Certain Pasta from Italy: Preliminary Results of the Tenth Countervailing Duty Administrative Review, 43616-43622 [07-3832]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 72, Number 150 (Monday, August 6, 2007)]
[Notices]
[Pages 43616-43622]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 07-3832]


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DEPARTMENT OF COMMERCE

International Trade Administration

[C-475-819]


Certain Pasta from Italy: Preliminary Results of the Tenth 
Countervailing Duty Administrative Review

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.
SUMMARY: The Department of Commerce is conducting an administrative 
review of the countervailing duty order on certain pasta from Italy for 
the period January 1, 2005, through December 31, 2005. We preliminarily 
find that Pastificio Antonio Pallante S.r.L. (``Pallante'') and De 
Matteis Agroalimetare S.p.A. (``De Matteis'') received countervailable 
subsidies in this review, and Atar S.r.L. (``Atar'') did not receive 
any countervailable subsidies in this review and its rate is, 
consequently, zero. See the ``Preliminary Results of Review'' section, 
below. Interested parties are invited to comment on these preliminary 
results. See the ``Public Comment'' section of this notice.

DATES: Effective Date: August 6, 2007.

FOR FURTHER INFORMATION CONTACT: Audrey Twyman or Brandon Farlander, 
AD/CVD Operations, Office 1, Import Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 
20230; telephone: (202) 482-3534 and (202) 482-0182, respectively.

SUPPLEMENTARY INFORMATION:

Background

    On July 24, 1996, the Department of Commerce (``the Department'') 
published a countervailing duty order on certain pasta (``pasta'' or 
``subject merchandise'') from Italy. See Notice of Countervailing Duty 
Order and Amended Final Affirmative Countervailing Duty Determination: 
Certain Pasta From Italy, 61 FR 38544 (July 24, 1996) (``Pasta 
Order''). On July 3, 2006, the Department published a notice of 
``Opportunity to Request Administrative Review'' of this countervailing 
duty order for calendar year 2005, the period of review (``POR''). See 
Antidumping or Countervailing Duty Order, Finding, or Suspended 
Investigation; Opportunity to Request Administrative Review, 71 FR 
37890 (July 3, 2006). On July 31, 2006, we received a request for 
review from Atar and Pallante. On July 31, 2006, we received a request 
for review for De Matteis on behalf of New World Pasta Company, 
American Italian Pasta Company, and Dakota Growers Pasta Company 
(``petitioners''). In accordance with 19 CFR 351.221(c)(1)(i), we 
published a notice of initiation of the review on August 30, 2006. See 
Initiation of Antidumping and Countervailing Duty Administrative 
Reviews and Requests for Revocation in Part, 70 FR 51573 (August 30, 
2006).
    On August 31, 2006, we issued countervailing duty questionnaires to 
the Commission of the European Union, the Government of Italy 
(``GOI''), Pallante, De Matteis, and Atar. We received responses to our 
questionnaire in October and November 2006. We issued supplemental 
questionnaires to the respondents in November 2006, and we received 
responses to our supplemental questionnaires in December 2006 and 
January 2007. In November 2006, we also requested that Agritalia S.r.L. 
(``Agritalia'') provide a full questionnaire response because of its 
status as a trading company for Italian pasta producers participating 
in this review. We received Agritalia's questionnaire response in 
January 2007. On March 2, 2007, we sent out supplemental questionnaires 
to Agritalia, De Matteis and the GOI. We received responses on April 
11, 2007. We sent out additional supplemental questionnaires to 
Agritalia, De Matteis, Atar, Pallante, and the GOI on May 11, 2007, and 
received responses in May and June 2007. We sent out additional 
supplemental questionnaires to De Matteis, Agritalia, and Pallante on 
June 19, 2007, and received responses on July 5, 2007.
    In accordance with 19 CFR 351.213(b), this review covers only those 
producers or exporters for which a review was specifically requested. 
The companies subject to this review are De Matteis, Atar, and 
Pallante.

Period of Review

    The POR for which we are measuring subsidies is January 1, 2005, 
through December 31, 2005.

Scope of the Order

    Imports covered by the order are shipments of certain non-egg dry 
pasta in packages of five pounds four ounces or less, whether or not 
enriched or fortified or containing milk or other optional ingredients 
such as chopped vegetables, vegetable purees, milk, gluten, diastasis, 
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 the order 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 Instituto Mediterraneo Di 
Certificazione, Bioagricoop S.r.l., QC&I International Services, 
Ecocert Italia, Consorzio per il Controllo dei Prodotti Biologici, 
Associazione Italiana per l'Agricoltura Biologica, or Codex S.r.l. In 
addition, based on publicly available information,

[[Page 43617]]

the Department has determined that, as of August 4, 2004, imports of 
organic pasta from Italy that are accompanied by the appropriate 
certificate issued by Bioagricert S.r.l. are also excluded from this 
order. See memorandum from Eric B. Greynolds to Melissa G. Skinner, 
dated August 4, 2004, which is on file in the Department's Central 
Records Unit (``CRU'') in Room B-099 of the main Department building. 
In addition, based on publicly available information, the Department 
has determined that, as of March 13, 2003, imports of organic pasta 
from Italy that are accompanied by the appropriate certificate issued 
by Instituto per la Certificazione Etica e Ambientale (ICEA) are also 
excluded from this order. See memorandum from Audrey Twyman to Susan 
Kuhbach, dated February 28, 2006, entitled ``Recognition of Instituto 
per la Certificazione Etica e Ambientale (ICEA) as a Public Authority 
for Certifying Organic Pasta from Italy'' which is on file in the 
Department's Central Records Unit (``CRU'') in Room B-099 of the main 
Department building.
    The merchandise subject to review is currently classifiable under 
items 1901.90.9095 and 1902.19.20 of the Harmonized Tariff Schedule of 
the United States (``HTSUS''). Although the HTSUS subheadings are 
provided for convenience and customs purposes, the written description 
of the merchandise subject to the order is dispositive.

Scope Rulings

    The Department has issued the following scope rulings to date:
    (1) On August 25, 1997, the Department issued a scope ruling that 
multicolored pasta, imported in kitchen display bottles of decorative 
glass that are sealed with cork or paraffin and bound with raffia, is 
excluded from the scope of the antidumping and countervailing duty 
orders. See Memorandum from Edward Easton to Richard Moreland, dated 
August 25, 1997, which is on file in the CRU.
    (2) On July 30, 1998, the Department issued a scope ruling finding 
that multipacks consisting of six one-pound packages of pasta that are 
shrink-wrapped into a single package are within the scope of the 
antidumping and countervailing duty orders. See Letter from Susan H. 
Kuhbach to Barbara P. Sidari, dated July 30, 1998, which is available 
in the CRU.
    (3) On October 26, 1998, the Department self-initiated a scope 
inquiry to determine whether a package weighing over five pounds as a 
result of allowable industry tolerances is within the scope of the 
antidumping and countervailing duty orders. On May 24, 1999, we issued 
a final scope ruling finding that, effective October 26, 1998, pasta in 
packages weighing or labeled up to (and including) five pounds four 
ounces is within the scope of the antidumping and countervailing duty 
orders. See Memorandum from John Brinkmann to Richard Moreland, dated 
May 24, 1999, which is available in the CRU.
    (4) On April 27, 2000, the Department self-initiated an anti-
circumvention inquiry to determine whether Pastificio Fratelli Pagani 
S.p.A.'s importation of pasta in bulk and subsequent repackaging in the 
United States into packages of five pounds or less constitutes 
circumvention with respect to the antidumping and countervailing duty 
orders on pasta from Italy pursuant to section 781(a) of the Act and 19 
CFR 351.225(b). See Certain Pasta from Italy: Notice of Initiation of 
Anti-Circumvention Inquiry of the Antidumping and Countervailing Duty 
Orders, 65 FR 26179 (May 5, 2000). On September 19, 2003, we published 
an affirmative finding of the anti-circumvention inquiry. See Anti-
Circumvention Inquiry of the Antidumping and Countervailing Duty Orders 
on Certain Pasta from Italy: Affirmative Final Determinations of 
Circumvention of Antidumping and Countervailing Duty Orders, 68 FR 
54888 (September 19, 2003).

Subsidies Valuation Information

Allocation Period

    Pursuant to 19 CFR 351.524(b), non-recurring subsidies are 
allocated over a period corresponding to the average useful life 
(``AUL'') of the renewable physical assets used to produce the subject 
merchandise. The Department's regulations create a rebuttable 
presumption that the AUL will be taken from the U.S. Internal Revenue 
Service's 1977 Class Life Asset Depreciation Range System (``IRS 
Tables''). See 19 CFR 351.524(d)(2). For pasta, the IRS Tables 
prescribe an AUL of 12 years. None of the responding companies or 
interested parties objected to this allocation period. Therefore, we 
have used the 12-year allocation period for all respondents.

Attribution of Subsidies

    Pursuant to 19 CFR 351.525(b)(6), the Department will attribute 
subsidies received by certain companies to the combined sales of those 
companies. Based on our review of the responses, we preliminarily find 
that ``cross-ownership'' exists with respect to certain companies, as 
described below, and we have attributed subsidies accordingly:
    Pallante: Pallante has reported that it is affiliated with Vitelli 
Foods LLC (``Vitelli''), which is a U.S. importer of subject 
merchandise and other products from Italy and other countries. See 
Pallante's questionnaire response at pages 1-2 (October 31, 2006). 
Pallante also explained that until April 2003 it was affiliated with 
Industrie Alimentare Molisane (``IAM''), another Italian pasta 
producer, but that the affiliation has ended and they were not 
affiliated during the POR. See Pallante's questionnaire response at 
pages 2-4 (October 31, 2006). Because IAM is no longer cross-owned with 
Pallante, and because Vitelli is located in the United States, we are 
attributing Pallante's subsidies to the sales of Pallante only.
    De Matteis: De Matteis has reported that it is affiliated with De 
Matteis Construzioni S.r.L. (``Construzioni'') by virtue of being 100 
percent owned by Construzioni. See De Matteis' questionnaire response 
at pages 2-3 (October 31, 2007). In the Fourth Administrative Review 
\1\ De Matteis had another affiliate, Demaservice S.r.l. De Matteis 
reported that Demaservice S.r.l. is no longer in existence as of 
December 21, 2001. See De Matteis' January 16, 2006, first supplemental 
questionnaire response at pages 16-17. De Matteis has reported that 
Construzioni did not receive any subsidies during the POR or AUL 
period. See De Matteis' Second Supplemental Response at 1 (April 13, 
2007). Therefore, we are attributing De Matteis' subsidies to its sales 
only.
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    \1\ See Certain Pasta from Italy: Preliminary Results and 
Partial Rescission of Countervailing Duty Administrative Review, 66 
FR 40987 (August 6, 2001) (``Fourth Administrative Review''); 
(unchanged in Final Results) Certain Pasta From Italy: Final Results 
of the Fourth Countervailing Duty Administrative Review, 66 FR 64214 
(December 12, 2001).
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    Atar: Atar has reported that it has no affiliates or cross-
ownership. Thus, we are attributing any subsidies received to Atar's 
sales only.

Discount Rates

    Pursuant to 19 CFR 351.524(d)(3)(i)(B), we used the national 
average cost of long-term, fixed-rate loans as a discount rate for 
allocating non-recurring benefits over time because no company for 
which we need such discount rates took out any loans in the years in 
which the government agreed to provide the subsidies in question. 
Consistent with past practice in this proceeding, for years prior to 
1995, we used the Bank of Italy reference rate adjusted upward to 
reflect the mark-up an Italian commercial bank

[[Page 43618]]

would charge a corporate customer. See, e.g., Certain Pasta from Italy: 
Preliminary Results and Partial Recision of the Eighth Countervailing 
Duty Administrative Review, 70 FR 17971 (April 8, 2005) (decision 
unchanged in the final results, Certain Pasta from Italy: Final Results 
of the Eighth Countervailing Duty Administrative Review, 70 FR 37084 
(June 28, 2005)). For benefits received in 1995-2004, we used the 
Italian Bankers' Association prime interest rate (as reported by the 
Bank of Italy), increased by the average spread charged by banks on 
loans to commercial customers plus an amount for bank charges. The Bank 
of Italy ceased reporting this rate in 2004. Because the ABI prime rate 
was no longer reported after 2004, for these preliminary results, for 
2005 we have used the ``Bank Interest Rates on Euro Loans: Outstanding 
Amounts, Non-Financial Corporations, Loans With Original Maturity More 
Than Five Years'' published by the Bank of Italy and provided by the 
Government of Italy in their October 24, 2006, Questionnaire Response 
at Exhibit 9. To this rate we made the adjustments described above. See 
Memorandum to the File, ``Calculations for the Preliminary Results for 
De Matteis Agroalimentare S.p.A.'' (July 31, 2007) (``De Matteis Calc 
Memo'').

Analysis of Programs

I. Program Preliminarily Determined to be Countervailable

A. Industrial Development Grants Under Law 64/86

    Law 64/86 provided assistance to promote development in the 
Mezzogiorno (the south of Italy). 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 abrogated Law 64/86 and replaced it 
with Law 488/92 (see below). This decision became effective in 1993. 
However, companies whose projects had been approved prior to 1993 were 
authorized to continue receiving grants under Law 64/86 after 1993.
    DeMatteis and Pallante received grants under Law 64/86 which 
conferred a benefit during the POR.
    In the Pasta Investigation, the Department determined that these 
grants confer a countervailable subsidy within the meaning of section 
771(5) of the Act. See Final Affirmative Countervailing Duty 
Determination: Certain Pasta (``Pasta'') from Italy, 61 FR 30288 (June 
14, 1996) (``Pasta Investigation''). They are a direct transfer of 
funds from the GOI bestowing a benefit in the amount of the grant. 
Also, these grants were found to be regionally specific within the 
meaning of section 771(5A) of the Act. In this review, neither the GOI 
nor the responding companies have provided new information which would 
warrant reconsideration of our determination that these grants are 
countervailable subsidies.
    In the Pasta Investigation, the Department treated the industrial 
development grants as non-recurring. No new information has been placed 
on the record of this review that would cause us to depart from this 
treatment. We have followed the methodology described in 19 CFR 
351.524(b)(2) which directs us to allocate over time those non-
recurring grants whose total authorized amount exceeds 0.5 percent of 
the recipient's sales in the year of authorization. Where the total 
amount authorized is less than 0.5 percent of the recipient's sales in 
the year of authorization, the benefit is countervailed in full 
(``expensed'') in the year of receipt. We determined that the grants 
received by De Matteis and Pallante under law 64/86 exceeded 0.5 
percent of their sales in the year in which the grants were approved, 
as was done in the Fourth Administrative Review.
    We used the grant methodology described in section 351.524(d) of 
the regulations to calculate the countervailable subsidy from those 
grants that were allocated over time. We divided the benefit received 
by each company in the POR by its total sales in the POR.
    On this basis, we preliminarily determine the countervailable 
subsidy from the Law 64/86 industrial development grants to be 0.07 
percent ad valorem for DeMatteis, and 0.28 percent ad valorem for 
Pallante. See De Matteis Calc Memo; Memorandum to the File, 
``Calculations for the Preliminary Results for Pastificio Antonio 
Pallante S.r.L.'' (July 31, 2007) (``Pallante Calc Memo'').

B. Industrial Development Grants Under Law 488/92

    In 1986, the European Union (``EU'') initiated an investigation of 
the GOI's regional subsidy practices. As a result of this 
investigation, the GOI changed the regions eligible for regional 
subsidies to include depressed areas in central and northern Italy in 
addition to the Mezzogiorno. After this change, the areas eligible for 
regional subsidies are the same as those classified as Objective 1 
(underdeveloped regions), Objective 2 (declining industrial regions), 
or Objective 5(b) (declining agricultural regions) areas by the EU. The 
new policy was given legislative form in Law 488/92 under which Italian 
companies in the eligible sectors (manufacturing, mining, and certain 
business services) may apply for industrial development grants.
    Law 488/92 grants are made only after a preliminary examination by 
a bank authorized by the Ministry of Industry. On the basis of the 
findings of this preliminary examination, the Ministry of Industry 
ranks the companies applying for grants. The ranking is based on 
indicators such as the amount of capital the company will contribute 
from its own funds, the number of jobs created, regional priorities, 
etc. Grants are then made based on this ranking.
    DeMatteis and Pallante received grants under Law 488/92 which 
conferred a benefit during the POR.
    Industrial development grants under Law 488/92 were found 
countervailable in the Second Administrative Review \2\. The grants are 
a direct transfer of funds from the GOI bestowing a benefit in the 
amount of the grant. Also, these grants were found to be regionally 
specific within the meaning of section 771(5A) of the Act. In this 
review, neither the GOI nor the responding companies have provided new 
information which would warrant reconsideration of our determination 
that these grants are countervailable subsidies.
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    \2\ See Certain Pasta From Italy: Preliminary Results of 
Countervailing Duty Administrative Review, 64 FR 17618 (April 12, 
1999) (``Second Administrative Review''); (unchanged in Final 
Results) Certain Pasta From Italy: Final Results of Second 
Countervailing Duty Administrative Review, 64 FR 44489 (August 16, 
1999).
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    In the Second Administrative Review, the Department treated 
industrial development grants under Law 488/92 as non-recurring. No new 
information has been placed on the record of this review that would 
cause us to depart from this treatment. In accordance with section 
351.524(b)(2) of the regulations, we determined that the grants 
received by De Matteis and Pallante under law 488/92 exceeded 0.5 
percent of their sales in the year in which the grants were approved, 
as was the case in the Fourth Administrative Review.
    We used the grant methodology as described in section 351.524(d) of 
the regulations to calculate the subsidy for those grants that were 
allocated over

[[Page 43619]]

time. We divided the benefits received by Pallante in the POR by its 
total sales in the POR, and the benefits received by De Matteis in the 
POR by its sales of subject merchandise in the POR.
    On this basis, we preliminarily determine the countervailable 
subsidy from the Law 488/92 industrial development grants to be 0.81 
percent ad valorem for DeMatteis and 0.61 percent ad valorem for 
Pallante. See De Matteis Calc Memo and Pallante Calc Memo.

C. European Regional Development Fund (``ERDF'') Programma Operativo 
Plurifondo (P.O.P.) Grant

    The ERDF is one of the European Union's Structural Funds. It 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 EU. 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.
    DeMatteis received a P.O.P. Grant from the Regione Campania in 
1998. See Fourth Administrative Review. The P.O.P. Grants were funded 
by the European Union, the GOI and the Regione Campania.
    In the Pasta Investigation, the Department determined that ERDF 
grants confer a countervailable subsidy within the meaning of section 
771(5) of the Act. They are a direct transfer of funds bestowing a 
benefit in the amount of the grant. Also, these grants were found to be 
regionally specific within the meaning of section 771(5A) of the Act. 
In this review, neither the EU, the GOI nor the responding companies 
have provided new information which would warrant reconsideration of 
our determination that ERDF grants are countervailable subsidies.
    In the Pasta Investigation, the Department treated ERDF grants as 
non-recurring. No new information has been placed on the record of this 
review that would cause us to depart from this treatment. In accordance 
with section 351.524(b)(2) of the regulations, we determined that the 
ERDF grant received by De Matteis exceeded 0.5 percent of its sales in 
the year in which the grant was approved, as was the case in the Fourth 
Administrative Review.
    We used the grant methodology described in section 351.524(d) of 
the regulations to calculate the countervailable benefit. We divided 
the benefit received De Matteis in the POR by its total sales in the 
POR.
    On this basis, we preliminarily determine the countervailable 
subsidy from the ERDF grant to be 0.06 percent ad valorem for 
DeMatteis. See De Matteis Calc Memo.

D. Social Security Reductions and Exemptions--Sgravi

    Italian law allows companies, particularly those located in the 
Mezzogiorno region (southern Italy), to use a variety of exemptions 
from and reductions (sgravi) of payroll contributions that employers 
make to the Italian social security system for health care benefits, 
pensions, etc. The sgravi benefits are regulated by a complex set of 
laws and regulations, and are sometimes linked to conditions such as 
creating more jobs. We have found in past segments of this proceeding 
that the benefits under some of these laws (e.g., Laws 183/76 and 449/
97) are available only to companies located in the Mezzogiorno and 
other disadvantaged regions. Other laws (e.g., Laws 407/90 and 863/84) 
provide benefits to companies all over Italy, but the level of benefits 
is higher for companies in the south than for companies in other parts 
of the country.
    In the Pasta Investigation and subsequent reviews, the Department 
determined that the various forms of social security reductions and 
exemptions confer countervailable subsidies within the meaning of 
section 771(5) of the Act. They represent revenue foregone by the GOI 
bestowing a benefit in the amount of the savings received by the 
companies. Also, they were found to be regionally specific within the 
meaning of section 771(5A)(D)(iv) of the Act because they were limited 
to companies in the Mezzogiorno or because the higher levels of 
benefits were limited to companies in the Mezzogiorno.
    In the instant review, no party in this proceeding challenged our 
past determinations in the Pasta Investigation and subsequent reviews 
that sgravi benefits were countervailable for companies located within 
the Mezzogiorno region. Additionally, no new information or evidence of 
changed circumstances was received that would warrant reconsideration 
of these past determinations.
    The laws identified as having provided countervailable sgravi 
benefits during the POR are the following: Law 407/90 (De Matteis and 
Pallante), 196/97 (De Matteis), 223/91 Article 8 Paragraph 2 
(Pallante), and Law 223/91 Article 25 Paragraph 9 (Pallante). All of 
these companies are located in the Mezzogiorno region of Italy and, 
therefore, the programs provide countervailable subsidies to these 
companies.
1. Law 407/90
    Law 407/90 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. A 100 percent exemption is allowed for companies 
in southern Italy. However, companies located in northern Italy receive 
only a 50 percent exemption.
    In accordance with section 351.524(c) of the Department's 
regulations and consistent with our methodology in the Pasta 
Investigation and in reviews subsequent to the Pasta Investigation, we 
have treated social security reductions and exemptions as recurring 
benefits. To calculate the countervailable subsidy, we divided De 
Matteis's and Pallante's savings in social security contributions 
during the POR by their total sales in the POR. On this basis, we 
preliminarily determine the countervailable subsidy from the sgravi 
program to be 0.04 percent ad valorem for De Matteis and 0.03 percent 
ad valorem for Pallante. See De Matteis Calc Memo and Pallante Calc 
Memo.
2. Law 196/97
    Law 196/97 allows for a reduction or exemption from social security 
contributions for workers between the ages of 16 and 32 hired under 
labor or training contacts. Reductions range from 25 percent to 100 
percent depending on the location. The newly hired worker(s) must 
increase the company's total work force or the worker must be 29 years 
old or younger. For newly hired workers under a temporary contract, 
employers are exempt from paying a social security contribution for up 
to 2 years. If workers are then switched to a permanent contract, the 
exemption may apply for another 12 months. These benefits will only 
apply if the worker who is switched from a temporary to a permanent 
contract increases the number of employees in the enterprise.
    In accordance with section 351.524(c) of the Department's 
regulations and consistent with our methodology in the Pasta 
Investigation and in reviews subsequent to the Pasta Investigation, we 
have treated social security reductions and exemptions as recurring 
benefits. To calculate the countervailable subsidy, we divided De 
Matteis's savings in social security contributions during the POR by 
its total sales in the POR. On this basis, we preliminarily determine 
the countervailable subsidy from the sgravi program to be 0.04 percent 
ad valorem

[[Page 43620]]

for De Matteis. See De Matteis Calc Memo.
3. Law 223/91 Article 8, Paragraph 2
    Law 223/91, Article 8, Paragraph 2 is intended to encourage the 
hiring of laid off workers or mobility-listed people. Companies who 
hire unemployed people are allowed to pay lower social security taxes 
for up to a maximum of 18 months for employees hired under a long-term 
contract with no expiration date. If an employee is hired for a short-
term contract, then the benefit will last as long as the contract. If 
the short-term contract is renewed, the benefit can be used for an 
additional 12 months. In the seventh review preliminary results we 
stated that record information for law 223/91 shows that this law is 
regionally specific within the meaning of section 771(5A)(D)(iv) of the 
Act because the higher levels of benefits were limited to companies in 
the Mezzogiorno and to handicraft enterprises. See Certain Pasta from 
Italy: Preliminary Results and Partial Rescission of the Seventh 
Countervailing Duty Administrative Review, 69 FR 45676, 45683 (July 30, 
2004); (unchanged in Final Results) Certain Pasta from Italy: Final 
Results of the Seventh Countervailing Duty Administrative Review, 69 FR 
70657 (December 7, 2004).
    In accordance with section 351.524(c) of the Department's 
regulations and consistent with our methodology in the Pasta 
Investigation and in reviews subsequent to the Pasta Investigation, we 
have treated social security reductions and exemptions as recurring 
benefits. To calculate the countervailable subsidy, we divided each 
company's savings in social security contributions during the POR by 
its total sales in the POR. On this basis, we preliminarily determine 
the countervailable subsidy from the sgravi program to be 0.05 percent 
ad valorem for Pallante. See Pallante Calc Memo.
4. Law 223/91 Article 8, Paragraph 4
    Law 223/91, Article 8, Paragraph 4 is intended to encourage the 
hiring of mobility-listed people. Companies who hire unemployed people 
on a permanent and full time contract are granted a credit of 50 
percent of what the employee would have received in unemployment 
benefits.
    In the 7th Administrative Review results we stated that record 
information for law 223/91 shows that this law is regionally specific 
within the meaning of section 771(5A)(D)(iv) of the Act because the 
higher levels of benefits were limited to companies in the Mezzogiorno 
and to handicraft enterprises. See Certain Pasta from Italy: 
Preliminary Results and Partial Rescission of the Seventh 
Countervailing Duty Administrative Review, 69 FR 45676, 45683 (July 30, 
2004); (unchanged in Final Results) Certain Pasta from Italy: Final 
Results of the Seventh Countervailing Duty Administrative Review, 69 FR 
70657 (December 7, 2004).
    In accordance with section 351.524(c) of the Department's 
regulations and consistent with our methodology in the Pasta 
Investigation and in reviews subsequent to the Pasta Investigation, we 
have treated social security reductions and exemptions as recurring 
benefits. To calculate the countervailable subsidy, we divided 
Pallante's savings in social security contributions during the POR by 
its total sales in the POR. On this basis, we preliminarily determine 
the countervailable subsidy from the sgravi program to be 0.01 percent 
ad valorem for Pallante. See Pallante Calc Memo.

E. Law 289/02

1. Article 62--Investments in Disadvantaged Areas
    We preliminarily find that Article 62 of Law 289/02 is a credit 
towards taxes payable. The law was established to promote investment in 
disadvantaged areas by providing a tax credit to companies that make 
investments such as the purchase of new equipment for existing 
structures, or the building of new structures. See the GOI's Second 
Supplemental Response at 3-4 and Annex 1, 2, 5, and 6 (April 13, 2007).
    We preliminarily determine that Article 62 of Law 289/02 confers a 
countervailable subsidy in the form of a financial contribution within 
the meaning of section 771(5)(D)(ii) of the Act because it represents 
revenue foregone by the GOI. A benefit is conferred in the amount of 
the tax savings received by the companies per section 771(5)(E)(iv) of 
the Act. Also, the program is specific within the meaning of 
751(5A)(D)(iv) of the Act because it is limited to certain geographical 
regions in Italy, specifically, the regions of Calabria, Campania, 
Basilicata, Pugilia, Sicilia, and Sardegna, and certain municipalities 
in the Abruzzo and Molise region, and certain municipalities in central 
and northern Italy. See GOI Third Supplemental Response at 3 and Annex 
1 and 2, (May 25, 2007).
    De Matteis is located in Campania, therefore, it could take 
advantage of this program. De Matteis explained that it received the 
benefit for the construction of a new semolina milling facility, 
including wheat silos, by-product storage silos, semolina silos, and 
milling equipment. See De Matteis' Second Supplemental Response at 2 
(April 13, 2007). The Department is treating this program as a credit 
towards taxes payable per 19 CFR 351.509. Normally, the Department will 
allocate the benefit of a tax exemption to the year in which the 
benefit is considered to have been received per 19 CFR 351.509(c), 
treating the benefit as recurring per 19 CFR 351.524(c). However, the 
Department may find a benefit to be non-recurring by considering the 
criteria in 19 CFR 351.524(c)(2)(i)-(iii). In this case, the tax 
program is exceptional because it was only available for a limited 
period of time, and was dependent upon companies making specific 
investments. Further, the subsidy required the government of Italy's 
express authorization, and the subsidy was tied to capital assets of 
the firm.
    In accordance with section 351.524(b)(2) of the regulations, we 
determined that the tax credit received by De Matteis exceeded 0.5 
percent of its sales in the year in which the tax credit was approved. 
We used the non-recurring benefit calculation described in 19 CFR 
351.524(d) of the regulations to calculate the countervailable benefit. 
We divided the benefit received by De Matteis in the POR by its total 
sales in the POR. On this basis, we preliminarily determine the 
countervailable subsidy from Law 289/02 Article 62 to be 0.35 percent 
ad valorem for De Matteis. See De Matteis Calc Memo.
    Pallante is located in Campania and, therefore, it could also take 
advantage of this program. In accordance with section 351.524(b)(2) of 
the regulations, we determined that the tax credit received by Pallante 
exceeded 0.5 percent of its sales in the year in which the tax credit 
was approved. We used the non-recurring benefit calculation described 
in 19 CFR 351.524(d) of the regulations to calculate the 
countervailable benefit. We divided the benefit received by Pallante in 
the POR by its total sales in the POR. On this basis, we preliminarily 
determine the countervailable subsidy from Law 289/02 Article 62 to be 
1.04 percent ad valorem for Pallante. See Pallante Calc Memo.
2. Article 63--Increase in Employment
    We preliminarily find that Article 63 of Law 289/02 is a credit 
towards taxes payable. The law was established to promote employment by 
providing a tax credit to companies that hire new employees. The tax 
credit is 100 euros for a new hire for any company in Italy. If the 
employee is over 45 the amount

[[Page 43621]]

increases to 150 euros. An additional 300 euros will be granted if the 
company is located in certain regions of Italy. See GOI Second 
Supplemental Response at 3-4 and Annex 3, 4, 7, and 8 (April 13, 2007).
    We preliminarily determine that Article 63 of Law 289/02 confers a 
countervailable subsidy in the form of a financial contribution within 
the meaning of section 771(5)(D)(ii) of the Act because it represents 
revenue foregone by the GOI. A benefit is conferred in the amount of 
the tax savings received by the companies per section 771(5)(E)(iv) of 
the Act. The program is specific within the meaning of 751(5A)(D)(iv) 
of the Act because the greater benefit amount is limited to certain 
geographical regions in Italy, specifically, Campania, Basilicata, 
Puglia, Calabria, Sicilia, Sardegna, Abruzzo, Molise, and the 
municipalities of Tivoli, Formia, Sora, Cassino, Frosnone, Viterbo, and 
Massa. See GOI Third Supplemental Response at 3-4 (May 25, 2007). 
However, if a company is located outside the higher subsidy area, then 
the program is not countervailable because it is not specific.
    De Matteis is located in Campania and, therefore, it could take 
advantage of the higher subsidy rate. The Department is treating this 
program as a credit towards taxes payable per 19 CFR 351.509. Normally, 
the Department will allocate the benefit of a credit towards taxes 
payable to the year in which the benefit is considered to have been 
received per 19 CFR 351.509. ``The Secretary normally will consider the 
benefit as having been received on the date on which the recipient firm 
would otherwise have had to pay the taxes associated with the exemption 
or remission. Normally, this date will be the date on which the firm 
filed its tax return.'' See 19 CFR 351.509(b). In expensing the 
complete benefit in one year, the Department is considering this 
program as recurring per 19 CFR 351.524(c) which states that 
``{t{time} he Secretary normally will treat the following types of 
subsidies as providing recurring benefits: Direct tax exemptions and 
deductions; * * *'' To calculate the countervailable subsidy, we 
divided De Matteis' tax credit used on the tax return filed during the 
POR by its total sales in the POR. On this basis, we preliminarily 
determine the countervailable subsidy from Law 289/02 Article 63 to be 
0.03 percent ad valorem for De Matteis. See De Matteis Calc Memo.

F. Law 662/96

    The GOI describes the Patti Territoriali grant (Law 662/96 Article 
2, Paragraph 203, Letter d) as provided to companies for 
entrepreneurial initiatives such as new plants, additions, 
modernization, restructuring, conversion, reactivation, or transfer. 
Companies that can apply for the grants must be involved in mining, 
manufacturing, production of thermal or electric power from biomasses, 
service companies, tourist companies, agricultural, maritime and salt-
water fishing businesses, aquaculture enterprises, or their 
associations. The Patti Territoriali provides grants to companies 
located within regions which meet the criteria of Objective 1 or 
Objective 2 under the Structural Funds or article 87.3.c of the Treaty 
of Rome. See the GOI's Second Supplemental Response at 4-5 and Annex 9-
13 (April 13, 2007).
    The GOI has stated that De Matteis received disbursements from the 
Patti Territoriali in 2000 and 2004 from a grant approved on January 
29, 1999.
    The Department preliminarily determines that the Patti Territoriali 
grant confers a countervailable subsidy within the meaning of section 
771(5)(D)(i) of the Act because it is a direct transfer of funds. A 
benefit is conferred in the full amount of the grant. Further, the 
grant is regionally specific within the meaning of section 
771(5A)(D)(iv) of the Act because it is limited to companies located 
within regions which meet the criteria of Objective 1 or Objective 2 
under the Structural Funds or article 87.3.c of the Treaty of Rome.
    We normally treat grants as non-recurring. In accordance with 
section 351.524(b)(2) of the regulations, we determined that the Patti 
Territoriali grant received by De Matteis exceeded 0.5 percent of its 
sales in the year in which the grant was approved and, therefore, we 
will allocate the grant over the 12 year AUL.
    We used the grant methodology described in section 351.524(d) of 
the regulations to calculate the countervailable benefit. We divided 
the benefit received by De Matteis in the POR by its total sales in the 
POR. On this basis, we preliminarily determine the countervailable 
subsidy from the Patti Territoriali grant to be 0.57 percent ad valorem 
for De Matteis. See De Matteis Calc Memo.
    On July 23, 2007, petitioners submitted ``Comments In Anticipation 
of Preliminary Results.'' In these comments, petitioners have made a 
further claim concerning this program. Because we did not have time to 
issue a supplemental questionnaire, we are not acting on the claim at 
this time. Following the publication of these preliminary results, the 
Department will decide whether to issue any further supplemental 
questionnaires concerning this program.

II. Programs Preliminarily Determined to be Not Countervailable

A. Social Security Reductions and Exemptions--Sgravi (Article 120 of 
Law 388/00)

    Atar has reported receiving benefits from Article 120 of Law 388/
00. Unlike many other sgravi programs, Article 120 of Law 388/00 
(fiscalizzazione program) is a nationwide sgravi program that provides 
an equivalent level of deductions throughout Italy and is not specific 
to the Mezzogiorno region or to the pasta industry pursuant to section 
771(5A) of the Act. Article 120 of Law 388/00 provides a deduction of 
certain social security payments related to health care or insurance. 
The government takes over a minimal amount of the payments for social 
contributions which are owed to the Instituto Nazionale Previdenza 
Sociale (``INPS''). In the ninth administrative review we found this 
program to be non-countervailable. See Certain Pasta from Italy: 
Preliminary Results of the Ninth Countervailing Duty Administrative 
Review and Notice of Intent to Revoke Order, in Part, 71 FR 17440 
(April 6, 2006); and Certain Pasta from Italy: Final Results of the 
Ninth Countervailing Duty Administrative Review and Notice of 
Revocation of Order, in Part, 71 FR 36318 (June 26, 2006). Therefore, 
we continue to find that Article 120 of Law 388/00 is not a 
countervailable subsidy because the subsidy is not specific. 
Accordingly, we determine that Atar did not receive countervailable 
subsidies under this program.

III. Programs Preliminarily Determined to Not be Used

    We examined the following programs and preliminarily determine that 
the producers and/or exporters of the subject merchandise under review 
did not apply for or receive benefits under these programs during the 
POR:
    A. Industrial Development Loans Under Law 64/86.
    B. Law 236/93 Training Grants.
    C. Law 1329/65 Interest Contributions (Sabatini Law) (Formerly 
Lump-Sum Interest Payment Under the Sabatini Law for Companies in 
Southern Italy).
    D. Development Grants Under Law 30 of 1984.

[[Page 43622]]

    E. Law 908/55 Fondo di Rotazione Iniziative Economiche (Revolving 
Fund for Economic Initiatives) Loans.
    F. Law 317/91 Benefits for Innovative Investments.
    G. Brescia Chamber of Commerce Training Grants.
    H. Ministerial Decree 87/02.
    I. Law 10/91 Grants to Fund Energy Conservation.
    J. Export Restitution Payments.
    K. Export Credits Under Law 227/77.
    L. Capital Grants Under Law 675/77.
    M. Retraining Grants Under Law 675/77.
    N. Interest Contributions on Bank Loans Under Law 675/77.
    O. Preferential Financing for Export Promotion Under Law 394/81.
    P. Urban Redevelopment Under Law 181.
    Q. Industrial Development Grants Under Law 183/76.
    R. Interest Subsidies Under Law 598/94.
    S. Duty-Free Import Rights.
    T. European Social Fund Grants.
    U. Law 113/86 Training Grants.
    V. European Agricultural Guidance and Guarantee Fund.
    W. Law 341/95 Interest Contributions on Debt Consolidation Loans 
(Formerly Debt Consolidation Law 341/95).
    X. Interest Grants Financed by IRI Bonds.
    Y. Grant Received Pursuant to the Community Initiative Concerning 
the Preparation of Enterprises for the Single Market (PRISMA).
    Z. Article 44 of Law 448/01.

IV. Programs Preliminarily Determined To Have Been Terminated

    We examined the following programs at verification during the 9th 
Administrative Review and preliminarily determine in this review that 
they have been terminated prior to the current POR and that there will 
be no remaining subsidy benefits from these programs after this POR. 
See ``Verification of the Questionnaire Responses of the Government of 
Italy in the 9th Administrative Review'' (March 31, 2006) which was 
placed on the record of this proceeding on July 31, 2007.
    A. Social Security Reductions and Exemptions--Sgravi Article 44 of 
Law 448/01.
    B. Social Security Reductions and Exemptions--Sgravi Law 337/90.

Preliminary Results of Review

    In accordance with 19 CFR 351.221(b)(4)(i), we calculated an 
individual subsidy rate for Pallante and De Matteis. Atar had no 
countervailable subsidies. We did not calculate an individual rate for 
Agritalia because a review was not requested for Agritalia. Agritalia 
was only asked to participate because of the possible effect of 
subsidies it received on its suppliers who are included in this review. 
We have preliminarily found that Agritalia did not receive any 
subsidies which affected any suppliers' rates. For the period January 
1, 2005, through December 31, 2005, we preliminarily find the net 
subsidy rates for the producers/exporters under review to be those 
specified in the chart shown below:

------------------------------------------------------------------------
                                                             Net subsidy
                     Producer/exporter                           rate
                                                              (percent)
------------------------------------------------------------------------
De Matteis Agroalimetare S.p.A.............................         1.97
Pastificio Antonio Pallante S.r.L..........................         2.02
Atar S.r.l.................................................         0.00
------------------------------------------------------------------------

    The calculations will be disclosed to the interested parties in 
accordance with 19 CFR 351.224(b).
    If the final results of this review remain the same as these 
preliminary results, the Department intends to instruct Customs to 
assess countervailing duties at these net subsidy rates. The Department 
will issue appropriate instructions directly to Customs within 15 days 
of publication of the final results of this review.
    For all other companies that were not reviewed (except Barilla G. e 
R. F.lli S.p.A. and Gruppo Agricoltura Sana S.r.l., which are excluded 
from the order, and Pasta Lensi S.r.l. which was revoked from the 
order), the Department has directed CBP to assess countervailing duties 
on all entries between January 1, 2005, and December 31, 2005, at the 
rates in effect at the time of entry. Agritalia has been reviewed 
previously and has its own exporter specific rate of 2.92 percent.
    The Department also intends to instruct CBP to collect cash 
deposits of estimated countervailing duties.
    For all non-reviewed firms (except Barilla G. e R. F.lli S.p.A. and 
Gruppo Agricoltura Sana S.r.l., which are excluded from the order, and 
Pasta Lensi S.r.l. which was revoked from the order), we will instruct 
CBP to collect cash deposits of estimated countervailing duties at the 
most recent company-specific or ``all others'' rate applicable to the 
company. These rates shall apply to all non-reviewed companies until a 
review of a company assigned these rates is requested.

Public Comment

    Pursuant to 19 CFR 351.224(b), the Department will disclose to 
parties to the proceeding any calculations performed in connection with 
these preliminary results within five days after the date of the public 
announcement of this notice.
    Pursuant to 19 CFR 351.309(c)(ii), interested parties may submit 
written arguments in case briefs within 30 days of the date of 
publication of this notice. Rebuttal briefs, limited to issues raised 
in case briefs, may be filed no later than five days after the date of 
filing the case briefs, in accordance with 19 CFR 351.309(d). Parties 
who submit briefs in this proceeding should provide a summary of the 
arguments not to exceed five pages and a table of statutes, 
regulations, and cases cited. Copies of case briefs and rebuttal briefs 
must be served on interested parties in accordance with 19 CFR 
351.303(f).
    Interested parties may request a hearing within 30 days after the 
date of publication of this notice, pursuant to 19 CFR 351.310(c). Any 
hearing, if requested, will be held two days after the scheduled date 
for submission of rebuttal briefs.
    The Department will publish a notice of the final results of this 
administrative review within 120 days from the publication of these 
preliminary results, in accordance with section 751(a)(3) of the Act.
    We are issuing and publishing these results in accordance with 
sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR 351.221(b)(4).

    Dated: July 31, 2007.
Stephen J. Claeys,
Acting Assistant Secretary for Import Administration.
 [FR Doc. 07-3832 Filed 8-3-07; 8:45 am]
BILLING CODE 3510-DS-P