Certain Pasta from Italy: Notice of Preliminary Results of Twelfth Antidumping Duty Administrative Review, 39285-39291 [E9-18884]

Agencies

• DEPARTMENT OF COMMERCE
• International Trade Administration

[Federal Register Volume 74, Number 150 (Thursday, August 6, 2009)]
[Notices]
[Pages 39285-39291]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-18884]



[[Page 39285]]

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DEPARTMENT OF COMMERCE

International Trade Administration

[A-475-818]


Certain Pasta from Italy: Notice of Preliminary Results of 
Twelfth Antidumping Duty Administrative Review

AGENCY: Import Administration, International Trade Administration, 
Department of Commerce.
SUMMARY: In response to requests by interested parties, the Department 
of Commerce (``the Department'') is conducting an administrative review 
of the antidumping duty order on certain pasta (``pasta'') from Italy 
for the period of review (``POR'') July 1, 2007, through June 30, 2008. 
This review covers four producers/exporters of subject merchandise. We 
preliminarily determine that during the POR, respondents sold subject 
merchandise at less than normal value (``NV''). If these preliminary 
results are adopted in the final results of this administrative review, 
we will instruct U.S. Customs and Border Protection (``CBP'') to assess 
antidumping duties on all appropriate entries of subject merchandise 
during the POR. Interested parties are invited to comment on these 
preliminary results.

DATES: Effective Date: August 6, 2009.

FOR FURTHER INFORMATION CONTACT: Christopher Hargett or Victoria Cho, 
AD/CVD Operations, Office 3, Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th Street and 
Constitution Avenue, NW., Washington, DC 20230; telephone: (202) 482-
4161 or (202) 482-5075, respectively.

SUPPLEMENTARY INFORMATION:

Background

    On July 24, 1996, the Department published in the Federal Register 
the antidumping duty order on pasta from Italy. See Notice of 
Antidumping Duty Order and Amended Final Determination of Sales at Less 
Than Fair Value: Certain Pasta From Italy, 61 FR 38547 (July 24, 1996).
    On July 11, 2008, the Department published a notice of opportunity 
to request an administrative review of the antidumping duty order on 
certain pasta from Italy. See Antidumping or Countervailing Duty Order, 
Finding, or Suspended Investigation: Opportunity to Request 
Administrative Review, 73 FR 39948 (July 11, 2008). We received 
requests for review from petitioners \1\ and from individual Italian 
exporters/producers of pasta, in accordance with 19 CFR 351.213(b)(1) 
and (2). On August 26, 2008, the Department published the notice of 
initiation of this antidumping duty administrative review covering the 
period July 1, 2007, through June 30, 2008, listing the following 
companies as respondents: Arrigi, S.p.A. (``Arrigi''), Domenico Paone 
fu Erasmo S.p.A., F. Divella SpA (``Divella''), Industria Alimentare 
Colavita, S.p.A., P.A.M. S.p.A. (``PAM''), Pasta Lensi, Pasta Zara SpA 
(``Zara''), Pastificio Di Martino Gaetano & F.lli S.r.L. (``Di 
Martino''), Pastificio Felicetti S.r.L. (``Felicetti''), Pastificio 
Fratelli Pagani S.p.A., Pastificio Labor S.r.L., Pastificio Lucio 
Garofalo (``Garofalo''), Pastificio Riscossa F.Illi Mastromauro S.r.L., 
Rummo S.p.A. Molino e Pastificio, and Rustichella d'Abruzzo S.p.A. See 
Initiation of Antidumping and Countervailing Duty Administrative 
Reviews, 73 FR 50308 (August 26, 2008) (``Initiation Notice'').
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    \1\ New World Pasta Company, Dakota Growers Pasta Company, and 
American Italian Pasta Company.
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    On August 26, 2008, due to the significant number of requests 
received and the Department's resource constraints at the time of 
initiation of the instant review, the Department informed known 
interested parties its intent to limit the number of companies examined 
in the current review, and requested comments. See memo to Melissa 
Skinner, through James Terpstra, from Christopher Hargett, ``2007-2008 
Antidumping Duty Administrative Review of Certain Pasta from Italy: 
Customs and Border Protection Data for Selection of Respondents for 
Individual Review,'' dated August 26, 2008.
    On September 25, 2008, the Department selected the two exporters/
producers accounting for the largest volume of exports--PAM and 
Garofalo, as mandatory respondents.\2\
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    \2\ See Memorandum to James Terpstra, from the Team regarding 
Selection of Respondents for Individual Review, September 25, 2008.
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    As a result of timely withdrawals of request for review, we 
rescinded this review, in part, with respect to Zara, Felicetti, 
Divella, Di Martino, and Arrighi.\3\
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    \3\ See Certain Pasta From Italy: Notice of Partial Rescission 
of Antidumping Duty Administrative Review, 74 FR 23392 (May 19, 
2009).
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    Between September 2008 and May 2009, the Department issued its 
initial questionnaire and supplemental questionnaires to each 
respondent, as applicable. We received responses to the Department's 
initial and supplemental questionnaires on December 3, 2008, December 
10, 2008, March 5, 2009, April 10, 2009, May 4, 2009, May 11, 2009, and 
May 29, 2009, from PAM. Garofalo provided responses to the Department's 
initial and supplemental questionnaires on November 10, 2008, November 
24, 2008, December 10, 2009, April 15, 2009, May 14, 2009, and July 7, 
2009.
    On March 16, 2009, the Department fully extended the due date for 
the preliminary results of review from April 2, 2009, to July 31, 2009. 
See Certain Pasta from Italy: Extension of Time Limits for the 
Preliminary Results of Twelfth Antidumping Duty Administrative Review, 
74 FR 11084 (March 16, 2009).
    On May 8, 2009, the petitioners alleged that a particular market 
situation exists with respect to the Italian market for certain pasta 
that warrants the Department rejecting home market prices as the basis 
for NV and instead, relying on constructed value (``CV''). On May 20, 
2009, the Department requested additional information from the 
petitioners regarding their allegation. On June 12, 2009, the 
petitioners provided the information requested. On June 22, 2009, the 
respondents submitted rebuttal comments.

Scope of the Order

    Imports covered by this 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 this 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, by Bioagricoop Scrl, by QC&I International Services, by 
Ecocert Italia, by Consorzio per il Controllo dei Prodotti Biologici, 
by Associazione Italiana per l'Agricoltura Biologica, or 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, ``Recognition of Instituto per la 
Certificazione Etica e Ambientale .''
    The merchandise subject to this order is currently classifiable 
under subheadings 1901.90.95 and 1902.19.20

[[Page 39286]]

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.

Model Match Clarification

    In the eleventh review of pasta from Italy the Department stated 
that it would solicit comments from interested parties with respect to 
the appropriate standards and criteria to be applied in differentiating 
among wheat codes, and make any necessary changes and/or clarifications 
to the model match criteria for pasta to apply to all future 
respondents. See Certain Pasta from Italy: Notice of Final Results of 
the Eleventh Administrative Review and Partial Rescission of Review, 73 
FR 75400 (December 11, 2008).
    On January 9, 2009, we contacted interested parties and solicited 
comments on the following four factors: (1) Industry standards, (2) 
measuring material cost differences, (3) defining commercial 
significance, and (4) physical characteristics. Parties submitted 
comments on February 23, 2009, and rebuttal comments on March 10, 
2009.\4\
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    \4\ In addition, we sent a letter on June 4, 2009, soliciting 
additional information from PAM and Garafolo. PAM and Garafolo 
submitted responses on July 7, 2009.
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    Because of a lack of consistency in the Department's treatment of 
separate wheat codes in model match decisions in previous 
determinations, we solicited comments in order to articulate a clearer 
statement of our policy. Our goal was to develop objective criteria 
that would apply in each review of this antidumping duty order. 
Petitioners and the two respondents in this review submitted factual 
information and comments. Based on our analysis of these comments, and 
our review of prior determinations, we propose to clarify and modify 
our treatment of the wheat code physical characteristic. See memorandum 
from James Terpstra, Program Manager, to John M. Andersen, Acting 
Deputy Assistant Secretary, entitled ``Preliminary Model Match 
Clarification on Pasta Wheat Code Classifications,'' dated July 31, 
2009. We propose replacing the existing single Wheat Code field with 
the following three fields: Wheat species, form, and protein content.
    We note that the threshold set forth in Protein Content corresponds 
to the minimum protein content of 12.5 percent established by the 
Italian Commodity Exchanges. We are requesting that interested parties 
provide comments on the proposed model match changes included there in. 
We will evaluate comments on the proposed methodology. Any new model 
match criteria developed will be applicable in the 2008-2009 and 
subsequent administrative reviews of pasta from Italy.

Product Comparisons

    In accordance with section 771(16) of the Tariff Act of 1930, as 
amended (``the Act''), we first attempted to match contemporaneous 
sales of products sold in the United States and comparison markets that 
were identical with respect to the following characteristics: (1) Pasta 
shape; (2) type of wheat; (3) additives; and (4) enrichment, by 
quarter. When there were no sales of identical merchandise in the 
comparison market to compare with U.S. sales, we compared U.S. sales 
with the most similar product based on the characteristics listed 
above, in descending order of priority. When there were no appropriate 
comparison market sales of comparable merchandise, we compared the 
merchandise sold in the United States to CV, in accordance with section 
773(a)(4) of the Act.
    For purposes of the preliminary results, where appropriate, we have 
calculated the adjustment for differences in merchandise based on the 
difference in the variable cost of manufacturing (``VCOM'') between 
each U.S. model and the most similar home market model selected for 
comparison.

Comparisons to Normal Value

    To determine whether sales of certain pasta from Italy were made in 
the United States at less than NV, we compared the export price 
(``EP'') or constructed export price (``CEP'') to the NV by quarter, as 
described in the ``Export Price/Constructed Export Price'' and ``Normal 
Value'' sections of this notice. In accordance with section 777A(d)(2) 
of the Act, we calculated monthly weighted-average prices for NV and 
compared these to individual U.S. transactions. Because we are using a 
quarterly costing approach, we have not made price-to-price comparisons 
outside of a quarter to lessen the potential distortion to sales prices 
which result from significantly changing costs. See Memorandum Through 
James Terpstra from Christopher Hargett titled ``Sales Analysis 
Memorandum--PAM S.p.A., Liguori Pastificio dal 1820 S.p.A. 
(``Liguori''), and Chirico Molini e Pastificio S.p.A. (``Chirico'') 
(collectively, ``PAM'')'' (``PAM Sales Analysis Memo''), and Memorandum 
from Christopher Hargett to James Terpstra titled ``Sales Analysis 
Memorandum--Pastificio Lucio Garofalo (``Garofalo'')'' (``Garofalo 
Sales Analysis Memorandum''), both dated July 31, 2009, and available 
in the Central Records Unit (``CRU'') in Room 1117 of the Main Commerce 
Building.

Export Price/Constructed Export Price

    For the price to the United States, we used, as appropriate, EP or 
CEP, in accordance with sections 772(a) and (b) of the Act. We 
calculated EP when the merchandise was sold by the producer or exporter 
outside of the United States directly to the first unaffiliated 
purchaser in the United States prior to importation and when CEP was 
not otherwise warranted based on the facts on the record. We calculated 
CEP for those sales where a person in the United States, affiliated 
with the foreign exporter or acting for the account of the exporter, 
made the sale to the first unaffiliated purchaser in the United States 
of the subject merchandise. We based EP and CEP on the packed cost-
insurance-freight (``CIF''), ex-factory, free-on-board (``FOB''), or 
delivered prices to the first unaffiliated customer in, or for 
exportation to, the United States. When appropriate, we reduced these 
prices to reflect discounts and rebates.
    In accordance with section 772(c)(2) of the Act, we made 
deductions, where appropriate, for movement expenses including inland 
freight from plant or warehouse to port of exportation, foreign 
brokerage, handling and loading charges, export duties, international 
freight, marine insurance, U.S. inland freight expenses, warehousing, 
and U.S. duties. In addition, when appropriate, we increased EP or CEP 
as applicable, by an amount equal to the countervailing duty (``CVD'') 
rate attributed to export subsidies in the most recently completed CVD 
administrative review, in accordance with section 772(c)(1)(C) of the 
Act.
    For CEP, in accordance with section 772(d)(1) of the Act, when 
appropriate, we deducted from the starting price those selling expenses 
that were incurred in selling the subject merchandise in the United 
States, including direct selling expenses (advertising, cost of credit, 
warranties, banking, slotting fees, and commissions paid to 
unaffiliated sales agents). In addition, we deducted indirect selling 
expenses that related to economic activity in the United States. These 
expenses include certain indirect selling expenses incurred by its 
affiliated U.S. distributors. We also deducted from CEP an amount for 
profit in accordance with

[[Page 39287]]

sections 772(d)(3) and (f) of the Act. See PAM's Sales Analysis Memo; 
see also Garofalo's Sales Analysis Memo.

Normal Value

A. Selection of Comparison Markets

    Section 773(a)(1) of the Act directs that NV be based on the price 
of the foreign like product sold in the home market, provided that the 
merchandise is sold in sufficient quantities (or value, if quantity is 
inappropriate) and that there is no particular market situation that 
prevents a proper comparison with the export price or constructed 
export price. The statute contemplates that quantities (or value) 
normally be considered insufficient if they are less than five percent 
of the aggregate quantity (or value) of sales of the subject 
merchandise to the United States. 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 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 its U.S. sales of the subject merchandise. Pursuant to 
section 773(a)(1)(B) of the Act, because PAM and Garofalo each had an 
aggregate volume of home market sales of the foreign like product that 
was greater than five percent of its aggregate volume of U.S. sales of 
the subject merchandise, we determined that the home market was viable 
for both PAM and Garofalo.
    On May 8, 2009, the petitioners alleged that a particular market 
situation existed in the Italian pasta market that prevents a proper 
comparison with the export price or constructed export price. Neither 
the antidumping statute nor the Statement of Administrative Action 
(``SAA'') that accompanied the Uruguay Round Agreements Act 
specifically defines the term ``particular market situation.'' The SAA, 
however, states that a particular market situation might exist where, 
for instance, a single sale in the home market constitutes five percent 
of sales to the United States, there is government control over pricing 
to such an extent that home market prices cannot be considered to be 
competitively set, or the demand patterns in the home market are 
different from those in the United States. See SAA at 822. In their May 
8, 2009 filing, the petitioners submitted a February 2009 press release 
of the Italian Competition Authority (``ICA'') which contains a summary 
of its findings regarding an agreement among Italian pasta producers to 
increase prices for non-egg dry pasta. The petitioners claimed that 
these findings demonstrate that the respondents' reported home market 
prices are per se unrepresentative and prevent a proper comparison with 
the respondents' U.S. sale prices. The petitioners requested, 
therefore, that the Department reject home market prices and rely on CV 
as the basis for NV. On June 12, 2009, the petitioners provided the 
Department a complete English translation of the ICA report and stated 
that a review of the complete report shows that the ICA was focused 
solely on anticompetitive conduct in the Italian market and did not 
cover export sales. The petitioners also noted that the ICA report is 
an Italian government finding. In this connection, the petitioners 
noted that the Italian government regularly participates in CVD reviews 
on pasta and the Department considers the evidence and information 
provided by the Italian government in its CVD findings. Finally, the 
petitioners noted that, in this review, they are only requesting that 
the Department resort to the statutorily-approved, alternative 
calculation for NV using CV because of the non-market nature of the 
home market prices.
    On June 22, 2009, the respondents submitted rebuttal comments in 
which they noted that the ICA's decision is currently being appealed, 
that no fines have been paid to date, and thus, no final determination 
has been made by the ICA. Additionally, the respondents argued that the 
ICA did not find that home market prices were not market-based. Rather, 
the respondents asserted that the ICA specifically found that each 
producer set its prices in accordance with its own market position and 
cost structure. The respondents further argued that the Department 
properly is not interested in the various reasons dumping may occur, 
such as conditions of competition in the comparison market including 
the existence of a monopoly or oligopoly, or high import duty rates. 
Further, anticompetitive behavior in the home market is not covered by 
AD law. The respondents also asserted that the Department should not 
consider the ICA report because, unlike in a CVD review, the Italian 
government is not a party to this case, and the underlying data is not 
subject to review or verification.
    In past cases, the Department has recognized a strong preference to 
use home market prices in its dumping calculations and, therefore, has 
established a high threshold for rejecting home market prices based 
upon a particular market situation.\5\ Based on the information and 
arguments submitted by the petitioners and the respondents, the 
Department has considered whether a particular market situation exists 
in the Italian pasta market that would warrant rejection of home market 
prices as the basis for NV. As discussed below, the Department 
preliminarily finds that there is not a particular market situation in 
the Italian pasta market that would prevent a proper comparison with 
the export price or constructed export price.
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    \5\ See Fresh Kiwifruit from New Zealand: Final Results of 
Antidumping Administrative Review, 61 FR 46438 (September 3, 1996); 
Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat 
Products from Korea: Final Results of Antidumping Duty 
Administrative Review, 62 FR 18404 (April 15, 1997) (``Cold-Rolled 
from Korea''); Notice of Final Results of Antidumping Duty 
Administrative Review: Furfuryl Alcohol from South Africa, 62 FR 
61804 (November 14, 1997); Notice of Final Determination of Sales at 
Less than Fair Value: Fresh Atlantic Salmon from Chile, 63 FR 31411 
(June 9, 1998); Final Results of Antidumping Duty Administrative 
Review: Electrolytic Manganese Dioxide from Greece, 65 FR 68978 
(November 15, 2000); Notice of Final Determinations of Sales at Less 
Than Fair Value: Certain Durum Wheat and Hard Red Spring Wheat from 
Canada, 68 FR 52741 (September 5, 2003) (``Wheat from Canada''); 
Certain Hot-Rolled Carbon Steel Flat Products From Thailand: 
Preliminary Results and Partial Rescission of Antidumping Duty 
Administrative Review, 68 FR 68336 (December 8, 2003), unchanged in 
final, Certain Hot-Rolled Carbon Steel Flat Products From Thailand: 
Final Results and Partial Rescission of Antidumping Duty 
Administrative Review, 69 FR 19388 (April 13, 2004) (``Hot-Rolled 
from Thailand'').
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    At the outset we note that, unlike in prior cases where the 
Department has examined whether home market prices were not 
competitively set and, therefore, could not be used as the basis for 
NV, in this case, petitioners' allegation claims that Italian producers 
of pasta colluded to increase home market prices. Specifically, the 
petitioners assert that according to the ICA press release and report, 
the ICA found that between October 2006 and at least March 2008, 
members of the Italian pasta industry had a concerted strategy to 
change prices in the Italian market. Further, the petitioners claim 
that just because the ``non-competitive'' behavior results in an 
increase in home market prices (and potentially dumping margins) does 
not diminish the fact that the behavior is ``non-competitive'' and 
therefore, rejection of home market prices is appropriate.
    The Department has a longstanding practice of evaluating each 
particular market situation independently based on the facts of the 
record. In prior cases where the Department has evaluated whether home 
market prices were competitively set, the Department has found that 
government participation in

[[Page 39288]]

the market place, and the government control, by itself, was not 
sufficient enough to determine that home market prices could not be 
considered to be competitively set. For example, in Cold-Rolled from 
Korea the Department noted that the petitioners provided evidence 
indicative of a not insubstantial level of government interest and 
involvement in the day-to-day operations of the Korean steel industry, 
including domestic price levels. The Department determined that absent 
substantial evidence that government control is so extensive that 
prices are not competitively set, the Department cannot find the Korean 
home market not viable.
    Further, in Wheat from Canada prelim,\6\ the Department noted that 
the fact that the Canadian Wheat Board, a government entity, operated 
as a monopoly buyer and seller of wheat in the Canadian domestic market 
raised legitimate concerns that a particular market situation might 
exist with respect to the Canadian home market. The Department, 
nonetheless, based on the record evidence, determined that the Canadian 
government did not control prices to such an extent that home market 
prices were non-competitive and inappropriate for use in the 
Department's dumping analyses.
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    \6\ See Notice of Preliminary Determinations of Sales at Less 
Than Fair Value: Certain Durum Wheat and Hard Red Spring Wheat From 
Canada, 68 FR 24707 (May 8, 2003) (``Wheat from Canada prelim''), 
unchanged in final Wheat from Canada.
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    Additionally, in Hot-Rolled from Thailand, the Department examined 
whether a government-imposed price ceiling, possibly affecting 
producers' ability to set prices competitively, constituted a 
particular market situation sufficient to warrant rejection of home 
market prices as the basis for NV. Based on the evidence on the record 
in that case, the Department found that the government-imposed price 
ceilings did not warrant a finding that a particular market situation 
existed that would prevent a proper comparison between home market 
prices and export price or constructed export price.\7\
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    \7\ \\ See Hot-Rolled from Thailand.
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    In this case, there is no evidence of government control or 
intervention to suppress home market prices, although the evidence 
indicates that the majority of Italian pasta producers may have 
colluded to raise home market prices of pasta. However, there is no 
evidence that Italian pasta producers agreed upon a particular ceiling 
or floor price. Rather, each company set its own prices with its 
customers independently. Additionally, as we discuss more fully below, 
there was a change in the cost of manufacturing (``COM'') that was 
primarily attributed to the price volatility of semolina. Thus, the 
respondents' price increases could have resulted from objective market 
conditions (i.e., significant increases in the price of inputs) rather 
than particular anti-competition conduct. Accordingly, we do not find 
sufficient evidence to conclude that a particular market situation 
exists that warrants a determination that home market prices cannot 
form the basis for a proper comparison. Therefore, the Department has 
not requested that either respondent report sales to its largest third 
country market.\8\
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    \8\ We note that contrary to the petitioners' assertion that the 
Department should resort to CV for calculating NV, were the 
Department to find that a particular market situation exists in the 
home market, preventing proper comparison with the export price or 
constructed export price, section 773(a)(1)(B)(ii) of the Act 
instructs the Department to use the price at which the foreign like 
product is first sold (or, in the absence of a sale, offered for 
sale) for consumption in a country other than the exporting country 
or the United States. The petitioners have not alleged that a basis 
exists for rejecting third country prices and, in fact, have 
specifically stated that the findings of the ICA do not apply to 
exports from Italy.
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B. Cost Reporting Period

    The Department's normal practice is to calculate an annual 
weighted-average cost for the entire POR. See, e.g., Certain Pasta from 
Italy: Final Results of Antidumping Duty Administrative Review, 65 FR 
77852 (Dec. 13, 2000) (Pasta from Italy), and accompanying Issues and 
Decision Memorandum at Comment 18 and Notice of Final Results of 
Antidumping Duty Administrative Review of Carbon and Certain Alloy 
Steel Wire Rod from Canada, 71 FR 3822 (Jan. 24, 2006) (Wire Rod from 
Canada), and accompanying Issues and Decision Memorandum at Comment 5 
(explaining the Department's practice of computing a single weighted-
average cost for the entire period). This methodology is predictable 
and generally applicable in all proceedings. However, the Department 
recognizes that possible distortions may result when our annual average 
cost method is used during a period of significant cost changes. In 
these circumstances, in determining whether to deviate from our normal 
methodology, the Department has evaluated the case-specific record 
evidence using two primary factors: (1) The change in the COM 
recognized by the respondent during the POR must be deemed significant; 
and (2) the record evidence must show that sales during the shorter 
averaging periods could be reasonably linked with the COP or CV during 
the same shorter averaging periods. See, e.g., Stainless Steel Plate in 
Coils From Belgium: Final Results of Administrative Review, 73 FR 
75398, 75399 (December 11, 2008) (SSPC from Belgium) and Stainless 
Steel Sheet and Strip in Coils from Mexico: Final Results of 
Administrative Review, 74 FR 6365 (February 9, 2009) (2006-2007 Final 
Results).
1. Significance of Cost Changes
    In the instant case, record evidence shows that both respondents, 
PAM and Garofalo, experienced significant changes (i.e., changes that 
exceeded 25 percent) between the high and low quarterly COM during the 
POR, and that the change in COM is primarily attributable to the price 
volatility of semolina, the primary input consumed in the production of 
the merchandise under consideration. In examining the company-specific 
inventory records and commodity exchanges within Italy, we found that 
semolina prices changed dramatically throughout the POR and directly 
affected the total cost of manufacturing for pasta. Specifically, the 
record data shows that the percentage difference between the high and 
low quarterly costs for pasta products exceeded 25 percent during the 
POR. As a result, we have determined for the preliminary results that 
the changes in COM for both PAM and Garofalo are significant enough to 
warrant a departure from our standard annual costing approach for 
direct materials, as these significant cost changes create distortions 
in the Department's sales-below-cost test as well as the overall margin 
calculation.
2. Linkage Between Cost and Sales Information
    The Department evaluated whether there is evidence of linkage 
between the cost changes and the sales prices during the POR. The 
Department's definition of linkage does not require direct traceability 
between specific sales and their specific production cost, but rather 
relies on whether there are elements which would demonstrate a 
reasonable correlation between the underlying costs and the final sales 
prices levied by the company. See Certain Welded Stainless Steel Pipes 
From the Republic of Korea: Final Results of Antidumping Duty 
Administrative Review, 74 FR 31242, 31244 (June 30, 2009) (SSP from 
Korea). These correlative elements may be measured and defined in a 
number of ways depending on the associated industry and the overall 
production and sales processes.
    To examine the correlation, we conducted a price and cost trend 
analysis using the quarterly net sale prices for the five most 
frequently sold

[[Page 39289]]

control numbers (``CONNUMs'') in the U.S. market and the corresponding 
quarterly costs of this merchandise. Our comparison reveals that sales 
and costs for each of the sample CONNUMs generally trended in the same 
direction and demonstrated a high degree of correlation between the 
sales and cost data. The inventory records for both respondents 
demonstrate that the raw material and finished goods inventory are 
relatively low, indicating a minimal time lag between production and 
sale dates.
    In light of the two factors discussed above, we have preliminarily 
determined that a quarterly costing approach, with respect to both PAM 
and Garofalo, would lead to more accurate comparisons in our 
antidumping duty calculations. Thus, we used quarterly indexed annual 
average direct material costs and annual weighted-average conversion 
costs in the cost of production (``COP'') and CV calculations.

C. Cost of Production Analysis

    The Department disregarded sales below the COP in the last 
completed review in which each respondent, PAM and Garofalo, 
participated. See Notice of Final Results of the Seventh Administrative 
Review of the Antidumping Duty Order on Certain Pasta from Italy and 
Determination to Revoke in Part, 70 FR 6832 (February 9, 2005) (Pasta 
Seven); see also Amended Final Results of the Sixth Administrative 
Review of the Antidumping Duty Order on Certain Pasta from Italy and 
Determination Not to Revoke in Part, 69 FR 22761 (April 27, 2004) 
(Pasta Six). We therefore have reasonable grounds to believe or 
suspect, pursuant to section 773(b)(2)(A)(ii) of the Act, that sales of 
the foreign like product under consideration for the determination of 
NV in this review may have been made at prices below COP. Thus, 
pursuant to section 773(b)(1) of the Act, we examined whether sales 
from PAM and Garofalo in the home market were made at prices below the 
COP.
    We compared sales of the foreign like product in the home market 
with model-specific COP figures. In accordance with section 773(b)(3) 
of the Act, we calculated COP based on the sum of the costs of 
materials and fabrication employed in producing the foreign like 
product, plus selling, general and administrative (``SG&A'') expenses, 
financial expenses and all costs and expenses incidental to placing the 
foreign like product in packed condition and ready for shipment. In our 
sales-below-cost analysis, we relied on home market sales and COP 
information provided by PAM and Garofalo in its questionnaire 
responses, except where noted below.

PAM

    We are relying on PAM's reported quarterly indexed direct material 
costs and annual conversion costs.
    We collapsed products PAM classified as wheat code ``1'' (i.e., 
pasta made from superior semolina) with products classified as wheat 
code ``2'' (i.e., pasta made from normal semolina), as we did in Pasta 
Seven at Comment 21. Therefore we recalculated the weighted-average 
costs for this merchandise.
    We revised the general and administrative expense rate numerator to 
include costs related to the bankruptcy of Chirico, a producing entity 
within the PAM Group. See PAM Sales Analysis Memo and Memorandum from 
Angela Strom to Neal Halper ``Cost of Production and Constructed Value 
Calculation Adjustments for the Preliminary Results--PAM S.p.A., 
Liguori Pastificio dal 1820 S.p.A. (``Liguori''), and Chirico Molini e 
Pastificio S.p.A. (``Chirico'') (collectively, ``PAM''),'' dated July 
31, 2009 (``PAM Cost Calculation Memo'').

Garofalo

    We are relying on quarterly direct material costs and annual 
conversion costs.
1. Calculation of COP
    Before making any comparisons to NV, we conducted a COP analysis of 
PAM and Garofalo pursuant to section 773(b) of the Act, to determine 
whether PAM's and Garofalo's comparison market sales were made at 
prices below the COP, by quarter. We calculated the COP based on the 
sum of the cost of materials and fabrication for the foreign like 
product, plus amounts for SG&A expenses and packing, in accordance with 
section 773(b)(3) of the Act.
2. Test of Comparison Market Prices
    As required under section 773(b)(2) of the Act, we compared the 
quarterly weighted-average COP to the per-unit price of the comparison 
market sales of the foreign like product to determine whether these 
sales had been made at prices below the COP within an extended period 
of time in substantial quantities, and whether such prices were 
sufficient to permit the recovery of all costs within a reasonable 
period of time. We determined the net comparison market prices for the 
below-cost test by subtracting from the gross unit price any applicable 
movement charges, discounts, rebates, direct and indirect selling 
expenses (also subtracted from the COP), and packing expenses. See 
PAM's Sales Analysis Memo; see also Garofalo's Sales Analysis Memo.
3. Results of COP Test
    Pursuant to section 773(b)(2)(C)(i) of the Act, where less than 20 
percent of sales of a given product during the POR 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 during the POR were at prices less than the 
COP we determined such sales to have been made in ``substantial 
quantities.'' See section 773(b)(2)(C) of the Act. The sales were made 
within an extended period of time, in accordance with section 
773(b)(2)(B) of the Act, because they were made over the course of the 
POR. In such cases, because we compared prices to weighted-average 
costs, we also determined that such sales were not made at prices which 
would permit recovery of all costs within a reasonable period of time, 
in accordance with section 773(b)(2)(D) of the Act. Therefore, for PAM 
and Garofalo, we disregarded below-cost sales of a given product of 20 
percent or more and used the remaining sales as the basis for 
determining NV, in accordance with section 773(b)(1) of the Act. See 
PAM's Sales Analysis Memo; see also Garofalo's Sales Analysis Memo.

D. Calculation of Normal Value Based on Comparison Market Prices

    We calculated NV based on ex-works, FOB or delivered prices to 
comparison market customers. We made deductions from the starting 
price, when appropriate, for handling, loading, inland freight, 
warehousing, inland insurance, discounts, and rebates. In accordance 
with sections 773(a)(6)(A) and (B) of the Act, we added U.S. packing 
costs and deducted comparison market packing, respectively. In 
addition, we made circumstance-of-sale adjustments for direct expenses, 
including imputed credit expenses, advertising, warranty expenses, 
commissions, bank charges, and billing adjustments, in accordance with 
section 773(a)(6)(C)(iii) of the Act. We also made adjustments for PAM 
and Garofalo, in accordance with 19 CFR 351.410(e), for indirect 
selling expenses incurred in the home market or the United States where 
commissions were granted on sales in one market but not in the other, 
the ``commission offset.''

[[Page 39290]]

Specifically, where commissions are incurred in one market, but not in 
the other, we will limit the amount of such allowance to the amount of 
either the selling expenses incurred in the one market or the 
commissions allowed in the other market, whichever is less.
    When comparing U.S. sales with comparison market sales of similar, 
but not identical, merchandise, we also made adjustments for physical 
differences in the merchandise in accordance with section 
773(a)(6)(C)(ii) of the Act and 19 CFR 351.411. We based this 
adjustment on the difference in the variable cost of manufacture 
(``VCOM'') for the foreign like product and subject merchandise, using 
weighted-average costs.
    Sales of pasta purchased by the respondents from unaffiliated 
producers and resold in the comparison market were disregarded. See 
PAM's Sales Analysis Memo; see also Garofalo's Sales Analysis Memo.

E. Level of Trade

    In accordance with section 773(a)(1)(B) of the Act, we determined 
NV based on sales in the comparison market at the same level of trade 
(``LOT'') as the EP and CEP sales, to the extent practicable. When 
there were no sales at the same LOT, we compared U.S. sales to 
comparison market sales at a different LOT. When NV is based on CV, the 
NV LOT is that of the sales from which we derive SG&A expenses and 
profit.
    Consistent with 19 CFR 351.412, to determine whether comparison 
market sales were at a different LOT, we examined stages in the 
marketing process and selling functions along the chain of distribution 
between the producer and the unaffiliated (or arm's-length) customers. 
If the comparison market sales were at a different LOT and the 
differences affect price comparability, as manifested in a pattern of 
consistent price differences between the sales on which NV is based and 
comparison market sales at the LOT of the export transaction, we will 
make an LOT adjustment under section 773(a)(7)(A) of the Act.
    Finally, if the NV LOT is more remote from the factory than the CEP 
LOT and there is no basis for determining whether the differences in 
LOT between NV and CEP affected price comparability, we will grant a 
CEP offset, as provided in section 773(a)(7)(B) of the Act. See Notice 
of Final Determination of Sales at Less Than Fair Value: Certain Cut-
to-Length Carbon Steel Plate from South Africa, 62 FR 61731, 61732-33 
(November 19, 1997).
    Both respondents claim two LOTs in the home market. PAM reported 
that it sold through three channels of distribution to nine customer 
categories. Garofalo reported that it sold through three channels of 
distribution to four customer categories.
    We disagree with both PAM and Garofalo that there are two LOTs in 
the home market. Section 351.412 (c)(2) of the Department's regulations 
provides that the Department will determine that sales are made at 
different LOTs if they are made at different marketing stages (or their 
equivalent). Substantial differences in selling activities are a 
necessary, but not sufficient, condition for determining that there is 
a difference in the stage of marketing. Some overlap in selling 
activities will not preclude a determination that two sales are at 
different stages of marketing.
    Our analysis of the selling activities for PAM shows that there is 
overlap in these activities for channels of distribution and customer 
categories. In other words, PAM performs similar selling activities for 
all customer categories and channels of distribution. Although there 
are differences in intensity of these activities for some of the 
claimed customer categories, this, in and of itself, does not show a 
substantial difference in selling activities that would form the basis 
for finding a different LOT. See, e.g., Certain Frozen Warmwater Shrimp 
from Ecuador: Final Results of Antidumping Duty Administrative Review, 
72 FR 52070 (September 12, 2007), and accompanying Issues and Decision 
Memorandum at Comment 4. Due to the proprietary nature of this issue, 
please refer to PAM's Sales Analysis Memo for further discussion.
    Our analysis of the selling activities for Garofalo shows that 
Garofalo also performs similar selling activities for different 
customer categories, although some of the activities were at different 
levels of intensity. Moreover, some selling activities within the 
claimed LOT1 are at higher level of intensity while other selling 
activities are at lower level of intensity than the same selling 
activities in the claimed LOT2. In addition, there is overlap among the 
channels of distribution for the different customer categories in these 
two claimed LOTs. The differences in Garofalo's selling activities 
chart do not rise to a level of substantial differences that would 
support a finding that there are two LOTs in the home market. Due to 
the proprietary nature of this issue, please refer to Garofalo's Sales 
Analysis Memo for further discussion.
    In the U.S. market, both PAM and Garofalo reported that their sales 
were made through one channel of distribution to one customer category, 
and therefore, at one LOT. The Department has determined that PAM's and 
Garofalo's home market sales were made at LOT1 and at the same stage of 
marketing as the U.S. sales LOT. Therefore, the Department will not 
make an LOT adjustment for PAM and Garofalo's sales to the United 
States.

Currency Conversion

    For purposes of these preliminary results, we made currency 
conversions in accordance with section 773A(a) of the Act, based on the 
official exchange rates published by the Federal Reserve Bank. See 
PAM's Sales Analysis Memo; see also Garofalo's Sales Analysis Memo.

Preliminary Results of Review

    As a result of our review, we preliminarily determine that the 
following weighted-average percentage margins exist for the period July 
1, 2007, through June 30, 2008, for the mandatory respondents:

------------------------------------------------------------------------
                                                                Margin
                   Manufacturer/exporter                      (percent)
------------------------------------------------------------------------
PAM........................................................        15.77
Garofalo...................................................        15.91
------------------------------------------------------------------------

    For those companies not selected as mandatory respondents, Domenico 
Paone fu Erasmo S.p.A., Industria Alimentare Colavita, S.p.A.,, Pasta 
Lensi, Pastificio Fratelli Pagani S.p.A., Pastificio Labor S.r.L., 
Pastificio Riscossa F.Illi Mastromauro S.r.L., Rummo S.p.A. Molino e 
Pastificio, and Rustichella d'Abruzzo S.p.A., we preliminarily 
determine that the following simple average percentage margin (based on 
the two reviewed companies) exists for the period July 1, 2007, through 
June 30, 2008, is 15.84 percent.
    The Department will disclose the calculations performed for these 
preliminary results within five days of the date of publication of this 
notice to the parties of this proceeding, in accordance with 19 CFR 
351.224(b). An interested party may request a hearing within 30 days of 
publication of these preliminary results. See 19 CFR 351.310(c). The 
Department intends to verify the information upon which we will rely in 
making our final determination. As a result, we intend to establish the 
briefing schedule upon the completion of verification.
    Pursuant to 19 CFR 351.213(h), the Department intends to issue the 
final results of this administrative review, which will include the 
results of its analysis of issues raised in any such

[[Page 39291]]

comments, or at a hearing, if requested, within 120 days of publication 
of these preliminary results.

Assessment Rate

    Pursuant to 19 CFR 351.212(b), the Department calculated an 
assessment rate for each importer of the subject merchandise. Upon 
issuance of the final results of this administrative review, if any 
importer-specific assessment rates calculated in the final results are 
above de minimis (i.e., at or above 0.5 percent), the Department will 
issue appraisement instructions directly to CBP to assess antidumping 
duties on appropriate entries by applying the assessment rate to the 
entered value of the merchandise. For assessment purposes, we 
calculated importer-specific assessment rates for the subject 
merchandise by aggregating the dumping margins for all U.S. sales to 
each importer and dividing the amount by the total entered value of the 
sales to that importer. Where appropriate, to calculate the entered 
value, we subtracted international movement expenses (e.g., 
international freight) from the gross sales value. For the responsive 
companies which were not selected for individual review, we have 
calculated an assessment rate based on the simple average of the cash 
deposit rates calculated for the companies selected for individual 
review.
    The Department clarified its ``automatic assessment'' regulation on 
May 6, 2003 (68 FR 23954). This clarification will apply to entries of 
subject merchandise during the POR produced by companies included in 
these preliminary results of review for which the reviewed companies 
did not know their merchandise was destined for the United States. In 
such instances, we will instruct CBP to liquidate unreviewed entries at 
the all-others rate if there is no rate for the intermediate 
company(ies) involved in the transaction. For a full discussion of this 
clarification, see Antidumping and Countervailing Duty Proceedings: 
Assessment of Antidumping Duties, 68 FR 23954 (May 6, 2003).

Cash Deposit Requirements

    To calculate the cash deposit rate for PAM and Garofalo, we divided 
its total dumping margin by the total net value of its sales during the 
review period. For the responsive companies which were not selected for 
individual review, we have calculated a cash deposit rate based on the 
simple average of the cash deposit rates calculated for the companies 
selected for individual review.
    The following deposit rates will be effective upon publication of 
the final results of this administrative review for all shipments of 
pasta from Italy entered, or withdrawn from warehouse, for consumption 
on or after the publication date, as provided by section 751(a)(2)(C) 
of the Act: (1) The cash deposit rate for companies subject to this 
review will be the rate established in the final results of this 
review, except if the rate is less than 0.5 percent and, therefore, de 
minimis, no cash deposit will be required; (2) for previously reviewed 
or investigated companies not listed above, the cash deposit rate will 
continue to be the company-specific rate published for the most recent 
final results for a review in which that manufacturer or exporter 
participated; (3) if the exporter is not a firm covered in this review, 
a prior review, or the original less-than-fair-value (``LTFV'') 
investigation, but the manufacturer is, the cash deposit rate will be 
the rate established for the most recent final results for the 
manufacturer of the merchandise; and (4) if neither the exporter nor 
the manufacturer is a firm covered in this or any previous review 
conducted by the Department, the cash deposit rate will be 15.45 
percent, the all-others rate established in the LTFV investigation. See 
Implementation of the Findings of the WTO Panel in U.S.--Zeroing (EC): 
Notice of Determination Under Section 129 of the Uruguay Round 
Agreements Act and Revocations and Partial Revocations of Certain 
Antidumping Duty Orders, 72 FR 25261 (May 4, 2007). These cash deposit 
requirements, when imposed, shall remain in effect until further 
notice.

Notification to Importers

    This notice serves as a preliminary reminder to importers of their 
responsibility under 19 CFR 351.402(f) to file a certificate regarding 
the reimbursement of antidumping duties prior to liquidation of the 
relevant entries during this review period. Failure to comply with this 
requirement could result in the Secretary's presumption that 
reimbursement of antidumping duties occurred and increase the 
subsequent assessment of the antidumping duties by the amount of 
antidumping duties reimbursed.
    These preliminary results of administrative review are issued and 
published in accordance with sections 751(a)(1) and 777(i)(1) of the 
Act and 19 CFR 351.221(b)(4).

    Dated: July 31, 2009.
John M. Andersen,
Acting Deputy Assistant Secretary for Antidumping and Countervailing 
Duty Operations.
[FR Doc. E9-18884 Filed 8-5-09; 8:45 am]
BILLING CODE 3510-DS-P