[Federal Register Volume 74, Number 150 (Thursday, August 6, 2009)]
[Notices]
[Pages 39285-39291]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-18884]
[[Page 39285]]
=======================================================================
-----------------------------------------------------------------------
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'').
---------------------------------------------------------------------------
\1\ New World Pasta Company, Dakota Growers Pasta Company, and
American Italian Pasta Company.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\2\ See Memorandum to James Terpstra, from the Team regarding
Selection of Respondents for Individual Review, September 25, 2008.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\3\ See Certain Pasta From Italy: Notice of Partial Rescission
of Antidumping Duty Administrative Review, 74 FR 23392 (May 19,
2009).
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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'').
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\7\ \\ See Hot-Rolled from Thailand.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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