction. In so doing, the CAFC rejected the position of the Court
of International Trade (``CIT'') that an arm's length sale
automatically extinguished prior subsidies. It was the CIT's ``extreme
position'' that led to the addition of section 771(5)(F) to the Act
(see, SAA at 258).
Respondents attempt to distinguish the changes in ownership in the
instant investigation from Saarstahl by arguing that in addition to an
arm's length transaction at fair market value, the respondent parties
are privately held entities and there was no government ownership, nor
involvement in the sales of the companies'' shares or assets.
Accordingly, respondents argue, this lack of involvement by the state
in the transaction means that the previous owners retain the benefit
from the subsidies.
Respondents' argument conflicts with section 771(5)(F), which
reads:
Change in ownership.--A change in ownership of all or part of a
foreign enterprise or the productive assets of a foreign enterprise
does not by itself require a determination by the administering
authority that a past countervailable subsidy received by the
enterprise no longer continues to be countervailable, even if the
change in ownership is accomplished through an arm's length
transaction.
If Congress had intended that this section apply only to privatizations
of state-owned enterprises, the language would have been more explicit
in that regard. It is apparent that Congress intended that this
provision be applicable to all changes of ownership. Moreover, the
language of this provision purposely leaves much discretion to the
Department. As the SAA explains, ``Commerce must exercise its
discretion carefully through its consideration of the facts of each
case and its determination of the appropriate methodology to be
applied.'' (SAA at 258.)
Finally, we have rejected petitioners' arguments for countervailing
the entire amount of the prior subsidies, as these arguments are
contrary to the methodology described in the General Issues Appendix.
Comment 2: Expensing of subsidies bestowed on companies under
previous ownership: Barilla argues that in the
[[Page 30299]]
event the Department concludes it is appropriate to include in its
calculations the non-recurring subsidies received by Cagliari prior to
the company's purchase by Barilla, the amount of the grants is less
than Barilla's sales in the years of receipt, so the subsidies should
be allocated entirely to the years of receipt.
DOC Position: We disagree with respondent. To determine whether or
not a grant should be allocated over several years or entirely to the
year of receipt, the Department compares the amount of the grant to the
revenues of the grant recipient (in this instance, Cagliari) in the
year the grant is received. Barilla did not provide us with information
concerning the revenues of Cagliari in the year of receipt of the
grant. Lacking this information, we have assumed that the grant
exceeded 0.5 percent of Cagliari's sales in that year and have
allocated this grant using our standard allocation formula.
Comment 3: Expensing test for non-recurring subsidies: Respondents
La Molisana and Barilla argue that the Department should raise the
threshold used to decide whether a non-recurring countervailable
subsidy should be allocated to future periods or allocated entirely to
the year of receipt from 0.5 percent to one percent. Respondents cite
to Final Affirmative Countervailing Duty Determinations: Certain Steel
Products from Belgium (47 FR 39304, 39317) where the Department
established its current methodology for allocating grants over time and
instituted the practice of expensing small grants which were recognized
by the Department at the time to be generally less than one percent of
the appropriate denominator in the year of receipt. Respondents state
that the Department lowered this expensing threshold to 0.5 percent in
Cold-Rolled Carbon Steel Flat-Rolled Products from Argentina: Final
Affirmative Countervailing Duty Determination and Countervailing Duty
Order (49 FR 18016, 18018) (``Steel from Argentina'') to accord with
the then newly instituted de minimis level of 0.5 percent. Respondents
contend that the Department aligned the expensing and de minimis rates
because the application of an expensing rate different from the de
minimis rate could lead to anomalous results. Respondents cite to the
hypothetical example given in Steel from Argentina where a respondent
receiving a single countervailable grant slightly above the de minimis
rate, but below the expensing threshold, is subject to an order;
whereas another firm receiving a larger grant that is above the
expensing threshold and is, therefore, allocated over time receives a
de minimis rate and is excluded from any order. Respondents argue that
having an expense rate that is below the de minimis rate is equally
undesirable because such a policy would require application of the
allocation process for a subsidy the Department considers too small to
be countervailed.
Petitioners assert that there is no statutory or regulatory
requirement that compels the Department to align the expensing rate and
the de minimis rate. Petitioners argue that in Steel from Argentina the
Department did not consider a hypothetical circumstance where the
expense rate is lower than the de minimis rate, since such an exercise
was not required. Petitioners contend that raising the expensing rate
to one percent would enable foreign governments to subsidize companies
through numerous small grants. Additionally, petitioners argue, if the
Department were to carry respondents' logic further, and align the
expensing rate with the de minimis rate of two percent for developing
countries set by section 703(b)(4)(B), a government could obtain a
subsidization level of immense proportions while avoiding
countervailable duties by awarding numerous grants, each below a two
percent threshold.
DOC Position: Although the Department normally will allocate
nonrecurring grants over time, under the so-called 0.5 percent test,
the Department will generally allocate nonrecurring grants received
under a particular subsidy program entirely to the year of receipt if
the total amount of such grants is less than 0.5 percent of a firm's
sales in that year.
Respondents are correct in their assertion that the floor amount
was decreased from one percent to 0.5 percent when the de minimis rate
of 0.5 percent was instituted. However, the recent statutory increase
in the de minimis rate for investigations does not require an
equivalent increase in the rate used to determine whether a non-
recurring countervailable subsidy will be allocated over time or
entirely to the year of receipt. The use of an expensing rate that is
below the de minimis rate does not produce the ``anomalous results''
described by the Department in Steel from Argentina where the expensing
rate was above the de minimis rate.
Additionally, a one percent de minimis rate is being applied only
to certain investigations; investigations in certain developing
countries have higher de minimis rates of two percent and three
percent, and the de minimis rate will remain 0.5 percent for all
administrative reviews (SAA at 269). We believe retaining a consistent
expensing rate of 0.5 percent across all investigations and reviews is
desirable.
Comment 4: Northern Italy all-others rate: Pagani, an Italian pasta
producer, contends that a single all-others rate, applicable throughout
Italy, is unfairly prejudicial to Pagani. Pagani claims that the
inclusion of programs available exclusively to producers located in the
Mezzogiorno in the calculation of the all-others rate is unfair to
pasta producers located in northern Italy.
Pagani argues further that statutory changes resulting from the
URAA require the Department to assign Pagani an individual rate. To
support this position, Pagani cites to section 777A(e)(1) of the Act
which reads: ``[T]he administering authority shall determine an
individual countervailable subsidy rate for each known exporter or
producer of the subject merchandise.''
In the event the Department declines to assign it an individual
countervailing duty deposit rate, Pagani proposes that the Department
calculate a separate all-others rate applicable only to producers
located in northern Italy, and that programs for which companies
located in northern Italy were ineligible to participate be excluded in
calculating this rate. Pagani argues that the Act recognizes the
independent nature of regions of a subject country in particular
situations. Pagani argues that the statute's treatment of
``disadvantaged regions'' under the green light provisions permits
Commerce to treat a region as a separate country for purposes of the
specificity test. Pagani proposes that the Department recognize the
distinction between the Mezzogiorno and northern Italy and determine an
all-others rate for companies located in the north of Italy.
Petitioners argue that Pagani's assertion that the Act entitles it
to an individual rate is erroneous. Petitioners point to the SAA which
states that the amendment cited by Pagani ``eliminates the presumption
in favor of a single country-wide CVD rate and amends section 777A of
the Act to establish a general rule in favor of individual CVD rates
for each exporter or producer individually investigated'' (SAA at 271)
(emphasis added).
Petitioners state that Pagani's reliance on the regional green
light provisions in the statute is misplaced. Petitioners contend that
the green light amendments were enacted only to determine whether or
not a subsidy was countervailable, and have no bearing on how a subsidy
should be calculated.
DOC Position: We agree with petitioners that Pagani is not entitled
to
[[Page 30300]]
an individual rate. While section 777A calls for the application of
individual rates, section 705(c)(1)(B)(i) of the Act, which describes
the all-others rate, states the Department shall determine ``an
estimated all-others rate for all exporters and producers not
individually investigated * * *'' Pagani was not individually
investigated in this proceeding; it was not selected to respond, nor
did it submit a voluntary response to our questionnaire. Therefore, we
see no statutory basis for Pagani's argument.
Moreover, such a proposal is contrary to past practice (see, e.g.,
Lumber, 22578) and would be unadministrable. While there are regional
programs in the instant investigation that are available only to
producers in the Mezzogiorno, the Department hypothetically could
perform an investigation where there are dozens of regional programs,
each covering different regions, which would result in dozens of
different regional countervailable subsidy rates if we were to follow
the methodology proposed by Pagani. Therefore, we have not calculated
separate all-other rates for northern and southern Italy.
Comment 5: Trading company deposit rate: Agritalia claims that it
should be assigned an individual countervailing duty deposit rate based
only on countervailable subsidies it received, and its rate should not
include any subsidies received by its suppliers. At the same time,
Agritalia states that it does not object to the imposition of duties on
its exports to the United States based on any rates assigned to its
suppliers.
Agritalia argues that information in the record of this
investigation demonstrates that Agritalia received de minimis
countervailable subsidies, so it should be excluded from any order
resulting from this investigation. Agritalia cites to section
705(c)(1)(B)(i)(I) of the Act, which states that the Department will
determine an ``individual countervailable subsidy rate for each
exporter or producer individually investigated.'' Agritalia argues that
a rate based on a weighted average of the rates of its suppliers which
produced the pasta it sold during the POI is not the same as an
individual rate for each exporter or producer as prescribed in the
statute.
Petitioners argue that, contrary to Agritalia's assertions, section
705(c)(1)(B)(i)(I) does not mean that a company's ``individual'' rate
must be calculated based solely on subsidies ``individually'' received.
Petitioners state that Agritalia should receive a rate based on an
aggregation of the countervailable subsidies received by Agritalia and
the subsidies received by its producers attributable to the merchandise
sold by Agritalia during the POI. Petitioners cite to Certain Carbon
Steel Products from Brazil; Preliminary Results of Countervailing Duty
Administrative Review (51 FR 39774, 39777) (``Steel from Brazil''),
where the Department stated that subsidies to suppliers benefit the
merchandise exported by trading companies. Petitioners request that the
Department follow the calculation methodology laid out in Steel from
Brazil where subsidies to the producers of merchandise sold by export
trading companies are included in the margin calculation.
DOC Position: We agree that the Department must calculate a
countervailable subsidy rate for each exporter or producer of the
subject merchandise which is individually investigated. However,
certain subsidies to producers also benefit the merchandise exported by
the trading companies. Therefore, we have included all of the
countervailable subsidies which benefit the subject merchandise in the
countervailing duty rate assigned to Agritalia. A detailed explanation
of our calculation methodology for Agritalia's rate is provided in the
Suspension of Liquidation section of this notice.
Comment 6: Exclusion of de minimis companies: Petitioners assert
that the Department should not exclude any de minimis companies from
any countervailing duty order that is issued as a result of this
investigation. Petitioners cite to Final Affirmative Countervailing
Duty Determinations; Certain Steel Products from the Federal Republic
of Germany (47 FR 39345) (``Steel from the FRG''), where the Department
did not exclude a de minimis company from the order due to likelihood
that company would continue to receive benefits under investigated
subsidy programs. Petitioners argue that the Department applies strict
standards to companies that request individual, company-specific rates
in administrative reviews. Further, petitioners argue that the
standards for termination or revocation of an order require affirmative
evidence that a government has eliminated all subsidies on the
merchandise, and that there is an absence of likelihood that the
subsidies will be reinstated in the future.
Petitioners assert that the export restitution program has existed
for more than 20 years, and there is no indication that this program
will be terminated or revoked. Petitioners emphasize that export
restitution payments were only available during two months of the POI;
accordingly, petitioners contend, it is likely that respondent
companies will receive higher levels of countervailable subsidies in
the future.
Petitioners further argue that the possibility for circumvention is
very real, and that the record of this investigation has demonstrated
that pasta producers in Italy maintain an interrelated web of
relationships which could allow companies to funnel exports through
low-margin, or excluded, respondents. Petitioners think an exception to
the Department's general practice of excluding de minimis companies is
in order in light of these circumstances.
Respondents Arrighi and Barilla argue that any respondent receiving
a de minimis rate, should be excluded, as a matter of law, from any
countervailing duty order the Department might issue in connection with
this investigation. Respondents point to section 705(c)(1)(B)(i)(I) of
the Act which states that the Department will determine an ``individual
countervailable subsidy rate for each exporter or producer individually
investigated.'' Respondents then point to section 705(a)(3) of the Act
which states: ``In making a determination under this subsection, the
administering authority shall disregard any countervailable subsidy
that is de minimis * * *'' Respondents argue that since the statute
requires the Department to disregard any de minimis countervailable
subsidy, the Department must exclude respondents which are found to
have de minimis countervailable subsidy rates.
Respondents further argue that the Department has a long
established practice of excluding de minimis companies from the order.
Respondents point out that Steel from the FRG, cited by petitioners, is
more than ten years old, and is not reflective of current Department
practice.
DOC Position: We disagree that the circumstances surrounding this
investigation merit a departure from our usual practice of excluding de
minimis respondents from an order, even if the law permitted this. The
facts in this case differ from those in Steel from the FRG. In that
case, the Department did not exclude from the order a respondent that
had experienced a loss during the POI because there was a pattern of
prior subsidization through coverage of losses. Hence, the Department
had evidence that countervailable benefits associated with the coverage
of losses were likely to be received after the POI. In this case, we
have no evidence that the pattern of subsidization will change in such
a way that benefits to firms
[[Page 30301]]
which are currently below de minimis level will increase.
Comment 7: Export Restitution Payments: Respondents Delverde and
Tamma argue that, due to amendments effected by the URAA, the
Department cannot recognize the benefits from export restitution
payments on an ``earned'' basis. Delverde and Tamma assert that the new
statute requires a ``financial contribution'' before a subsidy can be
found and that ``earning'' a payment does not amount to a financial
contribution.
Agritalia and Arrighi argue that the Department should use the date
export restitution is recorded in company books as the basis upon which
to calculate any potentially countervailable subsidies. Agritalia and
Arrighi claim that accrual in the company records is an indication that
the company has reached a commercial and legal conclusion that the
receipt of the benefit is certain, thereby signifying that there has
been an economic effect on the company. Agritalia further claims that
the complex documentation process required to receive restitution
payments results in the company being uncertain it will receive
benefits until it receives confirmation from the GOI.
The EC argues that export restitution benefits should be calculated
at the time of the event giving rise to the benefit, i.e., the
exportation of the merchandise. The EC argues that the timing of the
payment can vary for reasons external to the objective of the subsidy,
such as delays in the administrative mechanism paying out the
restitution. The EC argues that the objective of the subsidy is a
payment for exportation, so restitution should be calculated based on
date of exportation.
Petitioners argue that the record in this investigation provides
evidence of substantial delays between the date of exportation, the
date a request is filed, and the date funds are eventually received. In
addition, petitioners contend that the various permutations associated
with the export restitution program, such as pre-fixing of the
restitution rate and the ability to sell and buy pre-fixing rights,
should lead the Department to the conclusion that the best method for
measuring restitution benefits is to calculate the benefit rates on a
received basis.
DOC Position: We agree with petitioners that various permutations
associated with the export restitution program create a level of
uncertainty that the amount of restitution expected at the time of
export will equal the amount received. Moreover, as stated in the
Export Restitution section of this notice, we found at verification
that companies do not always receive the amount of restitution expected
at the time of receipt. Therefore, we have calculated the benefits
under this program on a received basis.
Comment 8: Purchased Restitution Benefits: Arrighi argues that any
export restitution payments received as a result of using an advance-
fixing certificate it purchased are non-countervailable, as Arrighi
purchased the certificate from an unrelated party and paid adequate
remuneration for the certificate.
Petitioners argue that export restitution benefits, regardless of
whether they result from a purchased certificate, represent a direct
transfer of funds from the EC to the recipient, and that the Department
must countervail at least the net amount received by Arrighi.
DOC Position: We have calculated the benefits of export restitution
payments on a received, rather than earned, basis for our final
determination. As Arrighi did not receive any payments resulting from
purchased export restitution certificates during the POI, this issue is
moot.
Comment 9: Fee Received by Agritalia: Petitioners argue that
Agritalia was potentially eligible for export restitution on a sale of
pasta to the United States, but instead claimed IPR as a service to
another party. Petitioners claim that Agritalia would not have been
able to receive fees for this service absent the export restitution
subsidy program so, in effect, Agritalia indirectly benefited from the
export restitution program, and the fees received by Agritalia should
be countervailed. Petitioners argue that the fees received by Agritalia
represent a benefit provided indirectly by the GOI in that their very
existence stems from the design of the export restitution/IPR system in
Italy.
Agritalia responds that the fees it received were related to inward
processing relief and not to export restitution. Agritalia argues that
the Department has not found IPR countervailable, so any fees related
to IPR should not be countervailable. Agritalia argues that neither the
EU nor the GOI were involved in the transactions associated with the
fees, and that there is no more relationship between the fees received
by Agritalia and restitution than there is between IPR and restitution.
Since the IPR scheme is not a countervailable benefit, the fees
received by Agritalia are not a countervailable benefit.
DOC Position: When Agritalia accepted the fees, it surrendered its
eligibility to receive any restitution payments on those exports. The
fees were payment to Agritalia to give up its export restitution rights
with respect to those shipments where it was paid to claim IPR.
Accordingly, we have determined that the fees received by Agritalia
should be included in our calculation of countervailable export
restitution benefits for Agritalia.
Comment 10: VAT Reductions: Petitioners argue that VAT reductions
under Law 675/77 are grants associated with the purchase of capital
equipment and should be treated as non-recurring subsidies. Petitioners
refer to the verification report in support of their argument that the
GOI uses the VAT rebates to distribute these grants as a matter of
convenience, and that the method of distribution should not outweigh
the consideration that these are grants for capital equipment.
Respondents Delverde and Tamma cite to the General Issues Appendix
at 37226 where the Department indicates that its practice is to find
benefits to be non-recurring when:
the benefits are exceptional, the recipient cannot expect to receive
the benefits on an ongoing basis from review period to review period
and/or the provision of funds by the government must be approved
every year.
Delverde and Tamma argue that there is no lengthy application or
approval process to receive VAT reductions under Law 675; benefits are
claimed as a line item directly on a company's VAT return. Further,
recipients can expect to receive benefits on an ongoing basis.
Respondents further argue that because this provision of Law 675/77
provides a refund of VAT, it is a simple tax program and should be
found recurring.
Respondent De Matteis cites to Preliminary Affirmative
Countervailing Duty Determinations: Certain Steel Products from Italy
(57 FR 57739, 57744) where the Department determined that VAT
reductions under Law 675/77 were recurring benefits. De Matteis argues
that the Department should follow the precedent set in Certain Steel
from Italy and in the preliminary determination for this investigation,
and continue to treat VAT reductions under Law 675/77 as recurring
benefits.
DOC Position: We agree with respondents. In determining whether
subsidy benefits are recurring or nonrecurring, the Department
considers whether or not the benefits are exceptional, expected to be
received on an ongoing basis from review period to review period, and/
or require approval every year.
Although no new VAT reductions under Law 675 have been offered
since
[[Page 30302]]
1991, until that time the program had been longstanding, and pasta
manufacturers expected to receive benefits under the program on a
recurring basis, without any special approval. Therefore, we have
continued to treat these benefits as recurring in our final
determination.
Comment 11: Disaster Relief: Petitioners argue that assistance
provided under Law 219 for disaster relief should be countervailed in
the final determination. Petitioners acknowledge Float Glass from
Italy; Preliminary Results of Administrative Review of Countervailing
Duty Order (47 FR 56160) and Final Affirmative Countervailing Duty
Determinations; Certain Steel Products from Italy (47 FR 39360 (1982))
as two cases where disaster relief was found to be non-specific because
there was no predetermination of eligible areas and because no industry
was excluded from eligibility. Petitioners contrast this with the 1993
determination in Certain Steel from Italy, where the Department found
disaster relief to be countervailable because the government had not
provided information on specificity. Petitioners conclude that disaster
relief is countervailable when the government has failed to establish
its non-countervailable status, or where the assistance appears to be
de facto specific. Petitioners claim that this is the case in this
investigation.
According to petitioners, the Italian government used Law 219
assistance as a mechanism for expanding and modernizing production in
the Mezzogiorno region. As such, Law 219 assistance is a regionally
specific, industrial development subsidy whose ``[g]eneral financial
benefit to the production is sufficient to support a determination of
subsidy * * *'' (British Steel Corp v. United States, 605 F.Supp. 286,
295 (C.I.T 1984). Petitioners maintain that the assistance does not
appear to be limited to areas in need of assistance. In addition,
petitioners point out that only slightly more than half of submitted
applications were ultimately approved, indicating that benefits were
distributed selectively. Petitioners also argue that respondents'
failure to report Law 219 benefits in their original responses to the
questionnaire warrants adverse inferences and, therefore, the
Department should assume that these companies benefited from Law 219 to
the maximum extent possible.
Guido Ferrara states that Disaster Relief benefits under Law 219
are not countervailable. According to Guido Ferrara, benefits pursuant
to Law 219 went to build structures, businesses and churches destroyed
during the 1980 earthquake. Guido Ferrara points out that the amount of
assistance it received only helped to rebuild the factory, and not to
expand beyond the original number of production lines. Guido Ferrara
adds that the disaster relief assistance did not make up for several
years worth of lost sales and lost customers. Guido Ferrara maintains
that countervailing benefits received pursuant to Law 219 would create
a bad precedent in that the United States has provided similar
assistance during far less serious disasters.
Barilla, De Matteis and Campano argue that assistance under Law 219
was generally available to a wide range of facilities destroyed by the
earthquake, i.e., industries, residential buildings, public locations,
schools, and churches within an objectively defined geographic area.
These respondents also point out that the GOI used objective criteria
to select damaged eligible industries and that all companies that met
the criteria could participate. These respondents also point out that
only 5 of 598 companies eligible for assistance under Law 219 were
pasta producers.
DOC Position: We agree with respondents that assistance under Law
219 is non-specific within the meaning of section 771(5A) of the Act
and, as such, is not countervailable. Verification showed that all
companies that met the prescribed criteria were automatically eligible
for assistance. The criteria are neutral and do not favor one
enterprise or industry over another. Adherence to the criteria is
monitored by the GOI beginning with the application and approval stages
(e.g., by requiring proof/documentation of actual damage and the extent
of damage) and all the way through completion of the project by
requiring proof of costs incurred (e.g., receipts) and on-site
verification by government-appointed inspectors to ensure completion of
the approved plans.
As for petitioners' concern that the GOI is using Law 219 as
another mechanism for expanding and modernizing production in the
Mezzogiorno region, we saw no evidence that this program did anything
more than assist in the rebuilding of facilities damaged by a natural
disaster. Under the provisions of Law 219, the rebuilt facilities are
required to produce the same product as the predecessor factory. In
addition, eligibility for Law 219 assistance is strictly limited to
facilities that suffered more than minor damage. If Law 219 had been
designed to function as a mechanism for funneling more money into the
Mezzogiorno region for expansion and modernization of production
facilities, then one would expect to see looser eligibility
requirements. While it is true that companies are not restricted to
simple restoration of the damaged facilities, Law 219 assistance is
capped by a formula based on the number of employees at the time of the
earthquake and by a set percentage of project cost. To require that
companies restrict themselves to mere restoration of the previous
facility would be unreasonable and inefficient. This is especially true
in the presence of technological advances achieved subsequent to the
original capital purchases that would allow for cost effective building
of plants and for the acquisition of advanced machinery.
Contrary to petitioners'' assertion that the assistance does not
appear to be contained to areas in need of it, we found at verification
that assistance was limited to facilities damaged by the earthquake
within a defined geographic area centered about the area hardest hit by
the earthquake.
Our findings at verification also showed that assistance granted to
industries was non-specific in fact. First of all, there are numerous
users of this program. As respondents pointed out above, the pasta
industry is not a predominant user of this program. Also, we saw at
verification that in addition to assistance for industries involved in
production, all types of facilities (e.g., schools, public facilities,
residential structures) are eligible for assistance under other
articles of Law 219. Petitioners point to a high application rejection
rate as an indication that GOI discretion is being exercised in the
distribution of Law 219 assistance for industries. At verification, GOI
officials explained that many who sought approval were rejected for a
number of reasons such as damage was not significant enough, or the
company seeking assistance frequently was a retailer not involved in
production activities who properly had to apply for assistance under
another Article of Law 219. Hence, the rejections reflect application
of the eligibility criteria, and provide no evidence that benefits
under Law 219 were specific.
Comment 12: Treatment of Interest Contributions: Petitioners state
that interest contributions on Law 64/86 loans received as lump-sum
payments should be treated as non-recurring grants.
DOC Position: We disagree with petitioners that the lump-sum
interest contributions should be treated as grants. Where the borrower
can reasonably expect to receive interest subsidies at the time the
loan is taken out, our practice has been to use our
[[Page 30303]]
loan methodology to measure the benefit. (See, e.g., Certain Steel from
Italy, 37331, 37339). In this case, companies applied for the interest
subsidies at the same time they applied for the loan and in all but one
case, the interest subsidy was granted. Hence we have followed our
practice as articulated in Certain Steel from Italy.
Comment 13: Tamma's Industrial Development Loans: Delverde argues
that no benefits were received pursuant to Tamma's warehouse loan under
Law 64/86. According to Delverde, Tamma was paying the commercial rate
during the entire POI. Delverde points out that it was not until after
the POI that approval for Law 64/86 assistance was granted for this
loan.
DOC Position: We disagree with Delverde that Tamma paid a
commercial rate during the POI. We have compared the rate paid by Tamma
(the reference rate) to our benchmark and determined that Industrial
Development Loans conferred a benefit, in addition to the interest
contributions, because the loan recipients paid less than they would
pay for a comparable commercial loan (see section 771(5)(E)(ii)).
For the reasons stated above in the Industrial Development Loans
section, we are treating Law 64/86 loans as reduced-rate loans
throughout the life of the loans. Therefore, if a loan is outstanding
during the POI, benefits are accrued whether or not official
notification of approval of Law 64/86 benefits has been received; this
is due to the nearly automatic nature of the assistance.
Comment 14: Fees for Loan Guarantees: Delverde argues that the
benefit from its Law 64/86 loans should be calculated net of the
guarantee fees it paid on these loans. To support its argument,
Delverde cites section 701(a) of the Act where it states that the ``net
countervailable subsidy'' should be used to calculate countervailing
duties. ``Net countervailable subsidy,'' in turn is defined in section
771(6)(A), as follows:
For the purpose of determining the net countervailable subsidy,
[the Department] may subtract from the gross countervailable subsidy
the amount of * * * any application fee, deposit, or similar payment
paid in order to qualify for, or to receive, the benefit of the
countervailable subsidy.
Petitioners state that there is no evidence on the record showing
that guarantee fees were required by the GOI in order to receive Law
64/86 interest subsidies. Instead, petitioners point out that the fees
were required by the lending institution upon the transfer of the pasta
factory from the previous owners to Delverde. As such, petitioners
argue that the guarantee fees are related to the transfer of assets
between the two companies, but not to the existence of the benefits on
the applicable Law 64/86 loans. Petitioners also allude to potential
future refunds of these fees as evidence of the speculative nature of
these fees.
DOC Position: We agree with Delverde that the loan guarantee fees
it paid on certain Law 64/86 loans should be deducted. These fees are
part of the effective cost of the loan. It is Departmental practice to
compare the effective cost of the government loan to the benchmark loan
(see, section 355.44(b)(8) of the Proposed Regulations). In order to
determine the interest rate differential between the benchmark interest
rate and the interest rate on the loans provided pursuant to this
program, we have deducted the loan guarantee fee from the loan interest
rate.
Concerning petitioners' suggestion that these fees may be refunded
in the future, we note that, as stated in the verification report, the
agreement between Delverde and the lending institution speaks only of
the possibility of reviewing the agreement in the future upon the
reduction of the loan balances to a certain point--it does not mention
the possibility of refunding the fees.
Comment 15: Other Subsidies: Petitioners argue that the Department
should countervail all funds received from entities that appear to be
administering bodies for Law 64/86 contributions. These entities
include the Cassa per il Mezzogiorno (``CASMEZ''), the Institute for
the Economic Development of Southern Italy (``ISVEIMER''), and Istituto
Mobiliare Italiano S.p.A. (``IMI'').
DOC Position: We disagree with petitioners that all transactions
via these institutions should be presumed to entail some form of
government assistance. At verification we saw that some of these
institutions acted as agents for Law 64/86 assistance while also
engaging in commercial financial transactions (extension of loans,
etc.). Payment schedules and other documents pertaining to the loans
from these institutions outside of Law 64/86 did not contain any
indication that government assistance was involved. Therefore,
consistent with past practice (see Proposed Regulations at
355.44(b)(9)), we have not included these loans in our investigation.
Comment 16: Law 64/86 Grants: Petitioners urge the Department to
capture all Law 64/86 assistance that was either reported to or found
by the Department during the course of verification. In particular,
they urge the Department to include unreported grants received by the
previous owners of Delverde's pasta factory and by Delverde's related
companies, grants received by Tamma pursuant to a predecessor law, and
loans received by De Cecco and Indalco.
Delverde counters by stating that it did report Law 64/86
assistance pertaining to the pasta factory while under prior ownership.
Delverde points out that the ``unreported'' grants under Law 64
pertained to other unrelated operations of the prior owners of
Delverde's pasta factory. As for the grant disbursements received by
Tamma under the predecessor law, Delverde comments that the proper
denominators can be found in Tamma's financial statements provided to
Department officials during verification and attached to Delverde's
case brief.
DOC Position: We agree with Delverde that the ``unreported'' Law
64/86 grants referred to by petitioners pertained to unrelated
operations (e.g., a box factory, an olive oil producer) belonging to
the prior owners of Delverde's pasta factory. As such, these grants
were properly tied to operations other than the pasta factory presently
owned by Delverde.
Likewise, we verified that the ``unreported'' Law 64/86 loans
received by De Cecco pertained to the separately incorporated milling
operations and olive oil company. Therefore, they do not provide a
benefit to the production of the subject merchandise.
With respect to Indalco, we note that prior to verification the
company reported two loans and two grants which were received under Law
64/86 while Indalco was under previous ownership. In addition, at
verification we discovered three grants which were also provided under
Law 64/86 while the company was under previous ownership. Each of these
loans and grants related to the production of subject merchandise.
Therefore, they have been included in our calculations.
Comment 17: Riscossa: According to petitioners, the Department
should draw an adverse inference from Riscossa's inability to document
the source of amounts recorded as ``Other Debt'' in its 1994 balance
sheet and, as a result, should classify these amounts as Law 64/86
assistance.
DOC Position: We disagree with petitioners that the use of adverse
facts available is warranted with respect to the portion of ``Other
Debt'' for which company officials were not able to produce identifying
documentation. Riscossa's accounting system has other accounts into
which benefits received pursuant Law 64/86 and other programs would
more properly be recorded.
[[Page 30304]]
During verification, we examined these other accounts and saw no
indication that there were unreported loans granted under Law 64/86 or
any other program.
Comment 18: Publicita Grants: Delverde argues that the publicita
grants under Law 64/86 should not be countervailed since the assistance
related solely to advertising and publicity expenses for selling
products in Italy and not to the ``manufacture, production, or export''
functions enumerated in the Act.
Petitioners counter that the production and sale of merchandise are
``inextricably intertwined.'' According to petitioners, companies
produce only with the expectation of selling that production.
Petitioners also point out that the aim of governments in providing
subsidies is to stimulate production and sales.
DOC Position: We agree with petitioners that benefits received in
relation to selling activities do pertain to the manufacture,
production and export of merchandise. Both grants pertaining to
manufacturing activities and those to selling activities are given by
governments with the intention of jointly benefitting production and
sales. Hence, these subsidies are properly countervailed.
Comment 19: Publicita Grants: Petitioners argue that the publicita
grants to Tamma under Law 64/86 should be tied only to pasta since
Tamma was not able to distinguish between grants related to pasta and
those related to other products at verification.
Delverde counters that for the one publicita grant to Tamma that
applied to pasta and other products, company officials were able to
provide supporting documentation at verification showing the allocation
of those funds between pasta and the other products.
DOC Position: We agree with Delverde that Tamma was able at
verification to support the allocation of funds between pasta and other
products for one of its publicita grants. Accordingly, we considered
only the portion applicable to pasta for the one grant and used as our
denominator sales of all pasta products by Tamma. Since the other
publicita grants to Tamma were tied to pasta, we applied the entire
amounts received to sales of pasta by Tamma.
Comment 20: European Social Fund: Petitioners argue that the
Department should find that ESF grants received by Barilla, Delverde,
and De Matteis confer countervailable, non-recurring benefits to
companies under investigation. According to petitioners, the GOI
verification report clearly indicates that ESF grants are exceptional,
one-time measures, and that each project requires separate application
and government approval. Citing the Allocation section of the General
Issues Appendix, petitioners argue that it is the Department's practice
to treat this type of grant as non-recurring.
Petitioners also argue that the failure of the GOI and the EC to
provide accurate and timely information regarding the receipt of ESF
grants requires the Department to countervail the grants using adverse
inferences. They urge the Department to countervail all assistance
received during the period 1983 through 1994 as if it were received in
1994 (i.e., expensed during the POI). Petitioners also argue that the
Department should include in its calculations the ESF grant received by
De Matteis in 1995 (after the POI) because De Matteis applied for the
grant in 1993 and recorded the amount in its books in the same year.
The EC states that ESF grants should be considered non-recurring
because the grants relate to specific and individual projects and each
project requires separate government approval.
Barilla argues that the Department should continue to find ESF
benefits to be recurring because they are a type of benefit the
Department has traditionally considered recurring (i.e., worker
assistance). In the event that they are found to be non-recurring,
Barilla argues that each of its grants are below 0.5 percent of sales
in the year of receipt. Accordingly, Barilla urges the Department to
expense the ESF grants in the year of receipt.
Delverde argues that there is no basis for making any adverse
inference regarding the receipt of ESF benefits by its predecessor
company, MI.BA. Delverde claims that it has fully cooperated with the
Department and the use of facts available against Delverde would be
unlawful. Moreover, Delverde claims the Department was able to verify
that Delverde provided all available information regarding MI.BA's use
of the ESF program.
De Matteis argues that the Department's practice is to countervail
benefits when they are received; therefore, because De Matteis did not
receive its ESF grant until after the POI, there is no benefit to De
Matteis during the POI. Moreover, De Matteis argues that if the
Department were to change its methodology and measure the benefit from
the date that De Matteis accrued or applied for the benefit, the
benefit would not exceed 0.5 percent of sales and would be expensed
prior to the POI.
DOC Position: We agree with petitioners and the EC that benefits
under the ESF program are non-recurring. While worker benefits were
identified in the General Issues Appendix in a list of benefits which
are typically recurring, we note that the list was provided for
illustrative purposes only. The General Issues Appendix states that
``[t]he unique factual circumstances of a particular case may indicate
that a program listed generally as recurring be found nonrecurring or
vice versa.'' It is clear from the GOI verification that ESF grants
provide one-time assistance and should be considered non-recurring.
We do not agree, however, that an adverse inference of the type
proposed by petitioners is warranted. Under section 776(b) of the Act,
the Department is allowed to make an inference that is adverse to the
interests of a party only if that party has ``failed to cooperate by
not acting to the best of its ability to comply with a request for
information.'' There is no evidence that Barilla, Delverde, or De
Matteis did not act to the best of their abilities to supply
information regarding this program. Therefore, we have calculated the
benefits from the ESF grants using the appropriate years in which they
were received, as reported by the companies.
With respect to the ESF grant received by De Matteis, we agree with
the respondent that De Matteis received no benefit from this grant
during the POI. It is the Department's normal practice to recognize a
subsidy benefit when there is a cash-flow effect. In this instance, the
cash-flow effect takes place after the POI; therefore, there is no
benefit during the POI.
Comment 21: Benefits to Mills: Petitioners argue that the purpose
of the upstream subsidy provision, as reflected in the legislative
history, is to broaden the scope of subsidy practices that can be
captured under U.S. countervailing duty law. Petitioners argue that
using the upstream subsidy provision as a basis for excluding subsidies
from the investigation would contravene the intended purpose of the
provision.
Petitioners claim that the upstream subsidy provision is applicable
only when the producer of the subject merchandise purchases the input
product from an unaffiliated company. Petitioners point to Live Swine
from Canada; Final Results of Countervailing Duty Adminstrative Review
(59 FR 12243) (``Live Swine''), in which the Department has
consistently countervailed the Alberta Crow Benefit Offset Program,
which offsets the costs of feed grain fed to hogs, as precedent for
this position. Petitioners claim that this program was a subsidy for
the production of an input product and that
[[Page 30305]]
it was found to benefit the subject merchandise--without an upstream
subsidy allegation--due to the integrated nature of hog production.
Petitioners also argue that even if the Department determines that
subsidies to mills constitute upstream subsidies, they are
countervailable on other grounds. Petitioner asserts that they are
countervailable as subsidies to related parties and as subsidies
discovered during the course of the investigation.
Respondents argue that because semolina is an ``input product,''
subsidies to the production of semolina are correctly examined under
the upstream subsidy provision of the statute. To support their
position respondents cite Canadian Meat Council v. United States (661
F. Supp. 622 (CIT 1987)), wherein the Court determined that subsidies
to live swine could be found to benefit pork packers only within the
context of the upstream subsidy provision.
Respondents maintain that there is no exception to the upstream
subsidy provision for input products produced by related parties.
According to respondents, the only exception to the upstream subsidy
provision, falls under section 771B of the Act, which allows the
Department to dispense with the upstream subsidy analysis for processed
agricultural products if certain conditions are met. Respondents argue
that these conditions are not met with respect to pasta production for
several reasons. Respondents contend that semolina is not a raw
agricultural product and that the value added in converting semolina
into unfinished pasta is substantial.
Finally, respondents refute petitioners' claim that subsidies to
semolina mills are subsidies ``discovered during the course of'' a
countervailing duty investigation. Respondents point out that
information regarding these subsidies was on the record from the start
of the investigation.
DOC Position: As discussed above, in the Subsidies Valuation
section of this notice, the Department's past practice has been to
apply the upstream subsidy provision for subsidies to the input product
where the product is purchased from a separately incorporated company,
whether affiliated or not. Petitioners'' reliance on Live Swine is
misplaced. The subsidy program in question in that case was provided
directly to the producers of the subject merchandise to offset the
higher costs of the input product. Moreover, we agree with respondents
that the processed agricultural products exception to the upstream
subsidy provision (section 771B) is not met in the case of pasta.
Therefore, where the companies under investigation purchase their
semolina from separately incorporated companies, whether or not they
are affiliated, we have determined that the upstream subsidy provision
applies.
We disagree with petitioners that such subsidies are
countervailable as subsidies to related companies or as subsidies
discovered during the course of an investigation. We agree with
respondents that there is no exception from the upstream subsidy
provision for related input producers. Therefore, subsidies to
separately incorporated input producers can only be examined in an
upstream subsidy investigation. Moreover, we agree with respondents
that these subsidies were not discovered during the course of the
investigation.
Comment 22: Termination of certain Social Security benefits for
Molise and Abruzzo: La Molisana claims that the Department should
assign a ``zero'' duty deposit rate to La Molisana for certain social
security benefits because companies in the Molise region became
ineligible to receive these benefits at the end of 1994. La Molisana
argues that because the benefits were terminated prior to the
preliminary determination, setting the cash deposit rate at zero for
these benefits will accurately reflect the level of subsidization on
any entries which have been suspended from liquidation. Moreover, La
Molisana claims that any countervailing duty deposits for these
benefits will simply be refunded upon review.
Petitioners argue that the Department should reject La Molisana's
claims regarding the termination of social security benefits for
several reasons. Petitioners claim that La Molisana has not shown that
the termination has affected any company other than La Molisana itself.
In addition, petitioners point out that the basis of the change is the
Molise region's increased level of economic development. Petitioners
claim that neither La Molisana nor the government has given any
indication that the program will not be reinstated in the event that
the Molise region's level of development declines. Moreover,
petitioners claim there is no evidence on the record that benefits for
the Molise region were terminated by an official act. Finally,
petitioners claim that none of La Molisana's allegations were verified
at the GOI.
DOC Position: We have determined that the facts of the record do
not support a finding that the social security benefits in question
were terminated. While the GOI response indicated that benefits in the
Molise and Abruzzo regions were terminated pursuant to an August 5,
1994, decree of the Italian Ministry of Labor, record evidence
indicates that at least one company located in the Abruzzo region
continued to receive benefits after the supposed termination. This
indicates that residual benefits may be available under the program.
According to section 355.50(d), of the Proposed Regulations, the
Department will not adjust the cash deposit rate where residual
benefits may continue to be bestowed under a terminated program.
Therefore, we have not adjusted the cash deposit rate for companies
located in the Abruzzo or Molise regions.
Comment 23: La Molisana Fiscalizzazione: La Molisana argues that
there is no evidence on the record that La Molisana received
fiscalizzazione deductions at the higher rate available in the
Mezzogiorno. La Molisana claims that its 1994 DM-10S forms indicate
that different rates were paid by La Molisana from region to region,
but that the rates paid for employees in the south were not
systematically lower than those paid for employees in the north.
Petitioners argue that La Molisana's claims regarding its use of
the fiscalizzazione program directly contradict the verified
information regarding the operation of this program, which is that the
rate of deduction in southern Italy is greater than that in northern
Italy.
DOC Position: We disagree that there is no evidence on the record
that La Molisana received fiscalizzazione deductions at the higher rate
available in the Mezzogiorno. The company's DM-10S forms reflect
National Health Service payments equal to one percent for wages
eligible for fiscalizzazione deductions, indicating that deductions
were taken at the higher rate available in southern Italy. Therefore,
we have calculated the resulting benefit to La Molisana according to
the methodology described in the Social Security section of this
notice.
Comment 24: De Matteis Fiscalizzazione: De Matteis argues that the
greater fiscalizzazione deductions taken by De Matteis do not confer
any financial benefit. De Matteis claims that in order to receive the
greater fiscalizzazione deductions, companies located in the
Mezzogiorno must agree to abide by a collective labor bargaining
agreement. The company argues that the greater fiscalizzazione
deduction is intended to offset the increased cost associated with the
collective bargaining agreement and, for this reason, does not confer a
benefit.
Petitioners claim that there is no record evidence to support De
Matteis'
[[Page 30306]]
claims. Petitioners assert that there is no official document
establishing a connection between the additional fiscalizzazione
benefits and labor agreement compliance. In addition, petitioners argue
that neither De Matteis nor any other respondent has provided
information regarding any obligations that arise from participating in
a collective labor bargaining agreement. In addition, even if there was
information on the record regarding potentially increased costs
associated with a collective labor agreement, these costs do not fall
within the carefully circumscribed list of allowable offsets under the
statute.
DOC Position: We agree with petitioners. In order to claim any of
the numerous allowable social security deductions in Italy, companies
must be in compliance with the labor agreements. However, there is no
record evidence that any social security deduction, including
fiscalizzazione, is intended to offset any costs associated with labor
agreements.
Comment 25: Treatment of De Cecco: De Cecco argues that it
misinterpreted the Department's request for information regarding
related parties and, hence, should not be penalized for its failure to
provide information regarding its affiliate, Pescara. De Cecco claims
that it interpreted the term ``related parties'' in the context of
Italian tax law, and that because De Cecco and Pescara are not related
for Italian tax purposes, De Cecco believed the two companies to be
unrelated for purposes of this investigation. De Cecco argues that when
it came to De Cecco's attention that their questionnaire response may
have been deficient, De Cecco submitted a questionnaire response on
behalf of Pescara to correct the error. De Cecco argues that in making
this submission, the company was acting to the best of its ability to
comply with the investigation and, therefore, adverse inferences may
not be used against De Cecco.
De Cecco also argues that if the Department uses facts available
for Pescara, the appropriate facts available should be based on De
Cecco's verified submissions. According to De Cecco, its own
information would be much more representative of Pescara than simply
assigning Pescara the highest ``facts available'' rate for each
program. In addition, De Cecco argues that De Cecco's own
countervailing duty rates should remain unchanged in the event that the
Department uses facts available to determine Pescara's countervailing
duty rate. De Cecco argues that its responses have been verified and
all possible subsidies that De Cecco was alleged to have received were
fully investigated.
Finally, De Cecco argues that the Department's decision that
adverse facts available is justified in the companion antidumping duty
investigation is not relevant to this proceeding. De Cecco argues that
the main distinction between the antidumping case and the
countervailing duty case is that there was a complete verification of
De Cecco in the countervailing duty investigation, during which the
Department found no evidence that De Cecco withheld or attempted to
withhold information. In addition, De Cecco argues that in the
antidumping case, the Department sent a deficiency questionnaire
requesting information on related parties from De Cecco, whereas none
was sent in the countervailing duty case. De Cecco claims that it
submitted information on Pescara before it was even requested by the
Department.
Petitioners argue that De Cecco and Pescara are affiliated parties
and that De Cecco's failure to respond to the Department's
questionnaire on behalf of Pescara merits the use of facts available.
Petitioners argue that the legal standard and the facts on which the
Department based its affiliated party determination in the antidumping
case are identical to those in the present case, and hence, an
identical outcome is justified. Petitioners argue that in its
responses, De Cecco deliberately withheld information regarding its
relationship with Pescara. They argue that De Cecco provided a detailed
list of related parties and yet continually declined to include
Pescara. Petitioners argue that De Cecco's claim that it misinterpreted
the Department's request for information regarding related parties, is
without merit for several reasons. They point out that the Department's
questionnaire contained explicit definitions regarding the terms used
in its questionnaire and that De Cecco was represented by experienced
trade counsel that presumably was aware that the relationship between
two companies for purposes of foreign tax laws is irrelevant in the
context of a countervailing duty investigation.
Petitioners assert that De Cecco's conduct represents consistent
non-compliance with an information request, thereby justifying the use
of adverse facts available. Petitioner's also argue that the facts
available rate should be applied to both De Cecco and Pescara, pointing
out that the purpose of facts available is to provide the Department
with a necessary tool to encourage cooperation by respondents. In this
case, the reporting obligation lay with De Cecco, not Pescara, such
that any repercussions for non-cooperation should inure directly to De
Cecco.
DOC Position: We agree with petitioners that De Cecco's failure to
provide information regarding Pescara warrants the use of facts
available with adverse inferences. We are not persuaded by De Cecco's
argument that it misinterpreted the related party question because of
its understanding of Italian tax law. The Department's questionnaire
contained a detailed explanation of the definition of related parties
to be used in this investigation; it did not reference foreign tax
laws. In response to this and a supplemental questionnaire De Cecco
reported several related parties, including two companies, Desemark
S.r.L and Prodotti Mediterranei Inc. (``PMI''), which are related to De
Cecco through similar circumstances as Pescara. (Presumably these two
companies are also not considered related parties for Italian tax
purposes, and yet De Cecco chose to include information regarding these
companies in its responses.) Furthermore, contrary to De Cecco's
assertions, the Department requested information in a supplemental
questionnaire regarding whether there were other companies related to
De Cecco that were previously not reported but that are involved in the
production, distribution, or sale of pasta. In response, De Cecco
identified only PMI. For these reasons, we have determined that De
Cecco was not acting to the best of its ability to respond to the
related party section of the questionnaire. Therefore, the use of facts
available with adverse inferences regarding subsidies provided to
Pescara is warranted. However, we agree with De Cecco that the company
accurately reported and the Department verified, information regarding
subsidies received by De Cecco itself. Therefore, we have calculated a
combined rate using adverse inferences for Pescara's portion and De
Cecco's own verified information for De Cecco's portion.
Comment 26: Export Promotion Assistance: Petitioners allege that
information uncovered at verification indicates that Barilla is
currently operating a project using export promotion loans under Law
394, which was found to be not used in the preliminary determination.
Petitioners argue that while GOI officials stated at verification that
no amounts had been disbursed to Barilla under this program, there is
no evidence on the record to support this statement. In addition,
petitioners argue that the export promotion grant received by Barilla
under Law 304 in relation to an export promotion project in South
America in
[[Page 30307]]
fact promoted Barilla's pasta exports to the United States.
Barilla argues that export promotion benefits are countervailable
only if they promote exports to the United States. Barilla asserts that
nothing in the record demonstrates that Barilla received export
promotion grants or loans for export to the United States. According to
Barilla, the Department verified that the export promotion grant
received by Barilla related solely to the Argentine and Brazilian
markets and that the only export promotion loan for which Barilla
applied had not even been approved as of the GOI verification.
DOC Response: We agree with Barilla. Verification at the GOI and at
Barilla confirmed that Barilla accurately reported its receipt, or non-
receipt, of export promotion grants and loans for export to the United
States. We found no evidence at verification that Barilla received
export promotion grants which benefit exports to the United States, nor
that Barilla had any outstanding export promotion loans under this
program.
Comment 27: Green Light Treatment for Law 64/86: The EC, GOI, and
Delverde argue that, because of the superior nature of EC law, certain
of the necessary conditions for qualifying for green light treatment
are met at the Community level rather than at the national level.
According to respondents, the Department should not limit its analysis
to an examination of the Italian regional aid laws. Rather, the
Department should examine the Italian laws in the context of EC
competition policy rules which, respondents argue, form the basis of an
EC-wide general framework of regional development pursuant to which all
national regional aid programs must be granted.
The EC argues that within this general framework, the GOI performed
an initial socio-economic analysis using specific criteria and
identified all regions that were in need of regional aid. The GOI then
notified the EC of its proposed aid scheme and the scheme was found to
be compatible with the EC general framework of regional development
with the exception of certain regions which were found not to meet the
specific criteria of the competition policy rules. According to
respondents, the fact that Law 64/86 was notified, modified, and
ultimately approved according to the requirements of the competition
policy rules demonstrates that Law 64/86 assistance was provided within
a general framework of regional development. Respondents also argue
that all of the remaining green light criteria were met by Law 64/86.
Petitioners argue that the programs in question were not provided
pursuant to a generally applicable regional development policy in
Italy. In support of this argument, they point to verification findings
that, historically, the GOI has not maintained any statistical criteria
for determining which regions were in need of assistance and that a
systematic method of selection of the areas eligible for assistance was
not applied until 1988 when the EC investigated Law 64. In addition,
petitioners argue that it is inappropriate to consider Italy's regional
development programs in the context of the EC's competition policy
rules because there is no evidence linking the EC competition policy
rules to the Italian programs under investigation at the time of their
enactment. Petitioners also claim that the EC argument fails in light
of its own determination that Law 64/86 was not fully compatible with
the competition policy rules until the end of 1992.
Petitioners argue that regardless of whether the Italian regional
aid programs are examined within the EC framework, the remaining green
light criteria are not met. They argue that the GOI failed to establish
that regional development assistance contains ceilings on the amount of
assistance and that the GOI failed to establish that regional
distribution of aid is not specific.
DOC Position: We disagree with the EC statement that the GOI
performed a systematic analysis in order to identify the regions which
would receive regional development assistance. There is no evidence on
the record that such an analysis was undertaken and, moreover,
statements from the GOI verification directly contradict such an
assertion. Petitioners correctly note that the GOI verification
confirmed that the first time that a systematic review of the regions
eligible for assistance was applied in Italy was in 1988, when the EC
examined Law 64/86.
Moreover, as discussed in the Green Light section of this notice,
we need not reach the issue of whether the nature of Law 64/86 as a
green light subsidy is governed by a community-wide framework of
regional development because we find that Law 64/86 does not meet the
criteria established in the community-wide framework. Therefore, we
conclude that Law 64/86 programs do not qualify as non-countervailable
subsidies.
Comment 28: Initiation of Research and Development and European
Investment Bank (``EIB'') Loan Assistance: Petitioners argue that the
Department improperly rejected petitioners' request to initiate a
countervailing duty investigation of assistance provided through the
EIB and of research and development assistance provided under Law 46
because the programs were found to be non-specific in previous
investigations. According to petitioners, the fact that the Department
found EIB loans and research and development assistance to be de facto
non-specific in previous investigations is an insufficient basis for
rejecting petitioners' allegations. They argue that the previous
findings were fact-based, and thus, did not amount to a finding of non-
countervailability as a matter of law.
Respondents Barilla and La Molisana argue that the Department
correctly decided not to investigate EIB loans or research and
development assistance because the programs had been previously found
to be non-specific and, in the case of EIB loans, the Department has
chosen several times not to investigate the programs. Respondents also
argue that petitioners have provided no new evidence warranting a re-
examination of these issues.
DOC Position: Our decision not to investigate these programs was
based on the fact that petitioners had not provided a sufficient basis
to believe that the programs had changed since the previous findings of
noncountervailability. With respect to the EIB loan program,
petitioners never addressed the fact that the program had been found
not countervailable in a previous investigation and, therefore, made no
effort to allege that the program had changed or that pasta producers
may have received a disproportionate share of the benefits under the
program. With respect to the research and development program,
petitioners alleged that the Department's previous findings that the
program was non-specific had not taken into account an amendment which
made the program available to pasta producers. However, we noted in our
notice of initiation that the amendment was made seven years prior to
the finding that the program was non-specific. Therefore, we determined
that this amendment did not constitute a change in the program and was
not a sufficient basis for believing that pasta had received a
disproportionate share of the benefits under the program.
Comment 29: Affiliated Parties: Petitioners assert that the
relationships between several respondent companies and their affiliated
parties contain mechanisms through which subsidies can be transmitted
and/or exhibit the potential for channeling exports through the company
with the lowest margin. Petitioners distinguish between two types of
affiliated parties--those that
[[Page 30308]]
produce the subject merchandise (i.e., Delverde/Tamma and Arrighi/
Italpasta) and those that do not produce the subject merchandise and
yet still play a meaningful role in the production process (i.e., De
Matteis/Demaservice and Campano/Chirico).
With respect to Delverde and Tamma, petitioners argue that their
common board member plays an integral role in the most important
strategic decisions made by both companies, making it likely for
subsidies to be transmitted between the two companies. Petitioners
further argue that the day-to-day transactions between the companies
provide a vehicle for the transmittal of subsidies and the potential
for export-shifting. Petitioners claim that, for Arrighi and Italpasta,
the level of common ownership, the shared board members, and the day-
to-day transactions between the companies leads to a similar
conclusion. For these relationships, petitioners propose assigning one
rate to the affiliated companies, based on a weighted-average of their
individually calculated rates using exports to the United States.
Petitioners also argue that the Department should include in its
calculations subsidies to certain affiliated companies of Campano and
De Matteis. Petitioners support the Department's preliminary
determination that De Matteis' affiliated service company, Demaservice,
plays an integral role in De Matteis' production and that subsidies to
Demaservice are likely to benefit such production. In addition,
petitioners allege that certain transactions between Campano and its
affiliate exhibit the potential for transmitting subsidies between the
two companies. For these types of relationships, petitioners argue that
the Department should calculate a combined subsidy rate using subsidies
received by both companies and their combined sales.
Delverde argues that the single weighted-average margin applied to
Delverde and Tamma in the preliminary determination is an inappropriate
and unfounded anti-circumvention measure. According to Delverde, the
Department's preliminary finding that the relationship between Delverde
and Tamma is not a likely vehicle for transmitting subsidies was
confirmed at verification. Delverde asserts that Tamma holds less than
a 20 percent ownership interest in Sangralimenti, the holding company
that owns Delverde, and that while the companies share one common
director they operate as separate commercial entities. Moreover,
Delverde argues that there is no evidence on the record which suggests
that the companies would (or even could) shift exports in response to
differing subsidy rates. Therefore, Delverde claims, the imposition of
anti-circumvention measures is unreasonable and unlawful.
Arrighi argues that the methodology proposed by petitioners of
assigning a single margin for Arrighi and Italpasta based on a
weighted-average of their individual rates is inconsistent with the
Department's past practice and is unreasonable. According to Arrighi,
the purpose of combining two companies is to treat them as if they were
a single entity subsidized at the same rate. In the past, the
Department has accomplished this by combining the subsidy information
of the two companies and allocating them over their combined sales.
Arrighi contends that petitioners' proposed methodology results in the
Department not treating the combined companies as a single entity, but
rather as two separate entities.
DOC Position: We agree with petitioners that the relationships
between Delverde and its affiliate and Arrighi and its affiliate are
sufficient that the companies should be treated as a single company. We
disagree with Delverde that the ownership interest of Tamma does not
meet the 20 percent threshold. As discussed in the Related Parties
section of this notice, when the ownership interests of Tamma and its
affiliate, Tamma Service, are aggregated, the ownership interest is
above the 20 percent threshold. Therefore, we have calculated a single
rate for the two companies.
However, we agree with Arrighi that the appropriate method for
calculating a combined rate is to divide the total subsidy benefits of
the two companies by their combined sales. The methodology used in our
preliminary determination does not result in the two companies being
treated as a single entity and does not accurately measure the level of
subsidization of the subject merchandise.
With respect to the treatment of De Matteis and its affiliate, we
agree with petitioners and have calculated a combined subsidy rate for
the two companies accordingly. With respect to Campano, we note that
Chirico does not produce the subject merchandise and therefore Chirico
and Campano would only be treated as a single company if there were
evidence of the transmittal of subsidies between the companies. While
we agree with petitioners that certain transactions between the two
companies may exhibit the potential for the transmittal of subsidies,
through no fault of Campano's we do not have the information necessary
to determine whether transmittal of subsidies was likely. Therefore, we
have calculated a rate for Campano using only subsidies received by
Campano divided by Campano's sales.
Verification
In accordance with section 782(i) of the Act, we verified the
information used in making our final determination. We followed
standard verification procedures, including meeting with government and
company officials, and examination of relevant accounting records and
original source documents. Our verification results are outlined in
detail in the public versions of the verification reports, which are on
file in the Central Records Unit (Room B-099 of the Main Commerce
Building).
Suspension of Liquidation
In accordance with section 705(c)(1)(B)(i) of the Act, we have
calculated an individual subsidy rate for each company investigated.
For companies not investigated, we have determined an all-others rate
by weighting individual company subsidy rates by each company's exports
of the subject merchandise to the United States, if available, or pasta
exports to the United States. The all-others rate does not include zero
or de minimis rates, or any rates based solely on the facts available.
In accordance with our affirmative preliminary determination, we
instructed the U.S. Customs Service to suspend liquidation of all
entries of pasta from Italy which were entered, or withdrawn from
warehouse, for consumption on or after October 17, 1995, the date of
publication of our preliminary determination in the Federal Register.
In accordance with section 703(d) of the Act, we instructed the U.S.
Customs Service to terminate the suspension of liquidation for
merchandise entered on or after February 14, 1996, but to continue the
suspension of liquidation of entries made between October 17, 1995, and
February 13, 1996. We will reinstate suspension of liquidation under
section 706(a) of the Act, if the ITC issues a final affirmative injury
determination, and will require a cash deposit of estimated
countervailing duties for such entries of merchandise in the amounts
indicated below. If the ITC determines that material injury, or threat
of material injury, does not exist, this proceeding will be terminated
and all estimated duties deposited or securities posted as a result of
the suspension of liquidation will be refunded or canceled.
[[Page 30309]]
------------------------------------------------------------------------
Ad
Company valorem
rate
------------------------------------------------------------------------
Agritalia, S.r.l............................................. 2.55
Arrighi S.p.A. Industrie Alimentari.......................... 2.44
Barilla G. e R. F.lli S.p.A.................................. 0.65
De Matteis Agroalimentare S.p.A.............................. 2.47
Delverde, S.r.l.............................................. 5.55
F.lli De Cecco di Filippo Fara S. Martino S.p.A.............. 3.37
Gruppo Agricoltura Sana S.r.L................................ 0.00
Industria Alimentare Colavita, S.p.A......................... 2.18
Isola del Grano S.r.L........................................ 11.23
Italpast S.p.A............................................... 11.23
Italpasta S.r.L.............................................. 2.44
La Molisana Alimentari S.p.A.,............................... 4.17
Labor S.r.L.................................................. 11.23
Molino e Pastificio De Cecco S.p.A. Pescara.................. 3.37
Pastificio Guido Ferrara..................................... 1.21
Pastificio Campano, S.p.A.................................... 2.59
Pastificio Riscossa F.lli Mastromauro S.r.L.................. 6.91
Tamma Industrie Alementari di Capitanata..................... 5.55
All Others................................................... 3.78
------------------------------------------------------------------------
We calculated the ad valorem rate for Agritalia, an export trading
company, by weight averaging, based on the value of exports to the
United States represented by each of Agritalia's suppliers, the
adjusted subsidy rate for each supplier and adding to this rate the
subsidy rate calculated for Agritalia based on subsidies it received
directly. In performing this calculation, we adjusted the suppliers'
rates to account for any mark-up or mark-down by Agritalia, to adjust
prices to reflect Agritalia's f.o.b. export prices, and to exclude any
export restitution benefits received by Agritalia's suppliers on export
sales to the United States which were earned on sales made by the
producer independently of Agritalia. We note that at the time of our
preliminary determination, we lacked information to adjust the
producers' subsidy rates for any mark-up or mark-down taken by
Agritalia on sales. The methodology we have used in our final
determination effectively calculates the f.o.b. subsidy rate for
merchandise sold by Agritalia during the POI.
Since the estimated net countervailable subsidy rate for Barilla
and Gruppo is either zero or de minimis, these companies will be
excluded from the suspension of liquidation.
ITC Notification
In accordance with section 705(d) of the Act, we will notify the
ITC of our determination. In addition, we are making available to the
ITC all non-privileged and nonproprietary information relating to this
investigation. We will allow the ITC access to all privileged and
business proprietary information in our files, provided the ITC
confirms that it will not disclose such information, either publicly or
under an administrative protective order, without the written consent
of the Deputy Assistant Secretary for Investigations, Import
Administration.
If the ITC determines that material injury, or threat of material
injury, does not exist, these proceedings will be terminated and all
estimated duties deposited or securities posted as a result of the
suspension of liquidation will be refunded or canceled. If, however,
the ITC determines that such injury does exist, we will issue a
countervailing duty order directing Customs officers to assess
countervailing duties on pasta from Italy.
Return or Destruction of Proprietary Information
This notice serves as the only reminder to parties subject to
Administrative Protective Order (APO) of their responsibility
concerning the return or destruction of proprietary information
disclosed under APO in accordance with 19 CFR 355.34(d). Failure to
comply is a violation of the APO.
This determination is published pursuant to section 705(d) of the
Act.
Dated: June 3, 1996.
Paul L. Joffe,
Acting Assistant Secretary for Import Administration.
[FR Doc. 96-14734 Filed 6-13-96; 8:45 am]
BILLING CODE 3510-DS-P
