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

[Federal Register Volume 61, Number 13 (Friday, January 19, 1996)]
[Notices]
[Pages 1343-1351]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-457]



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[[Page 1344]]


DEPARTMENT OF COMMERCE
[A-475-818]


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

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

EFFECTIVE DATE: January 19, 1996.

FOR FURTHER INFORMATION CONTACT: John Brinkmann, Donna Berg, or 
Michelle Frederick, Office of Antidumping Investigations, Import 
Administration, International Trade Administration, U.S. Department of 
Commerce, 14th Street and Constitution Avenue, NW., Washington, DC 
20230; telephone: (202) 482-5288, (202) 482-0114, or (202) 482-0186, 
respectively.

The Applicable Statute

    Unless otherwise indicated, all citations to the Tariff Act of 
1930, as amended (the Act) are references to the provisions effective 
January 1, 1995, the effective date of the amendments made to the Act 
by the Uruguay Rounds Agreements Act.

Preliminary Determination

    We preliminarily determine that there is a reasonable basis to 
believe or suspect that certain pasta (pasta) from Italy is being, or 
is likely to be, sold in the United States at less than fair value 
(LTFV), as provided in section 733 of the Act. The estimated margins of 
sales at LTFV are shown in the ``Suspension of Liquidation'' section of 
this notice.

Case History

    Since the initiation of this investigation, the following events 
have occurred (Notice of Initiation of Antidumping Duty Investigations: 
Certain Pasta from Italy and Turkey, 60 FR 30268, 30269 (June 8, 1995) 
(Initiation Notice):
    On June 26, 1995, the United States International Trade Commission 
(ITC) issued an affirmative preliminary injury determination in this 
case (see ITC Investigation No. 731-TA-734).
    On July 10, 1995, the Department of Commerce (the Department) 
determined the resources available for this investigation limited our 
ability to analyze any more than the responses of the eight largest 
exporters of pasta to the United States. See the Respondent Selection 
section of this notice. We chose the following eight companies as 
mandatory respondents in this investigation: Arrighi S.p.A. Industrie 
Alimentari (Arrighi); F.lli De Cecco di Filippo Fara San Martino S.p.A. 
(De Cecco); Pastificio Del Verde S.r.l. (Delverde); De Matteis 
Agroalimentare S.p.A. (De Matteis); La Molisana Industrie Alimentari 
S.p.A. (La Molisana); Liguori Pastificio Dal 1820 S.p.A. (Liguori); 
Pastificio Fratelli Pagani S.p.A. (Pagani); and Saral Industrie 
Alimentari Della Sardegna S.r.l. (Saral) (collectively respondents). We 
issued antidumping duty questionnaires, in accordance with 19 CFR 
353.42(b), concerning Sections A, B, C, and D of the questionnaire to 
the eight mandatory respondents. Section A of the questionnaire 
requests general information concerning a company's corporate structure 
and business practices, the merchandise under investigation that it 
sells, and the sales of the merchandise in all of its markets. Sections 
B and C of the questionnaire request home market sales listings and 
U.S. sales listings, respectively. Section D requests information on 
the cost of production of the foreign like product and constructed 
value of the merchandise under investigation.
    On July 25 and 31, 1995, Delverde submitted comments concerning its 
relationship with an affiliate, Tamma Industrie Alimentari (TIA). On 
August 8, 1995, the Department requested clarification concerning this 
relationship. Responses to the Department's questions were received on 
August 14 and 15, 1995. On August 22, 1995, the Department determined 
TIA to be affiliated with Delverde under section 771(33) of the Act and 
informed Delverde that it must include TIA's sales in its response to 
Sections B and C of the questionnaire.
    The Department also requested clarification concerning the 
relationship between Arrighi and another Italian pasta manufacturer, 
Italpasta. We received the response to our inquiries on September 6, 
1995. Based on the response, we determined Italpasta to be affiliated 
with Arrighi and, on September 8, 1995, we informed Arrighi that it 
must include Italpasta's sales in its response to sections B and C of 
the questionnaire. Arrighi requested the Department to reconsider this 
decision. On September 26, 1995, however, we reiterated the 
determination that Arrighi and Italpasta are affiliated parties within 
the meaning of section 771(33) of the Act.
    On August 14, 1995, Saral requested that it be removed from the 
list of mandatory respondents citing the following: (1) it had ceased 
production in March 1995, (2) by July 1995, the company's employees had 
left Saral, (3) Saral's plant and property are for sale, and (4) Saral 
will no longer export any products to the United States. On August 18, 
1995, the Department informed Saral that if it could document the 
alleged extenuating circumstances, it would not be required to respond 
to the Department's questionnaire. Saral submitted the documentation on 
September 15, 1995. On September 19, 1995, the Department notified 
Saral that it had rescinded its determination that Saral is a mandatory 
respondent on the basis of the information the company submitted but 
that the information was subject to verification.
    On August 25, 1995, in accordance with section 733(c)(1)(B) of the 
Act, the Department determined this investigation to be extraordinarily 
complicated due to the large number of companies selected for 
investigation, the complexity of the transactions, and novel issues 
presented as a result of this investigation being one of the first 
cases conducted since the effective date of the Uruguay Round 
Agreements Act. Consequently, the Department postponed the preliminary 
determination until no later than December 8, 1995 (60 FR 45154 August 
30, 1995). As a result of the federal government six-day shutdown, this 
date was further extended to December 14, 1995.
    On September 13, 1995, La Molisana requested that it be excused 
from reporting its home market sales of the ``La Corte'' label. La 
Molisana stated that there were no U.S. sales of ``La Corte'' during 
the period of investigation (POI) and that the home market sales during 
the POI did not amount to a significant volume. The Department granted 
this request on September 26, 1995.
    On October 20, 1995, the petitioners alleged ``targeted dumping'' 
within the meaning of section 777A(d)(1)(B) of the Act and requested 
that the Department compare the transaction-specific export prices in 
the U.S. market to the weighted-average normal values for each 
respondent. See the Targeted Dumping section of this notice.
    The respondents submitted questionnaire responses to Sections A, B, 
C and D of the questionnaire in August, September, and November, 1995. 
The Department issued supplemental questionnaires in September and 
October, 1995. Responses to these supplemental questionnaires were 
received in September, October, and November, 1995.
    On October 10, 1995, Borden Inc., Hershey Foods Corp., and Gooch 
Foods, Inc. (the petitioners) alleged that Pagani sold the subject 
merchandise in Italy during the POI at prices below the cost of 
production (COP). The petitioners filed similar allegations against 
Liguori, Arrighi, De Matteis, De Cecco, Delverde, 

[[Page 1345]]
La Molisana, and Arrighi between October 11 and October 19, 1995. Our 
analyses of these allegations indicated that there were reasonable 
grounds to believe or suspect that each of the respondents sold pasta 
in Italy at prices below the COP. Accordingly, we initiated COP 
investigations against these respondents pursuant to section 773(b) of 
the Act (see Memoranda from Gary Taverman to Barbara Stafford, dated 
October 19, 1995, October 21, 1995, and October 25, 1995). The 
Department received responses to Section D of the questionnaire, the 
cost-of-production section, from each of these companies in November, 
1995.

Facts Available

    De Cecco submitted its response to Section D of the questionnaire 
on November 27, 1995. It had submitted supplemental questionnaire 
responses to Section A on September 22, 1995, and to Sections B and C 
on November 6, 1995. An analysis of these responses indicated that De 
Cecco had not provided a complete reporting of all of the affiliated 
persons defined in section 771(33) of the Act and requested in question 
2 of Section A of the Department's questionnaire. Specifically, while 
reviewing De Cecco's various responses, it became apparent that De 
Cecco failed to report the sales and production information of an 
affiliated company and the relationships among related investors in 
both De Cecco and the affiliated company. See also, Memorandum from 
Gary Taverman to Barbara Stafford dated December 14, 1995. The 
omissions and resulting inaccuracies in the De Cecco responses were 
material to the Department's ability to calculate a dumping margin and 
we met with counsel for De Cecco on December 4, 1995, to inform them of 
this fact. At that time, we provided a list of basic questions 
regarding affiliated persons to counsel and informed counsel that 
responses to these questions were necessary to clarify inconsistent, 
inaccurate, or misleading information in De Cecco's earlier submissions 
and to establish a frame of reference for additional questions that 
remain unanswered. De Cecco supplied responses to the questions on the 
list on December 6, 1995. The Department is in the process of preparing 
supplemental questions for issues that have yet to be resolved in the 
company's responses. Inasmuch as the company's responses to date 
indicate that both the U.S. and home market sales data bases are 
incomplete and that certain sales data and production costs have not 
been reported, we cannot conduct an accurate cost of production 
analysis or a less-than-fair-value analysis using the reported prices.
    Section 776(a)(2) of the Act provides that if an interested party 
withholds information that has been requested by the Department, fails 
to provide such information in a timely manner or in the form or manner 
requested, significantly impedes a determination under the antidumping 
statute, or provides such information but the information cannot be 
verified, the Department shall use facts otherwise available in 
reaching the applicable determination. Because De Cecco repeatedly 
failed to submit the information that the Department had specifically 
requested and failed to clarify the inconsistencies in the material 
that it did submit, we must use facts otherwise available with regard 
to De Cecco.
    Section 776(b) provides that adverse inferences may be used against 
a party that has failed to cooperate by not acting to the best of its 
ability to comply with requests for information. See also SAA, at 870. 
Again, De Cecco's failure to provide information in its possession that 
the Department requested on repeated occasions and its failure to 
clarify inconsistencies in information it submitted on the record 
demonstrate that De Cecco has failed, to date, to cooperate to the best 
of its ability in this investigation. Thus, the Department has 
determined that, in selecting among the facts otherwise available to De 
Cecco, an adverse inference is warranted. As facts otherwise available, 
we are assigning to De Cecco the simple average of the range of the 
margins stated in the notice of initiation, 46.67 percent.
    Section 776(c) provides that when the Department relies on 
secondary information in using the facts otherwise available it must, 
to the extent practicable, corroborate that information. When analyzing 
the petition, the Department reviewed all of the data the petitioners 
had submitted and the assumptions that petitioners made in calculating 
estimated dumping margins. As a result of that analysis, the Department 
revised the home market prices that petitioners relied upon in 
calculating the estimated dumping margins. On the basis of those 
adjustments, the Department recalculated the estimated dumping margins 
for certain pasta from Italy and found them to range from 21.85 percent 
to 71.49 percent. See Initiation Notice. In sum, the Department 
corroborated all of the secondary information in the petition from 
which the margins were calculated during our pre-initiation analysis of 
the petition.
    We informed counsel for De Cecco that if the company's responses to 
our supplemental questions are complete, we will attempt to conduct 
verification of the company's information. If we verify that De Cecco's 
reported information is accurate and complete, we will use such 
information in the final determination.

Mandatory Respondent Selection

    Section 777A(c) of the Act states that the Department shall 
calculate an individual dumping margin for each known exporter or 
producer of the subject merchandise, except where this approach is not 
practicable due to the large number of exporters or producers. Under 
this exception, the Department may limit its examination to: (1) a 
sample of exporters, producers, or types of products that is 
statistically valid based on the information available at the time of 
selection; or (2) exporters or producers accounting for the largest 
volume of the subject merchandise from the exporting country that can 
be reasonably examined. Section 353.44(b)(1) of the Department's 
regulations states that the Department will normally examine not less 
than 60 percent of the volume or value of sales, while section 
353.59(b)(1) provides for sampling when a significant volume of sales 
is involved.
    The petitions filed against pasta from Italy and Turkey listed 73 
Italian and 15 Turkish companies as possible producers or exporters of 
pasta to the United States. Other information available to the 
Department indicated an equally large number of producers or exporters. 
Since, at the time of respondent selection, there was insufficient 
information on the record to employ statistically valid sampling 
techniques, the Department focused its selection on the producers and 
exporters accounting for the largest volume of exports to the United 
States (see Sweaters Wholly or in Chief Weight of Man-Made Fiber from 
Taiwan (58 FR 34585, (August 23, 1990)) and Fresh Cut Roses from 
Colombia and Ecuador. (60 FR 13958, (March 15, 1995)). Based on the 
administrative resources available to the Department and the 
anticipated inclusion of many complex issues related to new provisions 
of the Act, it was determined that the maximum total number of 
companies that could be handled in the parallel pasta investigations 
was ten. In a subsequent analysis of the volume of exports of 
individual companies from Italy and Turkey, it was determined that 
investigating ten companies would allow the Department to investigate 
45 percent of the volume of exports from 

[[Page 1346]]
each country. In Italy, 45 percent was attained with the eight largest 
companies, while in Turkey 45 percent was attained with the two largest 
companies. A complete analysis of the respondent selection process is 
contained in a July 7, 1995, decision memorandum from Gary Taverman to 
Barbara Stafford.

Voluntary Respondents

    Section 782(a) of the Act states that individual rates shall be 
calculated for firms which voluntarily provide information, except 
where the number for all such respondents is so large that the 
calculation of individual dumping margins for all such respondents 
would be unduly burdensome and would prevent the timely completion of 
the investigation. Based on the same reasoning that led the Department 
to limit the number of respondents in the two antidumping duty 
investigations to ten companies (i.e. the large number of companies and 
administrative resource constraints), the Department determined that no 
voluntary respondents could be accepted unless one of the mandatory 
respondents did not participate. (See the July 7, 1995, decision 
memorandum from Gary Taverman to Barbara Stafford.) Potential voluntary 
respondents were provided with specific written guidance on the 
Department's criteria for including a voluntary respondent in the 
investigation. Ultimately, no voluntary respondent attempted to fulfill 
the Department's criteria for consideration.

Postponement of Final Determination

    On December 11, 1995, Arrighi, De Cecco, De Matteis, Delverde, La 
Molisana, and Liguori requested that, pursuant to section 735(a)(2)(A) 
of the Act, in the event of an affirmative preliminary determination in 
this investigation, the Department postpone its final determination 
until not later than 135 days after the publication of the affirmative 
preliminary determination in the Federal Register. In accordance with 
19 CFR 353.20(b), inasmuch as our preliminary determination is 
affirmative, the respondents account for a significant proportion of 
exports of the subject merchandise, and we are not aware of the 
existence of any compelling reasons for denying the request, we are 
granting respondents' request and postponing the final determination.

Scope of Investigation

    The merchandise under investigation consists of certain non-egg dry 
pasta in packages of five pounds (or 2.27 kilograms) or less, whether 
or not enriched or fortified or containing milk or other optional 
ingredients such as chopped vegetables, vegetable purees, milk, gluten, 
diastases, vitamins, coloring and flavorings, and up to two percent egg 
white. The pasta covered by this scope is typically sold in the retail 
market, in fiberboard or cardboard cartons or polyethylene or 
polypropylene bags, of varying dimensions.
    Excluded from the scope of these investigations are refrigerated, 
frozen, or canned pastas, as well as all forms of egg pasta, with the 
exception of non-egg dry pasta containing up to two percent egg white.
    The merchandise under investigation is currently classifiable under 
items 1902.19.20 of the Harmonized Tariff Schedule of the United States 
(HTSUS). Although the HTSUS subheadings are provided for convenience 
and customs purposes, our written description of the scope of this 
investigation is dispositive.

Scope Issues

    (1) On July 19, 1995, and on August 24, 1995, the Association of 
Food Industries and the petitioners, respectively, requested that we 
expand the scope to cover all imports of non-egg dry pasta for the 
retail and food service markets. We have determined that the scope 
should not be expanded. See, Preliminary Affirmative Countervailing 
Duty Determination: Certain Pasta From Italy, 60 FR 53739 (October 17, 
1995). (For further discussion of this decision, see Memorandum to 
Susan G. Esserman, Assistant Secretary for Import Administration, dated 
October 10, 1995.)
    (2) On October 2, 1995, a U.S. importer of Italian pasta requested 
that the Department exclude from the scope of this investigation and 
the companion countervailing duty investigation ``organic pasta'' in 
compliance with European Economic Community Regulation No. 2092/91. 
This regulation sets forth a regime of standards for the cultivation, 
processing, storage, and transportation of organic foodstuffs with 
inspections of farms and processing plants by EEC-approved national 
certification authorities. For example, organic wheat farmers abstain 
from using chemical fertilizers, pesticides, and fungus control and, 
instead, rely upon the use of compost, manure, and crop rotation for 
fertilizer, predator insects for pest control, and air ventilation and 
movement systems to control fungus.
    On November 9, 1995, the petitioners indicated that they were 
willing to modify the scope of the petition and the investigation to 
exclude certified organic pasta of Italian origin if U.S. imports of 
such pasta were accompanied by certificates issued pursuant to EEC 
Regulation No. 2092/91.
    On November 21, 1995, we requested additional data on the EEC 
regulation and certification process from the Section of Agriculture of 
the Delegation of the European Commission of the European Union. On 
December 8, 1995, the European Commission submitted responses to our 
inquiries. Included in the information submitted was the statement that 
EEC Regulation No. 2092/91 ``. . . does not provide for certification 
of products intended for export to third Countries.'' Accordingly, we 
will not be able to modify the scope of the investigation to exclude 
organic pasta on the basis of the certification procedure called for 
under EEC Regulation No. 2092/91. Nevertheless, if similar 
certification procedures are established for exports to the United 
States, the Department will consider an exclusion for organic pasta at 
that time.

Period of Investigation

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

Product Comparisons

    In accordance with section 771(16) of the Act, we considered all 
products produced by the respondent, covered by the description in the 
Scope of Investigation section, above, and sold in the home market 
during the POI, to be foreign-like products for purposes of determining 
appropriate product comparisons to U.S. sales. Where there were no 
sales of identical merchandise in the home market to compare to U.S. 
sales, we compared U.S. sales to the next most similar foreign-like 
product on the basis of the characteristics listed in Appendix III of 
the Department's antidumping questionnaire. In making the product 
comparisons, we relied on the shape classifications proposed by the 
respondents.

Targeted Dumping

    On October 20, 1995, the petitioners requested that, for all 
respondents, the Department compare the transaction specific export 
prices in the United States market to weighted-average normal values, 
in accordance with the ``targeted dumping'' provisions of section 
777A(d)(1)(B) of the Act. The petitioners' allegation rested on an 
analysis of average retail prices of selected brands of pasta, rather 
than on the export or constructed export prices of the respondents 
which were already on the record in the investigation and thus 
available to the petitioners. This 

[[Page 1347]]
request was denied by the Department on November 8, 1995, on the 
grounds that the allegation did not meet the requirements of section 
777(A)(d)(1)(B) because it was not: (1) Based on exporter-specific 
prices; (2) based on examination of ``comparable'' merchandise. See 
Memorandum from the Pasta Team to Barbara S. Stafford dated November 8, 
1995.
    On November 21 and 22, 1995, the petitioners requested that the 
Department apply the ``targeted dumping'' provision when calculating 
dumping margins for two of the Italian respondents, De Cecco and 
Delverde. The petitioners' allegation claimed that there is substantial 
evidence that prices for pasta sold by De Cecco and Delverde in the 
United States vary significantly on the basis of purchaser, geographic 
region and time and that using a weighted-average price would have the 
effect of concealing or minimizing dumping. This request was denied by 
the Department on December 8, 1995, on the ground that the petitioners' 
analysis failed to meet the basic requirements of section 777A(d)(1)(B) 
(i) and (ii).
    The petitioners' allegation was based on conclusions drawn from 
simple averaging or from minimum and maximum price differentials and 
was not supported by any more specific analysis addressing the 
statutory elements. For example, the petitioners did not demonstrate 
satisfactorily a pattern of export prices differing significantly among 
either purchasers, regions or periods of time; moreover, they did not 
provide evidence or argument as to why different patterns of export 
prices could not be taken into account using the section 777A(d)(1)(A) 
preferred fair value comparison methodology. See, Memorandum from the 
Pasta Team to Barbara S. Stafford dated December 8, 1995.

Level of Trade

    As set forth in section 773(a)(7)(A) of the Act and in the 
Statement of Administrative Action (SAA) accompanying the Uruguay Round 
Agreements Act, at 829-831, to the extent practicable, the Department 
will calculate normal values based on sales at the same level of trade 
as the U.S. sales. When the Department is unable to find sales in the 
comparison market at the same level of trade as the U.S. sale(s), the 
Department may compare sales in the U.S. and foreign markets at a 
different level of trade.
    In accordance with section 773(a)(7)(A) of the Act, if sales at 
different levels of trade are compared, the Department will adjust the 
normal value to account for differences in levels of trade if two 
conditions are met. First, there must be differences between the 
selling functions performed by the seller at the different levels of 
trade. Second, the differences must affect price comparability as 
evidenced by a pattern of consistent price differences between sales at 
different levels of trade in the market in which normal value is 
determined. When constructed export price is applicable, section 
773(a)(7)(B) of the Act establishes the procedures for making a 
constructed export price offset when: (1) Normal value is at a 
different level of trade, and (2) the data available do not provide an 
appropriate basis for a level of trade adjustment.
    In order to identify levels of trade, the Department must review 
information concerning selling functions of the exporter. In addition, 
a respondent seeking to establish a level of trade adjustment must 
demonstrate the appropriateness of such an adjustment. Therefore, in 
addition to the questions related to the level of trade in our July 10, 
1995, questionnaire, on October 23, 1995, we sent each respondent 
supplemental questions related to level of trade comparisons and 
adjustments. We asked each respondent to establish any claimed levels 
of trade based on selling functions performed and services offered to 
each customer or customer class, and to document and explain any claims 
for a level of trade adjustment.
    Upon review of each respondent's submissions on level of trade, and 
other related information on the record, we identified one or both of 
the following difficulties: 1) not all of the selling functions 
performed were identified; 2) although certain selling functions were 
assigned to specific groups of customers, not all customers in some 
identified groups were provided the service.
    In light of these concerns, we reviewed each response to identify 
all types of selling functions, both claimed and unclaimed, that had 
been provided. We subsequently consolidated the selling functions into 
four broad categories related to the sale of pasta: (1) Freight and 
delivery services; (2) advertising; (3) maintaining finished goods 
inventories to fill customer orders; and (4) other service programs 
(primarily handling rebate and warranty claims). We then analyzed each 
respondent's submissions to determine which selling function categories 
applied to each pasta sale made in the U.S. and Italian market. We did 
this based on both the selling expenses reported for that transaction 
and the respondent's narrative descriptions. Finally, we created a 
computer program that assessed, on a transaction specific basis, 
whether or not services corresponding to the four selling function 
categories were provided.
    To the extent practicable, we compared normal value at the same 
level of trade as the U.S. sale (as indicated by the level of trade 
codes established in the computer program). Where comparisons at the 
same level of trade were not possible, we attempted a comparison at the 
next most comparable level of trade. Any remaining unmatched U.S. sales 
were compared to sales in the comparison market without regard to level 
of trade.
    Two Italian respondents, Liguori and La Molisana claimed a level of 
trade adjustment for comparisons between different levels of trade. 
However, these level of trade adjustments were not allowed because none 
of the claimed adjustments were based on price differences between the 
two levels of trade. One respondent, Del Verde, claimed a constructed 
export price offset, but the offset was not considered because U.S. 
sales were matched to normal values at the same levels of trade.
    The level of trade methodology employed by the Department in this 
preliminary determination is based on the facts particular to this 
investigation. As stated above, there is a new emphasis on function of 
the seller in determining level of trade, as well as new conditions for 
a level of trade comparison or adjustment. The Department intends, 
where appropriate, to request additional information prior to 
verification for its continuing analysis of this issue. The Department 
will continue to examine its policy for making level of trade 
comparisons and adjustments.

Fair Value Comparisons

    To determine whether sales of pasta by the Italian respondents to 
the United States were made at less than fair value, we compared the 
export price (EP) and/or constructed export price (CEP) to the Normal 
Value (NV), as described in the ``Export Price and Constructed Export 
Price'' and ``Normal Value'' sections of this notice. In accordance 
with section 777A(d)(1)(A)(i), we calculated weighted-average EPs and 
CEPs for comparisons to weighted-average NVs.
    For certain U.S. and Italian market sales, Arrighi, Delverde, La 
Molisana, Liguori, and Pagani reported the re-sale of subject 
merchandise purchased in Italy from unaffiliated producers. Section 
772(a) of the Act defines the export price to the United States in a 
reseller situation as ``the price at which the subject merchandise is 
first sold (or 

[[Page 1348]]
agreed to be sold) by the producer to an unaffiliated purchaser for 
exportation to the United States.'' Where unaffiliated producers of the 
merchandise under investigation knew at the time of the sale that the 
merchandise was destined for the United States, the relevant basis for 
the export price would be the price between the producer and the 
respondents. Delverde, Liguori, La Molisana, Pagani, and Arrighi have 
each stated that the unaffiliated producers knew or had reason to know 
at the time of sale that the ultimate destination of the merchandise 
was the United States because the U.S. market is the only market where 
enriched pasta is sold. For these transactions, therefore, the price 
between the respondents and their U.S. customers cannot be the basis 
for the export price.
    In calculating EP for Arrighi, however, we were unable to determine 
which particular U.S. sales were of merchandise produced by firms other 
than Arrighi. Therefore, we weighted the dumping margin for Arrighi for 
each product category it identified by 1) calculating a ratio of the 
volume of Arrighi-produced product to the combined total volumes of 
Arrighi-produced and purchased product in the same period, and 2) 
applying the ratio to margin calculation for that corresponding product 
sold to the United States during the POI, allowing us to calculate a 
margin based on an estimated quantity of Arrighi-produced product.
    Because section 773(a)(1)(B)(i) of the Act incorporates by 
reference the definition of foreign like product in section 771(16) of 
the Act, it prohibits our using sales of merchandise produced by 
persons other than the respondents in our calculation of normal value. 
Accordingly, we have excluded from our analysis all of the sales from 
each of the companies of subject merchandise in the U.S. and Italian 
markets that were not produced by the respondent companies.

Export Price and Constructed Export Price

    We calculated EP, in accordance with subsections 772(a) and (c) of 
the Act, for each of the respondents, where the subject merchandise was 
sold directly to the first unaffiliated purchaser in the United States 
prior to importation and CEP was not otherwise warranted based on the 
facts of record. In addition, for Delverde, we calculated CEP, in 
accordance with subsections 772(b) and (d) of the Act, for those sales 
to the first unaffiliated purchaser that took place after importation 
into the United States.
    We made company-specific adjustments as follows:
Arrighi
    We calculated EP based on packed, ex-works, FOB Italian port, and 
C&F prices to unaffiliated customers in the United States. Where 
appropriate, we made deductions from the starting price (gross unit 
price) for the following charges: foreign inland freight and brokerage, 
marine insurance, handling, and early payment discounts. We 
recalculated credit expenses for those transactions with no reported 
payment dates. For U.S. sales denominated in U.S. dollars, we adjusted 
interest expenses by applying the average U.S. prime interest rate 
during the POI.
Delverde
    We calculated EP based on packed, CIF, FOB Naples, C&F, or FAS 
Naples prices to unaffiliated customers in the United States. Where 
appropriate, we made deductions from the starting price for discounts, 
rebates, freight and warehousing expenses, foreign brokerage and 
handling, and ocean freight and marine insurance.
    We recalculated Delverde's gross unit prices for those sales that 
did not reflect ocean freight revenues and expenses. We also 
recalculated reported credit expenses and inventory carrying costs 
based on the weighted average of its short-term borrowings during the 
POI.
    We calculated CEP sales based on packed, FOB U.S. warehouse 
delivery to unaffiliated customers or on duty-paid, ex-dock prices to 
unaffiliated customers. Where appropriate, we made deductions for 
discounts, rebates, advertising, commissions, and credit. We also made 
deductions for foreign brokerage and handling, freight and warehousing 
expenses, ocean freight and marine insurance, U.S. brokerage and 
handling, and U.S. duty and harbor fees. We deducted those indirect 
selling expenses, including inventory carrying costs, that related to 
commercial activity in the United States. Finally, we made an 
adjustment for CEP profit in accordance with section 772 of the Act.
De Matteis
    We calculated EP based on packed, ex-factory prices to unaffiliated 
customers. We made no deductions from the starting price because no 
discounts, rebates, or movement expenses were reported. In those 
instances where De Matteis had not reported payment dates, we 
recalculated reported credit expenses.
La Molisana
    We based EP on packed, FOB Port of Naples prices to unaffiliated 
customers in the United States. Where appropriate, we made deductions 
from the starting price for foreign inland freight, foreign brokerage, 
and handling charges. We also recalculated credit expenses based upon 
information La Molisana submitted on November 30, 1995.
Liguori
    We based EP on packed, ex-factory prices to unaffiliated customers 
in the United States. Where appropriate, we made deductions for 
discounts, foreign brokerage and handling. For those sales denominated 
in Italian lira, we recalculated credit expenses using the short-term 
borrowing rate reported for the Italian market.
Pagani
    Pagani had not correctly reported its starting prices. We 
calculated EP on the basis of recalculated packed, prices to 
unaffiliated customers. Where appropriate, we made deductions from the 
starting price for quantity discounts, other discounts, rebates, and 
movement expenses. In those instances where Pagani did not report 
either payment dates or payment dates and shipment dates, we 
recalculated Pagani's reported credit expenses. Where Pagani did not 
report only shipment dates, we recalculated movement expenses.

Normal Value

    In order to determine whether there was a sufficient volume of 
sales in the home market to serve as a viable basis for calculating NV, 
we compared each respondent's volume of home market sales of the 
foreign like product to the volume of U.S. sales of the subject 
merchandise, in accordance with section 773(a)(1)(C) of the Act. Since 
all respondents' aggregate volume of home market sales of the foreign 
like product was greater than five percent of its aggregate volume of 
U.S. sales for the subject merchandise, we determined that the home 
market was viable for each respondent. Therefore, we have based NV on 
home market sales.

Cost of Production Analysis

    As noted in the Case History section above, based on the 
petitioners' allegations, the Department found reasonable grounds to 
believe or suspect that each respondent made sales in the home market 
at prices below the cost of producing the merchandise. As a result, the 
Department initiated investigations to determine whether the 
respondents made home market sales during the POI at prices below their 
respective cost of 

[[Page 1349]]
production (COP) within the meaning of section 773(b) of the Act.
    Before making any fair value comparisons, we conducted the COP 
analysis described below.
A. Calculation of COP
    We calculated the COP based on the sum of each respondent's cost of 
materials and fabrication for the foreign like product, plus amounts 
for home market selling, general, and administrative expenses (SG&A) 
and packing costs in accordance with section 773(b)(3) of the Act. We 
relied on the respondents' COP amounts except in the following specific 
instances wherein the reported costs were improperly valued:
    Arrighi. Arrighi and Italpasta excluded bank charges and 
commissions from the calculation of financial expenses. As these costs 
relate generally to the financing operation of the companies, we 
included them in the revised calculation of financial expenses.
    Delverde. (1) Delverde and TIA reported product-specific production 
quantities and costs of manufacture (COM) separately for each company. 
We used the reported production quantities to calculate a combined 
weighted-average COM for Delverde and TIA on a product-specific basis.
    (2) We combined Delverde's and TIA's submitted G&A expenses and 
cost of sales figures to derive a single G&A factor. Delverde included 
a negative amount for its parent company's allocated G&A. We excluded 
this amount in the revised G&A rate.
    (3) We combined Sangralimenti (Delverde's consolidated parent) and 
TIA's submitted net financing costs and cost of sales figures to derive 
a single net interest factor.
    De Matteis. (1) In calculating its cost of producing semolina, De 
Matteis offset wheat costs with the sales value of other products. We 
revised De Matteis' material costs to exclude this offset because it is 
inappropriate to reduce the cost of producing pasta with revenues 
earned on unrelated products.
    (2) We revised De Matteis' material costs to reflect the yield loss 
for both the self-produced and purchased semolina used in producing 
pasta.
    (3) De Matteis' financial statement indicated that the company 
incurred additional costs relating to employee social security. These 
costs were reported as extraordinary expenses on the company's 
financial statements. De Matteis did not report these costs in its COP 
and CV. We believe, however, that these amounts are properly included 
as part of labor costs relating to pasta production. We therefore 
revised De Matteis' submitted COP and CV figures to include the social 
security costs.
    La Molisana. La Molisana included bond interest income in its 
calculation of short-term interest income used as an offset to interest 
expense. We excluded the bond interest income because bonds generally 
are long-term in nature and, thus, are not an appropriate offset in 
calculating the interest expense. We adjusted La Molisana's reported 
indirect selling expenses by reclassifying a portion of reported direct 
advertising expense as indirect expenses.
    Liguori. Liguori did not include discount and finance charges in 
its calculation of financing expense. Given that Liguori's discount and 
finance charges are listed as an interest expense on its financial 
statement, we recalculated the company's financing expense inclusive of 
these charges.
    Pagani. We made no changes to Pagani's submitted costs.
B. Test of Home Market Prices
    We used the respondents' adjusted weighted-average COP for the POI. 
We compared the weighted-average COP figures to home market sales of 
the foreign like product as required under section 773(b) of the Act, 
in order to determine whether these sales had been made at below-cost 
prices within an extended period of time in substantial quantities, and 
were not at prices which permit recovery of all costs within a 
reasonable period of time. On a product specific basis, we compared the 
COP to the home market prices, less any applicable movement charges, 
rebates, and direct and indirect selling expenses.
C. Results of COP Test
    Pursuant to section 773(b)(2)(c) where less than 20 percent of a 
respondent's sales of a given product were at prices less than the COP, 
we did not disregard any below-cost sales of that product because we 
determined that the below-cost sales were not made in ``substantial 
quantities.'' Where 20 percent or more of a respondent's sales of a 
given product were at prices less than the COP, we disregarded only the 
below-cost sales where such sales were found to be made within an 
extended period of time (in accordance with section 773(b)(2)(B) of the 
Act) and at prices which would not permit recovery of all costs within 
a reasonable period of time (in accordance with section 773(b)(2)(D) of 
the Act). For each respondent, where all sales of a specific product 
were at prices below the COP, we disregarded all sales of that product, 
and calculated NV based on CV, in accordance with section 773(a) of the 
Act.
    We found that, for certain types of pasta, more than 20 percent of 
the following respondents' home market sales were sold at below COP 
prices within an extended period of time in substantial quantities: 
Arrighi, De Matteis, and La Molisana, and Liguori. Further we did not 
find that these sales provided for the recovery of costs within a 
reasonable period of time. We therefore excluded these sales and used 
the remaining above-cost sales as the basis of determining NV if such 
sales existed, in accordance with section 773(b)(1). For those types of 
pasta for which there were no above-cost sales in the ordinary course 
of trade, we compared export prices to CV.
D. Calculation of CV
    In accordance with section 773(e)(1) of the Act, we calculated CV 
based on the sum of a respondent's cost of materials, fabrication, SG&A 
and U.S. packing costs as reported in the U.S. sales databases. In 
accordance with sections 773(e)(2)(A) we based SG&A and profit on the 
amounts incurred and realized by the respondent in connection with the 
production and sale of the foreign like product in the ordinary course 
of trade, for consumption in the foreign country. Where appropriate, we 
calculated each respondent's CV based on the methodology described in 
the calculation of COP above. For selling expenses, we used the 
weighted-average home market selling expenses.
    For each of the respondents, we made adjustments, where 
appropriate, for physical differences in the merchandise in accordance 
with section 773(a)(6)(C)(ii) of the Act. Where the difference in 
merchandise adjustment for any product comparison exceeded 20 percent, 
we based normal value on CV. In addition, in accordance with section 
773(a)(6)(B), we deducted home market packing costs and added U.S. 
packing costs for all respondents.
    We adjusted for commissions as follows. Where commissions were paid 
on some, but not all, home market sales used to calculate NV, and U.S. 
commissions were greater than home market commissions, we calculated 
the weighted-average of home market indirect selling expenses 
attributable to those sales on which no commissions were paid. If U.S. 
commissions were greater than the sum of the home market commissions 
and indirect selling expenses, we deducted the weighted-average home 
market indirect selling expenses from NV. Otherwise, we adjusted NV for 
the difference between U.S. and home market commissions. Where no 
commissions were paid on a 

[[Page 1350]]
home market sale used to calculate NV, we deducted the lesser of either 
(1) the weighted-average amount of commission paid on a U.S. sale for a 
particular product, or (2) the weighted-average amount of indirect 
selling expenses paid on the home market sales for a particular 
product. Where commissions were paid on all home market sales used to 
calculate NV, we adjusted NV by the lesser of either (1) the amount of 
the commission paid on the home market sale, or (2) the weighted 
average of indirect selling expenses paid on U.S. sales.
    La Molisana and Liguori reported that their sales to their 
respective affiliated resellers were made at arm's length. Sales not 
made at arm's length were excluded from our LTFV analysis. Where the 
exclusion of such sales eliminated all sales of the most appropriate 
comparison product, we made a comparison to the next most similar 
model. To test whether these sales were made at arm's length, we 
compared the starting prices of sales to affiliated and unaffiliated 
customers net of all movement charges, direct and indirect selling 
expenses, and packing. We utilized the 99.5 percent benchmark ratio 
used in the 1993 carbon steel investigations (see below). Where a 
related customer price ratio was composed of comparisons between sales 
of identical products to unrelated customers at both the same and 
different levels of trade, only those sales of identical products at 
the same level of trade were used to construct the ratio. Where a 
related customer ratio was composed of comparisons between sales of 
identical products to unrelated customers but those sales did not take 
place at the same level of trade, we continued to use all the sales in 
our comparisons regardless of level of trade to construct the ratio. 
Where no related customer ratio could be constructed because identical 
merchandise was not sold to unrelated customers, we were unable to 
determine that these sales were made at arm's length and, therefore, 
excluded them from our LTFV analysis. See Final Determination of Sales 
at Less Than Fair Value: Certain Cold-Rolled Carbon Steel Flat Products 
from Argentina (58 FR 37062, 37077 (July 9, 1993)).
    Price-to-Price Comparisons. We made company-specific adjustments 
for price-to-price comparisons as follows:
    Arrighi. We calculated NV based on ex-works or delivered prices to 
unaffiliated customers. We made deductions from the starting price for 
discounts, rebates, and inland freight. In addition, we adjusted for 
differences in circumstances of sale for imputed credit expenses, 
advertising, warranties, and commissions.
    We recalculated Arrighi's credit expenses for those transactions 
missing payment dates.
    Delverde. We allowed Delverde to exclude sales of gift packets in 
the home market; its home market sales from its on-site factory store; 
and the home market sales of pasta by, and sales of pasta purchased 
from, an affiliated producer. We calculated NV based on ex-factory, ex-
warehouse, CIF, or delivered prices to unaffiliated customers. 
Deductions were made for discounts and rebates, inland freight, 
warehousing and insurance expenses. In addition, we made circumstance 
of sale adjustments or deductions for credit, advertising expenses, and 
commissions, where appropriate. We reclassified reported slotting fees 
and certain commission payments as indirect selling expenses because 
Delverde was unable to link these payments to specific POI sales.
    De Matteis. We calculated NV based on ex-factory or delivered 
prices to unaffiliated customers. We made deductions from the starting 
price for discounts and inland freight. We also made adjustments for 
differences in sale for imputed credit and commissions. In those 
instances where De Matteis did not report a payment date, we 
recalculated reported credit expenses.
    La Molisana. We based NV on ex-factory or delivered prices to 
unaffiliated customers, or prices to affiliated customers that were 
determined to be at arm's length. We made deductions for discounts and 
rebates, inland freight, and pre-sale warehousing expenses. We made 
circumstance of sale adjustments for differences in credit and 
advertising expenses between the United States and the home market.
    In reporting a discount, La Molisana reported both the value 
recorded in its internal accounting system on specific invoices and the 
average discount on a customer-specific basis. We relied upon the 
average amount reported on a per customer basis. We also adjusted La 
Molisana's reported direct advertising expense by removing introduction 
incentives and trade promotion expenses and adding these expenses to 
the indirect selling expenses reported as a component of COP (see 
``Calculation of COP'' section below). Finally, we excluded a small 
number of reported sales where product characteristics were not 
reported and/or the transactions were later found not to have been 
sales.
    Liguori. We based NV on delivered prices to unaffiliated customers, 
or prices to affiliated customers which were determined to be at arm's 
length. Deductions were made for discounts and rebates, inland freight 
and unloading expenses. We made circumstance of sale adjustments for 
differences in credit, warranty, commission, and advertising expenses. 
We recalculated Liguori's reported credit expenses in instances where 
Liguori had not reported a payment date because the merchandise had not 
yet been paid for at the time of the filing of its responses. We also 
reclassified reported slotting fees as indirect selling expenses.
    Pagani. Pagani had not correctly reported its starting prices. We 
recalculated NV on the basis of ex-factory prices to unaffiliated 
customers. Where appropriate, we deducted discounts, rebates, and 
movement expenses from the starting price. We also made adjustments for 
differences in sale for imputed credit expenses, advertising, and 
commissions. In those instances where Pagani did not report payment 
dates or payment and shipment dates, we recalculated reported credit 
expenses. Where Pagani did not report shipment dates, we recalculated 
movement expenses.

Price to CV Comparisons

    Where we compared CV to export prices, we deducted from CV the 
weighted-average home market direct selling expenses and added the 
weighted-average U.S. product-specific direct selling expenses.

Currency Conversion

    For the purpose of the preliminary determination, we made currency 
conversions based on the official exchange rates in effect on the dates 
of the U.S. sales as certified by the Federal Reserve Bank of New York. 
Section 773A(a) directs the Department to use a daily exchange rate in 
order to convert foreign currencies into U.S. dollars, unless the daily 
rate involves a ``fluctuation.'' For this preliminary determination, we 
have determined that a fluctuation exists when the daily exchange rate 
differs from a benchmark by 2.25 percent. The benchmark is defined as 
the rolling average of rates for the past 40 business days. When we 
determined a fluctuation existed, we substituted the benchmark for the 
daily rate.
    Further, section 773A(b) directs the Department to allow a 60-day 
adjustment period when a currency has undergone a sustained movement. 
Such an adjustment period is required only when a foreign currency is 
appreciating against the U.S. dollar. No adjustment period is warranted 
in this case, because 

[[Page 1351]]
the Italian lira generally remained constant or depreciated against the 
U.S. dollar during the POI.

Verification

    As provided in section 782(i) of the Act, we will verify all 
information determined to be acceptable for use in making our final 
determination.

Suspension of Liquidation

    In accordance with section 733(d) of the Act, we are directing the 
Customs Service to suspend liquidation of all entries of certain pasta 
from Italy, that are entered, or withdrawn from warehouse for 
consumption, on or after the date of publication of this notice in the 
Federal Register. Normally, we would instruct the Customs Service to 
require a cash deposit or the posting of a bond equal to the weighted-
average amount by which the normal value exceeds the export price, as 
indicated in the chart below. However, the product under investigation 
is also subject to concurrent countervailing duty investigation. 
Article VI.5 of the General Agreement on Tariffs and Trade (GATT) 
provides that ``[n]o product * * * shall be subject to both antidumping 
and countervailing duties to compensate for the same situation of 
dumping or export subsidization.'' This provision is implemented by 
section 772(c)(1)(C) of the Act. Since antidumping duties cannot be 
assessed on the portion of the margin attributed to export subsidies, 
there is no reason to require a cash deposit or bond for that amount.
    The Department has determined, in its Preliminary Affirmative 
Countervailing Duty Determination: Certain Pasta from Italy (60 FR 
53747 (October 17, 1995)), that the product under investigation 
benefitted from export subsidies. To obtain the most accurate estimate 
of antidumping duties, and to fulfill our international obligations 
arising under the GATT, we are subtracting, for deposit purposes, the 
cash deposit rate attributable to the export subsidies found in the 
countervailing duty investigation. (For Arrighi 0.62, Delverde 0.77, 
and La Molisana 0.08 percent.) We are also subtracting from the ``All 
Others'' rate the cash deposit rate attributable to the export 
subsidies included in the countervailing duty investigation for the All 
Others rate, 0.20 percent. In keeping with Article of 17.4 of the WTO 
Agreement on Subsidies and Countervailing Measures, the Department will 
terminate the suspension of liquidation in the companion countervailing 
duty investigation of Certain Pasta From Italy, effective February 14, 
1995, which is 120 days after the date of publication of the 
preliminary determination. Accordingly, on February 14, 1996, the 
antidumping deposit rate will revert to the full amount calculated in 
this preliminary determination. These suspension of liquidation 
instructions will remain in effect until further notice.

------------------------------------------------------------------------
                                                   Weighted-            
                                                    average     Bonding 
              Exporter/Manufacturer                 margin    percentage
                                                  percentage            
------------------------------------------------------------------------
Arrighi.........................................        0.06        0.00
De Cecco *......................................       46.67       46.67
Delverde........................................        0.06        0.00
De Matteis......................................       22.15       22.15
La Molisana.....................................       14.83       14.03
Liguori.........................................       12.85       12.85
Pagani..........................................        0.14        0.00
All Others......................................       15.85      15.56 
------------------------------------------------------------------------
* Facts Available Rate.                                                 

    Pursuant to section 775(c)(5)(A) of the Act, the Department has 
excluded all zero and de minimis weighted-average dumping margins and 
margins determined entirely under section 776 of the Act, from the 
calculation of the All Others rate.

ITC Notification

    In accordance with section 733(f) of the Act, we have notified the 
ITC of our determination. If our final determination is affirmative, 
the ITC will determine before the later of 120 days after the date of 
this preliminary determination or 45 days after our final determination 
whether these imports are materially injuring, or threaten material 
injury to, the U.S. industry.

Public Comment

    Case briefs or other written comments in at least ten copies must 
be submitted to the Assistant Secretary for Import Administration no 
later than April 1, 1996, and rebuttal briefs, no later than April 4, 
1996. A list of authorities used and an executive summary of issues 
should accompany any briefs submitted to the Department. Such summary 
should be limited to five pages total, including footnotes. In 
accordance with section 774 of the Act, we will hold a public hearing, 
if requested, to afford interested parties an opportunity to comment on 
arguments raised in case or rebuttal briefs. Tentatively, the hearing 
will be held on April 8, 1996, the time and place to be determined, at 
the U.S. Department of Commerce, 14th Street and Constitution Avenue, 
N.W., Washington, D.C. 20230. Parties should confirm by telephone the 
time, date, and place of the hearing 48 hours before the scheduled 
time.
    Interested parties who wish to request a hearing, or to participate 
if one is requested, must submit a written request to the Assistant 
Secretary for Import Administration, U.S. Department of Commerce, Room 
B-099, within ten days of the publication of this notice. Requests 
should contain: (1) the party's name, address, and telephone number; 
(2) the number of participants; and (3) a list of the issues to be 
discussed. Oral presentations will be limited to issues raised in the 
briefs. If this investigation proceeds normally, we will make our final 
determination by 135 days after the publication of this notice in the 
Federal Register.
    This determination is published pursuant to section 733(f) of the 
Act.

    Dated: December 14, 1995.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 96-457 Filed 1-18-96; 8:45 am]
BILLING CODE 3510-DS-P