Notice of Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination: Certain Pasta From Italy

[[Page 1344]]

DEPARTMENT OF COMMERCE

[A-475-818]

Notice of Preliminary Determination of Sales at Less Than Fair

Value and Postponement of Final Determination: Certain Pasta From Italy

AGENCY: Import Administration, International Trade Administration,

Department of Commerce.

EFFECTIVE DATE: January 19, 1996.

FOR FURTHER INFORMATION CONTACT: John Brinkmann, Donna Berg, or

Michelle Frederick, Office of Antidumping Investigations, Import

Administration, International Trade Administration, U.S. Department of

Commerce, 14th Street and Constitution Avenue, NW., Washington, DC

20230; telephone: (202) 482-5288, (202) 482-0114, or (202) 482-0186,

respectively.

The Applicable Statute

Unless otherwise indicated, all citations to the Tariff Act of

1930, as amended (the Act) are references to the provisions effective

January 1, 1995, the effective date of the amendments made to the Act

by the Uruguay Rounds Agreements Act.

Preliminary Determination

We preliminarily determine that there is a reasonable basis to

believe or suspect that certain pasta (pasta) from Italy is being, or

is likely to be, sold in the United States at less than fair value

(LTFV), as provided in section 733 of the Act. The estimated margins of

sales at LTFV are shown in the ``Suspension of Liquidation'' section of

this notice.

Case History

Since the initiation of this investigation, the following events

have occurred (Notice of Initiation of Antidumping Duty Investigations:

Certain Pasta from Italy and Turkey, 60 FR 30268, 30269 (June 8, 1995)

(Initiation Notice):

On June 26, 1995, the United States International Trade Commission

(ITC) issued an affirmative preliminary injury determination in this

case (see ITC Investigation No. 731-TA-734).

On July 10, 1995, the Department of Commerce (the Department)

determined the resources available for this investigation limited our

ability to analyze any more than the responses of the eight largest

exporters of pasta to the United States. See the Respondent Selection

section of this notice. We chose the following eight companies as

mandatory respondents in this investigation: Arrighi S.p.A. Industrie

Alimentari (Arrighi); F.lli De Cecco di Filippo Fara San Martino S.p.A.

(De Cecco); Pastificio Del Verde S.r.l. (Delverde); De Matteis

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

S.p.A. (La Molisana); Liguori Pastificio Dal 1820 S.p.A. (Liguori);

Pastificio Fratelli Pagani S.p.A. (Pagani); and Saral Industrie

Alimentari Della Sardegna S.r.l. (Saral) (collectively respondents). We

issued antidumping duty questionnaires, in accordance with 19 CFR

353.42(b), concerning Sections A, B, C, and D of the questionnaire to

the eight mandatory respondents. Section A of the questionnaire

requests general information concerning a company's corporate structure

and business practices, the merchandise under investigation that it

sells, and the sales of the merchandise in all of its markets. Sections

B and C of the questionnaire request home market sales listings and

U.S. sales listings, respectively. Section D requests information on

the cost of production of the foreign like product and constructed

value of the merchandise under investigation.

On July 25 and 31, 1995, Delverde submitted comments concerning its

relationship with an affiliate, Tamma Industrie Alimentari (TIA). On

August 8, 1995, the Department requested clarification concerning this

relationship. Responses to the Department's questions were received on

August 14 and 15, 1995. On August 22, 1995, the Department determined

TIA to be affiliated with Delverde under section 771(33) of the Act and

informed Delverde that it must include TIA's sales in its response to

Sections B and C of the questionnaire.

The Department also requested clarification concerning the

relationship between Arrighi and another Italian pasta manufacturer,

Italpasta. We received the response to our inquiries on September 6,

1995. Based on the response, we determined Italpasta to be affiliated

with Arrighi and, on September 8, 1995, we informed Arrighi that it

must include Italpasta's sales in its response to sections B and C of

the questionnaire. Arrighi requested the Department to reconsider this

decision. On September 26, 1995, however, we reiterated the

determination that Arrighi and Italpasta are affiliated parties within

the meaning of section 771(33) of the Act.

On August 14, 1995, Saral requested that it be removed from the

list of mandatory respondents citing the following: (1) it had ceased

production in March 1995, (2) by July 1995, the company's employees had

left Saral, (3) Saral's plant and property are for sale, and (4) Saral

will no longer export any products to the United States. On August 18,

1995, the Department informed Saral that if it could document the

alleged extenuating circumstances, it would not be required to respond

to the Department's questionnaire. Saral submitted the documentation on

September 15, 1995. On September 19, 1995, the Department notified

Saral that it had rescinded its determination that Saral is a mandatory

respondent on the basis of the information the company submitted but

that the information was subject to verification.

On August 25, 1995, in accordance with section 733(c)(1)(B) of the

Act, the Department determined this investigation to be extraordinarily

complicated due to the large number of companies selected for

investigation, the complexity of the transactions, and novel issues

presented as a result of this investigation being one of the first

cases conducted since the effective date of the Uruguay Round

Agreements Act. Consequently, the Department postponed the preliminary

determination until no later than December 8, 1995 (60 FR 45154 August

30, 1995). As a result of the federal government six-day shutdown, this

date was further extended to December 14, 1995.

On September 13, 1995, La Molisana requested that it be excused

from reporting its home market sales of the ``La Corte'' label. La

Molisana stated that there were no U.S. sales of ``La Corte'' during

the period of investigation (POI) and that the home market sales during

the POI did not amount to a significant volume. The Department granted

this request on September 26, 1995.

On October 20, 1995, the petitioners alleged ``targeted dumping''

within the meaning of section 777A(d)(1)(B) of the Act and requested

that the Department compare the transaction-specific export prices in

the U.S. market to the weighted-average normal values for each

respondent. See the Targeted Dumping section of this notice.

The respondents submitted questionnaire responses to Sections A, B,

C and D of the questionnaire in August, September, and November, 1995.

The Department issued supplemental questionnaires in September and

October, 1995. Responses to these supplemental questionnaires were

received in September, October, and November, 1995.

On October 10, 1995, Borden Inc., Hershey Foods Corp., and Gooch

Foods, Inc. (the petitioners) alleged that Pagani sold the subject

merchandise in Italy during the POI at prices below the cost of

production (COP). The petitioners filed similar allegations against

Liguori, Arrighi, De Matteis, De Cecco, Delverde,

[[Page 1345]]

La Molisana, and Arrighi between October 11 and October 19, 1995. Our

analyses of these allegations indicated that there were reasonable

grounds to believe or suspect that each of the respondents sold pasta

in Italy at prices below the COP. Accordingly, we initiated COP

investigations against these respondents pursuant to section 773(b) of

the Act (see Memoranda from Gary Taverman to Barbara Stafford, dated

October 19, 1995, October 21, 1995, and October 25, 1995). The

Department received responses to Section D of the questionnaire, the

cost-of-production section, from each of these companies in November,

1995.

Facts Available

De Cecco submitted its response to Section D of the questionnaire

on November 27, 1995. It had submitted supplemental questionnaire

responses to Section A on September 22, 1995, and to Sections B and C

on November 6, 1995. An analysis of these responses indicated that De

Cecco had not provided a complete reporting of all of the affiliated

persons defined in section 771(33) of the Act and requested in question

2 of Section A of the Department's questionnaire. Specifically, while

reviewing De Cecco's various responses, it became apparent that De

Cecco failed to report the sales and production information of an

affiliated company and the relationships among related investors in

both De Cecco and the affiliated company. See also, Memorandum from

Gary Taverman to Barbara Stafford dated December 14, 1995. The

omissions and resulting inaccuracies in the De Cecco responses were

material to the Department's ability to calculate a dumping margin and

we met with counsel for De Cecco on December 4, 1995, to inform them of

this fact. At that time, we provided a list of basic questions

regarding affiliated persons to counsel and informed counsel that

responses to these questions were necessary to clarify inconsistent,

inaccurate, or misleading information in De Cecco's earlier submissions

and to establish a frame of reference for additional questions that

remain unanswered. De Cecco supplied responses to the questions on the

list on December 6, 1995. The Department is in the process of preparing

supplemental questions for issues that have yet to be resolved in the

company's responses. Inasmuch as the company's responses to date

indicate that both the U.S. and home market sales data bases are

incomplete and that certain sales data and production costs have not

been reported, we cannot conduct an accurate cost of production

analysis or a less-than-fair-value analysis using the reported prices.

Section 776(a)(2) of the Act provides that if an interested party

withholds information that has been requested by the Department, fails

to provide such information in a timely manner or in the form or manner

requested, significantly impedes a determination under the antidumping

statute, or provides such information but the information cannot be

verified, the Department shall use facts otherwise available in

reaching the applicable determination. Because De Cecco repeatedly

failed to submit the information that the Department had specifically

requested and failed to clarify the inconsistencies in the material

that it did submit, we must use facts otherwise available with regard

to De Cecco.

Section 776(b) provides that adverse inferences may be used against

a party that has failed to cooperate by not acting to the best of its

ability to comply with requests for information. See also SAA, at 870.

Again, De Cecco's failure to provide information in its possession that

the Department requested on repeated occasions and its failure to

clarify inconsistencies in information it submitted on the record

demonstrate that De Cecco has failed, to date, to cooperate to the best

of its ability in this investigation. Thus, the Department has

determined that, in selecting among the facts otherwise available to De

Cecco, an adverse inference is warranted. As facts otherwise available,

we are assigning to De Cecco the simple average of the range of the

margins stated in the notice of initiation, 46.67 percent.

Section 776(c) provides that when the Department relies on

secondary information in using the facts otherwise available it must,

to the extent practicable, corroborate that information. When analyzing

the petition, the Department reviewed all of the data the petitioners

had submitted and the assumptions that petitioners made in calculating

estimated dumping margins. As a result of that analysis, the Department

revised the home market prices that petitioners relied upon in

calculating the estimated dumping margins. On the basis of those

adjustments, the Department recalculated the estimated dumping margins

for certain pasta from Italy and found them to range from 21.85 percent

to 71.49 percent. See Initiation Notice. In sum, the Department

corroborated all of the secondary information in the petition from

which the margins were calculated during our pre-initiation analysis of

the petition.

We informed counsel for De Cecco that if the company's responses to

our supplemental questions are complete, we will attempt to conduct

verification of the company's information. If we verify that De Cecco's

reported information is accurate and complete, we will use such

information in the final determination.

Mandatory Respondent Selection

Section 777A(c) of the Act states that the Department shall

calculate an individual dumping margin for each known exporter or

producer of the subject merchandise, except where this approach is not

practicable due to the large number of exporters or producers. Under

this exception, the Department may limit its examination to: (1) a

sample of exporters, producers, or types of products that is

statistically valid based on the information available at the time of

selection; or (2) exporters or producers accounting for the largest

volume of the subject merchandise from the exporting country that can

be reasonably examined. Section 353.44(b)(1) of the Department's

regulations states that the Department will normally examine not less

than 60 percent of the volume or value of sales, while section

353.59(b)(1) provides for sampling when a significant volume of sales

is involved.

The petitions filed against pasta from Italy and Turkey listed 73

Italian and 15 Turkish companies as possible producers or exporters of

pasta to the United States. Other information available to the

Department indicated an equally large number of producers or exporters.

Since, at the time of respondent selection, there was insufficient

information on the record to employ statistically valid sampling

techniques, the Department focused its selection on the producers and

exporters accounting for the largest volume of exports to the United

States (see Sweaters Wholly or in Chief Weight of Man-Made Fiber from

Taiwan (58 FR 34585, (August 23, 1990)) and Fresh Cut Roses from

Colombia and Ecuador. (60 FR 13958, (March 15, 1995)). Based on the

administrative resources available to the Department and the

anticipated inclusion of many complex issues related to new provisions

of the Act, it was determined that the maximum total number of

companies that could be handled in the parallel pasta investigations

was ten. In a subsequent analysis of the volume of exports of

individual companies from Italy and Turkey, it was determined that

investigating ten companies would allow the Department to investigate

45 percent of the volume of exports from

[[Page 1346]]

each country. In Italy, 45 percent was attained with the eight largest

companies, while in Turkey 45 percent was attained with the two largest

companies. A complete analysis of the respondent selection process is

contained in a July 7, 1995, decision memorandum from Gary Taverman to

Barbara Stafford.

Voluntary Respondents

Section 782(a) of the Act states that individual rates shall be

calculated for firms which voluntarily provide information, except

where the number for all such respondents is so large that the

calculation of individual dumping margins for all such respondents

would be unduly burdensome and would prevent the timely completion of

the investigation. Based on the same reasoning that led the Department

to limit the number of respondents in the two antidumping duty

investigations to ten companies (i.e. the large number of companies and

administrative resource constraints), the Department determined that no

voluntary respondents could be accepted unless one of the mandatory

respondents did not participate. (See the July 7, 1995, decision

memorandum from Gary Taverman to Barbara Stafford.) Potential voluntary

respondents were provided with specific written guidance on the

Department's criteria for including a voluntary respondent in the

investigation. Ultimately, no voluntary respondent attempted to fulfill

the Department's criteria for consideration.

Postponement of Final Determination

On December 11, 1995, Arrighi, De Cecco, De Matteis, Delverde, La

Molisana, and Liguori requested that, pursuant to section 735(a)(2)(A)

of the Act, in the event of an affirmative preliminary determination in

this investigation, the Department postpone its final determination

until not later than 135 days after the publication of the affirmative

preliminary determination in the Federal Register. In accordance with

19 CFR 353.20(b), inasmuch as our preliminary determination is

affirmative, the respondents account for a significant proportion of

exports of the subject merchandise, and we are not aware of the

existence of any compelling reasons for denying the request, we are

granting respondents' request and postponing the final determination.

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 these investigations 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.

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.

Scope Issues

(1) On July 19, 1995, and on August 24, 1995, the Association of

Food Industries and the petitioners, respectively, requested that we

expand the scope to cover all imports of non-egg dry pasta for the

retail and food service markets. We have determined that the scope

should not be expanded. See, Preliminary Affirmative Countervailing

Duty Determination: Certain Pasta From Italy, 60 FR 53739 (October 17,

1995). (For further discussion of this decision, see Memorandum to

Susan G. Esserman, Assistant Secretary for Import Administration, dated

October 10, 1995.)

(2) 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 countervailing duty investigation ``organic pasta'' in

compliance with European Economic Community 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 EEC-approved national

certification authorities. For example, organic wheat farmers abstain

from using chemical fertilizers, pesticides, and fungus control and,

instead, rely upon the use of compost, manure, and crop rotation for

fertilizer, predator insects for pest control, and air ventilation and

movement systems to control fungus.

On November 9, 1995, the petitioners indicated 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 EEC

Regulation No. 2092/91.

On November 21, 1995, we requested additional data on the EEC

regulation and certification process 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. Included in the information submitted was the statement that

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

of products intended for export to third Countries.'' Accordingly, we

will not be able to modify the scope of the investigation to exclude

organic pasta on the basis of the certification procedure called for

under EEC Regulation No. 2092/91. Nevertheless, if similar

certification procedures are established for exports to the United

States, the Department will consider an exclusion for organic pasta at

that time.

Period of Investigation

The period of investigation is May 1, 1994, through April 30, 1995.

Product Comparisons

In accordance with section 771(16) of the Act, we considered all

products produced by the respondent, covered by the description in the

Scope of Investigation section, above, and sold in the home market

during the POI, to be foreign-like products for purposes of determining

appropriate product comparisons to U.S. sales. Where there were no

sales of identical merchandise in the home market to compare to U.S.

sales, we compared U.S. sales to the next most similar foreign-like

product on the basis of the characteristics listed in Appendix III of

the Department's antidumping questionnaire. In making the product

comparisons, we relied on the shape classifications proposed by the

respondents.

Targeted Dumping

On October 20, 1995, the petitioners requested that, for all

respondents, the Department compare the transaction specific export

prices in the United States market to weighted-average normal values,

in accordance with the ``targeted dumping'' provisions of section

777A(d)(1)(B) of the Act. The petitioners' allegation rested on an

analysis of average retail prices of selected brands of pasta, rather

than on the export or constructed export prices of the respondents

which were already on the record in the investigation and thus

available to the petitioners. This

[[Page 1347]]

request was denied by the Department on November 8, 1995, on the

grounds that the allegation did not meet the requirements of section

777(A)(d)(1)(B) because it was not: (1) Based on exporter-specific

prices; (2) based on examination of ``comparable'' merchandise. See

Memorandum from the Pasta Team to Barbara S. Stafford dated November 8,

1995.

On November 21 and 22, 1995, the petitioners requested that the

Department apply the ``targeted dumping'' provision when calculating

dumping margins for two of the Italian respondents, De Cecco and

Delverde. The petitioners' allegation claimed that there is substantial

evidence that prices for pasta sold by De Cecco and Delverde in the

United States vary significantly on the basis of purchaser, geographic

region and time and that using a weighted-average price would have the

effect of concealing or minimizing dumping. This request was denied by

the Department on December 8, 1995, on the ground that the petitioners'

analysis failed to meet the basic requirements of section 777A(d)(1)(B)

(i) and (ii).

The petitioners' allegation was based on conclusions drawn from

simple averaging or from minimum and maximum price differentials and

was not supported by any more specific analysis addressing the

statutory elements. For example, the petitioners did not demonstrate

satisfactorily a pattern of export prices differing significantly among

either purchasers, regions or periods of time; moreover, they did not

provide evidence or argument as to why different patterns of export

prices could not be taken into account using the section 777A(d)(1)(A)

preferred fair value comparison methodology. See, Memorandum from the

Pasta Team to Barbara S. Stafford dated December 8, 1995.

Level of Trade

As set forth in section 773(a)(7)(A) of the Act and in the

Statement of Administrative Action (SAA) accompanying the Uruguay Round

Agreements Act, at 829-831, to the extent practicable, the Department

will calculate normal values based on sales at the same level of trade

as the U.S. sales. When the Department is unable to find sales in the

comparison market at the same level of trade as the U.S. sale(s), the

Department may compare sales in the U.S. and foreign markets at a

different level of trade.

In accordance with section 773(a)(7)(A) of the Act, if sales at

different levels of trade are compared, the Department will adjust the

normal value to account for differences in levels of trade if two

conditions are met. First, there must be differences between the

selling functions performed by the seller at the different levels of

trade. Second, the differences must affect price comparability as

evidenced by a pattern of consistent price differences between sales at

different levels of trade in the market in which normal value is

determined. When constructed export price is applicable, section

773(a)(7)(B) of the Act establishes the procedures for making a

constructed export price offset when: (1) Normal value is at a

different level of trade, and (2) the data available do not provide an

appropriate basis for a level of trade adjustment.

In order to identify levels of trade, the Department must review

information concerning selling functions of the exporter. In addition,

a respondent seeking to establish a level of trade adjustment must

demonstrate the appropriateness of such an adjustment. Therefore, in

addition to the questions related to the level of trade in our July 10,

1995, questionnaire, on October 23, 1995, we sent each respondent

supplemental questions related to level of trade comparisons and

adjustments. We asked each respondent to establish any claimed levels

of trade based on selling functions performed and services offered to

each customer or customer class, and to document and explain any claims

for a level of trade adjustment.

Upon review of each respondent's submissions on level of trade, and

other related information on the record, we identified one or both of

the following difficulties: 1) not all of the selling functions

performed were identified; 2) although certain selling functions were

assigned to specific groups of customers, not all customers in some

identified groups were provided the service.

In light of these concerns, we reviewed each response to identify

all types of selling functions, both claimed and unclaimed, that had

been provided. We subsequently consolidated the selling functions into

four broad categories related to the sale of pasta: (1) Freight and

delivery services; (2) advertising; (3) maintaining finished goods

inventories to fill customer orders; and (4) other service programs

(primarily handling rebate and warranty claims). We then analyzed each

respondent's submissions to determine which selling function categories

applied to each pasta sale made in the U.S. and Italian market. We did

this based on both the selling expenses reported for that transaction

and the respondent's narrative descriptions. Finally, we created a

computer program that assessed, on a transaction specific basis,

whether or not services corresponding to the four selling function

categories were provided.

To the extent practicable, we compared normal value at the same

level of trade as the U.S. sale (as indicated by the level of trade

codes established in the computer program). Where comparisons at the

same level of trade were not possible, we attempted a comparison at the

next most comparable level of trade. Any remaining unmatched U.S. sales

were compared to sales in the comparison market without regard to level

of trade.

Two Italian respondents, Liguori and La Molisana claimed a level of

trade adjustment for comparisons between different levels of trade.

However, these level of trade adjustments were not allowed because none

of the claimed adjustments were based on price differences between the

two levels of trade. One respondent, Del Verde, claimed a constructed

export price offset, but the offset was not considered because U.S.

sales were matched to normal values at the same levels of trade.

The level of trade methodology employed by the Department in this

preliminary determination is based on the facts particular to this

investigation. As stated above, there is a new emphasis on function of

the seller in determining level of trade, as well as new conditions for

a level of trade comparison or adjustment. The Department intends,

where appropriate, to request additional information prior to

verification for its continuing analysis of this issue. The Department

will continue to examine its policy for making level of trade

comparisons and adjustments.

Fair Value Comparisons

To determine whether sales of pasta by the Italian respondents to

the United States were made at less than fair value, we compared the

export price (EP) and/or constructed export price (CEP) to the Normal

Value (NV), as described in the ``Export Price and Constructed Export

Price'' and ``Normal Value'' sections of this notice. In accordance

with section 777A(d)(1)(A)(i), we calculated weighted-average EPs and

CEPs for comparisons to weighted-average NVs.

For certain U.S. and Italian market sales, Arrighi, Delverde, La

Molisana, Liguori, and Pagani reported the re-sale of subject

merchandise purchased in Italy from unaffiliated producers. Section

772(a) of the Act defines the export price to the United States in a

reseller situation as ``the price at which the subject merchandise is

first sold (or

[[Page 1348]]

agreed to be sold) by the producer to an unaffiliated purchaser for

exportation to the United States.'' Where unaffiliated producers of the

merchandise under investigation knew at the time of the sale that the

merchandise was destined for the United States, the relevant basis for

the export price would be the price between the producer and the

respondents. Delverde, Liguori, La Molisana, Pagani, and Arrighi have

each stated that the unaffiliated producers knew or had reason to know

at the time of sale that the ultimate destination of the merchandise

was the United States because the U.S. market is the only market where

enriched pasta is sold. For these transactions, therefore, the price

between the respondents and their U.S. customers cannot be the basis

for the export price.

In calculating EP for Arrighi, however, we were unable to determine

which particular U.S. sales were of merchandise produced by firms other

than Arrighi. Therefore, we weighted the dumping margin for Arrighi for

each product category it identified by 1) calculating a ratio of the

volume of Arrighi-produced product to the combined total volumes of

Arrighi-produced and purchased product in the same period, and 2)

applying the ratio to margin calculation for that corresponding product

sold to the United States during the POI, allowing us to calculate a

margin based on an estimated quantity of Arrighi-produced product.

Because section 773(a)(1)(B)(i) of the Act incorporates by

reference the definition of foreign like product in section 771(16) of

the Act, it prohibits our using sales of merchandise produced by

persons other than the respondents in our calculation of normal value.

Accordingly, we have excluded from our analysis all of the sales from

each of the companies of subject merchandise in the U.S. and Italian

markets that were not produced by the respondent companies.

Export Price and Constructed Export Price

We calculated EP, in accordance with subsections 772(a) and (c) of

the Act, for each of the respondents, where the subject merchandise was

sold directly to the first unaffiliated purchaser in the United States

prior to importation and CEP was not otherwise warranted based on the

facts of record. In addition, for Delverde, we calculated CEP, in

accordance with subsections 772(b) and (d) of the Act, for those sales

to the first unaffiliated purchaser that took place after importation

into the United States.

We made company-specific adjustments as follows:

Arrighi

We calculated EP based on packed, ex-works, FOB Italian port, and

C&F prices to unaffiliated customers in the United States. Where

appropriate, we made deductions from the starting price (gross unit

price) for the following charges: foreign inland freight and brokerage,

marine insurance, handling, and early payment discounts. We

recalculated credit expenses for those transactions with no reported

payment dates. For U.S. sales denominated in U.S. dollars, we adjusted

interest expenses by applying the average U.S. prime interest rate

during the POI.

Delverde

We calculated EP based on packed, CIF, FOB Naples, C&F, or FAS

Naples prices to unaffiliated customers in the United States. Where

appropriate, we made deductions from the starting price for discounts,

rebates, freight and warehousing expenses, foreign brokerage and

handling, and ocean freight and marine insurance.

We recalculated Delverde's gross unit prices for those sales that

did not reflect ocean freight revenues and expenses. We also

recalculated reported credit expenses and inventory carrying costs

based on the weighted average of its short-term borrowings during the

POI.

We calculated CEP sales based on packed, FOB U.S. warehouse

delivery to unaffiliated customers or on duty-paid, ex-dock prices to

unaffiliated customers. Where appropriate, we made deductions for

discounts, rebates, advertising, commissions, and credit. We also made

deductions for foreign brokerage and handling, freight and warehousing

expenses, ocean freight and marine insurance, U.S. brokerage and

handling, and U.S. duty and harbor fees. We deducted those indirect

selling expenses, including inventory carrying costs, that related to

commercial activity in the United States. Finally, we made an

adjustment for CEP profit in accordance with section 772 of the Act.

De Matteis

We calculated EP based on packed, ex-factory prices to unaffiliated

customers. We made no deductions from the starting price because no

discounts, rebates, or movement expenses were reported. In those

instances where De Matteis had not reported payment dates, we

recalculated reported credit expenses.

La Molisana

We based EP on packed, FOB Port of Naples prices to unaffiliated

customers in the United States. Where appropriate, we made deductions

from the starting price for foreign inland freight, foreign brokerage,

and handling charges. We also recalculated credit expenses based upon

information La Molisana submitted on November 30, 1995.

Liguori

We based EP on packed, ex-factory prices to unaffiliated customers

in the United States. Where appropriate, we made deductions for

discounts, foreign brokerage and handling. For those sales denominated

in Italian lira, we recalculated credit expenses using the short-term

borrowing rate reported for the Italian market.

Pagani

Pagani had not correctly reported its starting prices. We

calculated EP on the basis of recalculated packed, prices to

unaffiliated customers. Where appropriate, we made deductions from the

starting price for quantity discounts, other discounts, rebates, and

movement expenses. In those instances where Pagani did not report

either payment dates or payment dates and shipment dates, we

recalculated Pagani's reported credit expenses. Where Pagani did not

report only shipment dates, we recalculated movement expenses.

Normal Value

In order to determine whether there was a sufficient volume of

sales in the home market to serve as a viable basis for calculating NV,

we compared each respondent's volume of home market sales of the

foreign like product to the volume of U.S. sales of the subject

merchandise, in accordance with section 773(a)(1)(C) of the Act. Since

all respondents' aggregate volume of home market sales of the foreign

like product was greater than five percent of its aggregate volume of

U.S. sales for the subject merchandise, we determined that the home

market was viable for each respondent. Therefore, we have based NV on

home market sales.

Cost of Production Analysis

As noted in the Case History section above, based on the

petitioners' allegations, the Department found reasonable grounds to

believe or suspect that each respondent made sales in the home market

at prices below the cost of producing the merchandise. As a result, the

Department initiated investigations to determine whether the

respondents made home market sales during the POI at prices below their

respective cost of

[[Page 1349]]

production (COP) within the meaning of section 773(b) of the Act.

Before making any fair value comparisons, we conducted the COP

analysis described below.

A. Calculation of COP

We calculated the COP based on the sum of each respondent's cost of

materials and fabrication for the foreign like product, plus amounts

for home market selling, general, and administrative expenses (SG&A)

and packing costs in accordance with section 773(b)(3) of the Act. We

relied on the respondents' COP amounts except in the following specific

instances wherein the reported costs were improperly valued:

Arrighi. Arrighi and Italpasta excluded bank charges and

commissions from the calculation of financial expenses. As these costs

relate generally to the financing operation of the companies, we

included them in the revised calculation of financial expenses.

Delverde. (1) Delverde and TIA reported product-specific production

quantities and costs of manufacture (COM) separately for each company.

We used the reported production quantities to calculate a combined

weighted-average COM for Delverde and TIA on a product-specific basis.

(2) We combined Delverde's and TIA's submitted G&A expenses and

cost of sales figures to derive a single G&A factor. Delverde included

a negative amount for its parent company's allocated G&A. We excluded

this amount in the revised G&A rate.

(3) We combined Sangralimenti (Delverde's consolidated parent) and

TIA's submitted net financing costs and cost of sales figures to derive

a single net interest factor.

De Matteis. (1) In calculating its cost of producing semolina, De

Matteis offset wheat costs with the sales value of other products. We

revised De Matteis' material costs to exclude this offset because it is

inappropriate to reduce the cost of producing pasta with revenues

earned on unrelated products.

(2) We revised De Matteis' material costs to reflect the yield loss

for both the self-produced and purchased semolina used in producing

pasta.

(3) De Matteis' financial statement indicated that the company

incurred additional costs relating to employee social security. These

costs were reported as extraordinary expenses on the company's

financial statements. De Matteis did not report these costs in its COP

and CV. We believe, however, that these amounts are properly included

as part of labor costs relating to pasta production. We therefore

revised De Matteis' submitted COP and CV figures to include the social

security costs.

La Molisana. La Molisana included bond interest income in its

calculation of short-term interest income used as an offset to interest

expense. We excluded the bond interest income because bonds generally

are long-term in nature and, thus, are not an appropriate offset in

calculating the interest expense. We adjusted La Molisana's reported

indirect selling expenses by reclassifying a portion of reported direct

advertising expense as indirect expenses.

Liguori. Liguori did not include discount and finance charges in

its calculation of financing expense. Given that Liguori's discount and

finance charges are listed as an interest expense on its financial

statement, we recalculated the company's financing expense inclusive of

these charges.

Pagani. We made no changes to Pagani's submitted costs.

B. Test of Home Market Prices

We used the respondents' adjusted weighted-average COP for the POI.

We compared the weighted-average COP figures to home market sales of

the foreign like product as required under section 773(b) of the Act,

in order to determine whether these sales had been made at below-cost

prices within an extended period of time in substantial quantities, and

were not at prices which permit recovery of all costs within a

reasonable period of time. On a product specific basis, we compared the

COP to the home market prices, less any applicable movement charges,

rebates, and direct and indirect selling expenses.

C. Results of COP Test

Pursuant to section 773(b)(2)(c) where less than 20 percent of a

respondent's sales of a given product were at prices less than the COP,

we did not disregard any below-cost sales of that product because we

determined that the below-cost sales were not made in ``substantial

quantities.'' Where 20 percent or more of a respondent's sales of a

given product were at prices less than the COP, we disregarded only the

below-cost sales where such sales were found to be made within an

extended period of time (in accordance with section 773(b)(2)(B) of the

Act) and at prices which would not permit recovery of all costs within

a reasonable period of time (in accordance with section 773(b)(2)(D) of

the Act). For each respondent, where all sales of a specific product

were at prices below the COP, we disregarded all sales of that product,

and calculated NV based on CV, in accordance with section 773(a) of the

Act.

We found that, for certain types of pasta, more than 20 percent of

the following respondents' home market sales were sold at below COP

prices within an extended period of time in substantial quantities:

Arrighi, De Matteis, and La Molisana, and Liguori. Further we did not

find that these sales provided for the recovery of costs within a

reasonable period of time. We therefore excluded these sales and used

the remaining above-cost sales as the basis of determining NV if such

sales existed, in accordance with section 773(b)(1). For those types of

pasta for which there were no above-cost sales in the ordinary course

of trade, we compared export prices to CV.

D. Calculation of CV

In accordance with section 773(e)(1) of the Act, we calculated CV

based on the sum of a respondent's cost of materials, fabrication, SG&A

and U.S. packing costs as reported in the U.S. sales databases. In

accordance with sections 773(e)(2)(A) we based SG&A and profit on the

amounts incurred and realized by the respondent in connection with the

production and sale of the foreign like product in the ordinary course

of trade, for consumption in the foreign country. Where appropriate, we

calculated each respondent's CV based on the methodology described in

the calculation of COP above. For selling expenses, we used the

weighted-average home market selling expenses.

For each of the respondents, we made adjustments, where

appropriate, for physical differences in the merchandise in accordance

with section 773(a)(6)(C)(ii) of the Act. Where the difference in

merchandise adjustment for any product comparison exceeded 20 percent,

we based normal value on CV. In addition, in accordance with section

773(a)(6)(B), we deducted home market packing costs and added U.S.

packing costs for all respondents.

We adjusted for commissions as follows. Where commissions were paid

on some, but not all, home market sales used to calculate NV, and U.S.

commissions were greater than home market commissions, we calculated

the weighted-average of home market indirect selling expenses

attributable to those sales on which no commissions were paid. If U.S.

commissions were greater than the sum of the home market commissions

and indirect selling expenses, we deducted the weighted-average home

market indirect selling expenses from NV. Otherwise, we adjusted NV for

the difference between U.S. and home market commissions. Where no

commissions were paid on a

[[Page 1350]]

home market sale used to calculate NV, we deducted the lesser of either

(1) the weighted-average amount of commission paid on a U.S. sale for a

particular product, or (2) the weighted-average amount of indirect

selling expenses paid on the home market sales for a particular

product. Where commissions were paid on all home market sales used to

calculate NV, we adjusted NV by the lesser of either (1) the amount of

the commission paid on the home market sale, or (2) the weighted

average of indirect selling expenses paid on U.S. sales.

La Molisana and Liguori reported that their sales to their

respective affiliated resellers were made at arm's length. Sales not

made at arm's length were excluded from our LTFV analysis. Where the

exclusion of such sales eliminated all sales of the most appropriate

comparison product, we made a comparison to the next most similar

model. To test whether these sales were made at arm's length, we

compared the starting prices of sales to affiliated and unaffiliated

customers net of all movement charges, direct and indirect selling

expenses, and packing. We utilized the 99.5 percent benchmark ratio

used in the 1993 carbon steel investigations (see below). Where a

related customer price ratio was composed of comparisons between sales

of identical products to unrelated customers at both the same and

different levels of trade, only those sales of identical products at

the same level of trade were used to construct the ratio. Where a

related customer ratio was composed of comparisons between sales of

identical products to unrelated customers but those sales did not take

place at the same level of trade, we continued to use all the sales in

our comparisons regardless of level of trade to construct the ratio.

Where no related customer ratio could be constructed because identical

merchandise was not sold to unrelated customers, we were unable to

determine that these sales were made at arm's length and, therefore,

excluded them from our LTFV analysis. See Final Determination of Sales

at Less Than Fair Value: Certain Cold-Rolled Carbon Steel Flat Products

from Argentina (58 FR 37062, 37077 (July 9, 1993)).

Price-to-Price Comparisons. We made company-specific adjustments

for price-to-price comparisons as follows:

Arrighi. We calculated NV based on ex-works or delivered prices to

unaffiliated customers. We made deductions from the starting price for

discounts, rebates, and inland freight. In addition, we adjusted for

differences in circumstances of sale for imputed credit expenses,

advertising, warranties, and commissions.

We recalculated Arrighi's credit expenses for those transactions

missing payment dates.

Delverde. We allowed Delverde to exclude sales of gift packets in

the home market; its home market sales from its on-site factory store;

and the home market sales of pasta by, and sales of pasta purchased

from, an affiliated producer. We calculated NV based on ex-factory, ex-

warehouse, CIF, or delivered prices to unaffiliated customers.

Deductions were made for discounts and rebates, inland freight,

warehousing and insurance expenses. In addition, we made circumstance

of sale adjustments or deductions for credit, advertising expenses, and

commissions, where appropriate. We reclassified reported slotting fees

and certain commission payments as indirect selling expenses because

Delverde was unable to link these payments to specific POI sales.

De Matteis. We calculated NV based on ex-factory or delivered

prices to unaffiliated customers. We made deductions from the starting

price for discounts and inland freight. We also made adjustments for

differences in sale for imputed credit and commissions. In those

instances where De Matteis did not report a payment date, we

recalculated reported credit expenses.

La Molisana. We based NV on ex-factory or delivered prices to

unaffiliated customers, or prices to affiliated customers that were

determined to be at arm's length. We made deductions for discounts and

rebates, inland freight, and pre-sale warehousing expenses. We made

circumstance of sale adjustments for differences in credit and

advertising expenses between the United States and the home market.

In reporting a discount, La Molisana reported both the value

recorded in its internal accounting system on specific invoices and the

average discount on a customer-specific basis. We relied upon the

average amount reported on a per customer basis. We also adjusted La

Molisana's reported direct advertising expense by removing introduction

incentives and trade promotion expenses and adding these expenses to

the indirect selling expenses reported as a component of COP (see

``Calculation of COP'' section below). Finally, we excluded a small

number of reported sales where product characteristics were not

reported and/or the transactions were later found not to have been

sales.

Liguori. We based NV on delivered prices to unaffiliated customers,

or prices to affiliated customers which were determined to be at arm's

length. Deductions were made for discounts and rebates, inland freight

and unloading expenses. We made circumstance of sale adjustments for

differences in credit, warranty, commission, and advertising expenses.

We recalculated Liguori's reported credit expenses in instances where

Liguori had not reported a payment date because the merchandise had not

yet been paid for at the time of the filing of its responses. We also

reclassified reported slotting fees as indirect selling expenses.

Pagani. Pagani had not correctly reported its starting prices. We

recalculated NV on the basis of ex-factory prices to unaffiliated

customers. Where appropriate, we deducted discounts, rebates, and

movement expenses from the starting price. We also made adjustments for

differences in sale for imputed credit expenses, advertising, and

commissions. In those instances where Pagani did not report payment

dates or payment and shipment dates, we recalculated reported credit

expenses. Where Pagani did not report shipment dates, we recalculated

movement expenses.

Price to CV Comparisons

Where we compared CV to export prices, we deducted from CV the

weighted-average home market direct selling expenses and added the

weighted-average U.S. product-specific direct selling expenses.

Currency Conversion

For the purpose of the preliminary determination, we made currency

conversions based on the official exchange rates in effect on the dates

of the U.S. sales as certified by the Federal Reserve Bank of New York.

Section 773A(a) directs the Department to use a daily exchange rate in

order to convert foreign currencies into U.S. dollars, unless the daily

rate involves a ``fluctuation.'' For this preliminary determination, we

have determined that a fluctuation exists when the daily exchange rate

differs from a benchmark by 2.25 percent. The benchmark is defined as

the rolling average of rates for the past 40 business days. When we

determined a fluctuation existed, we substituted the benchmark for the

daily rate.

Further, section 773A(b) directs the Department to allow a 60-day

adjustment period when a currency has undergone a sustained movement.

Such an adjustment period is required only when a foreign currency is

appreciating against the U.S. dollar. No adjustment period is warranted

in this case, because

[[Page 1351]]

the Italian lira generally remained constant or depreciated against the

U.S. dollar during the POI.

Verification

As provided in section 782(i) of the Act, we will verify all

information determined to be acceptable for use in making our final

determination.

Suspension of Liquidation

In accordance with section 733(d) of the Act, we are directing the

Customs Service to suspend liquidation of all entries of certain pasta

from Italy, that are entered, or withdrawn from warehouse for

consumption, on or after the date of publication of this notice in the

Federal Register. Normally, we would instruct the Customs Service to

require a cash deposit or the posting of a bond equal to the weighted-

average amount by which the normal value exceeds the export price, as

indicated in the chart below. However, the product under investigation

is also subject to concurrent countervailing duty investigation.

Article VI.5 of the General Agreement on Tariffs and Trade (GATT)

provides that ``[n]o product * * * shall be subject to both antidumping

and countervailing duties to compensate for the same situation of

dumping or export subsidization.'' This provision is implemented by

section 772(c)(1)(C) of the Act. Since antidumping duties cannot be

assessed on the portion of the margin attributed to export subsidies,

there is no reason to require a cash deposit or bond for that amount.

The Department has determined, in its Preliminary Affirmative

Countervailing Duty Determination: Certain Pasta from Italy (60 FR

53747 (October 17, 1995)), that the product under investigation

benefitted from export subsidies. To obtain the most accurate estimate

of antidumping duties, and to fulfill our international obligations

arising under the GATT, we are subtracting, for deposit purposes, the

cash deposit rate attributable to the export subsidies found in the

countervailing duty investigation. (For Arrighi 0.62, Delverde 0.77,

and La Molisana 0.08 percent.) We are also subtracting from the ``All

Others'' rate the cash deposit rate attributable to the export

subsidies included in the countervailing duty investigation for the All

Others rate, 0.20 percent. In keeping with Article of 17.4 of the WTO

Agreement on Subsidies and Countervailing Measures, the Department will

terminate the suspension of liquidation in the companion countervailing

duty investigation of Certain Pasta From Italy, effective February 14,

1995, which is 120 days after the date of publication of the

preliminary determination. Accordingly, on February 14, 1996, the

antidumping deposit rate will revert to the full amount calculated in

this preliminary determination. These suspension of liquidation

instructions will remain in effect until further notice.

------------------------------------------------------------------------

Weighted-

average Bonding

Exporter/Manufacturer margin percentage

percentage

------------------------------------------------------------------------

Arrighi......................................... 0.06 0.00

De Cecco *...................................... 46.67 46.67

Delverde........................................ 0.06 0.00

De Matteis...................................... 22.15 22.15

La Molisana..................................... 14.83 14.03

Liguori......................................... 12.85 12.85

Pagani.......................................... 0.14 0.00

All Others...................................... 15.85 15.56

------------------------------------------------------------------------

* Facts Available Rate.

Pursuant to section 775(c)(5)(A) of the Act, the Department has

excluded all zero and de minimis weighted-average dumping margins and

margins determined entirely under section 776 of the Act, from the

calculation of the All Others rate.

ITC Notification

In accordance with section 733(f) of the Act, we have notified the

ITC of our determination. If our final determination is affirmative,

the ITC will determine before the later of 120 days after the date of

this preliminary determination or 45 days after our final determination

whether these imports are materially injuring, or threaten material

injury to, the U.S. industry.

Public Comment

Case briefs or other written comments in at least ten copies must

be submitted to the Assistant Secretary for Import Administration no

later than April 1, 1996, and rebuttal briefs, no later than April 4,

1996. A list of authorities used and an executive summary of issues

should accompany any briefs submitted to the Department. Such summary

should be limited to five pages total, including footnotes. In

accordance with section 774 of the Act, we will hold a public hearing,

if requested, to afford interested parties an opportunity to comment on

arguments raised in case or rebuttal briefs. Tentatively, the hearing

will be held on April 8, 1996, the time and place to be determined, at

the U.S. Department of Commerce, 14th Street and Constitution Avenue,

N.W., Washington, D.C. 20230. Parties should confirm by telephone the

time, date, and place of the hearing 48 hours before the scheduled

time.

Interested parties who wish to request a hearing, or to participate

if one is requested, must submit a written request to the Assistant

Secretary for Import Administration, U.S. Department of Commerce, Room

B-099, within ten days of the publication of this notice. Requests

should contain: (1) the party's name, address, and telephone number;

(2) the number of participants; and (3) a list of the issues to be

discussed. Oral presentations will be limited to issues raised in the

briefs. If this investigation proceeds normally, we will make our final

determination by 135 days after the publication of this notice in the

Federal Register.

This determination is published pursuant to section 733(f) of the

Act.

Dated: December 14, 1995.

Susan G. Esserman,

Assistant Secretary for Import Administration.

[FR Doc. 96-457 Filed 1-18-96; 8:45 am]

BILLING CODE 3510-DS-P