30288 Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices

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entered, or withdrawn from warehouse,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 ECapproved 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
Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices 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 longterm, 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 longterm 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 companyspecific 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 Paperrelated 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 reexamine 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
30290 Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices

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 reducedrate 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
Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices 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 noncountervailable 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 nonactionable 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 noncountervailable 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
30292 Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices

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 communitywide 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 communitywide 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 noncountervailable 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 nonqualifying 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 ‘‘nonrecurring’’ 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
Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices 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
30294 Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices

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
Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices 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 ‘‘nonrecurring’’ (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
30296 Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices

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, lumpsum 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
Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices 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
30298 Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices

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 nonrecurring 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 stateowned 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
Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices 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 nonrecurring 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 nonrecurring 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 allothers 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
30300 Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices

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, companyspecific 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
Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices 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
30302 Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices

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 nonspecific 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 noncountervailable 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
Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices 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.
30304 Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices

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 nonrecurring. 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 onetime 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
Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices 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’
30306 Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices

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 noncompliance 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
Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices 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 nonspecific 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
30308 Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices

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 exportshifting. 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 anticircumvention 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.
Federal Register / Vol. 61, No. 116 / Friday, June 14, 1996 / Notices 30309

Company Ad 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 nonprivileged 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

DEPARTMENT OF COMMERCE

INTERNATIONAL TRADE

ADMINISTRATION

[A–489–805]

Notice of Final Determination of Sales

at Less Than Fair Value: Certain Pasta

From Turkey

AGENCY: Import Administration,

International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: June 14, 1996.

FOR FURTHER INFORMATION CONTACT: John

Brinkmann, Michelle Frederick or

Sunkyu Kim, Office of Antidumping

Investigations, Import Administration,

International Trade Administration,

U.S. Department of Commerce, 14th

Street and Constitution Avenue, N.W.,

Washington, D.C. 20230; telephone:

(202) 482–5288, (202) 482–0186, or

(202) 482–2613, respectively.

The Applicable Statute

Unless otherwise indicated, all

citations to the statute are references to

the provisions effective January 1, 1995,

the effective date of the amendments

made to the Tariff Act of 1930 (the Act)

by the Uruguay Round Agreements Act

(URAA).

Final Determination

We determine that certain pasta

(pasta) from Turkey is being sold in the

United States at less than fair value

(LTFV), as provided in section 735 of

the Act. The estimated margins are

shown in the ‘‘Suspension of

Liquidation’’ section of this notice.

Case History

Since the preliminary determination

of sales at less than fair value in this

investigation on December 14, 1995, (60

FR 1351, January 19, 1996) (Preliminary

Determination), the following events

have occurred:

On January 22, 1996, the Department

requested that Filiz Gida Sanayii ve

Ticaret (Filiz) and Maktas Makarnacilik

ve Ticaret T.A.S. (Maktas), the two

respondents in this case, submit

additional information relating to level

of trade. Responses were received on

January 31, 1996, as part of their

supplemental Section D questionnaire

responses.

On January 25, 1996, Hershey Foods

Corp., Borden Inc., and Gooch Foods,

Inc. (collectively the petitioners) alleged

ministerial errors in the Department’s

preliminary determination calculations

regarding the two respondents. The

respondents alleged a ministerial error

in the Department’s preliminary

determination on January 26, 1996.

With respect to the petitioners’

allegation, we agreed that errors were

made as alleged and the errors were

found to constitute significant

ministerial errors because the correction

resulted in a difference of at least five

absolute percentage points and was at

least 25 percent greater than the

preliminary margin, for both Filiz and

Maktas. With respect to the

respondents’ allegation, we determined

that the respondents’ allegation did not

constitute a ministerial error. See

Memorandum to Barbara R. Stafford

from the Team dated February 6, 1996.

An amended preliminary determination

was issued on February 12, 1996 (61 FR

6348, February 20, 1996).

We conducted verification of Filiz’s

and Maktas’s sales and cost

questionnaire responses in Turkey in

February and March 1996.

On May 1, 1996, Maktas, at the

request of the Department, submitted