[Federal Register Volume 59, Number 219 (Tuesday, November 15, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-28184]
[[Page Unknown]]
[Federal Register: November 15, 1994]
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DEPARTMENT OF COMMERCE
International Trade Administration
[C-517-501]
Carbon Steel Wire Rod From Saudi Arabia; Final Results of
Countervailing Duty Administrative Review and Revocation of
Countervailing Duty Order
AGENCY: International Trade Administration/Import Administration,
Department of Commerce.
ACTION: Notice of final results of countervailing duty administrative
review and revocation of countervailing duty order.
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SUMMARY: The Department of Commerce (the Department) has completed an
administrative review of the countervailing duty order on carbon steel
wire rod from Saudi Arabia. We determine the total bounty or grant to
be 0.18 percent ad valorem for the period January 1, 1991 through
December 31, 1991. In accordance with 19 CFR 355.7, any rate less than
0.50 percent ad valorem is de minimis. In addition, because the
requirements for revocation of the order have been met by the
Government of the Kingdom of Saudi Arabia and the sole producer of the
subject merchandise pursuant to 19 CFR 355.25(a)(2) and 355.25(b)(2),
the Department is revoking the countervailing duty order.
EFFECTIVE DATE: November 15, 1994.
FOR FURTHER INFORMATION CONTACT: Joe Kaesshaefer or Kelly Parkhill,
Office of Countervailing Compliance, International Trade
Administration, U.S. Department of Commerce, Washington, DC 20230;
telephone: (202) 482-2786.
SUPPLEMENTARY INFORMATION:
Background
On November 2, 1993, the Department published in the Federal
Register the preliminary results of its administrative review and
intent to revoke countervailing duty order on carbon steel wire rod
from Saudi Arabia (58 FR 58537). The Department has now completed this
administrative review in accordance with section 751 of the Tariff Act
of 1930, as amended (the Tariff Act).
Scope of Review
Imports covered by this review are shipments of Saudi carbon steel
wire rod. Carbon steel wire rod is a coiled, semi-finished, hot-rolled
carbon steel product of approximately round solid cross section, not
under 0.20 inch nor over 0.74 inch in diameter, tempered or not
tempered, treated or not treated, not manufactured or partly
manufactured, and valued over or under 4 cents per pound. Such
merchandise is classifiable under item numbers 7213.20.00, 7213.31.30,
7213.31.60, 7213.39.00, 7213.41.30, 7213.41.60, 7213.49.00 and
7213.50.00 of the Harmonized Tariff Schedule (HTS). The HTS item
numbers are provided for convenience and Customs purposes. The written
description remains dispositive.
The review period is January 1, 1991 through December 31, 1991.
This review involves one company, the Saudi Iron and Steel Company
(HADEED), and three programs: (1) Public Investment Fund (PIF) loan to
HADEED, (2) Saudi Basic Industries Corporation's (SABIC) transfer of
Steel Rolling Company (SULB) shares to HADEED, and (3) preferential
provision of equipment to HADEED. HADEED is the sole producer/exporter
of carbon steel wire rod in Saudi Arabia.
The Department's determination to revoke the countervailing duty
order is based on the following. First, in accordance with the
requirements of section 355.25(b)(2), the Government of the Kingdom of
Saudi Arabia has requested that the Department revoke the
countervailing duty order on carbon steel wire rod from Saudi Arabia.
Second, in accordance with the requirements of sections 355.25(b)(2)
and 355.22(a)(2), certifications executed by officials of HADEED and
the Government of the Kingdom of Saudi Arabia attest to the fact that
the producer/exporter has not received any net subsidy during the
January 1 through December 31, 1991 period of review. Third, in
accordance with the requirements of section 355.25(a)(2)(i) of the
Department's regulations, the Department has found the absence of net
subsidies based on administrative reviews conducted for each of the
past five consecutive years. Fourth, in accordance with the
requirements of section 355.25(b)(2), HADEED has certified that it will
neither apply for nor receive any net subsidy in the future.
Accordingly, the Department has found that the producer/exporter
covered by the order is not likely to apply for or receive any net
subsidy in the future from any program found countervailable or from
any other countervailable programs.
Analysis of Comments Received
We gave interested parties an opportunity to comment on the
preliminary results. We received comments from the respondent, HADEED,
and the petitioners.
Comment 1: HADEED argues that recent developments in Commerce
practice warrant a reexamination of PIF linkage to the Saudi Industrial
Development Fund (SIDF). HADEED cites to a memorandum examining the
possibility of integral linkage of programs in the sixth administrative
review on Live Swine from Canada as the basis for its claim that the
Department has changed its practice with respect to integral linkage.
(See, Memorandum from CVD Team to Joseph A. Spetrini, Acting Assistant
Secretary for Import Administration (October 13, 1993), which is on
file in the Central Records Unit (Room B099 of the Main Commerce
Building) (Integral Linkage Memorandum).) As cited by HADEED,
The Department acknowledges that: ``if the multiple programs are
created at separate points in time, the Department has not required
that * * * an express statement that the programs are complementary
parts of an overarching governmental policy be made when the first
program is enacted.'' The Department stated further that it seeks
information showing ``an express intention to create multiple
programs, whether at the same time or separately,'' which are
designed to be ``complementary parts of an overarching governmental
policy directive.'' (Integral Linkage Memorandum at 4 as cited, with
emphasis added, by HADEED. Respondent's case brief at 3.)
HADEED concludes from this that the Integral Linkage Memorandum now
recognizes that: (1) linked programs need only be complementary, not
identical; (2) linked programs can be created at separate points in
time; and (3) explicit documentation of linkage is not required at the
time of the enactment of the first program. According to HADEED, this
recent development has eliminated two of the Department's three
previous barriers to finding that PIF and SIDF are integrally linked
and requires a reexamination of the record evidence on linkage as it
pertains to the inception of SIDF.
HADEED argues that the PIF loan program and the SIDF loan program
are ``integrally linked'' as defined in section 355.43(b)(6) of the
Department's proposed regulations; see Countervailing Duties; Notice of
Proposed Rulemaking and Request for Public Comments, 54 FR 23366 (May
31, 1989). Since PIF and the SIDF are integrally linked, they should be
considered together in determining whether loans provided by these two
entities are limited to a specific enterprise or industry, or group of
enterprises or industries. SIDF and PIF qualify for linkage under each
factor identified in the Department's proposed regulations. These
factors are (1) the administration of the programs, (2) evidence of a
government policy to treat industries equally, (3) the purposes of the
programs as stated in their enabling legislation, (4) the manner of
funding the programs, and (5) ``other factors.''
HADEED argues that the information on the record shows a Saudi
government policy to treat industries equally. PIF and SIDF provide
identical benefits--low-cost, long-term construction loans--on
identical terms to a wide variety of industries. PIF and SIDF are two
of five Specialized Credit Institutions that the Saudi government
created to develop and diversify the Saudi economy. The PIF and SIDF
share a common purpose as the only sources of low-cost financing for
the industrial and manufacturing sector. PIF loans are available to
companies with some government equity, and are suited for the types of
large projects that the Saudi government would be most likely to
undertake. SIDF loans, on the other hand, are available to companies
with some private Saudi ownership and are best suited for small and
medium-sized projects. Between them, the two programs address the
borrowing needs of the entire range of Saudi industries.
PIF and SIDF share a common purpose, based on statements in each
entity's enabling legislation. PIF was created ``to finance investment
in the productive projects of a commercial nature.'' Similarly, SIDF
was created ``to support industrial development in the private sector
of the Kingdom's economy.'' Both programs are aimed at financing
development in the Saudi industrial and manufacturing sector.
PIF and SIDF are administered in a comparable manner through SAMA
(the Saudi Central Bank) and the Ministry of Finance and National
Economy. Both PIF and SIDF are administered by boards of directors with
a common chairman, the Minister of Finance and National Economy, with
the remaining members drawn from SAMA and other Saudi government
agencies.
PIF and SIDF were originally funded through the Ministry of Finance
and National Economy. Currently, both programs are self-sufficient.
SAMA produces a consolidated balance sheet showing assets and
liabilities of PIF and SIDF jointly. All information regarding budget
allocations, disbursements and repayments of PIF and SIDF are published
as consolidated statements.
According to HADEED, other factors integrally linking PIF and SIDF
include the fact that there are no de jure limitations on the types of
industries eligible to receive loans under either fund. The lending
practices and histories of both funds are similar. The maximum loan
amount is SR 500 million for PIF and SR 400 million for SIDF. The
maximum loan period for both PIF and SIDF is 15 years. The PIF requires
Saudi government equity participation in a project in order to obtain
funds. Similarly, SIDF requires at least 25 percent equity contribution
from private Saudi sources in order to obtain funds.
Thus, in light of the factors described above, HADEED argues that
the Department has a compelling case for finding integral linkage
between PIF and SIDF. The programs are part of the same overall
government lending policy, they are intended to be complementary and to
achieve the same purpose, they are administered and funded through the
same governmental agency, and they provide similar benefits to the same
sector of the Saudi economy. Based on a finding of integral linkage,
the Department should consider PIF and SIDF programs together and find
that they are not specifically provided and therefore not
countervailable.
The petitioner argues that the Department has rejected respondent's
argument regarding integral linkage in the previous three reviews (see
Final Results of Countervailing Duty Administrative Review; Carbon
Steel Wire Rod from Saudi Arabia, 56 FR 26652, June 10, 1991; and,
Final Results of Countervailing Duty Administrative Reviews; Carbon
Steel Wire Rod from Saudi Arabia, 56 FR 48158, September 24, 1991). The
unique aspects of the PIF program cannot be hidden by lumping it
together with other Saudi government financing programs such as SIDF,
which were established for other reasons. Nothing the Saudi government
does in providing other loans through separate programs detracts from
PIF's specificity.
Department's Position: HADEED's arguments regarding integral
linkage have been addressed and rejected in three previous reviews (see
Final Results of Countervailing Duty Administrative Review; Carbon
Steel Wire Rod from Saudi Arabia, 56 FR 26652, June 10, 1991; and,
Final Results of Countervailing Duty Administrative Reviews; Carbon
Steel Wire Rod from Saudi Arabia, 56 FR 48158, September 24, 1991).
Further, a full reading of the Integral Linkage Memorandum and the
Department's previous decisions on integral linkage in this case
clearly indicates that: (1) the Department's practice with respect to
integral linkage has not changed; and (2) a re-examination of the
Department's decision with respect to PIF's linkage to SIDF is not
warranted.
Contrary to HADEED's assertion, the fact that linked programs need
only be complementary is not a recent change in Departmental practice.
The Department has never based its PIF linkage decision on the fact
that PIF and SIDF are not identical. As stated in the 1988, 1989 and
1990 administrative reviews, ``Documented information on the inception
of the programs that explicitly ties PIF and SIDF as complementary
parts of an overarching governmental policy directive has not been
presented by the respondent [despite the Department's repeated
requests.''] (Bracketed portion from the 1990 administrative review
only.) Final Results of Countervailing Duty Administrative Reviews;
Carbon Steel Wire Rod from Saudi Arabia, 56 FR 48160, September 24,
1991 and Final Results of Countervailing Duty Administrative Reviews;
Carbon Steel Wire Rod from Saudi Arabia, 57 FR 8304, March 9, 1992.
Furthermore, HADEED completely misrepresents the Department when it
states that the Department previously ``recognized'' that PIF and SIDF
are complementary.1
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1The sentence from which HADEED draws its conclusion that the
Department has already determined that PIF and SIDF are
complementary reads as follows, ``It may be that, in principle and
practice, the respective roles of PIF and SIDF have evolved to
complement and overlap each other.'' Final Results of Countervailing
Duty Administrative Reviews; Carbon Steel Wire Rod from Saudi
Arabia, 56 FR 48160, September 24, 1991 (emphasis added). This
sentence is at the beginning of the paragraph that concludes that
respondents have failed to provide the necessary factual information
that PIF and SIDF were ``complementary parts of an overarching
policy directive.'' Id.
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It is also clear that the Integral Linkage Memorandum did not
change the Department's practice with respect to a supposed timing
requirement for the creation of linked programs. The Department never
based its PIF linkage decision on the fact that PIF and SIDF were not
created simultaneously. Rather, ``the fact that these programs were
founded separately, three years apart, suggests (without other
documented information) that the programs were not conceived as parts
of a single program.'' Final Results of Countervailing Duty
Administrative Reviews; Carbon Steel Wire Rod from Saudi Arabia, 56 FR
48160, September 24, 1991 (emphasis added). That the Integral Linkage
Memorandum follows the same standard can be clearly discerned from the
following discussion preceding the Department's determination that the
Tripartite Program is not integrally linked to the other three
programs:
Therefore, as we explained in Carbon Steel Wire Rod (57 FR at
8304), in order to prevail on a claim of integral linkage, the
claimant should be able to point to a clear undisputed statement in
the enabling legislation or some other authoritative source
indicating an express intention to create multiple programs, whether
at the same time or separately, which are designed to be
``complementary parts of an overarching governmental policy
directive.'' * * * For instance, it is easy to state that the
purpose of two separate programs is the same. * * * However, absent
an objective indication by the government of why it created two (or
more) programs instead of one, it is very difficult if not
impossible to conclude that the government actually intended to have
the programs complement one another. Similarly, if the government's
policy is truly to treat the industries covered by the various
programs equally, it is reasonable to expect the government to have
made this intention clear. Integral Linkage Memorandum at 4
(emphasis added).
Finally, with respect to HADEED's claim that the Department has
changed its practice and no longer requires explicit documentation
demonstrating linkage at the inception of the first program, an
examination of the cited passage clearly shows that the passage is
describing a long-standing Departmental practice rather than a recent
change in practice.\2\ The Department has not based its previous PIF
linkage determinations solely on the lack of documentation linking PIF
and SIDF at the inception of PIF. Rather, HADEED has consistently
failed to present documented information at the inception of either PIF
or SIDF that explicitly ties the two programs as complementary parts of
an overarching governmental policy directive. It is the lack of the
type of documentation indicated in the above passage from the Integral
Linkage Memorandum (i.e., ``a clear undisputed statement in the
enabling legislation or some other authoritative source indicating an
express intention to create multiple programs. * * *''), that has led
the Department to consistently find that PIF and SIDF are not
integrally linked.
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\2\If the multiple programs are created at separate points in
time, the Department has not required that such an express statement
be made when the first program is enacted.
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Finally, it is the Department's practice as set forth in section
355.43(b)(6) of the Department's proposed regulations to consider,
among other factors, the following in determining whether two programs
are integrally linked: ``the administration of the programs, evidence
of a government policy to treat industries equally, the purposes of the
programs as stated in their enabling legislation, and the manner of
funding the programs.'' The Department has interpreted the second
factor in a strict manner, so as to conform our interpretation of
``integral linkage'' to the purpose of the specificity test as a whole.
The specificity test was designed to avoid carrying the countervailing
duty law to absurd results by countervailing public highways and
bridges, i.e., programs, which clearly benefit the economy at large, as
opposed to identifiable and specific segments of the economy. See,
e.g., Carlisle Tire and Rubber Co., v. United States, 564 F. Supp. 834,
838 (Court of International Trade, 1983). ``Integral linkage'' should
not be interpreted to create a loophole which would allow de facto
specific subsidy programs benefitting only particular segments of the
economy to escape the imposition of countervailing duties.
Permitting respondent governments to loosely connect two or more
programs which were otherwise designed to serve different purposes
would create the type of loophole the Department seeks to avoid. See
Final Results of Countervailing Duty Administrative Review; Live Swine
from Canada, 59 FR 12246 (March 16, 1994). Moreover, the creation of
such a loophole would be contrary to the intent of Congress. S. Rep.
No. 71, 100th Congress, First Session 123 (June 12, 1987). Congress
stated that the Department should avoid taking an ``overly narrow'' or
``overly restrictive'' view of its authority to determine specificity.
Thus, the Department has required documented information from the
inception of one or the other of the programs that explicitly ties PIF
and SIDF as complementary parts of an overarching governmental policy
directive. See Carbon Steel Wire Rod from Saudi Arabia; Final Results
of Countervailing Duty Administrative Review, 57 FR 8304 (March 9,
1992). Information of this nature has not been provided by respondent;
therefore there is no information on the record that would tie SIDF and
PIF at the inception of one or the other. We have thus considered each
program separately.
Comment 2: The respondent contends that it is unreasonable for the
Department to demand any more factual proof of integral linkage than
that which HADEED has provided. All known existing evidence has been
presented. For reasons relating primarily to the nature of record-
keeping during the early stages of Saudi Arabia's industrialization
process, better evidence appears not to exist. The Department is not
justified in treating evidence of linkage at inception as a criterion
for finding integral linkage. Such a criterion is not even explicitly
listed in the Department's proposed regulation. Furthermore, the
Department's insistence on proof of such additional factors violates
prescribed rules of procedure by using factors purporting to be
guidance as a final rule determining substantive rights. The Court of
International Trade has held that the Department must follow the
minimal ``notice and comment'' procedures embodied in the
Administrative Procedures Act (APA) before promulgating final rules.
Ipsco, Inc. v. United States, 687 F. Supp. 614, (Court of International
Trade, 1988).
Department's Position: With regard to the question of ``integral
linkage,'' the Department has consistently focused its attention on the
relationship between the programs in question and ``an overall
government policy or national development plan.'' See Final Results of
Countervailing Duty Administrative Reviews; Carbon Steel Wire Rod from
Saudi Arabia, 56 FR 48158, September 24, 1991. This interpretation was
clearly stated in the Final Affirmative Countervailing Duty
Determination; Certain Fresh Cut Flowers from the Netherlands (52 FR
3301, February 3, 1987) wherein the Department would not find integral
linkage because ``the government was unable to document the inclusion
of [the programs] as part of an overall national energy program * * *''
Id. at 3309.
In requiring that this relationship be explicit at the inception of
one or the other of the programs, the Department violates no statutory
or regulatory provision. Even if one turns to the Department's proposed
regulations, the decision herein is fully supported. Section
355.43(b)(6) of the proposed regulations tells us that when deciding an
integral linkage question the Secretary will examine ``evidence of a
government policy to treat industries equally.'' This broad instruction
is included on a list that explicitly advises parties that the
Department will consider the factors on the list together with ``other
factors.'' Thus, it is within the Department's discretion to elaborate
on each factor listed in the proposed regulation. This is precisely
what the Department has done with the second factor listed in the
proposed regulation.
Comment 3: HADEED argues that, contrary to the Department's
preliminary results, PIF loans are not limited to a specific group of
enterprises, and therefore, they are not countervailable. HADEED
contends that the Department's preliminary determination that the Saudi
government, through PIF, provides loans to ``a specific enterprise or
industry or group of enterprises or industries'' within the meaning of
19 U.S.C. 1677(5)(B), is incorrect. The basis for the Department's
determination is the erroneous assumption that only six companies have
effectively benefited from the program. In reality, 24 companies in a
wide variety of industries have received PIF financing. The 18
companies that are at least 50 percent-owned by either SABIC or
Petromin (government-owned corporations) should be treated as separate
entities. The Department has, in effect, found that there is an
intercorporate transfer of benefits based solely on corporate
relationships with SABIC or Petromin. Such an application of the
specificity test based on a commonality of shareholders is without
precedent and contravenes the Department's established policy not to
assume automatic transfer of benefits based on related party status.
Respondents cite the following cases in defense of their argument:
Industrial Phosphoric Acid from Israel, 52 FR 25447 (July 7, 1987);
Operators for Jalousie and Awning Windows from El Salvador, 51 FR 41516
(November 17, 1986); Low-Fuming Brazing Copper Rod and Wire from New
Zealand, 50 FR 31638 (August 5, 1985); and Carbon Steel Structural
Shapes from Luxembourg, 47 FR 39364 (September 7, 1982).
The petitioner contends that PIF provides benefits almost
exclusively to the projects undertaken by a few companies with
controlling government ownership and therefore constitute a specific
group of enterprises in Saudi Arabia.
Department's Position: We disagree with respondent. We have
considered and rejected respondent's argument in the original
investigation, and in the subsequent three reviews (see Final
Affirmative Countervailing Duty Determination and Countervailing Duty
Order; Carbon Steel Wire Rod from Saudi Arabia, 51 FR 4206, February 3,
1986; Final Results of Countervailing Duty Administrative Review;
Carbon Steel Wire Rod from Saudi Arabia, 56 FR 26652, June 10, 1991;
and, Final Results of Countervailing Duty Administrative Reviews;
Carbon Steel Wire Rod from Saudi Arabia, 56 FR 48158, September 24,
1991, respectively). We determined that the loan in question was part
of a de facto specific program, and respondent has presented no new
evidence that would disturb this conclusion (other than that pertaining
to ``integral linkage'').
We based this determination on the fact that there were three
holding companies, SABIC, Petromin, and Saudia Airlines, which had 50
percent or more ownership in virtually all of the PIF loan recipients.
The Court of International Trade examined this analysis as it pertained
to the original investigation of the subject merchandise, and held that
the Department ``reasonably applied the specificity test,'' and that
the determination was in accordance with law. See Saudi Iron and Steel
Co. v. United States, 675 F. Supp. 1362 (Court of International Trade
1987).
Comment 4: Petitioners contend that the Department's use of a
composite benchmark incorporating a short-term interest rate is
incorrect. In calculating the benchmark, the Department relied on the
erroneous assumption that HADEED could have obtained the SIDF's maximum
loan limit of fifty percent of the project's total cost. In fact, the
maximum amount HADEED could have obtained from SIDF was SR 400 million,
significantly less than fifty percent of the project's total cost.
Department's Position: We disagree. We have considered and rejected
this argument in a previous review. The Department has previously found
that the SIDF, in fact, often loaned combined amounts greater than the
``cap'' to a single company. We concluded that it was reasonable to
include more than SR 400 million in the benchmark. See Final Results of
Countervailing Duty Administrative Review; Carbon Steel Wire Rod from
Saudi Arabia, 56 FR 26652 (June 10, 1991). Our methodology remains
unchanged from the original investigation. Since the PIF loan covered
60 percent of HADEED's total project costs, for our benchmark we
assumed that HADEED could have financed 50 percent of its total project
costs with a SIDF loan (the maximum eligibility for a company with at
least 50 percent Saudi ownership) and the remaining 10 percent of
project costs with a Saudi commercial bank loan. The commercial bank
portion of the benchmark was based on the average Saudi Interbank
Offering Rate (SIBOR) for 1990, plus the normal one percent spread that
is common for commercial borrowing from private Saudi banks.
Final Results of Review
After reviewing all of the comments received, we determine the
total bounty or grant to be 0.18 percent ad valorem for the period
January 1, 1991 through December 31, 1991. In accordance with 19 CFR
355.7, any rate less than 0.50 percent ad valorem is de minimis.
Therefore, the Department will instruct the Customs Service to
liquidate, without regard to countervailing duties, all shipments of
this merchandise exported on or after January 1, 1991 and exported on
or before December 31, 1991; in addition, the Department will instruct
the Customs Service to refund with interest any deposits of estimated
duties on such entries.
We have determined that the Government of the Kingdom of Saudi
Arabia has met the requirements for revocation of the countervailing
duty order pursuant to 19 CFR 355.25(a)(2) and 19 CFR 355.25(b)(2).
Based upon certifications by HADEED and the Government of the Kingdom
of Saudi Arabia, as well as the Department's administrative
determinations, we have determined that HADEED, the only producer of
the subject merchandise, has not applied for or received any net
subsidy for five consecutive years. In addition, HADEED has certified
that it will not apply for or receive any net subsidy under a program
deemed by the Department to be countervailable. We therefore determine
that there is no likelihood that this company will apply for or receive
any net subsidy in the future. Accordingly, we are revoking the
countervailing duty order. The Department will instruct the Customs
Service to terminate suspension of liquidation on entries of the
subject merchandise and to liquidate, without regard to countervailing
duties, such merchandise exported on or after January 1, 1992, the
first day after the period reviewed herein. We will also instruct the
Customs Service to refund any deposits of estimated duties on such
entries.
Administrative Protective Order (APO)
This notice serves as the only reminder to parties subject to APO
of their responsibilities concerning the return or destruction of
proprietary information disclosed under APO in accordance with 19 CFR
353.34(d). Failure to comply is a violation of the APO.
This administrative review and notice are in accordance with
section 751(a)(1) of the Act (19 U.S.C. 1675(a)(1)), and 19 CFR 355.22
and 19 CFR 355.25.
Dated: October 27, 1994.
Susan G. Esserman,
Assistant Secretary for Import Administration.
[FR Doc. 94-28184 Filed 11-14-94; 8:45 am]
BILLING CODE 3510-DS-P