[Federal Register Volume 61, Number 116 (Friday, June 14, 1996)]
[Notices]
[Pages 30366-30373]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-14737]



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DEPARTMENT OF COMMERCE
[C-489-806]


Final Affirmative Countervailing Duty Determination: Certain 
Pasta (``Pasta'') from Turkey

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

EFFECTIVE DATE: June 14, 1996.

FOR FURTHER INFORMATION CONTACT: Elizabeth Graham or Kristin Mowry, 
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) 482-4105 and 482-3798, 
respectively.

Final Determination

    The Department determines that countervailable subsidies are being 
provided to manufacturers, producers, or exporters of pasta in Turkey. 
For information on the countervailing duty rates, please see the 
Suspension of Liquidation section of this notice.

Case History

    Since the publication of the preliminary affirmative determination 
in the Federal Register (60 FR 53747, October 17, 1995), 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 Turkey (60 FR 54847, October 
26, 1995). Subsequently, the final determinations in the antidumping 
and countervailing duty determinations were postponed until June 3, 
1996 (61 FR 1351, January 13, 1996).
    Verification of the responses of the Government of Turkey (GOT), 
Filiz Gida Sanayi ve Ticaret (Filiz), Maktas Makarnacilik ve Ticaret 
(Maktas), Andas Gida Dagitim ve Ticaret A.S. (Andas), Dogus Holding 
A.S. (Dogus), and Aytac Dis Ticaret Yatirim Sanayi A.S. (Aytac) was 
conducted between October 30, 1995, and November 10, 1995. We verified 
that Aytac did act as the exporter of record for certain of Maktas'' 
sales of pasta to the United States during 1994 and that Aytac had 
transferred its rights to benefits with respect to those exports to 
Maktas. Furthermore, we verified that Aytac received no benefits during 
the POI. Based on this information, we have not calculated an 
individual countervailing duty rate for Aytac. If this company exports 
to the United States, it will be subject to the all others rate.
    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 and rebuttal briefs on April 
17, 1996 and April 22, 1996. The hearing in this case was held on April 
25, 1996.

Scope of Investigation

    The product covered by this investigation is 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 investigation 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. 
In the companion countervailing and antidumping duty investigations 
involving pasta from Italy, we have excluded imports of organic pasta 
that are accompanied by the appropriate certificate issued by the 
Associazione Marchigiana Agricultura Biologica (AMAB). The Department 
has determined that AMAB is legally authorized to certify foodstuffs as 
organic for the Government of Italy (GOI). If certification procedures 
similar to those implemented by the GOI are established by the GOT for 
exports of organic pasta to the United States, we would consider an 
exclusion for organic pasta at that time.
    The merchandise under investigation is currently classifiable under 
subheading 1902.19.20 of the Harmonized Tariff Schedule of the United 
States (HTS). Although the HTS subheading is provided for convenience 
and customs purposes, our written description of the scope of this 
proceeding is dispositive.

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 the Countervailing Duties: Notice of Proposed Rulemaking 
and Request for Public Comments, 54 FR 23366 (May 31, 1989) (Proposed 
Regulations), which have been withdrawn, are provided solely for 
further explanation of the Department's CVD practice.

Petitioners

    The petition in this investigation was filed by Borden, Inc., 
Hershey Foods Corp., and Gooch Foods, Inc.

Period of Investigation

    The period for which we are measuring subsidies (the ``POI'') is 
calendar year 1994.

Facts Available

    Section 776(a)(2)(A) of the Act requires the Department to use the 
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.'' One of the companies included in 
this investigation, Oba, did not respond to our questionnaire. Section 
776(b) of the Act provides that the administering authority may use an 
inference that is adverse to the interests of such a 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, 
or (4) any other information placed on the record. Because the petition 
did not provide 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 Oba 
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 as the facts available for Oba 
the sum of the highest

[[Page 30367]]

rate calculated for each program used by any of the companies.
    Based upon the responses to our questionnaires and the results of 
verification, we determine the following:

I. Programs Determined to be Countervailable

A. Pre-Shipment Export Loans

    The Export Credit Bank of Turkey (Turk Eximbank) provides short-
term pre-shipment export loans to exporters through intermediary 
commercial banks. The program was commenced in March 1989 in order to 
meet the financing needs of exporters and overseas contractors. Loans 
are made available to certified exporters who commit to a certain value 
of exports within a specified time period. Generally, loans are 
extended for 180 days, covering between 50 and 75 percent of the FOB 
value of the committed export value. During the POI, the food sector 
(including pasta) was eligible for pre-shipment export loans amounting 
to 75 percent of the committed FOB value of exports, for a maximum of 
180 days. These loans were denominated in Turkish lira (TL).
    Of the companies investigated, only Maktas received Eximbank Pre-
Shipment Export Loans.
    Short-term Loan Benchmark: Due to an average inflation rate in 
Turkey of 91 percent during the POI, interest rates have fluctuated 
significantly. Hence, we have calculated monthly benchmarks. (See 
section 355.44(b)(3)(iii) of the Proposed Regulations.)
    As illustrated by section 355.44(b)(3) of our Proposed Regulations, 
the Department's practice is to use as its short-term benchmark the 
interest rate on the predominant alternative source of short-term 
financing in the country in question. Typically, we use national 
average benchmarks and not company-specific interest rates. However, 
the GOT responded that there is no predominant source of short-term 
financing in Turkey and that it does not maintain statistics concerning 
short-term interest rates. Moreover, our review of the Annual Report of 
the Central Bank of Turkey did not reveal any national average short-
term interest rates.
    Therefore, in the absence of our preferred benchmark, we have 
turned to company-specific interest rates. Specifically, we have used 
the average cost of Maktas' short-term commercial loans outstanding 
during each of the months it received Pre-Shipment Export Loans as our 
benchmark. We note that because of the way in which Maktas kept its 
records we were not able to calculate monthly benchmarks based only on 
loans taken out in each month. However, given the information 
available, we believe this monthly average cost of borrowing provides 
the most accurate measure of what Maktas would pay on a comparable 
commercial loan that it could actually obtain on the market. (See 
section 771(5)(E)(ii) of the Act.)
    Based on our comparison of the benchmark interest rate to the rate 
paid by Maktas on its export loans, we have determined that these loans 
provide a countervailable subsidy within the meaning of section 771(5) 
of the Act. The loans are a direct transfer of funds from the GOT 
through commercial banks. They provide a benefit because the interest 
rate paid on these loans is less than the amount the recipient would 
pay on a comparable commercial loan. Finally, the loans are specific 
because their receipt is contingent upon export performance.
    We calculated the countervailable subsidy as the difference between 
actual interest paid on loans for shipments to the United States during 
the POI and the interest that would have been paid using the benchmark 
interest rates. This difference was divided by Maktas' total exports to 
the United States during the POI. On this basis, we determine the 
countervailable subsidy from this program to be 8.82 percent ad valorem 
for Maktas.
    Respondents argue that the Department should use as its benchmark 
the interest rate on Central Bank Rediscount Loans. They point to the 
fact that Maktas received such loans during the POI and that this type 
of loan was available throughout the POI. Moreover, respondents argue, 
if the Department elects to use this benchmark, it must find that 
Eximbank Pre-Shipment Export Loans are not countervailable because, in 
two of nine months that Maktas received Pre-Shipment Export Loans, the 
interest rate on Central Bank Rediscount loans was lower than the rate 
for commercial loans obtained by Maktas.
    We have not used the Central Bank Rediscount Loan rates as our 
benchmark, nor have we included Central Bank Rediscount Loans received 
by Maktas in calculating Maktas' average monthly cost of outstanding 
loans. Information obtained at verification indicates that the Central 
Bank Rediscount Loans are offered to increase liquidity in the economy. 
In light of the policy objectives of these loans, and the lack of any 
information that would support the conclusion that they were made as 
part of the Central Bank's commercial operations (if any), we have 
concluded that these loans should not be viewed as commercial loans. 
Moreover, while we have information on the terms of the Central Bank 
Rediscount Loans (90 days), we do not have information on the lengths 
of the other short-term loans Maktas had outstanding. Therefore, we 
have no basis to say that the Central Bank Rediscount Loans are more 
comparable to the Pre-Shipment Export Loans taken out by Maktas.
    Petitioners urge the Department to rely on adverse facts available 
and use the highest rate per month from the various sources on the 
record (this includes Maktas' own rates, the overnight rates, the sale 
of government securities, etc.) as the benchmark rate. Petitioners 
believe adverse facts available is justified because they claim Maktas 
``manipulated its rates'' and failed to cooperate with the Department's 
attempts to find the appropriate company-specific rates.
    We disagree that adverse facts available are warranted in this 
situation. In seeking short-term loan benchmarks, it is our practice to 
request this information of the government. Companies are not asked to 
provide any short-term benchmark data. In this case, Maktas provided 
its own borrowing rates. As we learned at verification, those rates 
included the interest rate on the Eximbank Pre-Shipment Export loans. 
We have since verified the correct company specific interest rates and 
have used them in our calculation.

B. Pasta Export Grants

    During 1994, the Central Bank of Turkey provided cash grants and 
government promissory notes or bonds to exporters of pasta. According 
to the GOT, the purpose of the program was to develop Turkey's export 
potential. In order to receive the grants, exporters were required to 
submit applications (including proof of exportation and payment from 
the customer) to the local office of the Central Bank. The exporter 
received a specified percentage of the FOB U.S. dollar price, subject 
to a cap.
    We have determined that these export grants and bonds are 
countervailable subsidies within the meaning of section 771(5) of the 
Act. The grants and bonds are a direct transfer of funds from the GOT 
providing a benefit in the amount of the grant. Also, the grants and 
bonds are specific because their receipt is contingent upon export 
performance.
    We have also determined that the benefits under this program are 
bestowed when the cash is received, in the case of grants, and on 
maturity date, in the case of promissory notes or

[[Page 30368]]

bonds. Regarding the bonds, although we note that there are no 
restrictions on their transfer or sale, markets have not developed that 
would allow exporters to convert their bonds to cash. Therefore, we 
have treated the subsidy as being received at the first point in time 
when the exporter knows with certainty the amount being received, which 
is the date of maturity.
    We have further determined that the benefits under the Pasta Export 
Grant program are ``recurring.'' Once a company has exported and 
provided documentation to the local office of the Central Bank it 
becomes eligible for the Pasta Export Grants. The receipt of benefits 
is automatic and continues from year to year. (See General Issues 
Appendix in Final Affirmative Countervailing Duty Determination: 
Certain Steel Products from Austria (58 FR 37217, 37268-69, July 9, 
1993) (``General Issues Appendix'').)
    To calculate the countervailable subsidy, we divided the total 
amount of cash grants received and the value of bonds maturing during 
the POI for exports to the United States (denominated in Turkish lira) 
by the total exports to the United States denominated in Turkish lira. 
On this basis, we determine the countervailable subsidy from this 
program to be 1.17 percent ad valorem for Filiz and 3.79 percent ad 
valorem for Maktas.
    The GOT has stated that this program was terminated for pasta 
exports made on or after January 1, 1995, by a confidential government 
decree. However, we saw at verification that while this program had 
expired, it was reinstated with a new formula for determining the 
subsidy amount and a new time line for implementation. This 
reinstatement was effective September 29, 1995. Therefore, we do not 
view this program as having been terminated.
    Respondents further argue that, should the Department value the 
benefits on an earned basis, it should then treat this program as 
having undergone a program-wide change, and benefits should be adjusted 
to reflect the newly-announced formula. As discussed above, we are not 
valuing the benefits on an earned basis. Moreover, we are not aware of 
any change in the reinstated program that would lead us to value the 
benefits on an earned basis. Therefore, because the benefits of the 
Pasta Export Grant Program are being valued on a received basis which, 
in the case of bonds is the date of maturity, the changes effectuated 
in September 1995 are not measurable and do not qualify as a program-
wide change. (See section 355.50 of the Proposed Regulations.)

C. Free Wheat Program

    During our verification of Filiz, we discovered that the company 
received free wheat under a GOT program. The program, established by 
Decree 93/4534, provides free wheat to companies that agree to export 
flour, pasta, semolina, or biscuits. The companies sign contracts with 
the Turkish Grain Board (TMO) committing to export a certain amount of 
their product in return for a pre-determined amount of durum wheat. 
Once the company has exported the product, it provides the TMO with 
copies of its export documents. The TMO examines the documents, and 
upon TMO approval, wheat is delivered to the company. We verified that 
the price of wheat is determined on the date of the TMO invoice and 
Filiz received seven invoices during 1994.
    Filiz argues that it did not receive a benefit under the Free Wheat 
Program during the POI. Although the company received wheat in 1994, 
Filiz contracted with the TMO in 1993, and knew at the time of the 
contract precisely how much wheat it would receive for each ton of 
pasta exported. Filiz cites to section 355.48(b)(7) of the Proposed 
Regulations in support of its claim that the benefit of the Free Wheat 
Program was received in 1995. Petitioners assert that the applicable 
section of the Proposed Regulations is 355.48(b)(2), which discusses 
the governmental provision of goods or services. According to section 
355.48(b)(2), the benefit for governmental provision of goods or 
services occurs ``at the time a firm pays, or in the absence of payment 
would have paid for the good or service.''
    Section 355.48(b)(7) states that, in the case of an export benefit 
provided as a percentage of the value of the exported merchandise, the 
cash flow effect of the subsidy is deemed to occur on the date of 
export. Because the benefit from the Free Wheat program is not provided 
as a percentage of the value of the exported merchandise, we agree with 
petitioners that section 355.48(b)(7) does not apply to this program. 
The benefit from the GOT's provision of free wheat occurred when Filiz 
actually received the wheat. Therefore, pursuant to section 
355.48(b)(2) we have determined that Filiz benefitted from the Free 
Wheat Program during the POI.
    We have determined that the provision of free wheat to exporters of 
pasta is a countervailable subsidy within the meaning of section 771(5) 
of the Act. The program provides goods for less than adequate 
remuneration and is specific because its receipt is contingent upon 
export performance. To calculate the countervailable subsidy, we 
divided the total value of the free wheat provided to Filiz during the 
POI by the total value of the company's exports during the POI. On this 
basis, we determine the countervailable subsidy from this program to be 
1.99 percent ad valorem for Filiz.
    We have further determined that the benefits under the Free Wheat 
Program are ``recurring.'' Once a company has exported and provided 
documentation to the TMO it becomes eligible for the free wheat. The 
receipt of benefits is automatic and continues from year to year. (See 
Allocation section of the General Issues Appendix.)
    Respondents argue that if the Department finds that Filiz received 
benefits during the POI, then the Department should treat the program 
as terminated and adjust the deposit rate accordingly. They assert that 
the GOT's statement that ``the subsidy program that was supposed to end 
on October 31, 1993 will be extended until November 28, 1993,'' and the 
statement that ``the wheat subsidy program will be terminated'' 
constitute clear evidence that the program has been terminated.
    Petitioners disagree that the Department should consider the Free 
Wheat program terminated. They state that the only documentation on the 
record refers to the possible termination of the program. As such, the 
Department has insufficient evidence on the record to treat the program 
as terminated. We agree with petitioners and have not adjusted the 
deposit rate.
    Respondents further assert that exporters were not allowed to 
receive benefits from the Free Wheat and Pasta Export Grant programs 
for the same exportation. Consequently, if countervailed, the Free 
Wheat program should not be subject to a deposit rate above the rate 
for the Pasta Export Grant program. Petitioners rebut respondents' 
claim that the Pasta Export Grant program and the Free Wheat program 
are mutually exclusive. They claim that respondents have provided no 
documentation to that effect.
    We agree with respondents that Turkish pasta exporters cannot claim 
Pasta Export grants and Free Wheat on the same exportation. (Contrary 
to petitioners' assertions, the record evidence is clear on this 
point.) We further believe that our methodology appropriately accounts 
for this. Regarding Pasta Export grants, we have divided the total 
amount of benefit received on U.S. shipments in the POI by the total 
U.S. exports during the same period. The fact that export grants were 
not received on every shipment is reflected in this calculation. For 
the Free Wheat program, we divided the

[[Page 30369]]

value of free wheat received as a consequence of exports to all markets 
by total exports. The two rates, when added together, reflect the total 
grants and free wheat that were received on exports to the United 
States.

D. Payments for Exports on Turkish Ships/State Aid for Exports Program

    At verification, GOT officials explained that the Payments for 
Exports on Turkish Ships program was instituted to aid industries 
producing processed goods. Under the program, exporters applied to the 
Central Bank for cash grants or bonds based on the number of tons of 
product transported by sea. As with the Pasta Export Grant program, 
payments are made to companies in the form of cash grants or bonds.
    Filiz reported in its questionnaire response that it did not apply 
for, use, or benefit from this program during the POI. However, we 
discovered during verification that Filiz had applied for benefits on 
shipments made in both 1993 and 1994. We further verified that the 
company received payment during 1994 in the form of both cash grants 
and maturing bonds for certain of its 1993 applications, and was still 
waiting for payment in 1995 for applications filed in both 1993 and 
1994. Additionally, contrary to the explanation provided by the GOT, 
Filiz officials explained that the program provided the company 15 U.S. 
dollars per ton for its exports made using Turkish ships and 7.50 U.S. 
dollars per ton for its exports made on non-Turkish ships.
    We have determined that these export grants and bonds are 
countervailable subsidies within the meaning of section 771(5) of the 
Act. The grants and bonds are a direct transfer of funds from the GOT 
providing a benefit in the amount of the grant and bonds. Also, the 
grants and bonds are specific because their receipt is contingent upon 
export performance.
    We have further determined that the benefits under the Payments for 
Exports on Turkish Ships program are ``recurring.'' Once a company has 
exported and provided documentation to the Central Bank it becomes 
eligible for the cash grants or bonds. The receipt of benefits is 
automatic and continues from year to year. (See Allocation section of 
the General Issues Appendix.)
    To calculate the countervailable subsidy we divided the total 
amount of grants received and bonds maturing during the POI by Filiz's 
total exports. On this basis, we determine the countervailable subsidy 
from this program to be 0.45 percent ad valorem for Filiz.
    Petitioners assert that in light of Filiz's failure to report these 
benefits in its questionnaire response, the Department should calculate 
an adverse facts available rate by including all transportation subsidy 
amounts on the record, regardless of when the amounts were received. 
They also state that the benefit should be divided by exports of the 
subject merchandise to the United States. We disagree with petitioners. 
Although we agree that these benefits should have been included in the 
questionnaire response, we collected and verified all of the necessary 
data required to calculate a benefit under this program. Therefore, 
there is no basis for applying an adverse facts available rate.
    Respondents assert that the Freight Premium for Distance Program 
should not be countervailed because it has been modified to exclude 
pasta products. However, respondents argue if the Department determines 
that the program is countervailable, then the benefit should be treated 
as having been bestowed when the cash was received (for grants) and on 
the maturity date (for bonds). In their view, the benefit should be 
allocated over total exports.
    We agree with respondents that the program was terminated. We 
verified that this program was terminated by confidential government 
decree. Although a new transportation program entitled ``State Aid for 
Exports'' was instituted on September 29, 1995, we verified that this 
program differs from the former program in that it covers sea, air, and 
truck transportation, and specifically excludes exports of pasta. We 
are calculating the benefit as of the time the cash grant was received 
or the date on which the bond matures. Filiz has still not received all 
of its payments from applications made in 1993 and 1994. Based on the 
fact that residual benefits continue to be bestowed under the program, 
we are not adjusting the cash deposit rate for the termination. (See 
section 355.50 of the Proposed Regulations.)

E. Incentive Premium on Domestically Obtained Goods

    The Incentive Premium on Domestically Obtained Goods is part of the 
General Incentives Program (GIP), which is discussed further below. 
Although we have analyzed certain of the benefits provided under the 
GIP within the context of the GIP as a whole, two types of benefits 
merit separate consideration. These are the Incentive Premium on 
Domestically Obtained Goods and the Resource Utilization Support Fund, 
discussed below. In both instances, the benefit is tied to the purchase 
of domestic over imported goods. Therefore, because receipt of both of 
these benefits is contingent upon the use of domestically-sourced 
inputs, these particular benefits are specific pursuant to section 
771(5A)(C) of the Act.
    The Incentive Premium program provides companies holding investment 
incentive certificates under the GIP with rebates of the 15 percent VAT 
paid on locally-sourced machinery and equipment plus a 10 percent 
premium. We verified that imported machinery and equipment is subject 
to the VAT and is not eligible for the rebate.
    Respondents argue that we should not countervail the Incentive 
Premium because VAT paid on imported equipment may be deferred, which, 
in a hyperinflationary economy, results in the amount of VAT ultimately 
paid having a present value substantially less than the amount of VAT 
originally incurred. Hence, they argue, there is essentially no 
difference between exempting domestically-sourced goods from the VAT 
and deferring payment of the VAT on imported goods. Petitioners argue 
that the complementarity of the two programs does not eliminate the 
benefit provided by the Incentive Premium program. They assert that the 
two types of benefits are not identical and that hyperinflationary 
pressures would not necessarily nullify the difference between these 
two benefits. Additionally, they argue that not all companies receive 
the same GIP benefits and, therefore, not all companies would receive 
both the Incentive Premium VAT rebates and the VAT deferral.
    Despite respondents' assertions, the benefit is not related to the 
treatment of imported merchandise. The VAT rebates constitute revenue 
foregone by the GOT and provide a benefit in the amount of the rebates.
    We have determined that these VAT rebates are countervailable 
subsidies within the meaning of section 771(5) of the Act. As stated 
above, the rebates constitute revenue foregone by the GOT and provide a 
benefit in the amount of the VAT savings to the company. Also, as 
discussed above, they are specific because their receipt is contingent 
upon the use of domestic goods rather than imported goods. Maktas 
received incentive premiums in 1991 and Filiz received incentive 
premiums in 1993 and 1994.
    We have further determined that the benefits under the Incentive 
Premium program are ``recurring.'' Once a company has received an 
investment incentive certificate it becomes eligible for the Incentive 
Premium benefits. The receipt of benefits is automatic and continues 
from year to year. (See

[[Page 30370]]

Allocation section of the General Issues Appendix.)
    For the rebates received by Filiz during the POI, we divided the 
amount received by the total value of the company's sales during the 
POI. On this basis, we determine the countervailable subsidy to be 
0.0022 percent ad valorem for Filiz.

F. Resource Utilization Support Fund (GIP)

    Filiz reported that it received Resource Utilization Support Fund 
(RUSF) rebates during the POI, but failed to identify the nature of the 
benefit. Because RUSF payments are made under the GIP, we treated RUSF 
benefits like other GIP benefits and we did not consider them to be 
countervailable in the preliminary determination. However, during 
verification of Filiz, we learned that the RUSF program actually 
operates like the Incentive Premium program in that it provides rebates 
of the 15 percent VAT paid on domestically-sourced machinery and 
equipment.
    We have determined that the RUSF rebates are countervailable 
subsidies within the meaning of section 771(5) of the Act. The rebates 
represent revenue foregone by the GOT and provide a benefit in the 
amount of the VAT savings to the company. Also, they are specific 
because their receipt is contingent upon the use of domestic goods over 
imported goods. Filiz received RUSF rebates during 1993 and 1994.
    We have further determined that the benefits under the RUSF program 
are ``recurring.'' Once a company has received an investment incentive 
certificate it becomes eligible for the RUSF benefits. The receipt of 
benefits is automatic and continues from year to year. (See Allocation 
section of the General Issues Appendix.)
    For the rebates received by Filiz during the POI, we divided the 
amount received by the total value of the company's sales during the 
POI. On this basis, we determine the countervailable subsidy to be 0.27 
percent ad valorem for Filiz.

G. Tax Exemption Based on Export Earnings

    Corporate Tax Law 3946, dated December 25, 1993, provided that 
companies exporting industrial products valued in excess of 
U.S.$250,000 (or the equivalent) were entitled to deduct five percent 
of total export revenues from taxable profit. We verified that tax 
returns for fiscal year 1993 filed in 1994 provided the last 
opportunity for companies to benefit from this program.
    We have determined that this tax exemption is a countervailable 
subsidy within the meaning of section 771(5) of the Act. The exemption 
represents revenue foregone by the GOT and provides a benefit in the 
amount of the tax saving to the company. Also, the subsidy is specific 
because its receipt is contingent upon export performance. Of the 
exporters investigated, only Maktas claimed this tax exemption on the 
tax return it filed in 1994.
    Petitioners argue that the Department does not have sufficient 
evidence on the record to consider this program terminated. They assert 
that the GOT is required to do more than just show that the current law 
is silent regarding a previous subsidy in order for the Department to 
treat the program as terminated. Furthermore, given the GOT's practice 
of revising, renaming, and reinstating subsidy programs, petitioners 
argue that the Department should treat the program as a suspended 
subsidy rather than as a terminated subsidy.
    We disagree with petitioners. Although the GOT did not publish a 
specific decree describing the termination of this program, through a 
detailed review of the Budget Laws (Tax Code) and an examination of the 
tax return for fiscal year 1994 filed in 1995, we were able to verify 
that the GOT had abolished the Tax Exemption for Export Earnings 
program for tax returns for fiscal year 1994 (filed in 1995). 
Therefore, based on this information, we have determined that the 
termination of the program qualifies as a program-wide change. (See 
section 355.50 of the Proposed Regulations.) Moreover, there is no 
evidence on the record which would indicate that residual benefits are 
being bestowed or that a substitute program has been implemented. 
Therefore, we have adjusted the cash deposit rate to account for this 
change.
    To calculate the countervailable subsidy, we divided the tax 
savings realized during the POI by the company's export sales during 
the POI. On this basis, we determine the countervailable subsidy from 
this program to be 0.50 percent ad valorem for Maktas. For cash deposit 
purposes the subsidy rate for Maktas is zero.

II. Benefits Determined to be Not Countervailable

Certain GIP Benefits to Filiz

    The GIP is designed to eliminate the developmental differences 
between regions in Turkey and to support investments in industry 
sectors where the country is lacking investment. The regions and 
sectors targeted by the GIP are generally selected by the 
Undersecretariat of the Treasury (UT). The UT is also responsible for 
issuing investment incentive certificates under the GIP. Investment 
incentive certificates identify the types of GIP benefits for which 
certificate holders are eligible.
    In deciding whether to issue investment incentive certificates, the 
UT considers whether the proposed investment project meets certain 
criteria and financial thresholds set by the Council of Ministers. 
These criteria include whether the project: (1) Provides international 
competitiveness; (2) incorporates appropriate advanced technology; and 
(3) satisfies at least a minimum of economic capacity or scale 
determined on a sectoral basis. We verified that exportation was not a 
prerequisite for receiving benefits under this program. Each 
application for an investment incentive certificate must be accompanied 
by a feasibility study and detailed financial projection. The GOT 
stated that approximately 99 percent of the applications for investment 
incentive certificates are approved. Those applications which are 
rejected are generally revised, resubmitted, and eventually obtain 
approval.
    For purposes of the GIP, Turkey is divided into four types of 
regions: (1) Developed; (2) normal; (3) priority regions of the second 
degree; and (4) priority regions of the first degree. The level of 
investment needed to obtain an investment incentive certificate for the 
priority regions is lower than the level needed for normal and 
developed regions (e.g., the minimum investment requirement during 1994 
in priority regions was 1 billion TL and the minimum investment in 
normal and developed regions was 5 billion TL). Moreover, we learned on 
verification that companies located in the developed region are 
required to utilize a greater percentage of their own funds and less 
bank financing in connection with the investment than companies located 
in any of the other three regions. Finally, we discovered that there 
are distinctions between the amounts granted in the different regions 
for the Fund-Based Credit and Investment Allowance benefits.
    Filiz, located in a normal region, received the following benefits 
under the GIP during the POI: (1) Customs duty exemptions on imported 
machinery and equipment, (2) VAT deferrals on imported machinery and 
equipment, (3) Resource Utilization Support Fund Rebates, and (4) 
Incentive Premiums on Domestically-Obtained

[[Page 30371]]

Goods. Maktas, located in a developed region, only received Incentive 
Premiums on Domestically-Obtained Goods. As discussed above, we have 
determined that the Incentive Premiums on Domestically-Obtained Goods 
and RUSF rebates are countervailable. Therefore, the following analysis 
is limited to customs duty exemptions and VAT deferrals on imported 
machinery and equipment.
    For these two types of benefits, the amount does not vary by 
region. Hence the issues before us are: (1) Whether the different 
eligibility requirements for each region render the program regionally 
specific, and (2) if not, whether the benefits received by Filiz under 
the GIP are otherwise specific. Regarding the first issue, although 
Filiz is located in the normal region and, thus, is subject to more 
lenient eligibility requirements than the developed region (which has 
the strictest requirements), Filiz surpassed the eligibility 
requirements for the developed region. Hence, Filiz's location did not 
affect its eligibility for benefits during the POI and we need not 
reach the issue of whether differing eligibility criteria by region 
make these benefits under the GIP specific.
    Since Filiz would have qualified to receive benefits under the 
strictest eligibility requirements, we went on to analyze whether the 
customs duty exemptions and VAT deferrals granted under the GIP are 
being provided to a specific industry or enterprise or group thereof 
within the meaning of section 771(5A)(D) (i)-(iii).
    In our original questionnaire, we asked the GOT to provide 
specificity information for each type of GIP benefit. In response to 
this request, the GOT stated that it did not maintain its records in 
such a way as to easily provide the requested information. Accepting 
their claim about the difficulty posed by our request, we asked the GOT 
to provide instead the total number of qualified applicants for 
investment incentive certificates by region. We relied on this data for 
our preliminary determination. At verification, we examined the GIP 
database and confirmed the enormous burden of retrieving the 
specificity information by type of benefit. Therefore, we have 
continued to rely on program-wide information for purposes of analyzing 
the specificity of customs duty exemptions and VAT deferral benefits 
under the GIP.
    There are no de jure limitations on the types of industries that 
are eligible for benefits under the GIP. Regarding de facto 
specificity, we consider the following four factors, in accordance with 
section 771(5A)(D)(iii) of the Act: (1) The number of enterprises, 
industries or groups thereof which actually 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.
    We verified the statistics provided by the GOT for the period 1991-
1994 concerning the awarding of investment incentive certificates to 
the various sectors of the economy. For 1994, these statistics indicate 
that during the POI, thirty-four industries, within the agriculture, 
mining, manufacturing, energy, and services sectors, received 
investment incentive certificates. We consider this distribution of 
industries sufficiently broad. We further verified that during the POI, 
the food and beverages industry received 7.5 percent of the investment 
incentive certificates issued. Pasta producers received less than 3.8 
percent of the investment incentive certificates issued to the food 
sector. During the same period, the textiles and clothing industry 
received 24.6 percent and the transportation industry received 14.8 
percent of the investment incentive certificates issued. Each of the 
thirty-one other industries accounted for 4.8 percent or less of the 
total investment incentive certificates issued. The statistics for the 
period 1991-1993 indicate a similar distribution of investment 
incentive certificates.
    Based on this distribution of certificates (including the fact that 
pasta accounts for a fraction of the certificates issued to the food 
and beverage industry), we determine that the pasta industry was 
neither a dominant user of the program nor did it receive a 
disproportionate amount of the investment incentive certificates. 
Moreover, if the actual users of the subsidy are too large in number to 
reasonably be considered a specific group, and if there is no evidence 
of dominant or disproportionate use, the fact that a foreign authority 
administering a subsidy program may have exercised discretion in 
selecting the recipients of the subsidy is insufficient for a finding 
of de facto specificity. (See, SAA p. 261.) Therefore, we determine 
that customs duty exemptions and VAT deferrals on imported machinery 
and equipment are not specific and do not confer countervailable 
subsidies on Filiz.
    Petitioners argue that because the Fund-Based Credit and the 
Investment Allowance programs provide different levels of benefits for 
each region, the Department cannot conclude that all GIP programs are 
not countervailable. They state further that the Department verified 
that GIP regulations issued in 1995 provide that no new investment 
certificates will be issued to companies located in developed regions. 
They conclude that because certain regions will no longer be able to 
receive benefits, a regional subsidy exists.
    Because Filiz did not benefit from the Fund-Based Credit and 
Investment Allowance programs during the POI, we have not made a 
determination as to the countervailability of these programs. With 
respect to the new regulations, they pertain to investment incentive 
certificates issued after our POI and, hence, are not relevant to our 
analysis.
    Petitioners also assert that for certain GIP programs, e.g., the 
Tax, Duty, and Charge Exemptions program, companies cannot receive 
benefits without pledging to meet a certain export commitment. They 
cite Extruded Rubber Thread from Malaysia (Rubber Thread), 57 FR 
38,472, 38,476 (August 25, 1992), where the Department determined that 
a program may be ``two-faceted'' in the sense that certain companies 
receive benefits under any number of eligibility criteria, but others 
receive it based on less neutral criteria (e.g., export). As with the 
Fund-Based Credit and the Investment Allowance, Filiz did not receive 
benefits under the Tax, Duty, and Charge Exemptions program. Therefore, 
we have not determined whether the Tax, Duty, and Charge Exemptions 
program is specific.
    Finally, petitioners claim that the GOT uses discretion in its 
distribution of GIP benefits, by designating certain projects as 
``particularly worthwhile.'' These are projects in sectors targeted by 
the GOT and that are not subject to the normal GIP requirements. 
Additionally, petitioners point out that companies do not always 
receive the same array of benefits under the GIP, as the GOT determines 
which benefits will be provided to which companies. Respondents claim 
that petitioners' assertion that government discretion is used in the 
distribution of GIP benefits is without merit, as the Department found 
no evidence at verification to this effect.
    We verified that the GOT did not designate pasta as a 
``particularly worthwhile'' industry during the POI. Furthermore, as 
stated above, and in the SAA, if the actual users of the subsidy are 
too large in number to reasonably be considered as a specific group, 
and if there is no dominant or disproportionate use of the program, the

[[Page 30372]]

fact that a government may have exercised discretion in selecting the 
recipients of a subsidy is insufficient to justify a finding of de 
facto specificity. Such is the case here. Moreover, we saw no evidence 
that the GOT in anyway used its discretion to award benefits to 
selected companies and to deny them to others.

III. Programs Determined to be Terminated

A. Support and Price Stabilization Program (SPSF)

    Petitioners argue that despite the Department's preliminary 
determination that this program was not used, and the GOT's claim that 
the program was terminated in 1992, the Department should countervail 
Filiz's reported SPSF payment. Respondents assert that they did not 
benefit from the SPSF program during the POI. It is simply a matter of 
nomenclature that the SPSF appears on Filiz's application for pasta 
export grants.
    During verification, we reviewed the Official Gazette dated August 
20, 1991, which discusses the termination of the SPSF. The Gazette 
states that the SPSF program was terminated effective February 1, 1992. 
Furthermore, we are confident that the term SPSF on Filiz's application 
for pasta export grants was simply an error on the company's part. 
Because this program was administered pursuant to a confidential 
government decree, companies were not aware which agency was providing 
the grants. Filiz mistakenly believed that the SPSF was providing the 
grants. However, during verification, we confirmed that the Central 
Bank and not the SPSF was the provider of the pasta export grants. We 
found no evidence during the verification of Filiz that the company 
received benefits from the SPSF.

B. Wharfage Fee Exemption (GIP)

    During verification, we reviewed the Official Gazette dated July 
11, 1992, which discusses the termination of the Wharfage Fee 
Exemption. The Gazette states that the Wharfage Fee Exemption program 
was terminated effective January 1, 1993. We saw no evidence during 
verification that companies could receive residual benefits or that the 
program had been reinstated.

IV. Programs Determined to be Not Used

    Based on the information provided in the responses and the results 
of verification, we determine that the following programs were not 
used.

1. Advance Refunds of Tax Savings
2. Export Credit Through the Foreign Trade Corporate Companies 
Rediscount Credit Facility
3. Normal Foreign Currency Export Loans
4. Performance Foreign Currency Export Loans
5. Export Credit Insurance
6. Regional Subsidies
    a. Investment Allowances
    b. Mass Housing Fund Levy Exemptions
    c. Customs Duty Exemptions
    d. Rebate of VAT on Domestically-Sourced Machinery and Equipment
    e. Additional Refunds of VAT
    f. Postponement of VAT on Imported Goods
    g. Other Tax Exemptions
    h. Payment of Certain Obligations of Firms Undertaking Large 
Investments
    i. Corporate Tax Deferral
    j. Subsidized Turkish Lira Credit Facilities
    k. Subsidized Credit for Proportion of Fixed Expenditures
    l. Subsidized Credit in Foreign Currency
    m. Land Allocation
7. Exemption from Mass Housing Fund Levy (Duty Exemptions)
8. Direct Payments to Exporters of Wheat Products to Compensate for 
High Domestic Input Prices
9. Interest Spread Return Program (GIP)

V. Programs Determined Not To Exist

    Based on the information provided in the responses and the results 
of verification, we determine that the following programs do not exist.

1. Export Promotion Program
2. Export Credit Program
3. Interest Rebates on Export Financing (GIP)
4. Foreign Exchange Allocation Program (GIP)

Interested Party Comments

    Comment 1: Petitioners argue that because there is no evidence on 
the record concerning certain tax programs discussed at verification, 
the Department should conclude that its subsidy calculations understate 
the tax benefits, and identify these other programs as subsidies to be 
examined in future proceedings. Petitioners also assert that the 
Department should not treat the Advanced Refund for Tax Savings program 
as terminated in the final determination. They state that the program 
is still in existence and that the Department verified this.
    Respondents assert that the Department verified that neither Filiz 
nor Maktas received benefits under the Advance Refund of Tax Savings 
program. Hence, this program should not be included in any 
countervailing duty order issued in this case. Respondents also assert 
that the Department has no record evidence with which to conclude that 
the other tax exemptions listed on the Turkish corporate income tax 
form constitute countervailable subsidies.
    DOC Position: We agree with petitioners that the Advanced Refund 
for Tax Savings program is still in existence and, therefore, should 
not be treated as a terminated program. However, we disagree with 
petitioners' contention concerning the other tax programs. We found no 
evidence during verification which would lead us to believe that these 
programs should be considered countervailable subsidies. Therefore, we 
are not including them in our final determination.
    Comment 2: Petitioners assert that the Department should allocate 
the benefits from the Pasta Export Grants to pasta exports to the 
United States. Petitioners also assert that certain subsidies 
attributed to Maktas appear in the company's ``Other Income'' account, 
which is a component of total sales. These subsidies should be 
subtracted from total sales so that they are not included in the 
denominator. Finally, petitioners argue that the Department should 
exclude from the denominator Filiz's sales of bulk pasta, because pasta 
sold in bulk is not subject merchandise.
    Respondents agree with petitioners that where it is clear that the 
benefit is tied to sales of pasta to the United States, the denominator 
should be total exports to the United States. However, they assert that 
for certain invoices, it was impossible for respondents to separate 
benefits between retail and bulk pasta sales. Therefore, the Department 
should not adjust for bulk sales.
    DOC Position: We have followed our standard practice of allocating 
countervailable benefits according to whether the benefit is tied to a 
particular product or market, or is untied. See, section 355.47 of the 
Proposed Regulations. Consequently, we have allocated the export grants 
received by Filiz for shipments to the U.S. to the company's exports to 
the United States. Because we were unable to distinguish between the 
pasta export grants received on bulk and those received on retail 
sales, we have included both retail and bulk sales in Filiz's total 
export sales. Finally, only the amount of foreign exchange gains from 
Maktas' ``Other Sales'' is included in the Maktas denominators used to 
calculate the benefit of the used subsidy programs.

[[Page 30373]]

    Comment 3: Petitioners assert that because Maktas reported that it 
applied for Normal Foreign Currency loans during the POI, the 
Department should not treat this program as not used, but rather as 
countervailable without benefit during the POI. Respondents state that 
Maktas did not apply for or use Normal Foreign Currency loans during 
the POI, and therefore, the Department should only consider this 
program in any future review.
    DOC Position: We found no evidence during verification of Maktas 
that the company had benefitted from the Normal Foreign Currency Loan 
program during the POI. Therefore, we will follow our standard practice 
of categorizing the program as not used. We may consider this program 
in future reviews.
    Comment 4: Petitioners argue that the Department should use 
effective interest rates when calculating the benefit in the Eximbank 
loan program.
    DOC Position: We agree with petitioners and have calculated the 
benefit from this program by comparing the effective Eximbank rates to 
the effective benchmark rates. Both the Eximbank and benchmark rates 
include legally-mandated commissions and fund surcharges.
    Comment 5: Petitioners argue that the Department should countervail 
the two additional grants received in 1994 that were discovered at the 
Filiz verification.
    Petitioners also argue that Filiz failed to establish that it did 
not use the Eximbank loan program. Therefore, the Department should use 
adverse facts available and apply to Filiz the rate calculated for 
Maktas under this program. Respondents state that the Department did, 
in fact, verify that Filiz did not benefit from the Eximbank loan 
program.
    DOC Position: The additional grants described by petitioners were 
Pasta Export Grants for shipments to third countries. As they can be 
tied to other markets, we have not included these two additional grants 
in our calculations.
    With respect to the Eximbank loan program, we agree with 
respondents that there is no evidence on the record to support the 
claim that Filiz benefitted from the Eximbank loan program. We examined 
Filiz's Chart of Accounts, General Ledger, and various accounts within 
each of these records, and found no evidence that Filiz had received 
loans through any GOT programs.

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 investigated 
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.
    Based on our affirmative preliminary determination, we instructed 
the U.S. Customs Service to suspend liquidation of all entries of pasta 
from Turkey 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, through February 
13, 1996. We will reinstate suspension of liquidation under section 
706(a)(1) 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.

------------------------------------------------------------------------
                                                         Ad       Cash  
                       Company                         valorem   deposit
                                                        rate      rate  
------------------------------------------------------------------------
Filiz...............................................      3.87      3.87
Maktas..............................................     13.12     12.61
Oba.................................................     15.82     15.82
All Others..........................................      9.70      9.38
------------------------------------------------------------------------

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.

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.

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. 96-14737 Filed 6-13-96; 8:45 am]
BILLING CODE 3510-DS-P