Final Affirmative Countervailing Duty Determination: Certain Pasta (``Pasta'') From Italy

[Federal Register Volume 61, Number 116 (Friday, June 14, 1996)]

[Notices]

[Pages 30288-30309]

From the Federal Register Online via the Government Publishing Office [www.gpo.gov]

[FR Doc No: 96-14734]

[[Page 30287]]

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Part II

Department of Commerce

_______________________________________________________________________

International Trade Administration

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Final Affirmative Countervailing Duty Determination and Final

Determination of Sales at Less Than Fair Value: Certain Pasta From

Italy and Turkey; Notices

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

Notices

[[Page 30288]]

DEPARTMENT OF COMMERCE

International Trade Administration

[C-475-819]

Final Affirmative Countervailing Duty Determination: Certain

Pasta (``Pasta'') From Italy

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: June 14, 1996.

FOR FURTHER INFORMATION CONTACT: Jennifer Yeske, Vincent Kane, Todd

Hansen, or Cynthia Thirumalai, Office of Countervailing Investigations,

Import Administration, U.S. Department of Commerce, Room 3099, 14th

Street and Constitution Avenue, N.W., Washington, D.C. 20230; telephone

(202) 482-0189, 482-2815, 482-1276, or 482-4087, respectively.

FINAL DETERMINATION: The Department of Commerce (``the Department'')

determines that countervailable subsidies are being provided to

manufacturers, producers, or exporters of pasta in Italy. For

information on the estimated countervailing duty rates, please see the

Suspension of Liquidation section of this notice.

Case History

Since the publication of our preliminary determination in this

investigation on October 17, 1995 (60 FR 53739), the following events

have occurred:

On October 21, 1995, we aligned the date of our final determination

with the date of the final determination in the companion antidumping

duty investigation of certain pasta from Italy (60 FR 54847, October

26, 1995). Subsequently, the final determinations in the antidumping

and countervailing duty investigations were postponed until June 3,

1996 (61 FR 1346, January 13, 1996).

We conducted verification of the countervailing duty questionnaire

responses from October 26 through November 11, 1995.

Three parties, Liguori Pastificio dal 1820, S.p.A, F.lli De Cecco

di Filippo Fara S. Martino S.p.A. (``De Cecco''), and Pastificio

Fratelli Pagani S.p.A (``Pagani''), made untimely submissions

containing factual information. These submissions were returned on

January 29, 1996, March 22, 1996, and April 12, 1996, respectively.

On February 14, 1996, we terminated the suspension of liquidation

of all entries of the subject merchandise entered, or withdrawn from

warehouse, for consumption on or after that date (61 FR 3672, February

1, 1996) (see, Suspension of Liquidation section, below).

Petitioners and respondents filed case briefs on April 2-4 and

rebuttal briefs on April 10-11, 1996. A public hearing was held on

April 15, 1996.

Scope of Investigation

The merchandise under investigation consists of certain non-egg dry

pasta in packages of five pounds (or 2.27 kilograms) or less, whether

or not enriched or fortified or containing milk or other optional

ingredients such as chopped vegetables, vegetable purees, milk, gluten,

diastases, vitamins, coloring and flavorings, and up to two percent egg

white. The pasta covered by this scope is typically sold in the retail

market, in fiberboard or cardboard cartons or polyethylene or

polypropylene bags, of varying dimensions.

Excluded from the scope of this investigation are refrigerated,

frozen, or canned pastas, as well as all forms of egg pasta, with the

exception of non-egg dry pasta containing up to two percent egg white.

Also excluded are imports of organic pasta from Italy that are

accompanied by the appropriate certificate issued by the Associazione

Marchigiana Agricultura Biologica (``AMAB'').

The merchandise under investigation is currently classifiable under

items 1902.19.20 of the Harmonized Tariff Schedule of the United States

(``HTSUS''). Although the HTSUS subheadings are provided for

convenience and customs purposes, our written description of the scope

of this investigation is dispositive.

Exclusion for Certain Organic Pasta

On October 2, 1995, a U.S. importer of Italian pasta requested that

the Department exclude from the scope of this investigation and the

companion antidumping duty investigation pasta certified to be

``organic pasta'' in compliance with European Economic Community

(``EC'') Regulation No. 2092/91. This regulation sets forth a regime of

standards for the cultivation, processing, storage, and transportation

of organic foodstuffs with inspections of farms and processing plants

by EC-approved national certification authorities. In addition to the

description of the EC regime, the request included a copy of a sample

certificate issued by the AMAB and a description, in English, of the

AMAB organization.

On November 9, 1995, petitioners stated that they were willing to

modify the scope of the petition and the investigation to exclude

certified organic pasta of Italian origin if U.S. imports of such pasta

were accompanied by certificates issued pursuant to EC Regulation No.

2092/91.

On November 21, we requested additional data on the EC regulation

from the Section of Agriculture of the Delegation of the European

Commission of the European Union. On December 8, 1995, the European

Commission submitted responses to our inquiries. The information

included a list of seven Italian inspection and certification

authorities (of which AMAB was one) and the statement that EC

Regulation No. 2092/91 ``* * * does not provide for certification of

products intended for export to third countries.'' Although the

Department was not able to fashion an exclusion of organic pasta from

the scope of these investigations in the preliminary determination of

the companion antidumping duty investigation, the Department stated

that if certification procedures similar to those under the EC

regulation were established for exports to the United States, we would

consider an exclusion for organic pasta at that time.

On April 2, 1996, the importer that had originally requested the

exclusion submitted a letter attaching a copy of a decree, with a

translation into English, of the Italian Ministry of Agriculture and

Forestry authorizing AMAB to certify foodstuffs as organic for the

implementation of EC Regulation 2092/91. On April 30, 1996, this

importer forwarded letters (with accompanying translations into

English) from the Director General of the Italian Ministry of

Agriculture and Forestry and from the Director of AMAB. The letter from

the Ministry states that it has authorized AMAB to insure compliance

with organic farming methods and to issue organic certificates since

December of 1992. The letter from the Director of AMAB states that this

organization will take responsibility for its organic pasta

certificates and will supply any necessary documentation to U.S.

authorities. On this basis, we are able to exclude--and do exclude--

imports of organic pasta from Italy that are accompanied by the

appropriate certificate issued by AMAB from the scope of these

investigations.

The Applicable Statute and Regulations

Unless otherwise indicated, all citations to the statute are

references to the provisions of the Tariff Act of 1930, as amended by

the Uruguay Round Agreements Act effective January 1, 1995 (the

``Act''). References to Countervailing Duties: Notice of Proposed

Rulemaking and Request for Public Comments, (54 FR 23366, May

[[Page 30289]]

31, 1989) (``Proposed Regulations''), which have been withdrawn, are

provided solely for further explanation of the Department's

countervailing duty practice.

Petitioners

The petition in this investigation was filed by Borden, Inc.,

Hershey Foods Corp., and Gooch Foods, Inc.

Respondents

Respondent companies in this investigation are Agritalia, S.r.l.

(``Agritalia''); Arrighi S.p.A. Industrie Alimentari (``Arrighi'');

Barilla G. e R. F.lli S.p.A. (``Barilla''); Pastificio Campano, S.p.A.

(``Campano''); F.lli De Cecco di Filippo Fara S. Martino S.p.A.; Molino

e Pastificio De Cecco S.p.A. Pescara (``Pescara''); De Matteis

Agroalimentare S.p.A. (``De Matteis''); La Molisana Alimentari S.p.A.

(``La Molisana''); Delverde, S.r.l. (``Delverde''); Gruppo Agricoltura

Sana S.r.L. (``Gruppo''); Pastificio Guido Ferrara (``Guido Ferrara'');

Industria Alimentare Colavita, S.p.A. (``Indalco''); Isola del Grano

S.r.L. (``Isola''); Italpast S.p.A. (``Italpast''); Italpasta S.r.L.

(``Italpasta''); Labor S.r.l. (``Labor''); Pastificio Riscossa F.lli

Mastromauro S.r.l. (``Riscossa''); and Tamma Industrie Alimentari di

Capitanata (``Tamma'') .

Period of Investigation

The period for which we are measuring subsidies (the ``POI'') is

calendar year 1994.

Subsidies Valuation Information

Benchmarks for Long-term Loans and Discount Rates: With the

exception of Barilla, the companies under investigation did not take

out any long-term, fixed-rate, lira-denominated loans or other debt

obligations which could be used as benchmarks in any of the years in

which grants were received or government loans under investigation were

given. Therefore, we used the Bank of Italy reference rate, adjusted

upward to reflect the mark-up an Italian bank would charge a corporate

customer, as the benchmark interest rate for long-term loans and as the

discount rate. The methodology used to adjust the reference rate was

described in our preliminary determination.

In the case of Barilla, the company reported and we verified that

it had secured fixed-rate obligations during two years of the relevant

period. Therefore, in accordance with section 355.49(b)(2) of the

Proposed Regulations, we used this company-specific benchmark as the

discount rate for Barilla in those years.

Allocation Period: Non-recurring benefits are being allocated over

a 12-year period, the average useful life of physically renewable

assets in the food processing industry (as reported in the Internal

Revenue Service Asset Depreciation Range System).

Benefits to Mills: Several companies under investigation produce

pasta using semolina sourced either internally or from affiliated

mills. In our preliminary determination, we concluded that subsidies to

the production of semolina, a primary input in the manufacture of

pasta, were properly analyzed under the upstream subsidy provision of

the Act (Section 771A).

Petitioners claim that the upstream subsidy provision is applicable

only when the producer of the subject merchandise purchases the input

product from an unrelated company. Petitioners assert that where the

input producer is affiliated with the producer of the subject

merchandise, production is sufficiently integrated that benefits

bestowed upon the manufacture of the input product will necessarily

flow down to the production of the subject merchandise. Petitioners

have not made an upstream subsidy allegation.

Respondents argue that because semolina is an ``input product,''

subsidies to the production of semolina are correctly examined under

the upstream subsidy provision of the statute. Respondents contend that

the language in the upstream subsidy provision of the statute expressly

defines ``upstream subsidies'' in terms of input products and makes no

distinction between purchases from related or unrelated suppliers.

A thorough examination of the Department's past practice reveals a

clear precedent for applying the upstream subsidy provision for

subsidies to the input product where the producer of the input product

is separately incorporated from the producer of the subject

merchandise, regardless of whether the two companies are affiliated

(see, e.g., Final Affirmative Countervailing Duty Determination:

Certain Oil Country Tubular Goods from Austria (60 FR 33534) and

Initiation of Countervailing Duty Investigation; Converted Paper-

related School and Office Supplies from Mexico (49 FR 58347, 58348)).

However, in two cases where the input product and the subject

merchandise are produced within a single corporate entity, the

Department has found that subsidies to the input product benefit total

sales of the corporation, including sales of the subject merchandise,

without conducting an upstream subsidy analysis (see, e.g., Final

Affirmative Countervailing Duty Determination: Certain Softwood Lumber

Products from Canada (``Lumber'') (57 FR 22570) and Final Affirmative

Countervailing Duty Determination: Industrial Phosphoric Acid from

Israel (52 FR 25447)).

Therefore, in accordance with our past practice, where the

companies under investigation purchase their semolina from a separately

incorporated company, whether or not they are affiliated, we have not

included subsidies to the mill in our calculations. However, for those

companies where the mill is not incorporated separately from the

producer of the subject merchandise, we have included subsidies for the

milling operations in our calculations. Where appropriate, we have also

included sales of semolina in calculating the ad valorem rate.

Changes in Ownership

We noted in our preliminary determination that one of the companies

under investigation, Delverde, purchased an existing pasta factory from

an unrelated party. Additionally, Indalco and De Matteis experienced

changes in ownership, and Barilla purchased an existing pasta producer.

With the exception of De Matteis, the previous owners of the purchased

enterprises or factories had received non-recurring countervailable

subsidies prior to the transfer of ownership and during the period

1983-1994.

For our preliminary determination, we calculated the amount of

those prior subsidies that passed through to Delverde with the

acquisition of the factory, following the methodology described in the

Restructuring section of the General Issues Appendix in Final

Affirmative Countervailing Duty Determination: Certain Steel Products

from Austria (58 FR 37217, 37268-69) (``General Issues Appendix''). At

the time of our preliminary determination, we did not have the

information needed to perform this calculation with respect to Indalco

and Barilla.

We noted in our preliminary determination that aspects of the

General Issues Appendix methodology were being reviewed by the Court of

Appeals for the Federal Circuit (``CAFC''), and that we would re-

examine whether the General Issues Appendix methodology is appropriate

for change of ownership transactions in light of facts developed in the

final investigation, ongoing litigation, and section 771(5)(F) of the

Act.

Since the time of our preliminary determination, the CAFC has

issued a ruling supporting our determination in those cases that

subsidies were not

[[Page 30290]]

necessarily extinguished as a result of the sale of an enterprise in an

arm's length transaction. Litigation, however, continues with regard to

certain aspects of our methodology.

For our final determination we have continued to follow the General

Issues Appendix Methodology and applied it to each of the respondents

involved in a change of ownership. We note that Barilla did not provide

the information necessary to analyze Barilla's acquisition of an

existing pasta producer. Without this information we cannot estimate

the portion of the purchase price that can reasonably be attributed to

prior subsidies. Therefore, we have treated all previously bestowed

subsidies as having passed through to the purchaser.

Related Parties

In the present investigation, we have examined several affiliated

companies (within the meaning of section 771(33) of the Act) whose

relationship may be sufficient to warrant treatment as a single

company. In the countervailing duty questionnaire, consistent with our

past practice, the Department defined companies as sufficiently related

where one company owns 20 percent or more of the other company, or

where companies prepare consolidated financial statements. The

Department also stated that companies may be considered sufficiently

related where there are common directors or one company performs

services for the other company. According to the questionnaire, such

companies that produce the subject merchandise or that have engaged in

certain financial transactions with the company under investigation are

required to respond.

In accordance with this practice, we have determined that the

following companies warrant treatment as a single company with a

combined rate: Delverde and Tamma, Arrighi and Italpasta, De Cecco and

Pescara, and De Matteis and Demaservice S.r.L. (``Demaservice'').

In our preliminary determination, we stated that Tamma held less

than a 20 percent ownership interest in the Delverde group. However,

upon reconsideration of the facts of their relationship, we have

concluded that the relationship between Tamma and the Delverde group is

substantially greater than 20 percent. We reach this conclusion by

aggregating the ownership interests of Tamma and Tamma Service, S.r.L,

which is appropriate given their relationship. In addition, the same

individual is the president of Tamma, Delverde, and Delverde's parent

company. Therefore, we have calculated a single countervailing duty

rate for these companies by dividing their combined subsidy benefits by

their combined sales.

In the cases of Arrighi and its affiliated producer, Italpasta, and

De Cecco and its affiliated producer, Pescara, we have found that the

respondents and their respective affiliates should be treated as a

single company based on the extent of common ownership. Therefore, we

have calculated a combined rate for Arrighi and Italpasta using the

methodology described above. For De Cecco and Pescara, because De Cecco

failed to provide subsidy information regarding Pescara, we have

calculated a combined rate using facts available, as described in the

Facts Available section of this notice.

As was noted in our preliminary determination, De Matteis is

related to another company, Demaservice, through common ownership.

Verification confirmed that while Demaservice does not produce the

subject merchandise, it is deeply involved in the operations of De

Matteis. Therefore, we have calculated a single countervailing duty

rate for the two companies as described above.

Facts Available

Section 776(a)(2)(A) of the Act requires the Department to use

facts available if ``an interested party or any other person * * *

withholds information that has been requested by the administering

authority or the Commission under this title.'' Two of the companies

selected to provide responses in this investigation, Italpast and

Labor, did not respond to our countervailing duty questionnaire.

Section 776(b) of the Act permits the administering authority to use an

inference that is adverse to the interests of the non-responding party

in selecting from among the facts otherwise available. Such adverse

inference may include reliance on information derived from: (1) the

petition, (2) a final determination in the investigation under this

title, (3) any previous review under section 751 or determination under

section 753 regarding the country under consideration, or (4) any other

information placed on the record. Because the petition did not include

subsidy rates, we were unable to use the petition as a source for facts

available.

In the absence of verified data concerning benefits received by

Italpast and Labor during the POI, we have determined that rates based

on record data obtained from similarly situated firms constitute the

most appropriate data available. Therefore, we have used the sum of the

highest rates calculated for each program used by any of the companies

as the facts available for Italpast and Labor.

In addition, we have determined that the final margin percentage

for Isola and its affiliated producer, Alce Nero, should also be based

on adverse facts available. At verification, Isola, a producer of

organic pasta, was unable to support the completeness and accuracy of

its response to our questionnaire. In particular, Isola did not

demonstrate that all grants received during the period 1983-1991 were

reported because it did not provide us with company records for that

time. We also found unreported grants during 1992-1994, the period for

which we were able to examine company records. In addition, Isola did

not report receiving reduced-rate loans; however, at verification we

found that during the POI it did have outstanding reduced-rate loans.

Therefore, lacking verified data concerning benefits received by Isola,

we have based its subsidy margin on adverse facts available, applying

the sum of the highest rates calculated for each program for respondent

companies.

Finally, De Cecco failed to include in the related parties section

of its questionnaire response information concerning Pescara, a related

producer of subject merchandise. We have determined that the

relationship between Pescara and De Cecco warrants treating them as one

company, as described in the Related Parties section of this notice.

After verification, De Cecco attempted to submit information into the

record of this investigation concerning Pescara. This information was

returned, however, as it was not filed in a timely manner. We retained

information on the record concerning the relationship of the companies

and the value and volume of sales made by Pescara during the POI.

We have determined that De Cecco's failure to provide a complete

response to the Department's countervailing duty questionnaire calls

for the use of facts available under section 776(a)(2) and (b) of the

Act. We have applied facts available with adverse inferences with

respect to the sales of Pescara relative to the combined sales of

Pescara and De Cecco, adjusted to eliminate intercompany transactions.

Specifically, we calculated an amount of subsidies for each program by

multiplying the highest calculated rate for any of the responding

companies by Pescara's sales, and then adding this amount to De Cecco's

subsidies under that program. This combined amount was

[[Page 30291]]

then divided by the companies' combined adjusted sales data to

calculate the ad valorem rate for De Cecco and Pescara.

Based upon our analysis of the petition and the responses to our

questionnaire, we determine the following:

Claims for ``Green Light'' Subsidy Treatment

Section 771(5B) of the Act describes subsidies that are non-

countervailable, the so-called ``green light'' subsidies. Among these

are subsidies to disadvantaged regions. The GOI and the EC have

requested that certain of their regional subsidies be considered non-

countervailable under the green light provisions of section 771(5B).

In its initial response, the EC requested green light treatment for

the regional aspects of the Structural Funds it administers (i.e., the

European Regional Development Fund (``ERDF''), the European Social Fund

(``ESF''), and the European Agricultural Guidance and Guarantee Fund

(``EAGGF'')). However, the EC also claimed that no companies under

investigation had received assistance under the ESF or the EAGGF

programs, and for this reason, the EC only responded to the green light

section of our questionnaire with respect to the ERDF program. We have

since learned that two companies did, in fact, receive assistance under

the ESF program.

Each of the Structural Funds was established with a different

purpose. The ERDF is tasked with helping to redress the main regional

imbalances in the Community by assisting in the development and

structural adjustment of underdeveloped regions and to help in the

conversion of declining industrial regions. The ESF was set up to

improve the employment opportunities for workers and to help raise

their living standards. The EAGGF assists in financing national

agricultural aid schemes and in developing and diversifying the EC's

rural areas.

The EC has established five priority objectives which govern the

operation of the Structural Funds:

Objective 1: To promote the development and structural adjustment

of the regions whose development is lagging behind;

Objective 2: To convert regions seriously affected by industrial

decline;

Objective 3: To combat long-term unemployment;

Objective 4: To facilitate the occupational integration of young

people;

Objective 5(a): To speed up the adjustment of agricultural

structures; and

Objective 5(b): To promote the development of rural areas.

In a submission made in connection with consultations held on March

11, 1996, the EC restated its claim that all regional aspects of the

Structural Funds merit green light treatment. In this submission, the

EC argued that green light status should not be analyzed separately for

each of the Structural Funds. Instead, the EC argued that each

Structural Fund ``objective'' should be treated as a program for green

light purposes. In other words, the EC focuses on the three regional

objectives under the Structural Funds, i.e., Objective 1, Objective 2,

and Objective 5(b). The EC considers the operation of Objective 1 under

the ERDF, the ESF, and the EAGGF as a distinct and separate aid

program, the operation of Objective 2 under the ERDF and the ESF as

another distinct and separate aid program, and the operation of

Objective 5 (b) under the ERDF, the ESF, and the EAGGF as yet another

distinct and separate aid program.

With respect to the ESF grants bestowed on the companies under

investigation, we do not have the information necessary to make a

determination on whether this assistance is entitled to green light

status. The EC opted not to provide a response to the green light

questionnaire for the ESF. Moreover, there is no evidence on the record

of this case regarding the particular objectives under which the ESF

aid in question was granted.

The only ERDF assistance received by a company under investigation

was granted under Objective 2 of the Structural Funds because the

company was located in a declining industrial region. According to EC

regulation, regions of a certain size which satisfy the following three

criteria may be entitled to Objective 2 status:

(a) the average rate of unemployment recorded over a period of

three years must be above the Community average;

(b) the percentage share of industrial employment to total

employment must have equaled or exceeded the Community average; and

(c) there must have been an observable fall in industrial

employment.

In addition, other types of regions may be accorded Objective 2 status

in certain circumstances. These include smaller, adjacent areas that

satisfy the above three criteria, areas defined by sectoral problems,

and urban areas with serious unemployment or certain other problems.

According to section 771(5B)(C) of the Act, in order for a subsidy

to be non-actionable it must have been provided pursuant to a general

framework of regional development, within which regions must be

considered disadvantaged on the basis of neutral and objective

criteria. These neutral and objective criteria must contain a measure

of economic development which is based on either a per capita income

that does not exceed 85 percent of the national average (in this case

the EC average) or an unemployment rate that is at least 110 percent of

the national average (also the EC average).

Regardless of whether we treat the ERDF itself as the relevant

program or adopt the EC's objective-by-objective approach, we find that

the assistance is not entitled to green light treatment. The Objective

2 criteria, described above, do include the level of unemployment;

however, by requiring unemployment only to exceed the Community

average, the criteria do not satisfy the requirement in our statute (or

the WTO Subsidies Agreement) that unemployment be at least 110 percent

of the national average. Moreover, the information on the record is

insufficient to indicate whether the region in which the sole recipient

of ERDF assistance is located does meet the requirements laid out in

section 771(5B)(C). Therefore, we need not decide whether such

information would be relevant. Finally, several of the various other

possible bases for according a region Objective 2 status do not include

one of the requisite measures of economic development.

For the foregoing reasons, we determine that subsidies received by

the Italian pasta producers under the ERDF and the ESF are

countervailable. Our treatment of these subsidies is discussed further

in the program specific section of this notice.

The GOI has requested that the Department find the following

subsidies to disadvantaged regions to be non-countervailable under

section 771(5B)(C):

ILOR and IRPEG Tax Exemptions under Decree 218 of 1978;

Industrial Development Grants under Law 64 of 1986;

Industrial Development Loans under Law 64 of 1986; and

VAT Reductions on Capital Goods under Law 675 of 1977.

The GOI has maintained a system of ``extraordinary intervention''

in southern Italy since the 1950's. Over time, various laws were passed

relating to the extraordinary intervention in the

[[Page 30292]]

South. Included in these laws were Law 64/86 and its predecessors,

which provided for capital grants and interest contributions to

productive investments in southern Italy, as well as the other programs

for which green light treatment has been requested. In 1986, Law 64/86

was passed in order to consolidate all laws relating to the

extraordinary intervention in the south into one development policy.

Each of the programs for which the GOI has requested green light

treatment can be considered part of Law 64/86 for this reason.

There is no indication that the GOI performed any analysis, using

neutral and objective criteria, in order to select the regions which

would be eligible for assistance. GOI officials admitted at

verification that the first time that a systematic review of the

regions eligible for assistance was applied in Italy was when Law 64/86

was investigated by the EC.

Subsequent to passage of Law 64/86, the EC initiated an

investigation as to whether this law was consistent with the EC's

competition policy rules. The EC competition policy rules contain a

general prohibition against member state aid schemes, with certain

exceptions which include two specific exceptions relating to regional

development. In particular, member states are allowed to provide one

level of aid intensity to regions with a per capita GDP that is less

than or equal to 75 percent of the EC average and another, lower level

of aid intensity to regions with a per capita GDP equal to 85 percent

of the member state average or an unemployment rate equal to 110

percent of the member state average.

In its decision, dated March 2, 1988, the EC found that the

majority of the Italian provinces eligible for assistance under Law 64/

86 met the criteria of the competition policy rules and were entitled

to receive aid at the higher intensity level. However, the decision

also called for a reduction of Law 64/86 benefits for one province and

the elimination of assistance for four additional provinces. The EC

allowed the GOI until 1992 for the complete reduction and elimination

of assistance to these areas.

The EC, the GOI, and certain respondents have argued that the

Department's analysis should recognize that Law 64/86 is part of a

community-wide framework of regional development. We need not reach the

issue of whether the nature of Law 64/86 as a green light subsidy is

governed by a community-wide framework of regional development because

we find that Law 64/86 does not meet the criteria established in the

community-wide framework. First, the EC itself concluded in 1988 that

several regions were ineligible to receive assistance under the

competition policy rules. In fact, Law 64/86 was not fully in

compliance with the competition policy rules until the close of 1992.

All of the Law 64/86 benefits included in this investigation were

received or approved prior to the close of 1992. In addition, the

Abruzzo region has continually been eligible to receive Law 64/86

assistance even though it did not meet the EC criteria (or even the

less stringent criteria in section 771(5B)(c)).

For the foregoing reasons, we determine that benefits provided

under Law 64/86 do not qualify as non-countervailable subsidies. Our

treatment of the individual benefits is discussed below in the program

specific section of this notice.

I. Programs Determined to be Countervailable

A. Local Income Tax (``ILOR'') Exemptions

Companies located in the Mezzogiorno may receive a complete

exemption for a period of 10 years from the ILOR on profits deriving

from new plant and equipment or from plant expansion and improvement

under Presidential Decree 218 of March 6, 1978. In addition, otherwise

non-qualifying profits which are reinvested in plant or equipment may

receive an exemption from the ILOR for the year of reinvestment. The

provision for ILOR exemptions expired on December 31, 1993, but

companies which were approved for the exemptions prior to this date may

continue to benefit from the exemption until the expiration of the 10-

year benefit period approved for each company.

We have determined that these tax exemptions are countervailable

subsidies. They constitute subsidies within the meaning of section

771(5) of the Act, as the tax exemptions represent revenue foregone by

the GOI and confer tax savings on the companies. Also, they are

regionally specific within the meaning of section 771(5A) because they

are limited to companies located in the Mezzogiorno.

Barilla, De Cecco/Pescara, and Delverde/Tamma claimed ILOR tax

exemptions on tax returns filed during the POI.

To calculate the countervailable subsidy for each company, we

divided the tax savings during the POI by the company's sales during

the POI. On this basis, we determine the countervailable subsidy from

this program to be 0.06 percent ad valorem for Barilla, 1.00 percent ad

valorem for De Cecco/Pescara, and 0.05 percent ad valorem for Delverde/

Tamma.

B. Industrial Development Grants Under Law 64/86

Law 64/86 provided assistance to promote industrial development in

the Mezzogiorno. Grants were awarded to companies constructing new

plants or expanding or modernizing existing plants. Pasta companies

were eligible for grants to expand existing plants but not to establish

new plants, because the market for pasta was deemed to be close to

saturated. Grants were made only after a private credit institution

chosen by the applicant made a positive assessment of the project.

In 1992, the Italian Parliament decided to abrogate Law 64/86. This

decision became effective in 1993. Projects approved prior to 1993,

however, were authorized to receive grant amounts after 1993.

Barilla, De Cecco/Pescara, La Molisana, Delverde/Tamma, Indalco,

and Riscossa received industrial development grants.

We determine that these grants provide a countervailable subsidy

within the meaning of section 771(5) of the Act. They are a direct

transfer of funds from the GOI providing a benefit in the amount of the

grant. Also, these grants are regionally specific, within the meaning

of section 771(5A).

We have treated these grants as ``non-recurring'' based on the

analysis set forth in the Allocation section of the General Issues

Appendix. In accordance with our past practice, we have allocated those

grants, net of any taxes paid, which exceeded 0.5 percent of a

company's sales in the year of receipt over time.

To calculate the countervailable subsidy, we used our standard

grant methodology. We divided the benefit attributable to the POI for

each company by that company's sales in the POI. On this basis, we

determine the countervailable subsidy for this program to be 0.00

percent ad valorem for Barilla, 0.56 percent ad valorem for De Cecco/

Pescara, 0.36 percent ad valorem for La Molisana, 1.86 percent ad

valorem for Delverde/Tamma, 0.58 percent ad valorem for Indalco, and

2.51 percent ad valorem for Riscossa.

C. Industrial Development Loans Under Law 64/86

Law 64/86 also provided reduced rate industrial development loans

with interest contributions to companies constructing new plants or

expanding or modernizing existing plants in the

[[Page 30293]]

Mezzogiorno. The interest rate on these loans was set at the reference

rate, with the GOI's interest contributions serving to reduce this

rate. For the reasons discussed above, pasta companies were eligible

for interest contributions to expand existing plants but not to

establish new plants.

Barilla, De Cecco/Pescara, Delverde/Tamma, Indalco and La Molisana

received industrial development loans with interest contributions from

the GOI.

We determine that these loans are countervailable subsidies within

the meaning of section 771(5). They are a direct transfer of funds from

the GOI providing a benefit in the amount of the difference between the

benchmark interest rate and the interest rate paid by the companies

after accounting for the GOI's interest contributions. Also, they are

regionally specific within the meaning of section 771(5A).

It is the Department's practice to measure the benefit conferred by

interest rebates using our loan methodology if the company knew in

advance that the government was likely to pay or rebate interest on the

loan at the time the loan was taken out. (See, e.g., Final Affirmative

Countervailing Duty Determinations: Certain Steel Products from Italy,

(58 FR 37327) (``Certain Steel from Italy'').) Because, in this case,

the recipients of the interest contributions knew, prior to taking out

the loans, that the GOI likely would provide the interest

contributions, we have allocated the benefit over the life of the loan

for which the contribution was received. We divided the benefit

attributable to the POI for each company by that company's sales. On

this basis, we determine the countervailable subsidy for this program

to be 0.09 percent ad valorem for Barilla, 0.42 percent ad valorem for

De Cecco/Pescara, 0.80 percent ad valorem for Delverde/Tamma, 0.09

percent ad valorem for Indalco, and 0.42 percent ad valorem for La

Molisana.

D. Export Marketing Grants Under Law 304/90

To increase market share in non-EU markets, Law 304/90 provides

grants to encourage enterprises operating in the food and agricultural

sectors to carry out pilot projects aimed at developing links between

Italian producers and foreign distributors and improving the quality of

services in those markets. Emphasis is placed on assisting small- and

medium-sized producers.

We have determined that the export marketing grants under Law 304

provide countervailable subsidies within the meaning of section 771(5)

of the Act. The grants are a direct transfer of funds from the GOI

providing a benefit in the amount of the grant. The grants are also

specific because their receipt is contingent upon anticipated

exportation.

Delverde/Tamma received a grant under this program for a market

development project in the United States.

Each project funded by a grant requires a separate application and

approval, and the projects represent one-time events in that they

involve an effort to establish warehouses, sales offices, and a selling

network in new overseas markets. Therefore, we have treated the grant

received under this program as ``non-recurring'' based on the analysis

set forth in the Allocation section of the General Issues Appendix.

Further, we have determined that the grant exceeded 0.5 percent of

Delverde/Tamma's exports to the United States in the year it was

received. Therefore, in accordance our past practice, we allocated the

benefits of this grant over time.

To calculate the countervailable subsidy, we used our standard

grant methodology. We divided the benefits attributable to the POI by

the total value of Delverde/Tamma's exports to the United States. On

this basis, we determine the countervailable subsidy to be 0.18 percent

ad valorem for Delverde/Tamma and 0.00 percent ad valorem for De Cecco/

Pescara.

E. Social Security Reductions and Exemptions

1. Sgravi Benefits

Pursuant to Law 1089 of October 25, 1968, companies located in the

Mezzogiorno were granted a 10 percent reduction in social security

contributions for all employees on the payroll as of September 1, 1968,

as well as those hired thereafter. Subsequent laws authorized companies

located in the Mezzogiorno to take additional reductions in social

security contributions for employees hired during later periods,

provided that the new hires represented a net increase in the

employment level of the company. The additional reductions ranged from

10 to 20 percentage points. Further, for employees hired during the

period July 1, 1976 to November 30, 1991, companies located in the

Mezzogiorno were granted a full exemption from social security

contributions for a period of 10 years, provided that employment levels

showed an increase over a base period.

We determine that the social security reductions and exemptions are

countervailable subsidies within the meaning of section 771(5). They

represent revenue foregone by the GOI and they confer a benefit in the

amount of the savings received by the companies. Also, they are

specific within the meaning of section 771(5A) because they are limited

to companies located in the Mezzogiorno.

Barilla, De Cecco/Pescara, Delverde/Tamma, La Molisana, Guido

Ferrara, Campano, De Matteis, Riscossa, and Indalco received social

security reductions and exemptions during the POI.

To calculate the countervailable subsidy, we have divided the total

savings in social security contributions realized by each company

during the POI by that company's sales during the same period. On this

basis, we calculated the countervailable subsidy from this program to

be 0.38 percent ad valorem for Barilla, 0.94 percent ad valorem for De

Cecco/Pescara, 1.40 percent ad valorem for Delverde/Tamma, 2.57 percent

ad valorem for La Molisana, 0.93 percent ad valorem for Guido Ferrara,

1.85 percent ad valorem for Campano, 2.03 percent ad valorem for De

Matteis, 0.95 percent ad valorem for Riscossa, and 1.06 percent ad

valorem for Indalco.

2. Fiscalizzazione Benefits

In addition to the sgravi deductions described above, the GOI

provides Social Security benefits of another type, called

``fiscalizzazione.'' Fiscalizzazione is a nationwide measure which

provides a deduction of certain social security payments related to

health care or insurance. The program provides an equivalent level of

deductions throughout Italy for contributions related to tuberculosis,

orphans, and pensions. However, the program also provides a deduction

from companies' contributions to the National Health Insurance system

which is equal to 3.44 percent of salaries paid in northern Italy and

9.60 percent of salaries paid in southern Italy.

We determine that the fiscalizzazione reductions are

countervailable subsidies within the meaning of section 771(5) for

companies with operations in southern Italy. They represent revenue

foregone by the GOI and confer a benefit in the amount of the greater

savings accruing to the companies in southern Italy. In addition, they

are regionally specific within the meaning of section 771(5A).

Barilla, De Cecco/Pescara, Delverde/Tamma, La Molisana, Guido

Ferrara, Campano, De Matteis, Riscossa, and Indalco received the higher

levels of fiscalizzazione deductions available to

[[Page 30294]]

companies located in the Mezzogiorno during the POI.

To calculate the countervailable subsidy, we have divided the

amount of the excessive fiscalizzazione deductions realized by each

company in the POI by that company's sales during the same period. On

this basis, we calculated the countervailable subsidy from this program

to be 0.11 percent ad valorem for Barilla, 0.53 percent ad valorem for

Campano, 0.38 percent ad valorem for De Cecco/Pescara, 0.40 percent ad

valorem for De Matteis, 0.32 percent ad valorem for Delverde/Tamma,

0.28 percent ad valorem for Guido Ferrara, 0.44 percent ad valorem for

Indalco, 0.71 percent ad valorem for La Molisana, and 0.51 percent ad

valorem for Riscossa.

3. Law 407/90 Benefits

Prior to verification, one of the respondent companies, Agritalia,

informed the Department that it had received benefits under Law 407/90.

Agritalia officials explained that this program grants a two-year

exemption from social security taxes when a company hires a worker who

has been previously unemployed for a period of two years. According to

Agritalia, a 100 percent exemption was allowed for companies in

southern Italy. However, companies located in northern Italy received

only a 50 percent exemption. During verification, two other companies,

Campano and De Matteis, also indicated that they had received benefits

under this program, and a review of documents related to Indalco's

social security payments indicated that Indalco had also received

benefits under this program.

We determine that the 100 percent exemptions provided to companies

with operations in southern Italy under Law 407 are countervailable

subsidies within the meaning of section 771(5). They represent revenue

foregone by the GOI and confer a benefit in the amount of the greater

savings accruing to the companies in southern Italy. In addition, they

are regionally specific within the meaning of section 771(5A).

To calculate the countervailable subsidy, we have divided the

amount of the Law 407 exemption which exceeds the amount available in

northern Italy realized by each company during the POI by that

company's sales during the same period. On this basis, we calculated

the countervailable subsidy from this program to be 0.03 percent ad

valorem for Agritalia, 0.21 percent ad valorem for Campano, 0.02

percent ad valorem for De Cecco/Pescara, 0.04 percent ad valorem for De

Matteis, and 0.01percent ad valorem for Indalco.

4. Law 863 Benefits

One of the respondents, Barilla, reported receiving Law 863

training benefits. According to Barilla, this law provides companies in

northern Italy a 25 percent reduction in social security payments for

employees who are participating in a training program. Companies in

southern Italy receive a 100 percent reduction in social security

payments for such employees.

None of the other responding companies reported receiving benefits

under this program. Additionally, we reviewed the social security

documentation for other responding companies and noted nothing to

indicate that any of the other respondents had claimed benefits under

this program.

We determine that the Law 863 reductions are countervailable

subsidies within the meaning of section 771(5) for companies with

operations in southern Italy. They represent revenue foregone by the

GOI and confer a benefit in the amount of the greater savings accruing

to the companies in southern Italy. In addition, they are regionally

specific within the meaning of section 771(5A).

To calculate the countervailable subsidy, we have divided the

amount of the Law 863 reductions which exceeds the amount available in

northern Italy realized by Barilla during the POI by that company's

sales during the same period. On this basis, we calculated the

countervailable subsidy from this program to be 0.01 percent ad valorem

for Barilla and 0.00 percent ad valorem for De Cecco/Pescara.

F. European Regional Development Fund

The ERDF is one of three Structural Funds operated by the EC. The

ERDF was created pursuant to the authority in Article 130 of the Treaty

of Rome in order to reduce regional disparities in socio-economic

performance within the Community. The ERDF program provides grants to

companies located within regions which meet the criteria of Objective 1

(underdeveloped regions), Objective 2 (declining industrial regions) or

Objective 5(b) (declining agricultural regions) under the Structural

Funds.

Arrighi/Italpasta received an ERDF grant.

We determine that the ERDF grant received by Arrighi/Italpasta

constitutes a countervailable subsidy within the meaning of section

771(5) of the Act. The grant is a direct transfer of funds providing a

benefit in the amount of the grant. Also, ERDF grants are regionally

specific within the meaning of section 771(5A) of the Act.

We view this as a ``non-recurring'' grant based on the analysis set

forth in the Allocation section of the General Issues Appendix. The

grant was received in two disbursements. The first disbursement was

received in 1993 and was less than 0.5 percent of Arrighi/Italpasta's

total sales in that year. Accordingly, this disbursement was expensed

in 1993. The second disbursement was received in 1994 (the POI) and was

also less than 0.5 percent of Arrighi/Italpasta's total sales in that

year. Therefore, in accordance with our past practice, we are

allocating the full amount of this disbursement to the POI.

To calculate the countervailable subsidy, we divided the full

amount of the grant by Arrighi/Italpasta's total sales. On this basis,

we calculated the countervailable subsidy from this program to be 0.19

percent ad valorem for Arrighi/Italpasta and 0.02 percent ad valorem

for De Cecco/Pescara.

G. European Social Fund

The ESF is also one of the Structural Funds operated by the EC. The

ESF was created under Article 123 of the Treaty of Rome in order to

improve employment opportunities for workers and to help raise their

living standards. The ESF principally provides vocational training and

employment aids. At the EC verification, we learned that ESF aid is

generally provided directly to public institutions or non-commercial

enterprises. However, it can also be provided directly to a company,

provided that it is located in an Objective 1, Objective 2, or

Objective 5(b) region. The ESF provides grants to such companies in

order to train current employees for new jobs or to hire new employees.

Barilla and Delverde/Tamma received ESF grants.

As stated in section 355.44(j) of the Proposed Regulations, the

Department considers worker assistance programs to be countervailable

when a company is relieved of an obligation it would otherwise have

incurred. We verified at the EC that in addition to providing funds for

training programs which may or may not relieve companies of an

obligation, ESF funds are available to aid companies in hiring new

employees. Because a company is normally obligated to meet its hiring

needs without assistance from the government, we determine that ESF

funds relieve companies of an obligation. Therefore, we determine that

ESF grants constitute countervailable subsidies within the meaning of

section 771(5) of the Act. The grants are a direct transfer of funds

providing a benefit in the amount of the grant. Also, because ESF

assistance to

[[Page 30295]]

individual companies is limited to companies located in Objective 1,

Objective 2, and Objective 5(b) regions, we have determined that ESF

grants are regionally specific within the meaning of section 771(5A) of

the Act.

In our preliminary determination, we treated ESF grants as

``recurring'' because worker training grants are among the types of

benefits the Department normally expenses in the year of receipt.

However, in light of the GOI verification and comments received by

interested parties, we have determined that ESF grants are ``non-

recurring'' (see Comment 20, below). We also have determined that the

grants received by Barilla and Delverde/Tamma were less than 0.5

percent of each company's respective sales in the year of receipt.

Therefore, in accordance with our past practice, we expensed these non-

recurring grants in the year of receipt. On this basis, we calculated

the countervailable subsidy from this program to be 0.00 percent ad

valorem for Barilla, 0.00 percent ad valorem for Delverde/Tamma, and

0.00 percent ad valorem for De Cecco/Pescara.

H. Export Restitution Payments

Since 1962, the EC has operated a subsidy program which provides

restitution payments to EU pasta exporters based on the durum wheat

content of their exported pasta products.

Generally, under this program, a restitution payment is available

to any EC exporter of pasta products, regardless of whether the pasta

was made with imported wheat or wheat grown within the EC. The amount

of the restitution payment is calculated by multiplying the prevailing

restitution payment rate on the date of exportation by the weight of

the unmilled durum wheat used to produce the exported pasta. The weight

of the unmilled durum wheat is calculated by applying a conversion

factor to the weight of the pasta. The EC calculates the restitution

payment rate, on a monthly basis, by first computing the difference

between the world market price of durum wheat and an internal EC price

and then adding a monthly increment (in all months except June and

July, which are harvest months). The EC normally will not allow the

restitution payment rate to be higher than the levy that the EC imposes

on imported durum wheat, as it would lead to circular trade.

Additionally, under this program, the EC permits a pasta exporter

to purchase a certificate that locks in a restitution payment rate if

the pasta exporter promises to export a certain amount of pasta by a

certain date. The promised export date can be as much as six months

later. Moreover, the pasta exporter is free to sell this certificate to

another pasta exporter. The selling price is determined through

negotiations between the seller and the purchaser and typically will be

dependent on such factors as the amount of time left until the

certificate expires, the purchaser's projected volume of exports, the

restitution payment rate under the certificate, and the current and

expected future restitution payment rates set by the EC. A pasta

exporter that fails to use a certificate by the date set forth in the

certificate must pay a penalty.

In 1987, the nature of this program changed with regard to exports

to the United States as a result of a settlement reached by the United

States and the EC. This settlement arose out of a GATT panel

proceeding, brought by the United States, in which the panel ruled (in

1983) that the restitution program violated the EC's GATT obligations

and did not fall within the exception under Item (d) of the

Illustrative List of Export Subsidies.

Under the settlement, the EC agreed to allow the importation of

durum wheat from any non-EU country free of any levy under a system

described in the settlement as ``Inward Processing Relief'' (``IPR'').

Under this system, the EC pasta exporter would not receive a

restitution payment when exporting to the United States pasta products

containing durum wheat imported with IPR. Essentially, a restitution

payment no longer was necessary because no levy had been paid upon

importation of durum wheat in the first place.

As to pasta products containing EC durum wheat or durum wheat that

had been imported without IPR, a restitution payment remained available

for exports to the United States, except that the restitution rate was

reduced, originally by 27.5 percent and later by approximately 35

percent, from the normal level available for exports to all other

countries.

As a further condition of the settlement, the EC agreed to attempt

to balance its exports to the United States equally between pasta

products containing durum wheat imported with IPR, on the one hand, and

pasta products containing EC durum wheat or durum wheat imported

without IPR, on the other hand. The goal was for 50 percent of the EC's

pasta exports to the United States to contain durum wheat imported with

IPR (for which the exporter had paid world market price, free of any

levy, and had received no restitution payments), while the remaining 50

percent of the EC's pasta exports to the United States would contain EC

durum wheat or durum wheat imported without IPR (for which the exporter

could receive reduced restitution payments). In all other respects, the

program remained unchanged.

We have concluded that the restitution payments made are

countervailable subsidies within the meaning of section 771(5) of the

Act. Each payment represents a direct transfer of funds from the EC

providing a benefit in the amount of the payment. The restitution

payments are specific because their receipt is contingent upon export

performance.

In our preliminary determination, we calculated export restitution

benefits on an earned basis, following the methodology set forth in

Final Affirmative Countervailing Duty Determination and Countervailing

Duty Order; Certain Steel Wire Nails from New Zealand (52 FR 37196,

37197). Based on information available at the time of our preliminary

determination, it appeared that the restitution rate was known at the

time of export and the respondents were confident of receiving

benefits.

In accordance with our normal practice of recognizing subsidy

benefits when there is a cash-flow effect, we have calculated the

subsidy rate for export restitution benefits based on the amount

actually received during the POI for purposes of our final

determination. We learned during verification that export restitution

benefits are not ``automatic'' in that their receipt is not certain

until an application has been filed, at the earliest. Applying for

restitution is voluntary, and not all parties eligible for restitution

always apply for benefits (see, e.g., verification report for the

European Union). We also noted that the amounts received, while

generally quite close to the amounts requested, did not always equal

the amount indicated by the company on its request form. We have

calculated the subsidy rate for export restitution benefits based on

the amount actually received during the POI.

Agritalia, Arrighi/Italpasta, Delverde/Tamma, and Riscossa received

export restitution payments during the POI on shipments to the United

States.

To calculate the countervailable subsidy, we divided the export

restitution payments received during the POI on shipments to the United

States by the company's total export sales to the United States during

the POI. We calculated a countervailable subsidy under this program of

0.42 percent ad valorem for Agritalia, 2.25 percent ad valorem for

Arrighi/Italpasta, 0.02 percent ad valorem for De Cecco/Pescara, 0.94

percent ad valorem for

[[Page 30296]]

Delverde/Tamma, and 2.94 percent ad valorem for Riscossa.

I. Lump-Sum Interest Payment Under the Sabatini Law for Companies in

Southern Italy

The Sabatini Law was enacted in 1965 to encourage the purchase of

machine tools and production machinery. It provides for a deferral of

up to five years of payments due on installment contracts for the

purchase of such equipment and for a one-time, lump-sum interest

contribution from Mediocredito Centrale toward the interest owed on

these contracts. The amount of the interest contribution is equal to

the present value of the difference between the payment stream over the

life of the contract based on the reference rate and the payment stream

over the life of the contract based on a concessionary rate. The

concessionary rate for companies located in the Mezzogiorno is the

reference rate less eight percentage points. The concessionary rate for

companies located outside the Mezzogiorno is the reference rate less

five percentage points.

Two companies in northern Italy received interest contributions

under the Sabatini Law for loans which were outstanding during the POI.

In addition, La Molisana received an interest contribution at the

concessionary rate available in the Mezzogiorno for a loan which was

still outstanding during the POI.

With respect to the benefits provided in northern Italy, we

analyzed whether the program is specific ``in law or in fact,'' within

the meaning of section 771(5A)(D)(i) and (iii). Section 771(5A)(D)(iii)

of the Act provides the following four factors to be examined with

respect to de facto specificity: 1) the number of enterprises,

industries or groups thereof which use a subsidy; 2) predominant use of

a subsidy by an enterprise, industry, or group; 3) the receipt of

disproportionately large amounts of a subsidy by an enterprise,

industry, or group; and 4) the manner in which the authority providing

a subsidy has exercised discretion in its decision to grant the

subsidy.

The Sabatini Law, which created the program, contains no

limitations on the types of industries that can apply for assistance.

Further, during the years 1988 through 1993, assistance under the

program was distributed over 19 sectors, representing a wide cross-

section of the economy. On this basis, we concluded that the subsidy

recipients were not limited to a specific industry or group of

industries. We also examined evidence regarding the usage of this

program and found no predominant use by the pasta industry. We next

examined whether a disproportionately large share of benefits was

granted to the pasta industry. We found that on average, benefits to

the food processing industry, which includes the pasta industry,

amounted to 4.9 percent of all benefits granted. Considering the number

and variety of sectors receiving benefits and the range of benefits

over the various sectors, we do not consider the benefits received by

the food processing sector to constitute a disproportionate share of

the benefits distributed under this program. Given our findings that

the number of users is large and that there is no dominant or

disproportionate use of the program by the pasta producers, we do not

reach the issue of whether administrators of the program exercised

discretion in awarding benefits. Thus, for companies located outside

the Mezzogiorno, we determine that interest contributions under the

Sabatini Law are not specific, and not countervailable.

However, because the concessionary rate for companies in southern

Italy is lower than the benchmark interest rate, we determine that the

Sabatini Law interest contributions to companies in southern Italy are

countervailable subsidies within the meaning of section 771(5). They

are a direct transfer of funds from the GOI providing a benefit in the

amount of the difference between the benchmark interest rate and the

interest rate paid by the companies. In addition, they are regionally

specific within the meaning of section 771(5A).

As stated earlier (see, Industrial Development Loans section,

above), when a company knows in advance that the government is likely

to pay or rebate interest on a loan, the Department will measure the

benefit conferred by that rebate using our loan methodology. Because La

Molisana knew, prior to taking out the loan, that it would receive the

interest contribution, we have allocated the benefit over the life of

the loan for which the contribution was received. We divided the

benefit attributable to the POI by La Molisana's total sales in the

POI. On this basis, we determine the countervailable subsidy for this

program to be 0.06 percent ad valorem for La Molisana and 0.01 percent

ad valorem for De Cecco/Pescara.

J. Remission of Taxes on Export Credit Insurance Under Article 33 of

Law 227/77

The Special Section for Export Credit Insurance (``SACE'') was

created under Article 2 of Law 227/77 as the branch of the GOI

responsible for the administration of government export credit

insurance and guarantee programs. Pursuant to Article 3 of Law 227/77,

SACE insures and reinsures political, catastrophic, economic,

commercial and exchange-rate risks which Italian operators are exposed

to in their foreign activities.

During the POI, only one private insurance company, Societa

Italiana Crediti S.p.A. (``SIAC''), had a reinsurance agreement with

SACE. Under the reinsurance agreement, SIAC passed along a fixed

percentage (i.e., 45 percent) of its export credit insurance premia to

SACE. In return, SACE assumed that same percentage of risk on export

credit insurance policies sold by SIAC (i.e., SACE would pay 45 percent

of any claim for which SIAC would become liable).

Article 33 of Law 227/77 provides for the remission of insurance

taxes on policies directly insured or reinsured with SACE. For

reinsurance policies, this remission of insurance taxes applied not

only to the portion of the risk covered by SACE, but also the remaining

portion covered by the private insurance company. As a result, export

credit insurance policies sold by SIAC during the POI were totally

exempt from the insurance tax by virtue of its reinsurance agreement

with SACE. Export credit insurance policies sold by other private

insurance companies, however, were not exempt from the insurance tax.

The insurance tax rate was 12.5 percent of premia paid.

We determine that the exemption from the insurance tax for policies

directly insured or reinsured with SACE is a countervailable subsidy

within the meaning of section 771(5) of the Act. The exemption

represents revenue foregone by the GOI and confer tax savings on the

companies. Also, because export credit insurance is available only to

exporters and is by its nature contingent upon export performance, we

find the remission of taxes on export credit insurance to be specific

within the meaning of section 771(5A) of the Act.

La Molisana obtained export credit insurance from SIAC for its

exports to the United States. We saw no evidence at verification to

indicate that other responding companies purchased export credit

insurance from SIAC. To calculate the benefit received by La Molisana,

we multiplied the amount of premia paid during the POI for exports to

the United States by the insurance tax rate and divided the amount by

total exports to the United States. We calculated a countervailable

subsidy rate of 0.05 percent ad valorem for La

[[Page 30297]]

Molisana and 0.00 percent ad valorem for De Cecco/Pescara.

II. Program Found To Be Not Countervailable

A. Disaster Relief

Four respondent companies, Barilla, Campano, De Matteis, and Guido

Ferrara, reported receiving disaster relief assistance between the

period 1983-1994 under Law 219/81. Law 219 was enacted following one of

the worst earthquakes to strike Italy in 50 years. Under Law 219, aid

was granted for the repair and reconstruction of residential buildings,

public locations, schools, churches and industries damaged in the

earthquakes of November 1980 and February 1981. Aid to industries was

provided to repair and rebuild facilities, such that the rebuilt

facility would employ the same number of workers as prior to the

disaster. The eligibility criteria for a facility to receive aid under

Law 219 consisted of the following:

It had to be a productive unit (e.g., shopkeepers were

ineligible);

It had to be extant at the time of the earthquake;

It had to have experienced actual damage (i.e., being

located in the applicable area was not sufficient);

The damage had to be more than minor in nature.

The amount of assistance provided was capped by a formula based on the

number of employees at the time of the earthquake and by a set

percentage of project cost.

In the past, the Department has found that disaster relief does not

confer countervailable subsidies where it constituted general

assistance to anyone in affected areas. In Final Affirmative

Countervailing Duty Determinations: Certain Steel Products from Italy

(47 FR 39360 (1982)), in reviewing a similar disaster relief program,

we stated:

Although not all areas would be eligible at any one time,

disaster relief is not selective in the same manner as other

regional programs since there is no predetermination of eligible

areas and no part of the country, and no industry, is excluded in

principle, from participation.

Accordingly, we have determined that, on a de jure basis, the disaster

relief provided under Law 219 was general in nature and available to

all who were affected. Moreover, at verification, we confirmed that aid

under Law 219 was granted to numerous companies in a variety of

industries. Therefore, we have determined this program to be not

countervailable.

III. Programs Determined To Be Not Used

A. VAT Reductions

The responses indicated that certain companies received VAT

reductions under Law 675/77. We have determined that any payments

received under this program are ``recurring,'' as they are not

exceptional and companies can expect to receive them on an ongoing

basis. Moreover, receipt of the VAT reductions is automatic provided

the company is eligible and the proper forms are filed. Such benefits

are among the types of benefits the Department has identified as

normally being expensed in the year of receipt. (See, Allocation

section of the General Issues Appendix.)

Since no payments were received by any investigated companies under

this program during the POI, we are treating the program as ``not

used'' and, consequently, have not analyzed whether it confers a

countervailable subsidy.

B. Export Credits Under Law 227/77

C. Capital Grants Under Law 675/77

D. Retraining Grants Under Law 675/77

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

F. Interest Grants Financed by IRI Bonds

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

H. Corporate Income Tax (``IRPEG'') Exemptions

I. European Agricultural Guidance and Guarantee Fund

J. Urban Redevelopment Under Law 181

Interested Party Comments

Comment 1: Subsidies bestowed under previous ownership: Respondents

Barilla, Indalco and Delverde argue generally that grants received by

the companies located in the Mezzogiorno (under Law 64/86) were used to

invest in new plant and equipment, and that the investment in new plant

and equipment increased the value of the enterprise. Respondents argue

that this increase in value was fully reflected in the sales price of

the acquired enterprise or its assets because, where a change of

ownership occurred, the sale was a private transaction at arm's length.

Thus, respondents argue, any competitive benefit would have been

included in the sales price of the enterprise, benefiting the previous

owner but not the new owner.

Barilla argues that neither Cagliari (a pasta producer acquired by

Barilla) nor Barilla was a state-owned enterprise and, accordingly,

Barilla's acquisition of Cagliari involved an arms-length transaction

resulting from fair and open negotiations between two purely private

parties. Barilla argues that it paid a market price for Cagliari, and

that this price reflected any remaining economic benefit from any pre-

acquisition grants that Cagliari received. Barilla further argues that

the grants received by Cagliari were received many years ago, and can

have no distortive impact on competition today.

Indalco argues that the assistance the company received under Law

64 was modest and that the company was not being rescued or bailed-out

by the government. Indalco argues that while the language of section

771(5)(F) may indicate that the provision applies both to privatization

of state-owned enterprises and to changes in ownership of private

firms, the legislative history makes it clear that the Congress

intended the provision to address privatization. In support of this

argument, Indalco cites to the Statement of Administrative Action

(``SAA'') at 258 where, referring to section 771(5)(F), the SAA reads:

``The issue of privatization of a state-owned firm can be extremely

complex and multifaceted.''

Delverde cites to Final Affirmative Countervailing Duty

Determination: Oil Country Tubular Goods from Canada (51 FR 15037,

15042) (``OCTG from Canada'') where the assets of a responding company

had been purchased in an arm's length transaction in bankruptcy

liquidation and the Department stated: ``In an arm's length

transaction, such as this one, subsidies, if there are any, are not

passed through.'' Delverde also argues that newly added amendments to

the Act clearly do not compel the Department to reach the conclusion

that subsidies to MI.BA (the previous owner of the pasta factory

purchased by Delverde) passed through to Delverde. Delverde cites

section 771(5)(F) of the Act and emphasizes that the statute indicates

that a change in ownership ``does not by itself require'' a

determination by the Department that subsidies do not pass through.

Delverde argues that the language in the statute indicates that it is

possible for subsidies to not pass through to a new owner when there is

an arm's length transaction.

Delverde further argues that MI.BA and Delverde are both private

entities, and that there has never been any government ownership of the

pasta factories. Delverde argues that, from an economic perspective, it

paid a market price for MI.BA, purchasing the assets of MI.BA at a

price determined by an

[[Page 30298]]

independent appraiser, so it should be irrelevant whether MI.BA had

received any subsidies.

Petitioners first point out that in Saarstahl AG v. United States

(Nos. 94-1457, -1475, Slip Op. (Fed. Cir. Mar. 12, 1996))

(``Saarstahl''), the CAFC sanctioned the Department's position that

``the subsidy survives unless there is evidence that it went elsewhere

or was repaid.'' Petitioners then argue that there is no evidence on

the record that would allow the Department to measure the precise

amount of the benefit that passed through to the current owner or that

remained with the previous owner, and as a result the Department must

countervail the entire amount of the prior subsidies. Petitioners

further argue that since the government was not involved in any of the

transactions, no repayment to the government of any previously bestowed

subsidies could have resulted from the changes in ownership. Finally,

petitioners argue that the type of subsidies bestowed on pasta

production under previous ownership is, for the most part, identical to

the subsidies bestowed on the production of pasta under the current

ownership. Therefore, it would be inconsistent and illogical to

countervail only the subsidies that benefited pasta production received

under current ownership while leaving the remaining portion of the

subsidies received by a facility under its previous owner

uncountervailed.

Petitioners argue that respondents are claiming that asset sales at

arm's length and for fair-market value, by themselves, insulate

previously bestowed subsidies from countervailability. Petitioners

argue that current law clearly establishes that subsidies received

under prior ownership are actionable. With regard to change of

ownership, petitioners point to the SAA, at page 258, which reads:

Section 771(5)(F) is being added to clarify that the sale of a

firm at arm's length does not automatically, and in all cases,

extinguish any prior subsidies conferred. Absent this clarification,

some might argue that all that would be required to eliminate any

countervailing duty liability would be to sell subsidized productive

assets to an unrelated party. Consequently, it is imperative that

the implementing bill correct such an extreme interpretation.

Petitioners contend further that the Department has been careful to

distinguish its findings in OCTG from Canada from other cases where

there have been changes in ownership. Petitioners cite to the General

Issues Appendix, at 37236, where the Department stated:

OCTG from Canada involved a situation where a company had become

defunct and non-operational. Its assets were disposed of through a

bankruptcy proceeding. This is a unique situation not involving the

sale of an ongoing operating company exporting subsidized

merchandise to the United States.

Petitioners additionally argue that the respondent company in OCTG from

Canada was engaged in the manufacture of a different product from the

predecessor company.

Petitioners next argue that the Department's own grant allocation

methodology recognizes that the value of a grant should be spread out

over several years. Petitioners cite to the General Issues Appendix at

37261:

The Department allocates non-recurring subsidies over time in

recognition of the fact that the statutory goal of providing a

remedy against subsidies would be defeated by allocating the

subsidies to a single moment or year. The statutory presumption that

subsidies benefit goods produced by their recipients must, in order

to have the intended effect, be applied over a reasonable period of

time * * *.

Petitioners contend that considering these subsides to be extinguished

when there is a change of ownership is tantamount to circumscribing all

of the subsidies to a single moment in time, a result that is

inconsistent with the Department's practice of allocating non-recurring

subsidies.

DOC Position: We have determined that a portion of the subsidies

bestowed while the enterprise was under previous ownership pass

through, as described in the Change of Ownership section of this

notice.

In Saarstahl, the CAFC stated that ``the statute does not limit

Commerce to countervailing only subsidies that confer a competitive

advantage on merchandise exported to the United States. Nor does the

legislative history say that Commerce was expected to perform any

calculations of competitive advantage.'' (Saarstahl at 245.) The CAFC

then cited to S. Rep. No. 1298, 93d Cong., 2d Sess. 184 (1974), which

states, ``Whenever the Secretary * * * has sufficient evidence to

determine the existence of a bounty or grant, he can and should make

his final determination and impose countervailing duties.''

Respondents argue that a purchaser is indifferent between buying a

previously subsidized enterprise and an enterprise that has not been

subsidized. As noted above, the CAFC in Saarstahl specifically stated

that the Department does not need to demonstrate competitive benefit.

The Department calculates a subsidy rate based upon the countervailable

subsidies to the merchandise. These subsidies do not necessarily lose

their countervailable nature by simple virtue of an arm's length

transaction, as the CAFC in Saarstahl and section 771(5)(F) confirm.

With Saarstahl, the CAFC upheld the Department's position that

subsidies were not necessarily extinguished as a result of the

privatization of a state-owned enterprise through an arm's length

transaction. In so doing, the CAFC rejected the position of the Court

of International Trade (``CIT'') that an arm's length sale

automatically extinguished prior subsidies. It was the CIT's ``extreme

position'' that led to the addition of section 771(5)(F) to the Act

(see, SAA at 258).

Respondents attempt to distinguish the changes in ownership in the

instant investigation from Saarstahl by arguing that in addition to an

arm's length transaction at fair market value, the respondent parties

are privately held entities and there was no government ownership, nor

involvement in the sales of the companies'' shares or assets.

Accordingly, respondents argue, this lack of involvement by the state

in the transaction means that the previous owners retain the benefit

from the subsidies.

Respondents' argument conflicts with section 771(5)(F), which

reads:

Change in ownership.--A change in ownership of all or part of a

foreign enterprise or the productive assets of a foreign enterprise

does not by itself require a determination by the administering

authority that a past countervailable subsidy received by the

enterprise no longer continues to be countervailable, even if the

change in ownership is accomplished through an arm's length

transaction.

If Congress had intended that this section apply only to privatizations

of state-owned enterprises, the language would have been more explicit

in that regard. It is apparent that Congress intended that this

provision be applicable to all changes of ownership. Moreover, the

language of this provision purposely leaves much discretion to the

Department. As the SAA explains, ``Commerce must exercise its

discretion carefully through its consideration of the facts of each

case and its determination of the appropriate methodology to be

applied.'' (SAA at 258.)

Finally, we have rejected petitioners' arguments for countervailing

the entire amount of the prior subsidies, as these arguments are

contrary to the methodology described in the General Issues Appendix.

Comment 2: Expensing of subsidies bestowed on companies under

previous ownership: Barilla argues that in the

[[Page 30299]]

event the Department concludes it is appropriate to include in its

calculations the non-recurring subsidies received by Cagliari prior to

the company's purchase by Barilla, the amount of the grants is less

than Barilla's sales in the years of receipt, so the subsidies should

be allocated entirely to the years of receipt.

DOC Position: We disagree with respondent. To determine whether or

not a grant should be allocated over several years or entirely to the

year of receipt, the Department compares the amount of the grant to the

revenues of the grant recipient (in this instance, Cagliari) in the

year the grant is received. Barilla did not provide us with information

concerning the revenues of Cagliari in the year of receipt of the

grant. Lacking this information, we have assumed that the grant

exceeded 0.5 percent of Cagliari's sales in that year and have

allocated this grant using our standard allocation formula.

Comment 3: Expensing test for non-recurring subsidies: Respondents

La Molisana and Barilla argue that the Department should raise the

threshold used to decide whether a non-recurring countervailable

subsidy should be allocated to future periods or allocated entirely to

the year of receipt from 0.5 percent to one percent. Respondents cite

to Final Affirmative Countervailing Duty Determinations: Certain Steel

Products from Belgium (47 FR 39304, 39317) where the Department

established its current methodology for allocating grants over time and

instituted the practice of expensing small grants which were recognized

by the Department at the time to be generally less than one percent of

the appropriate denominator in the year of receipt. Respondents state

that the Department lowered this expensing threshold to 0.5 percent in

Cold-Rolled Carbon Steel Flat-Rolled Products from Argentina: Final

Affirmative Countervailing Duty Determination and Countervailing Duty

Order (49 FR 18016, 18018) (``Steel from Argentina'') to accord with

the then newly instituted de minimis level of 0.5 percent. Respondents

contend that the Department aligned the expensing and de minimis rates

because the application of an expensing rate different from the de

minimis rate could lead to anomalous results. Respondents cite to the

hypothetical example given in Steel from Argentina where a respondent

receiving a single countervailable grant slightly above the de minimis

rate, but below the expensing threshold, is subject to an order;

whereas another firm receiving a larger grant that is above the

expensing threshold and is, therefore, allocated over time receives a

de minimis rate and is excluded from any order. Respondents argue that

having an expense rate that is below the de minimis rate is equally

undesirable because such a policy would require application of the

allocation process for a subsidy the Department considers too small to

be countervailed.

Petitioners assert that there is no statutory or regulatory

requirement that compels the Department to align the expensing rate and

the de minimis rate. Petitioners argue that in Steel from Argentina the

Department did not consider a hypothetical circumstance where the

expense rate is lower than the de minimis rate, since such an exercise

was not required. Petitioners contend that raising the expensing rate

to one percent would enable foreign governments to subsidize companies

through numerous small grants. Additionally, petitioners argue, if the

Department were to carry respondents' logic further, and align the

expensing rate with the de minimis rate of two percent for developing

countries set by section 703(b)(4)(B), a government could obtain a

subsidization level of immense proportions while avoiding

countervailable duties by awarding numerous grants, each below a two

percent threshold.

DOC Position: Although the Department normally will allocate

nonrecurring grants over time, under the so-called 0.5 percent test,

the Department will generally allocate nonrecurring grants received

under a particular subsidy program entirely to the year of receipt if

the total amount of such grants is less than 0.5 percent of a firm's

sales in that year.

Respondents are correct in their assertion that the floor amount

was decreased from one percent to 0.5 percent when the de minimis rate

of 0.5 percent was instituted. However, the recent statutory increase

in the de minimis rate for investigations does not require an

equivalent increase in the rate used to determine whether a non-

recurring countervailable subsidy will be allocated over time or

entirely to the year of receipt. The use of an expensing rate that is

below the de minimis rate does not produce the ``anomalous results''

described by the Department in Steel from Argentina where the expensing

rate was above the de minimis rate.

Additionally, a one percent de minimis rate is being applied only

to certain investigations; investigations in certain developing

countries have higher de minimis rates of two percent and three

percent, and the de minimis rate will remain 0.5 percent for all

administrative reviews (SAA at 269). We believe retaining a consistent

expensing rate of 0.5 percent across all investigations and reviews is

desirable.

Comment 4: Northern Italy all-others rate: Pagani, an Italian pasta

producer, contends that a single all-others rate, applicable throughout

Italy, is unfairly prejudicial to Pagani. Pagani claims that the

inclusion of programs available exclusively to producers located in the

Mezzogiorno in the calculation of the all-others rate is unfair to

pasta producers located in northern Italy.

Pagani argues further that statutory changes resulting from the

URAA require the Department to assign Pagani an individual rate. To

support this position, Pagani cites to section 777A(e)(1) of the Act

which reads: ``[T]he administering authority shall determine an

individual countervailable subsidy rate for each known exporter or

producer of the subject merchandise.''

In the event the Department declines to assign it an individual

countervailing duty deposit rate, Pagani proposes that the Department

calculate a separate all-others rate applicable only to producers

located in northern Italy, and that programs for which companies

located in northern Italy were ineligible to participate be excluded in

calculating this rate. Pagani argues that the Act recognizes the

independent nature of regions of a subject country in particular

situations. Pagani argues that the statute's treatment of

``disadvantaged regions'' under the green light provisions permits

Commerce to treat a region as a separate country for purposes of the

specificity test. Pagani proposes that the Department recognize the

distinction between the Mezzogiorno and northern Italy and determine an

all-others rate for companies located in the north of Italy.

Petitioners argue that Pagani's assertion that the Act entitles it

to an individual rate is erroneous. Petitioners point to the SAA which

states that the amendment cited by Pagani ``eliminates the presumption

in favor of a single country-wide CVD rate and amends section 777A of

the Act to establish a general rule in favor of individual CVD rates

for each exporter or producer individually investigated'' (SAA at 271)

(emphasis added).

Petitioners state that Pagani's reliance on the regional green

light provisions in the statute is misplaced. Petitioners contend that

the green light amendments were enacted only to determine whether or

not a subsidy was countervailable, and have no bearing on how a subsidy

should be calculated.

DOC Position: We agree with petitioners that Pagani is not entitled

to

[[Page 30300]]

an individual rate. While section 777A calls for the application of

individual rates, section 705(c)(1)(B)(i) of the Act, which describes

the all-others rate, states the Department shall determine ``an

estimated all-others rate for all exporters and producers not

individually investigated * * *'' Pagani was not individually

investigated in this proceeding; it was not selected to respond, nor

did it submit a voluntary response to our questionnaire. Therefore, we

see no statutory basis for Pagani's argument.

Moreover, such a proposal is contrary to past practice (see, e.g.,

Lumber, 22578) and would be unadministrable. While there are regional

programs in the instant investigation that are available only to

producers in the Mezzogiorno, the Department hypothetically could

perform an investigation where there are dozens of regional programs,

each covering different regions, which would result in dozens of

different regional countervailable subsidy rates if we were to follow

the methodology proposed by Pagani. Therefore, we have not calculated

separate all-other rates for northern and southern Italy.

Comment 5: Trading company deposit rate: Agritalia claims that it

should be assigned an individual countervailing duty deposit rate based

only on countervailable subsidies it received, and its rate should not

include any subsidies received by its suppliers. At the same time,

Agritalia states that it does not object to the imposition of duties on

its exports to the United States based on any rates assigned to its

suppliers.

Agritalia argues that information in the record of this

investigation demonstrates that Agritalia received de minimis

countervailable subsidies, so it should be excluded from any order

resulting from this investigation. Agritalia cites to section

705(c)(1)(B)(i)(I) of the Act, which states that the Department will

determine an ``individual countervailable subsidy rate for each

exporter or producer individually investigated.'' Agritalia argues that

a rate based on a weighted average of the rates of its suppliers which

produced the pasta it sold during the POI is not the same as an

individual rate for each exporter or producer as prescribed in the

statute.

Petitioners argue that, contrary to Agritalia's assertions, section

705(c)(1)(B)(i)(I) does not mean that a company's ``individual'' rate

must be calculated based solely on subsidies ``individually'' received.

Petitioners state that Agritalia should receive a rate based on an

aggregation of the countervailable subsidies received by Agritalia and

the subsidies received by its producers attributable to the merchandise

sold by Agritalia during the POI. Petitioners cite to Certain Carbon

Steel Products from Brazil; Preliminary Results of Countervailing Duty

Administrative Review (51 FR 39774, 39777) (``Steel from Brazil''),

where the Department stated that subsidies to suppliers benefit the

merchandise exported by trading companies. Petitioners request that the

Department follow the calculation methodology laid out in Steel from

Brazil where subsidies to the producers of merchandise sold by export

trading companies are included in the margin calculation.

DOC Position: We agree that the Department must calculate a

countervailable subsidy rate for each exporter or producer of the

subject merchandise which is individually investigated. However,

certain subsidies to producers also benefit the merchandise exported by

the trading companies. Therefore, we have included all of the

countervailable subsidies which benefit the subject merchandise in the

countervailing duty rate assigned to Agritalia. A detailed explanation

of our calculation methodology for Agritalia's rate is provided in the

Suspension of Liquidation section of this notice.

Comment 6: Exclusion of de minimis companies: Petitioners assert

that the Department should not exclude any de minimis companies from

any countervailing duty order that is issued as a result of this

investigation. Petitioners cite to Final Affirmative Countervailing

Duty Determinations; Certain Steel Products from the Federal Republic

of Germany (47 FR 39345) (``Steel from the FRG''), where the Department

did not exclude a de minimis company from the order due to likelihood

that company would continue to receive benefits under investigated

subsidy programs. Petitioners argue that the Department applies strict

standards to companies that request individual, company-specific rates

in administrative reviews. Further, petitioners argue that the

standards for termination or revocation of an order require affirmative

evidence that a government has eliminated all subsidies on the

merchandise, and that there is an absence of likelihood that the

subsidies will be reinstated in the future.

Petitioners assert that the export restitution program has existed

for more than 20 years, and there is no indication that this program

will be terminated or revoked. Petitioners emphasize that export

restitution payments were only available during two months of the POI;

accordingly, petitioners contend, it is likely that respondent

companies will receive higher levels of countervailable subsidies in

the future.

Petitioners further argue that the possibility for circumvention is

very real, and that the record of this investigation has demonstrated

that pasta producers in Italy maintain an interrelated web of

relationships which could allow companies to funnel exports through

low-margin, or excluded, respondents. Petitioners think an exception to

the Department's general practice of excluding de minimis companies is

in order in light of these circumstances.

Respondents Arrighi and Barilla argue that any respondent receiving

a de minimis rate, should be excluded, as a matter of law, from any

countervailing duty order the Department might issue in connection with

this investigation. Respondents point to section 705(c)(1)(B)(i)(I) of

the Act which states that the Department will determine an ``individual

countervailable subsidy rate for each exporter or producer individually

investigated.'' Respondents then point to section 705(a)(3) of the Act

which states: ``In making a determination under this subsection, the

administering authority shall disregard any countervailable subsidy

that is de minimis * * *'' Respondents argue that since the statute

requires the Department to disregard any de minimis countervailable

subsidy, the Department must exclude respondents which are found to

have de minimis countervailable subsidy rates.

Respondents further argue that the Department has a long

established practice of excluding de minimis companies from the order.

Respondents point out that Steel from the FRG, cited by petitioners, is

more than ten years old, and is not reflective of current Department

practice.

DOC Position: We disagree that the circumstances surrounding this

investigation merit a departure from our usual practice of excluding de

minimis respondents from an order, even if the law permitted this. The

facts in this case differ from those in Steel from the FRG. In that

case, the Department did not exclude from the order a respondent that

had experienced a loss during the POI because there was a pattern of

prior subsidization through coverage of losses. Hence, the Department

had evidence that countervailable benefits associated with the coverage

of losses were likely to be received after the POI. In this case, we

have no evidence that the pattern of subsidization will change in such

a way that benefits to firms

[[Page 30301]]

which are currently below de minimis level will increase.

Comment 7: Export Restitution Payments: Respondents Delverde and

Tamma argue that, due to amendments effected by the URAA, the

Department cannot recognize the benefits from export restitution

payments on an ``earned'' basis. Delverde and Tamma assert that the new

statute requires a ``financial contribution'' before a subsidy can be

found and that ``earning'' a payment does not amount to a financial

contribution.

Agritalia and Arrighi argue that the Department should use the date

export restitution is recorded in company books as the basis upon which

to calculate any potentially countervailable subsidies. Agritalia and

Arrighi claim that accrual in the company records is an indication that

the company has reached a commercial and legal conclusion that the

receipt of the benefit is certain, thereby signifying that there has

been an economic effect on the company. Agritalia further claims that

the complex documentation process required to receive restitution

payments results in the company being uncertain it will receive

benefits until it receives confirmation from the GOI.

The EC argues that export restitution benefits should be calculated

at the time of the event giving rise to the benefit, i.e., the

exportation of the merchandise. The EC argues that the timing of the

payment can vary for reasons external to the objective of the subsidy,

such as delays in the administrative mechanism paying out the

restitution. The EC argues that the objective of the subsidy is a

payment for exportation, so restitution should be calculated based on

date of exportation.

Petitioners argue that the record in this investigation provides

evidence of substantial delays between the date of exportation, the

date a request is filed, and the date funds are eventually received. In

addition, petitioners contend that the various permutations associated

with the export restitution program, such as pre-fixing of the

restitution rate and the ability to sell and buy pre-fixing rights,

should lead the Department to the conclusion that the best method for

measuring restitution benefits is to calculate the benefit rates on a

received basis.

DOC Position: We agree with petitioners that various permutations

associated with the export restitution program create a level of

uncertainty that the amount of restitution expected at the time of

export will equal the amount received. Moreover, as stated in the

Export Restitution section of this notice, we found at verification

that companies do not always receive the amount of restitution expected

at the time of receipt. Therefore, we have calculated the benefits

under this program on a received basis.

Comment 8: Purchased Restitution Benefits: Arrighi argues that any

export restitution payments received as a result of using an advance-

fixing certificate it purchased are non-countervailable, as Arrighi

purchased the certificate from an unrelated party and paid adequate

remuneration for the certificate.

Petitioners argue that export restitution benefits, regardless of

whether they result from a purchased certificate, represent a direct

transfer of funds from the EC to the recipient, and that the Department

must countervail at least the net amount received by Arrighi.

DOC Position: We have calculated the benefits of export restitution

payments on a received, rather than earned, basis for our final

determination. As Arrighi did not receive any payments resulting from

purchased export restitution certificates during the POI, this issue is

moot.

Comment 9: Fee Received by Agritalia: Petitioners argue that

Agritalia was potentially eligible for export restitution on a sale of

pasta to the United States, but instead claimed IPR as a service to

another party. Petitioners claim that Agritalia would not have been

able to receive fees for this service absent the export restitution

subsidy program so, in effect, Agritalia indirectly benefited from the

export restitution program, and the fees received by Agritalia should

be countervailed. Petitioners argue that the fees received by Agritalia

represent a benefit provided indirectly by the GOI in that their very

existence stems from the design of the export restitution/IPR system in

Italy.

Agritalia responds that the fees it received were related to inward

processing relief and not to export restitution. Agritalia argues that

the Department has not found IPR countervailable, so any fees related

to IPR should not be countervailable. Agritalia argues that neither the

EU nor the GOI were involved in the transactions associated with the

fees, and that there is no more relationship between the fees received

by Agritalia and restitution than there is between IPR and restitution.

Since the IPR scheme is not a countervailable benefit, the fees

received by Agritalia are not a countervailable benefit.

DOC Position: When Agritalia accepted the fees, it surrendered its

eligibility to receive any restitution payments on those exports. The

fees were payment to Agritalia to give up its export restitution rights

with respect to those shipments where it was paid to claim IPR.

Accordingly, we have determined that the fees received by Agritalia

should be included in our calculation of countervailable export

restitution benefits for Agritalia.

Comment 10: VAT Reductions: Petitioners argue that VAT reductions

under Law 675/77 are grants associated with the purchase of capital

equipment and should be treated as non-recurring subsidies. Petitioners

refer to the verification report in support of their argument that the

GOI uses the VAT rebates to distribute these grants as a matter of

convenience, and that the method of distribution should not outweigh

the consideration that these are grants for capital equipment.

Respondents Delverde and Tamma cite to the General Issues Appendix

at 37226 where the Department indicates that its practice is to find

benefits to be non-recurring when:

the benefits are exceptional, the recipient cannot expect to receive

the benefits on an ongoing basis from review period to review period

and/or the provision of funds by the government must be approved

every year.

Delverde and Tamma argue that there is no lengthy application or

approval process to receive VAT reductions under Law 675; benefits are

claimed as a line item directly on a company's VAT return. Further,

recipients can expect to receive benefits on an ongoing basis.

Respondents further argue that because this provision of Law 675/77

provides a refund of VAT, it is a simple tax program and should be

found recurring.

Respondent De Matteis cites to Preliminary Affirmative

Countervailing Duty Determinations: Certain Steel Products from Italy

(57 FR 57739, 57744) where the Department determined that VAT

reductions under Law 675/77 were recurring benefits. De Matteis argues

that the Department should follow the precedent set in Certain Steel

from Italy and in the preliminary determination for this investigation,

and continue to treat VAT reductions under Law 675/77 as recurring

benefits.

DOC Position: We agree with respondents. In determining whether

subsidy benefits are recurring or nonrecurring, the Department

considers whether or not the benefits are exceptional, expected to be

received on an ongoing basis from review period to review period, and/

or require approval every year.

Although no new VAT reductions under Law 675 have been offered

since

[[Page 30302]]

1991, until that time the program had been longstanding, and pasta

manufacturers expected to receive benefits under the program on a

recurring basis, without any special approval. Therefore, we have

continued to treat these benefits as recurring in our final

determination.

Comment 11: Disaster Relief: Petitioners argue that assistance

provided under Law 219 for disaster relief should be countervailed in

the final determination. Petitioners acknowledge Float Glass from

Italy; Preliminary Results of Administrative Review of Countervailing

Duty Order (47 FR 56160) and Final Affirmative Countervailing Duty

Determinations; Certain Steel Products from Italy (47 FR 39360 (1982))

as two cases where disaster relief was found to be non-specific because

there was no predetermination of eligible areas and because no industry

was excluded from eligibility. Petitioners contrast this with the 1993

determination in Certain Steel from Italy, where the Department found

disaster relief to be countervailable because the government had not

provided information on specificity. Petitioners conclude that disaster

relief is countervailable when the government has failed to establish

its non-countervailable status, or where the assistance appears to be

de facto specific. Petitioners claim that this is the case in this

investigation.

According to petitioners, the Italian government used Law 219

assistance as a mechanism for expanding and modernizing production in

the Mezzogiorno region. As such, Law 219 assistance is a regionally

specific, industrial development subsidy whose ``[g]eneral financial

benefit to the production is sufficient to support a determination of

subsidy * * *'' (British Steel Corp v. United States, 605 F.Supp. 286,

295 (C.I.T 1984). Petitioners maintain that the assistance does not

appear to be limited to areas in need of assistance. In addition,

petitioners point out that only slightly more than half of submitted

applications were ultimately approved, indicating that benefits were

distributed selectively. Petitioners also argue that respondents'

failure to report Law 219 benefits in their original responses to the

questionnaire warrants adverse inferences and, therefore, the

Department should assume that these companies benefited from Law 219 to

the maximum extent possible.

Guido Ferrara states that Disaster Relief benefits under Law 219

are not countervailable. According to Guido Ferrara, benefits pursuant

to Law 219 went to build structures, businesses and churches destroyed

during the 1980 earthquake. Guido Ferrara points out that the amount of

assistance it received only helped to rebuild the factory, and not to

expand beyond the original number of production lines. Guido Ferrara

adds that the disaster relief assistance did not make up for several

years worth of lost sales and lost customers. Guido Ferrara maintains

that countervailing benefits received pursuant to Law 219 would create

a bad precedent in that the United States has provided similar

assistance during far less serious disasters.

Barilla, De Matteis and Campano argue that assistance under Law 219

was generally available to a wide range of facilities destroyed by the

earthquake, i.e., industries, residential buildings, public locations,

schools, and churches within an objectively defined geographic area.

These respondents also point out that the GOI used objective criteria

to select damaged eligible industries and that all companies that met

the criteria could participate. These respondents also point out that

only 5 of 598 companies eligible for assistance under Law 219 were

pasta producers.

DOC Position: We agree with respondents that assistance under Law

219 is non-specific within the meaning of section 771(5A) of the Act

and, as such, is not countervailable. Verification showed that all

companies that met the prescribed criteria were automatically eligible

for assistance. The criteria are neutral and do not favor one

enterprise or industry over another. Adherence to the criteria is

monitored by the GOI beginning with the application and approval stages

(e.g., by requiring proof/documentation of actual damage and the extent

of damage) and all the way through completion of the project by

requiring proof of costs incurred (e.g., receipts) and on-site

verification by government-appointed inspectors to ensure completion of

the approved plans.

As for petitioners' concern that the GOI is using Law 219 as

another mechanism for expanding and modernizing production in the

Mezzogiorno region, we saw no evidence that this program did anything

more than assist in the rebuilding of facilities damaged by a natural

disaster. Under the provisions of Law 219, the rebuilt facilities are

required to produce the same product as the predecessor factory. In

addition, eligibility for Law 219 assistance is strictly limited to

facilities that suffered more than minor damage. If Law 219 had been

designed to function as a mechanism for funneling more money into the

Mezzogiorno region for expansion and modernization of production

facilities, then one would expect to see looser eligibility

requirements. While it is true that companies are not restricted to

simple restoration of the damaged facilities, Law 219 assistance is

capped by a formula based on the number of employees at the time of the

earthquake and by a set percentage of project cost. To require that

companies restrict themselves to mere restoration of the previous

facility would be unreasonable and inefficient. This is especially true

in the presence of technological advances achieved subsequent to the

original capital purchases that would allow for cost effective building

of plants and for the acquisition of advanced machinery.

Contrary to petitioners'' assertion that the assistance does not

appear to be contained to areas in need of it, we found at verification

that assistance was limited to facilities damaged by the earthquake

within a defined geographic area centered about the area hardest hit by

the earthquake.

Our findings at verification also showed that assistance granted to

industries was non-specific in fact. First of all, there are numerous

users of this program. As respondents pointed out above, the pasta

industry is not a predominant user of this program. Also, we saw at

verification that in addition to assistance for industries involved in

production, all types of facilities (e.g., schools, public facilities,

residential structures) are eligible for assistance under other

articles of Law 219. Petitioners point to a high application rejection

rate as an indication that GOI discretion is being exercised in the

distribution of Law 219 assistance for industries. At verification, GOI

officials explained that many who sought approval were rejected for a

number of reasons such as damage was not significant enough, or the

company seeking assistance frequently was a retailer not involved in

production activities who properly had to apply for assistance under

another Article of Law 219. Hence, the rejections reflect application

of the eligibility criteria, and provide no evidence that benefits

under Law 219 were specific.

Comment 12: Treatment of Interest Contributions: Petitioners state

that interest contributions on Law 64/86 loans received as lump-sum

payments should be treated as non-recurring grants.

DOC Position: We disagree with petitioners that the lump-sum

interest contributions should be treated as grants. Where the borrower

can reasonably expect to receive interest subsidies at the time the

loan is taken out, our practice has been to use our

[[Page 30303]]

loan methodology to measure the benefit. (See, e.g., Certain Steel from

Italy, 37331, 37339). In this case, companies applied for the interest

subsidies at the same time they applied for the loan and in all but one

case, the interest subsidy was granted. Hence we have followed our

practice as articulated in Certain Steel from Italy.

Comment 13: Tamma's Industrial Development Loans: Delverde argues

that no benefits were received pursuant to Tamma's warehouse loan under

Law 64/86. According to Delverde, Tamma was paying the commercial rate

during the entire POI. Delverde points out that it was not until after

the POI that approval for Law 64/86 assistance was granted for this

loan.

DOC Position: We disagree with Delverde that Tamma paid a

commercial rate during the POI. We have compared the rate paid by Tamma

(the reference rate) to our benchmark and determined that Industrial

Development Loans conferred a benefit, in addition to the interest

contributions, because the loan recipients paid less than they would

pay for a comparable commercial loan (see section 771(5)(E)(ii)).

For the reasons stated above in the Industrial Development Loans

section, we are treating Law 64/86 loans as reduced-rate loans

throughout the life of the loans. Therefore, if a loan is outstanding

during the POI, benefits are accrued whether or not official

notification of approval of Law 64/86 benefits has been received; this

is due to the nearly automatic nature of the assistance.

Comment 14: Fees for Loan Guarantees: Delverde argues that the

benefit from its Law 64/86 loans should be calculated net of the

guarantee fees it paid on these loans. To support its argument,

Delverde cites section 701(a) of the Act where it states that the ``net

countervailable subsidy'' should be used to calculate countervailing

duties. ``Net countervailable subsidy,'' in turn is defined in section

771(6)(A), as follows:

For the purpose of determining the net countervailable subsidy,

[the Department] may subtract from the gross countervailable subsidy

the amount of * * * any application fee, deposit, or similar payment

paid in order to qualify for, or to receive, the benefit of the

countervailable subsidy.

Petitioners state that there is no evidence on the record showing

that guarantee fees were required by the GOI in order to receive Law

64/86 interest subsidies. Instead, petitioners point out that the fees

were required by the lending institution upon the transfer of the pasta

factory from the previous owners to Delverde. As such, petitioners

argue that the guarantee fees are related to the transfer of assets

between the two companies, but not to the existence of the benefits on

the applicable Law 64/86 loans. Petitioners also allude to potential

future refunds of these fees as evidence of the speculative nature of

these fees.

DOC Position: We agree with Delverde that the loan guarantee fees

it paid on certain Law 64/86 loans should be deducted. These fees are

part of the effective cost of the loan. It is Departmental practice to

compare the effective cost of the government loan to the benchmark loan

(see, section 355.44(b)(8) of the Proposed Regulations). In order to

determine the interest rate differential between the benchmark interest

rate and the interest rate on the loans provided pursuant to this

program, we have deducted the loan guarantee fee from the loan interest

rate.

Concerning petitioners' suggestion that these fees may be refunded

in the future, we note that, as stated in the verification report, the

agreement between Delverde and the lending institution speaks only of

the possibility of reviewing the agreement in the future upon the

reduction of the loan balances to a certain point--it does not mention

the possibility of refunding the fees.

Comment 15: Other Subsidies: Petitioners argue that the Department

should countervail all funds received from entities that appear to be

administering bodies for Law 64/86 contributions. These entities

include the Cassa per il Mezzogiorno (``CASMEZ''), the Institute for

the Economic Development of Southern Italy (``ISVEIMER''), and Istituto

Mobiliare Italiano S.p.A. (``IMI'').

DOC Position: We disagree with petitioners that all transactions

via these institutions should be presumed to entail some form of

government assistance. At verification we saw that some of these

institutions acted as agents for Law 64/86 assistance while also

engaging in commercial financial transactions (extension of loans,

etc.). Payment schedules and other documents pertaining to the loans

from these institutions outside of Law 64/86 did not contain any

indication that government assistance was involved. Therefore,

consistent with past practice (see Proposed Regulations at

355.44(b)(9)), we have not included these loans in our investigation.

Comment 16: Law 64/86 Grants: Petitioners urge the Department to

capture all Law 64/86 assistance that was either reported to or found

by the Department during the course of verification. In particular,

they urge the Department to include unreported grants received by the

previous owners of Delverde's pasta factory and by Delverde's related

companies, grants received by Tamma pursuant to a predecessor law, and

loans received by De Cecco and Indalco.

Delverde counters by stating that it did report Law 64/86

assistance pertaining to the pasta factory while under prior ownership.

Delverde points out that the ``unreported'' grants under Law 64

pertained to other unrelated operations of the prior owners of

Delverde's pasta factory. As for the grant disbursements received by

Tamma under the predecessor law, Delverde comments that the proper

denominators can be found in Tamma's financial statements provided to

Department officials during verification and attached to Delverde's

case brief.

DOC Position: We agree with Delverde that the ``unreported'' Law

64/86 grants referred to by petitioners pertained to unrelated

operations (e.g., a box factory, an olive oil producer) belonging to

the prior owners of Delverde's pasta factory. As such, these grants

were properly tied to operations other than the pasta factory presently

owned by Delverde.

Likewise, we verified that the ``unreported'' Law 64/86 loans

received by De Cecco pertained to the separately incorporated milling

operations and olive oil company. Therefore, they do not provide a

benefit to the production of the subject merchandise.

With respect to Indalco, we note that prior to verification the

company reported two loans and two grants which were received under Law

64/86 while Indalco was under previous ownership. In addition, at

verification we discovered three grants which were also provided under

Law 64/86 while the company was under previous ownership. Each of these

loans and grants related to the production of subject merchandise.

Therefore, they have been included in our calculations.

Comment 17: Riscossa: According to petitioners, the Department

should draw an adverse inference from Riscossa's inability to document

the source of amounts recorded as ``Other Debt'' in its 1994 balance

sheet and, as a result, should classify these amounts as Law 64/86

assistance.

DOC Position: We disagree with petitioners that the use of adverse

facts available is warranted with respect to the portion of ``Other

Debt'' for which company officials were not able to produce identifying

documentation. Riscossa's accounting system has other accounts into

which benefits received pursuant Law 64/86 and other programs would

more properly be recorded.

[[Page 30304]]

During verification, we examined these other accounts and saw no

indication that there were unreported loans granted under Law 64/86 or

any other program.

Comment 18: Publicita Grants: Delverde argues that the publicita

grants under Law 64/86 should not be countervailed since the assistance

related solely to advertising and publicity expenses for selling

products in Italy and not to the ``manufacture, production, or export''

functions enumerated in the Act.

Petitioners counter that the production and sale of merchandise are

``inextricably intertwined.'' According to petitioners, companies

produce only with the expectation of selling that production.

Petitioners also point out that the aim of governments in providing

subsidies is to stimulate production and sales.

DOC Position: We agree with petitioners that benefits received in

relation to selling activities do pertain to the manufacture,

production and export of merchandise. Both grants pertaining to

manufacturing activities and those to selling activities are given by

governments with the intention of jointly benefitting production and

sales. Hence, these subsidies are properly countervailed.

Comment 19: Publicita Grants: Petitioners argue that the publicita

grants to Tamma under Law 64/86 should be tied only to pasta since

Tamma was not able to distinguish between grants related to pasta and

those related to other products at verification.

Delverde counters that for the one publicita grant to Tamma that

applied to pasta and other products, company officials were able to

provide supporting documentation at verification showing the allocation

of those funds between pasta and the other products.

DOC Position: We agree with Delverde that Tamma was able at

verification to support the allocation of funds between pasta and other

products for one of its publicita grants. Accordingly, we considered

only the portion applicable to pasta for the one grant and used as our

denominator sales of all pasta products by Tamma. Since the other

publicita grants to Tamma were tied to pasta, we applied the entire

amounts received to sales of pasta by Tamma.

Comment 20: European Social Fund: Petitioners argue that the

Department should find that ESF grants received by Barilla, Delverde,

and De Matteis confer countervailable, non-recurring benefits to

companies under investigation. According to petitioners, the GOI

verification report clearly indicates that ESF grants are exceptional,

one-time measures, and that each project requires separate application

and government approval. Citing the Allocation section of the General

Issues Appendix, petitioners argue that it is the Department's practice

to treat this type of grant as non-recurring.

Petitioners also argue that the failure of the GOI and the EC to

provide accurate and timely information regarding the receipt of ESF

grants requires the Department to countervail the grants using adverse

inferences. They urge the Department to countervail all assistance

received during the period 1983 through 1994 as if it were received in

1994 (i.e., expensed during the POI). Petitioners also argue that the

Department should include in its calculations the ESF grant received by

De Matteis in 1995 (after the POI) because De Matteis applied for the

grant in 1993 and recorded the amount in its books in the same year.

The EC states that ESF grants should be considered non-recurring

because the grants relate to specific and individual projects and each

project requires separate government approval.

Barilla argues that the Department should continue to find ESF

benefits to be recurring because they are a type of benefit the

Department has traditionally considered recurring (i.e., worker

assistance). In the event that they are found to be non-recurring,

Barilla argues that each of its grants are below 0.5 percent of sales

in the year of receipt. Accordingly, Barilla urges the Department to

expense the ESF grants in the year of receipt.

Delverde argues that there is no basis for making any adverse

inference regarding the receipt of ESF benefits by its predecessor

company, MI.BA. Delverde claims that it has fully cooperated with the

Department and the use of facts available against Delverde would be

unlawful. Moreover, Delverde claims the Department was able to verify

that Delverde provided all available information regarding MI.BA's use

of the ESF program.

De Matteis argues that the Department's practice is to countervail

benefits when they are received; therefore, because De Matteis did not

receive its ESF grant until after the POI, there is no benefit to De

Matteis during the POI. Moreover, De Matteis argues that if the

Department were to change its methodology and measure the benefit from

the date that De Matteis accrued or applied for the benefit, the

benefit would not exceed 0.5 percent of sales and would be expensed

prior to the POI.

DOC Position: We agree with petitioners and the EC that benefits

under the ESF program are non-recurring. While worker benefits were

identified in the General Issues Appendix in a list of benefits which

are typically recurring, we note that the list was provided for

illustrative purposes only. The General Issues Appendix states that

``[t]he unique factual circumstances of a particular case may indicate

that a program listed generally as recurring be found nonrecurring or

vice versa.'' It is clear from the GOI verification that ESF grants

provide one-time assistance and should be considered non-recurring.

We do not agree, however, that an adverse inference of the type

proposed by petitioners is warranted. Under section 776(b) of the Act,

the Department is allowed to make an inference that is adverse to the

interests of a party only if that party has ``failed to cooperate by

not acting to the best of its ability to comply with a request for

information.'' There is no evidence that Barilla, Delverde, or De

Matteis did not act to the best of their abilities to supply

information regarding this program. Therefore, we have calculated the

benefits from the ESF grants using the appropriate years in which they

were received, as reported by the companies.

With respect to the ESF grant received by De Matteis, we agree with

the respondent that De Matteis received no benefit from this grant

during the POI. It is the Department's normal practice to recognize a

subsidy benefit when there is a cash-flow effect. In this instance, the

cash-flow effect takes place after the POI; therefore, there is no

benefit during the POI.

Comment 21: Benefits to Mills: Petitioners argue that the purpose

of the upstream subsidy provision, as reflected in the legislative

history, is to broaden the scope of subsidy practices that can be

captured under U.S. countervailing duty law. Petitioners argue that

using the upstream subsidy provision as a basis for excluding subsidies

from the investigation would contravene the intended purpose of the

provision.

Petitioners claim that the upstream subsidy provision is applicable

only when the producer of the subject merchandise purchases the input

product from an unaffiliated company. Petitioners point to Live Swine

from Canada; Final Results of Countervailing Duty Adminstrative Review

(59 FR 12243) (``Live Swine''), in which the Department has

consistently countervailed the Alberta Crow Benefit Offset Program,

which offsets the costs of feed grain fed to hogs, as precedent for

this position. Petitioners claim that this program was a subsidy for

the production of an input product and that

[[Page 30305]]

it was found to benefit the subject merchandise--without an upstream

subsidy allegation--due to the integrated nature of hog production.

Petitioners also argue that even if the Department determines that

subsidies to mills constitute upstream subsidies, they are

countervailable on other grounds. Petitioner asserts that they are

countervailable as subsidies to related parties and as subsidies

discovered during the course of the investigation.

Respondents argue that because semolina is an ``input product,''

subsidies to the production of semolina are correctly examined under

the upstream subsidy provision of the statute. To support their

position respondents cite Canadian Meat Council v. United States (661

F. Supp. 622 (CIT 1987)), wherein the Court determined that subsidies

to live swine could be found to benefit pork packers only within the

context of the upstream subsidy provision.

Respondents maintain that there is no exception to the upstream

subsidy provision for input products produced by related parties.

According to respondents, the only exception to the upstream subsidy

provision, falls under section 771B of the Act, which allows the

Department to dispense with the upstream subsidy analysis for processed

agricultural products if certain conditions are met. Respondents argue

that these conditions are not met with respect to pasta production for

several reasons. Respondents contend that semolina is not a raw

agricultural product and that the value added in converting semolina

into unfinished pasta is substantial.

Finally, respondents refute petitioners' claim that subsidies to

semolina mills are subsidies ``discovered during the course of'' a

countervailing duty investigation. Respondents point out that

information regarding these subsidies was on the record from the start

of the investigation.

DOC Position: As discussed above, in the Subsidies Valuation

section of this notice, the Department's past practice has been to

apply the upstream subsidy provision for subsidies to the input product

where the product is purchased from a separately incorporated company,

whether affiliated or not. Petitioners'' reliance on Live Swine is

misplaced. The subsidy program in question in that case was provided

directly to the producers of the subject merchandise to offset the

higher costs of the input product. Moreover, we agree with respondents

that the processed agricultural products exception to the upstream

subsidy provision (section 771B) is not met in the case of pasta.

Therefore, where the companies under investigation purchase their

semolina from separately incorporated companies, whether or not they

are affiliated, we have determined that the upstream subsidy provision

applies.

We disagree with petitioners that such subsidies are

countervailable as subsidies to related companies or as subsidies

discovered during the course of an investigation. We agree with

respondents that there is no exception from the upstream subsidy

provision for related input producers. Therefore, subsidies to

separately incorporated input producers can only be examined in an

upstream subsidy investigation. Moreover, we agree with respondents

that these subsidies were not discovered during the course of the

investigation.

Comment 22: Termination of certain Social Security benefits for

Molise and Abruzzo: La Molisana claims that the Department should

assign a ``zero'' duty deposit rate to La Molisana for certain social

security benefits because companies in the Molise region became

ineligible to receive these benefits at the end of 1994. La Molisana

argues that because the benefits were terminated prior to the

preliminary determination, setting the cash deposit rate at zero for

these benefits will accurately reflect the level of subsidization on

any entries which have been suspended from liquidation. Moreover, La

Molisana claims that any countervailing duty deposits for these

benefits will simply be refunded upon review.

Petitioners argue that the Department should reject La Molisana's

claims regarding the termination of social security benefits for

several reasons. Petitioners claim that La Molisana has not shown that

the termination has affected any company other than La Molisana itself.

In addition, petitioners point out that the basis of the change is the

Molise region's increased level of economic development. Petitioners

claim that neither La Molisana nor the government has given any

indication that the program will not be reinstated in the event that

the Molise region's level of development declines. Moreover,

petitioners claim there is no evidence on the record that benefits for

the Molise region were terminated by an official act. Finally,

petitioners claim that none of La Molisana's allegations were verified

at the GOI.

DOC Position: We have determined that the facts of the record do

not support a finding that the social security benefits in question

were terminated. While the GOI response indicated that benefits in the

Molise and Abruzzo regions were terminated pursuant to an August 5,

1994, decree of the Italian Ministry of Labor, record evidence

indicates that at least one company located in the Abruzzo region

continued to receive benefits after the supposed termination. This

indicates that residual benefits may be available under the program.

According to section 355.50(d), of the Proposed Regulations, the

Department will not adjust the cash deposit rate where residual

benefits may continue to be bestowed under a terminated program.

Therefore, we have not adjusted the cash deposit rate for companies

located in the Abruzzo or Molise regions.

Comment 23: La Molisana Fiscalizzazione: La Molisana argues that

there is no evidence on the record that La Molisana received

fiscalizzazione deductions at the higher rate available in the

Mezzogiorno. La Molisana claims that its 1994 DM-10S forms indicate

that different rates were paid by La Molisana from region to region,

but that the rates paid for employees in the south were not

systematically lower than those paid for employees in the north.

Petitioners argue that La Molisana's claims regarding its use of

the fiscalizzazione program directly contradict the verified

information regarding the operation of this program, which is that the

rate of deduction in southern Italy is greater than that in northern

Italy.

DOC Position: We disagree that there is no evidence on the record

that La Molisana received fiscalizzazione deductions at the higher rate

available in the Mezzogiorno. The company's DM-10S forms reflect

National Health Service payments equal to one percent for wages

eligible for fiscalizzazione deductions, indicating that deductions

were taken at the higher rate available in southern Italy. Therefore,

we have calculated the resulting benefit to La Molisana according to

the methodology described in the Social Security section of this

notice.

Comment 24: De Matteis Fiscalizzazione: De Matteis argues that the

greater fiscalizzazione deductions taken by De Matteis do not confer

any financial benefit. De Matteis claims that in order to receive the

greater fiscalizzazione deductions, companies located in the

Mezzogiorno must agree to abide by a collective labor bargaining

agreement. The company argues that the greater fiscalizzazione

deduction is intended to offset the increased cost associated with the

collective bargaining agreement and, for this reason, does not confer a

benefit.

Petitioners claim that there is no record evidence to support De

Matteis'

[[Page 30306]]

claims. Petitioners assert that there is no official document

establishing a connection between the additional fiscalizzazione

benefits and labor agreement compliance. In addition, petitioners argue

that neither De Matteis nor any other respondent has provided

information regarding any obligations that arise from participating in

a collective labor bargaining agreement. In addition, even if there was

information on the record regarding potentially increased costs

associated with a collective labor agreement, these costs do not fall

within the carefully circumscribed list of allowable offsets under the

statute.

DOC Position: We agree with petitioners. In order to claim any of

the numerous allowable social security deductions in Italy, companies

must be in compliance with the labor agreements. However, there is no

record evidence that any social security deduction, including

fiscalizzazione, is intended to offset any costs associated with labor

agreements.

Comment 25: Treatment of De Cecco: De Cecco argues that it

misinterpreted the Department's request for information regarding

related parties and, hence, should not be penalized for its failure to

provide information regarding its affiliate, Pescara. De Cecco claims

that it interpreted the term ``related parties'' in the context of

Italian tax law, and that because De Cecco and Pescara are not related

for Italian tax purposes, De Cecco believed the two companies to be

unrelated for purposes of this investigation. De Cecco argues that when

it came to De Cecco's attention that their questionnaire response may

have been deficient, De Cecco submitted a questionnaire response on

behalf of Pescara to correct the error. De Cecco argues that in making

this submission, the company was acting to the best of its ability to

comply with the investigation and, therefore, adverse inferences may

not be used against De Cecco.

De Cecco also argues that if the Department uses facts available

for Pescara, the appropriate facts available should be based on De

Cecco's verified submissions. According to De Cecco, its own

information would be much more representative of Pescara than simply

assigning Pescara the highest ``facts available'' rate for each

program. In addition, De Cecco argues that De Cecco's own

countervailing duty rates should remain unchanged in the event that the

Department uses facts available to determine Pescara's countervailing

duty rate. De Cecco argues that its responses have been verified and

all possible subsidies that De Cecco was alleged to have received were

fully investigated.

Finally, De Cecco argues that the Department's decision that

adverse facts available is justified in the companion antidumping duty

investigation is not relevant to this proceeding. De Cecco argues that

the main distinction between the antidumping case and the

countervailing duty case is that there was a complete verification of

De Cecco in the countervailing duty investigation, during which the

Department found no evidence that De Cecco withheld or attempted to

withhold information. In addition, De Cecco argues that in the

antidumping case, the Department sent a deficiency questionnaire

requesting information on related parties from De Cecco, whereas none

was sent in the countervailing duty case. De Cecco claims that it

submitted information on Pescara before it was even requested by the

Department.

Petitioners argue that De Cecco and Pescara are affiliated parties

and that De Cecco's failure to respond to the Department's

questionnaire on behalf of Pescara merits the use of facts available.

Petitioners argue that the legal standard and the facts on which the

Department based its affiliated party determination in the antidumping

case are identical to those in the present case, and hence, an

identical outcome is justified. Petitioners argue that in its

responses, De Cecco deliberately withheld information regarding its

relationship with Pescara. They argue that De Cecco provided a detailed

list of related parties and yet continually declined to include

Pescara. Petitioners argue that De Cecco's claim that it misinterpreted

the Department's request for information regarding related parties, is

without merit for several reasons. They point out that the Department's

questionnaire contained explicit definitions regarding the terms used

in its questionnaire and that De Cecco was represented by experienced

trade counsel that presumably was aware that the relationship between

two companies for purposes of foreign tax laws is irrelevant in the

context of a countervailing duty investigation.

Petitioners assert that De Cecco's conduct represents consistent

non-compliance with an information request, thereby justifying the use

of adverse facts available. Petitioner's also argue that the facts

available rate should be applied to both De Cecco and Pescara, pointing

out that the purpose of facts available is to provide the Department

with a necessary tool to encourage cooperation by respondents. In this

case, the reporting obligation lay with De Cecco, not Pescara, such

that any repercussions for non-cooperation should inure directly to De

Cecco.

DOC Position: We agree with petitioners that De Cecco's failure to

provide information regarding Pescara warrants the use of facts

available with adverse inferences. We are not persuaded by De Cecco's

argument that it misinterpreted the related party question because of

its understanding of Italian tax law. The Department's questionnaire

contained a detailed explanation of the definition of related parties

to be used in this investigation; it did not reference foreign tax

laws. In response to this and a supplemental questionnaire De Cecco

reported several related parties, including two companies, Desemark

S.r.L and Prodotti Mediterranei Inc. (``PMI''), which are related to De

Cecco through similar circumstances as Pescara. (Presumably these two

companies are also not considered related parties for Italian tax

purposes, and yet De Cecco chose to include information regarding these

companies in its responses.) Furthermore, contrary to De Cecco's

assertions, the Department requested information in a supplemental

questionnaire regarding whether there were other companies related to

De Cecco that were previously not reported but that are involved in the

production, distribution, or sale of pasta. In response, De Cecco

identified only PMI. For these reasons, we have determined that De

Cecco was not acting to the best of its ability to respond to the

related party section of the questionnaire. Therefore, the use of facts

available with adverse inferences regarding subsidies provided to

Pescara is warranted. However, we agree with De Cecco that the company

accurately reported and the Department verified, information regarding

subsidies received by De Cecco itself. Therefore, we have calculated a

combined rate using adverse inferences for Pescara's portion and De

Cecco's own verified information for De Cecco's portion.

Comment 26: Export Promotion Assistance: Petitioners allege that

information uncovered at verification indicates that Barilla is

currently operating a project using export promotion loans under Law

394, which was found to be not used in the preliminary determination.

Petitioners argue that while GOI officials stated at verification that

no amounts had been disbursed to Barilla under this program, there is

no evidence on the record to support this statement. In addition,

petitioners argue that the export promotion grant received by Barilla

under Law 304 in relation to an export promotion project in South

America in

[[Page 30307]]

fact promoted Barilla's pasta exports to the United States.

Barilla argues that export promotion benefits are countervailable

only if they promote exports to the United States. Barilla asserts that

nothing in the record demonstrates that Barilla received export

promotion grants or loans for export to the United States. According to

Barilla, the Department verified that the export promotion grant

received by Barilla related solely to the Argentine and Brazilian

markets and that the only export promotion loan for which Barilla

applied had not even been approved as of the GOI verification.

DOC Response: We agree with Barilla. Verification at the GOI and at

Barilla confirmed that Barilla accurately reported its receipt, or non-

receipt, of export promotion grants and loans for export to the United

States. We found no evidence at verification that Barilla received

export promotion grants which benefit exports to the United States, nor

that Barilla had any outstanding export promotion loans under this

program.

Comment 27: Green Light Treatment for Law 64/86: The EC, GOI, and

Delverde argue that, because of the superior nature of EC law, certain

of the necessary conditions for qualifying for green light treatment

are met at the Community level rather than at the national level.

According to respondents, the Department should not limit its analysis

to an examination of the Italian regional aid laws. Rather, the

Department should examine the Italian laws in the context of EC

competition policy rules which, respondents argue, form the basis of an

EC-wide general framework of regional development pursuant to which all

national regional aid programs must be granted.

The EC argues that within this general framework, the GOI performed

an initial socio-economic analysis using specific criteria and

identified all regions that were in need of regional aid. The GOI then

notified the EC of its proposed aid scheme and the scheme was found to

be compatible with the EC general framework of regional development

with the exception of certain regions which were found not to meet the

specific criteria of the competition policy rules. According to

respondents, the fact that Law 64/86 was notified, modified, and

ultimately approved according to the requirements of the competition

policy rules demonstrates that Law 64/86 assistance was provided within

a general framework of regional development. Respondents also argue

that all of the remaining green light criteria were met by Law 64/86.

Petitioners argue that the programs in question were not provided

pursuant to a generally applicable regional development policy in

Italy. In support of this argument, they point to verification findings

that, historically, the GOI has not maintained any statistical criteria

for determining which regions were in need of assistance and that a

systematic method of selection of the areas eligible for assistance was

not applied until 1988 when the EC investigated Law 64. In addition,

petitioners argue that it is inappropriate to consider Italy's regional

development programs in the context of the EC's competition policy

rules because there is no evidence linking the EC competition policy

rules to the Italian programs under investigation at the time of their

enactment. Petitioners also claim that the EC argument fails in light

of its own determination that Law 64/86 was not fully compatible with

the competition policy rules until the end of 1992.

Petitioners argue that regardless of whether the Italian regional

aid programs are examined within the EC framework, the remaining green

light criteria are not met. They argue that the GOI failed to establish

that regional development assistance contains ceilings on the amount of

assistance and that the GOI failed to establish that regional

distribution of aid is not specific.

DOC Position: We disagree with the EC statement that the GOI

performed a systematic analysis in order to identify the regions which

would receive regional development assistance. There is no evidence on

the record that such an analysis was undertaken and, moreover,

statements from the GOI verification directly contradict such an

assertion. Petitioners correctly note that the GOI verification

confirmed that the first time that a systematic review of the regions

eligible for assistance was applied in Italy was in 1988, when the EC

examined Law 64/86.

Moreover, as discussed in the Green Light section of this notice,

we need not reach the issue of whether the nature of Law 64/86 as a

green light subsidy is governed by a community-wide framework of

regional development because we find that Law 64/86 does not meet the

criteria established in the community-wide framework. Therefore, we

conclude that Law 64/86 programs do not qualify as non-countervailable

subsidies.

Comment 28: Initiation of Research and Development and European

Investment Bank (``EIB'') Loan Assistance: Petitioners argue that the

Department improperly rejected petitioners' request to initiate a

countervailing duty investigation of assistance provided through the

EIB and of research and development assistance provided under Law 46

because the programs were found to be non-specific in previous

investigations. According to petitioners, the fact that the Department

found EIB loans and research and development assistance to be de facto

non-specific in previous investigations is an insufficient basis for

rejecting petitioners' allegations. They argue that the previous

findings were fact-based, and thus, did not amount to a finding of non-

countervailability as a matter of law.

Respondents Barilla and La Molisana argue that the Department

correctly decided not to investigate EIB loans or research and

development assistance because the programs had been previously found

to be non-specific and, in the case of EIB loans, the Department has

chosen several times not to investigate the programs. Respondents also

argue that petitioners have provided no new evidence warranting a re-

examination of these issues.

DOC Position: Our decision not to investigate these programs was

based on the fact that petitioners had not provided a sufficient basis

to believe that the programs had changed since the previous findings of

noncountervailability. With respect to the EIB loan program,

petitioners never addressed the fact that the program had been found

not countervailable in a previous investigation and, therefore, made no

effort to allege that the program had changed or that pasta producers

may have received a disproportionate share of the benefits under the

program. With respect to the research and development program,

petitioners alleged that the Department's previous findings that the

program was non-specific had not taken into account an amendment which

made the program available to pasta producers. However, we noted in our

notice of initiation that the amendment was made seven years prior to

the finding that the program was non-specific. Therefore, we determined

that this amendment did not constitute a change in the program and was

not a sufficient basis for believing that pasta had received a

disproportionate share of the benefits under the program.

Comment 29: Affiliated Parties: Petitioners assert that the

relationships between several respondent companies and their affiliated

parties contain mechanisms through which subsidies can be transmitted

and/or exhibit the potential for channeling exports through the company

with the lowest margin. Petitioners distinguish between two types of

affiliated parties--those that

[[Page 30308]]

produce the subject merchandise (i.e., Delverde/Tamma and Arrighi/

Italpasta) and those that do not produce the subject merchandise and

yet still play a meaningful role in the production process (i.e., De

Matteis/Demaservice and Campano/Chirico).

With respect to Delverde and Tamma, petitioners argue that their

common board member plays an integral role in the most important

strategic decisions made by both companies, making it likely for

subsidies to be transmitted between the two companies. Petitioners

further argue that the day-to-day transactions between the companies

provide a vehicle for the transmittal of subsidies and the potential

for export-shifting. Petitioners claim that, for Arrighi and Italpasta,

the level of common ownership, the shared board members, and the day-

to-day transactions between the companies leads to a similar

conclusion. For these relationships, petitioners propose assigning one

rate to the affiliated companies, based on a weighted-average of their

individually calculated rates using exports to the United States.

Petitioners also argue that the Department should include in its

calculations subsidies to certain affiliated companies of Campano and

De Matteis. Petitioners support the Department's preliminary

determination that De Matteis' affiliated service company, Demaservice,

plays an integral role in De Matteis' production and that subsidies to

Demaservice are likely to benefit such production. In addition,

petitioners allege that certain transactions between Campano and its

affiliate exhibit the potential for transmitting subsidies between the

two companies. For these types of relationships, petitioners argue that

the Department should calculate a combined subsidy rate using subsidies

received by both companies and their combined sales.

Delverde argues that the single weighted-average margin applied to

Delverde and Tamma in the preliminary determination is an inappropriate

and unfounded anti-circumvention measure. According to Delverde, the

Department's preliminary finding that the relationship between Delverde

and Tamma is not a likely vehicle for transmitting subsidies was

confirmed at verification. Delverde asserts that Tamma holds less than

a 20 percent ownership interest in Sangralimenti, the holding company

that owns Delverde, and that while the companies share one common

director they operate as separate commercial entities. Moreover,

Delverde argues that there is no evidence on the record which suggests

that the companies would (or even could) shift exports in response to

differing subsidy rates. Therefore, Delverde claims, the imposition of

anti-circumvention measures is unreasonable and unlawful.

Arrighi argues that the methodology proposed by petitioners of

assigning a single margin for Arrighi and Italpasta based on a

weighted-average of their individual rates is inconsistent with the

Department's past practice and is unreasonable. According to Arrighi,

the purpose of combining two companies is to treat them as if they were

a single entity subsidized at the same rate. In the past, the

Department has accomplished this by combining the subsidy information

of the two companies and allocating them over their combined sales.

Arrighi contends that petitioners' proposed methodology results in the

Department not treating the combined companies as a single entity, but

rather as two separate entities.

DOC Position: We agree with petitioners that the relationships

between Delverde and its affiliate and Arrighi and its affiliate are

sufficient that the companies should be treated as a single company. We

disagree with Delverde that the ownership interest of Tamma does not

meet the 20 percent threshold. As discussed in the Related Parties

section of this notice, when the ownership interests of Tamma and its

affiliate, Tamma Service, are aggregated, the ownership interest is

above the 20 percent threshold. Therefore, we have calculated a single

rate for the two companies.

However, we agree with Arrighi that the appropriate method for

calculating a combined rate is to divide the total subsidy benefits of

the two companies by their combined sales. The methodology used in our

preliminary determination does not result in the two companies being

treated as a single entity and does not accurately measure the level of

subsidization of the subject merchandise.

With respect to the treatment of De Matteis and its affiliate, we

agree with petitioners and have calculated a combined subsidy rate for

the two companies accordingly. With respect to Campano, we note that

Chirico does not produce the subject merchandise and therefore Chirico

and Campano would only be treated as a single company if there were

evidence of the transmittal of subsidies between the companies. While

we agree with petitioners that certain transactions between the two

companies may exhibit the potential for the transmittal of subsidies,

through no fault of Campano's we do not have the information necessary

to determine whether transmittal of subsidies was likely. Therefore, we

have calculated a rate for Campano using only subsidies received by

Campano divided by Campano's sales.

Verification

In accordance with section 782(i) of the Act, we verified the

information used in making our final determination. We followed

standard verification procedures, including meeting with government and

company officials, and examination of relevant accounting records and

original source documents. Our verification results are outlined in

detail in the public versions of the verification reports, which are on

file in the Central Records Unit (Room B-099 of the Main Commerce

Building).

Suspension of Liquidation

In accordance with section 705(c)(1)(B)(i) of the Act, we have

calculated an individual subsidy rate for each company investigated.

For companies not investigated, we have determined an all-others rate

by weighting individual company subsidy rates by each company's exports

of the subject merchandise to the United States, if available, or pasta

exports to the United States. The all-others rate does not include zero

or de minimis rates, or any rates based solely on the facts available.

In accordance with our affirmative preliminary determination, we

instructed the U.S. Customs Service to suspend liquidation of all

entries of pasta from Italy which were entered, or withdrawn from

warehouse, for consumption on or after October 17, 1995, the date of

publication of our preliminary determination in the Federal Register.

In accordance with section 703(d) of the Act, we instructed the U.S.

Customs Service to terminate the suspension of liquidation for

merchandise entered on or after February 14, 1996, but to continue the

suspension of liquidation of entries made between October 17, 1995, and

February 13, 1996. We will reinstate suspension of liquidation under

section 706(a) of the Act, if the ITC issues a final affirmative injury

determination, and will require a cash deposit of estimated

countervailing duties for such entries of merchandise in the amounts

indicated below. If the ITC determines that material injury, or threat

of material injury, does not exist, this proceeding will be terminated

and all estimated duties deposited or securities posted as a result of

the suspension of liquidation will be refunded or canceled.

[[Page 30309]]

------------------------------------------------------------------------

Ad

Company valorem

rate

------------------------------------------------------------------------

Agritalia, S.r.l............................................. 2.55

Arrighi S.p.A. Industrie Alimentari.......................... 2.44

Barilla G. e R. F.lli S.p.A.................................. 0.65

De Matteis Agroalimentare S.p.A.............................. 2.47

Delverde, S.r.l.............................................. 5.55

F.lli De Cecco di Filippo Fara S. Martino S.p.A.............. 3.37

Gruppo Agricoltura Sana S.r.L................................ 0.00

Industria Alimentare Colavita, S.p.A......................... 2.18

Isola del Grano S.r.L........................................ 11.23

Italpast S.p.A............................................... 11.23

Italpasta S.r.L.............................................. 2.44

La Molisana Alimentari S.p.A.,............................... 4.17

Labor S.r.L.................................................. 11.23

Molino e Pastificio De Cecco S.p.A. Pescara.................. 3.37

Pastificio Guido Ferrara..................................... 1.21

Pastificio Campano, S.p.A.................................... 2.59

Pastificio Riscossa F.lli Mastromauro S.r.L.................. 6.91

Tamma Industrie Alementari di Capitanata..................... 5.55

All Others................................................... 3.78

------------------------------------------------------------------------

We calculated the ad valorem rate for Agritalia, an export trading

company, by weight averaging, based on the value of exports to the

United States represented by each of Agritalia's suppliers, the

adjusted subsidy rate for each supplier and adding to this rate the

subsidy rate calculated for Agritalia based on subsidies it received

directly. In performing this calculation, we adjusted the suppliers'

rates to account for any mark-up or mark-down by Agritalia, to adjust

prices to reflect Agritalia's f.o.b. export prices, and to exclude any

export restitution benefits received by Agritalia's suppliers on export

sales to the United States which were earned on sales made by the

producer independently of Agritalia. We note that at the time of our

preliminary determination, we lacked information to adjust the

producers' subsidy rates for any mark-up or mark-down taken by

Agritalia on sales. The methodology we have used in our final

determination effectively calculates the f.o.b. subsidy rate for

merchandise sold by Agritalia during the POI.

Since the estimated net countervailable subsidy rate for Barilla

and Gruppo is either zero or de minimis, these companies will be

excluded from the suspension of liquidation.

ITC Notification

In accordance with section 705(d

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