[Federal Register Volume 64, Number 79 (Monday, April 26, 1999)]
[Notices]
[Pages 20257-20261]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10288]


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DEPARTMENT OF COMMERCE

International Trade Administration
[C-408-046]


Preliminary Results of Full Sunset Review: Sugar From the 
European Community

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

ACTION: Notice of preliminary results of full sunset review: Sugar from 
the European Community.

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SUMMARY: On October 1, 1998, the Department of Commerce (``the 
Department'') initiated a sunset review of the countervailing duty 
order on sugar from the European Community (``the Community'') (63 FR 
52683) pursuant to section 751(c) of the Tariff Act of 1930, as amended 
(``the Act''). On the basis of a notice of intent to participate filed 
on behalf of the domestic industry and adequate

[[Page 20258]]

substantive comments filed on behalf of the domestic industry and 
respondent interested parties, the Department is conducting a full 
review. As a result of this review, the Department preliminarily finds 
that revocation of the countervailing duty order would be likely to 
lead to continuation or recurrence of a countervailable subsidy. The 
net countervailable subsidy and the nature of the subsidy are 
identified in the ``Preliminary Results of Review'' section of this 
notice.

FOR FURTHER INFORMATION CONTACT: Scott E. Smith or Melissa G. Skinner, 
Office of Policy for Import Administration, International Trade 
Administration, U.S. Department of Commerce, 14th & Constitution, 
Washington, DC 20230; telephone: (202) 482-6397 or (202) 482-1560, 
respectively.

EFFECTIVE DATE: April 26, 1999.

Statute and Regulations

    This review is being conducted pursuant to sections 751(c) and 752 
of the Act. The Department's procedures for the conduct of sunset 
reviews are set forth in Procedures for Conducting Five-year 
(``Sunset'') Reviews of Antidumping and Countervailing Duty Orders, 63 
FR 13516 (March 20, 1998) (``Sunset Regulations'') and in 19 C.F.R. 
part 351 (1998) in general. Guidance on methodological or analytical 
issues relevant to the Department's conduct of sunset reviews is set 
forth in the Department's Policy Bulletin 98:3--Policies Regarding the 
Conduct of Five-year (``Sunset'') Reviews of Antidumping and 
Countervailing Duty Orders; Policy Bulletin, 63 FR 18871 (April 16, 
1998) (``Sunset Policy Bulletin'').

Scope

    The merchandise subject to this countervailing duty order is sugar, 
with the exception of specialty sugars (e.g., cones, hats, pearls, 
loaves), from the European Community. Blends of sugar and dextrose, a 
corn-derived sweetener, containing at least 65 percent sugar are within 
the scope of this order. According to the final results of the 
Department's most recent administrative review, the merchandise subject 
to this order is currently classifiable under item numbers 1701.11.00, 
1701.12.00, 1701.91.20, and 1701.99.00 of the Harmonized Tariff 
Schedule of the United States (``HTSUS'') (see Sugar From the European 
Community; Final Results of Countervailing Duty Administrative Review, 
55 FR 35703 (August 31, 1990). In their substantive response, the 
Associations stated that the merchandise subject to the order is 
currently classifiable under item numbers 1701.11.0025, 1701.11.0045, 
and 1702.90.300 of the HTSUS. Although the HTSUS subheadings are 
provided for convenience and Customs purposes, the written description 
remains dispositive.

Background

    On July 31, 1978, the Department of the Treasury (``Treasury'') 
issued its Final Countervailing Duty Determination, T.D. 78-53 (43 FR 
33237). The Department has conducted several administrative reviews of 
this outstanding countervailing duty order.1
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    \1\ See Sugar from the European Communities; Final Results of 
Administrative Review of Countervailing Duty Order, 46 FR 46984 
(September 23, 1981); Sugar from the European Communities; Final 
Results of Administrative Review of Countervailing Duty Order, 48 FR 
35001 (August 2, 1983); Sugar from the European Communities; Final 
Results of Administrative Review of Countervailing Duty Order, 49 FR 
45039 (November 14, 1984); and Sugar From the European Community; 
Final Results of Countervailing Duty Administrative Review, 55 FR 
35703 (August 31, 1990).
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    On October 1, 1998, the Department initiated a sunset review of the 
countervailing duty order on sugar from the European Community (63 FR 
52683), pursuant to section 751(c) of the Act. The Department received 
a Notice of Intent to Participate from the United States Beet Sugar 
Association (``the USBSA'') and the United States Cane Sugar Refiners'' 
Association (``the USCSRA'') (collectively ``the Associations'') on 
October 16, 1998, within the deadline specified in section 
351.218(d)(1)(i) of the Sunset Regulations. Both associations claimed 
interested party status under section 771(9)(E) of the Act, as trade 
associations, a majority of whose members produce sugar in the United 
States. We received complete substantive responses from the European 
Commission (``the Commission'') and from the Associations on October 
30, and November 2, 1998, respectively, within the 30-day deadline 
specified in section 351.218(d)(3)(i) of the Sunset Regulations.
    In its substantive response, the USBSA and its member 
organizations, and the USCSRA and its member organizations, stated that 
they are comprised of members that produce refined sugar from sugar 
beets and raw cane sugar, respectively, and, therefore, their member 
organizations constitute domestic interested parties under section 
771(9)(C) of the Act. The Associations stated that, together, they 
represent nearly all of the refined sugar production in the United 
States. The Associations stated that the petitioner in the original 
countervailing duty investigation was the Florida Sugar Marketing and 
Terminal Association Incorporated (``FSMTAI''), that the USCSRA 
requested the 1988 administrative review conducted by the Department, 
that the Associations requested a scope clarification in 1987, and that 
one or both have objected to various notices of intent to revoke issued 
by the Department. We received letters from the American Sugarbeet 
Growers Association and the FSMTAI on November 3 and November 5, 1998, 
respectively. Each of these associations indicated agreement with the 
conclusion reached in the Substantive Response of the Associations and 
expressed support for the order's continuation.
    In its substantive response, the Commission stated that it 
represents the European Union (``EU''), which comprises Austria, 
Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, 
Luxembourg, Netherlands, Portugal, Spain, Sweden, and the United 
Kingdom. In addition, the Commission stated that it is willing to 
participate in the sunset review as the authority responsible for 
administrating the sugar export restitution scheme and that it has, in 
the past, submitted responses to the Department with regard to the 
countervailing duty order. The Commission qualifies as an interested 
party under section 771(9)(B) of the Act.
    On November 9, 1998, we received rebuttal comments from the 
Associations. We did not receive rebuttal comments from the Commission.
    On the basis of the complete substantive responses filed by 
domestic interested parties and the Commission, and in accordance with 
section 351.218(e)(2) of the Sunset Regulations, the Department is 
conducting a full sunset review.
    The Department determined that the sunset review of the 
countervailing duty order on sugar from the European Community is 
extraordinarily complicated. In accordance with section 751(c)(5)(C)(v) 
of the Act, the Department may treat a review as extraordinarily 
complicated if it is a review of a transition order (i.e., an order in 
effect on January 1, 1995). (See section 751(c)(6)(C) of the Act.) 
Therefore, on January 15, 1999, the Department extended the time limit 
for completion of the preliminary results of this review until not 
later than April 19,

[[Page 20259]]

1999, in accordance with section 751(c)(5)(B) of the Act.2
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    \2\ See Sugar From the European Community: Extension of Time 
Limit for Preliminary Results of Five-Year Review, 64 FR 3683 
(January 25, 1999).
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Determination

    In accordance with section 751(c)(1) of the Act, the Department is 
conducting this review to determine whether revocation of the 
countervailing duty order would be likely to lead to continuation or 
recurrence of a countervailable subsidy. Section 752(b) of the Act 
provides that, in making this determination, the Department shall 
consider the net countervailable subsidy determined in the 
investigation and subsequent reviews, and whether any change in the 
program which gave rise to the net countervailable subsidy has occurred 
that is likely to affect that net countervailable subsidy. Pursuant to 
section 752(b)(3) of the Act, the Department shall provide to the 
International Trade Commission (``the ITC'') the net countervailable 
subsidy likely to prevail if the order is revoked. In addition, 
consistent with section 752(a)(6), the Department shall provide the ITC 
information concerning the nature of the subsidy and whether the 
subsidy is a subsidy described in Article 3 or Article 6.1 of the 1994 
WTO Agreement on Subsidies and Countervailing Measures (``Subsidies 
Agreement'').
    The Department's preliminary determinations concerning continuation 
or recurrence of a countervailable subsidy, the net countervailable 
subsidy likely to prevail if the order is revoked, and nature of the 
subsidy are discussed below. In addition, parties' comments with 
respect to each of these issues are addressed within the respective 
sections.

Continuation or Recurrence of a Countervailable Subsidy

Party Comments

    In their substantive response, the Associations stated that the EU 
continues to make restitution payments to sugar exporters under the 
Common Agricultural Policy (``CAP''). The Associations argued that, 
although the CAP has been modified and reformed in minor respects since 
the original countervailing duty order was issued in 1978, it continues 
to provide a system of production quotas, guarantees, and export 
restitution payments like those addressed in the earlier countervailing 
duty determination.
    The Associations stated that during the last twenty years, the CAP 
sugar regime has repeatedly been held to violate U.S. countervailing 
duty laws and GATT principles. In support of this statement, the 
Associations referred to several determinations, including the 1982 
injury determination by the ITC,3 a 1996 sunset review by 
the Canadian International Trade Tribunal,4 and two GATT 
panel reports.5
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    \3\ The ITC determined that revocation of the countervailing 
duty order will threaten material injury to the U.S. sugar industry 
based primarily on its assessment that the European Community 
(``EC'') will continue to subsidize exports. See Associations' 
Substantive Response, at 25 (November 2, 1998), referring to Sugar 
from the European Communities, ITC Investigation No. 104-TAA-7, 47 
Fed. Reg. 23057 (1982).
    \4\ The EU's export restitution payments under the CAP were 
again determined to be countervailable subsidies. See Associations' 
Substantive Response, at 26 (November 2, 1998), referring to The 
Dumping in Canada of Refined Sugar Originating in or Exported From 
the United States of America, Denmark, the Federal Republic of 
Germany, the Netherlands, the United Kingdom and the Republic of 
Korea, and the Subsidizing of Refined Sugar Originating in or 
Exported From the European Union, Review No. RD-95-001, 1 T.T.R. 
(2d) 355 (July 26, 1996).
    \5\ The panels determined that the Community system [for 
granting refunds on exports of sugar] and its application 
constitutes a threat of serious prejudice in terms of Article XVI:I. 
See Associations' Substantive Response, at 25 (November 2, 1998), 
referring to GATT Dispute Panel Report on Complaint By Brazil 
Concerning EC Refunds on Exports of Sugar, L/5011-27S/69, at part V 
(adopted November 10, 1980) and GATT Dispute Panel Report on 
Complaint By Australia Concerning EC Refunds on Exports of Sugar, L/
4833--26S/290, at part V (adopted November 6, 1979).
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    Further, the Associations argued that the import performance 
following the publication of the order establishes the likelihood that 
countervailable subsidies on sugar from the EU will continue. The 
Associations explained that, immediately after the imposition of the 
order, imports of subject merchandise disappeared from the U.S. market, 
thereby demonstrating that sugar can be sold in the United States only 
with the aid and benefit of subsidies. Although acknowledging that 
access to the U.S. market for foreign-origin sugar has been limited by 
quota since 1982, the Associations argued that the downward trend in 
the world price of refined sugar will shortly make it feasible to ship 
refined sugar into the United States despite the operation of the 
tariff rate quota (``TRQ'') on sugar imports. Further, the Associations 
stated that the TRQ rate is scheduled to be reduced in 1998, 1999, and 
2000, with the underpinning for current U.S. sugar policy due to expire 
at the end of 2002.
    In its substantive response, the Commission stated that the system 
of granting sugar export refunds in the Community is still in force as 
part of the Community's CAP. The Commission argued that the system is 
WTO-compatible and that the export refund is determined in such a way 
as not to undermine the world market price of sugar. The Commission 
explained that the export refund bridges the gap between the world 
market price (as quoted in the future white sugar quotations in London 
or Paris) and the Community effective support price (composed of the 
intervention price plus the storage levy) plus a lump sum amount to 
cover the transport costs for bringing the sugar to the Community port. 
Further, the Commission argued that, if the countervailing duty order 
is revoked, the U.S. market would not be in any way ``targeted'' by the 
export refund program as export refunds are the same for all 
destinations outside the EU. Finally, the Commission argued that, in 
view of the existence of quotas on sugar imports into the United 
States, revocation of the order is unlikely to have any effect on the 
U.S. market as actual exports to the United States are minimal.
    In their rebuttal comments, the Associations stated that the trend 
in the world price of sugar assures that the world price of sugar will 
be below the EU intervention prices for the foreseeable future. 
Additionally, the Associations argued that, contrary to the 
Commission's argument that the existence of the quota on sugar 
effectively prevents the recurrence of any countervailable subsidy, it 
is now economically feasible to ship sugar to the United States despite 
the quota. In conclusion, the Associations requested that, based on the 
information contained in their substantive response and the 
Commission's own admission that restitution payments will continue to 
be made on exports of the subject merchandise to compensate European 
producers for the difference between the world price of sugar and the 
EU intervention price, the Department find that, in the event of 
revocation, countervailable subsidies will continue or recur.

Department's Preliminary Determination

    Drawing on the guidance provided in the legislative history 
accompanying the Uruguay Round Agreements Act (``URAA''), specifically 
the Statement of Administrative Action (``the SAA''), H.R. Doc. No. 
103-316, vol. 1 (1994), the House Report, H.R. Rep. No. 103-826, pt.1 
(1994), and the Senate Report, S. Rep. No. 103-412 (1994), the 
Department issued its Sunset Policy Bulletin providing guidance on 
methodological and analytical issues, including the basis for 
likelihood determinations. The Department

[[Page 20260]]

clarified that determinations of likelihood will be made on an order-
wide basis (see section III.A.2 of the Sunset Policy Bulletin). 
Additionally, the Department normally will determine that revocation of 
a countervailing duty order is likely to lead to continuation or 
recurrence of a countervailable subsidy where (a) a subsidy program 
continues, (b) a subsidy program has been only temporarily suspended, 
or (c) a subsidy program has been only partially terminated (see 
section III.A.3.a of the Sunset Policy Bulletin). Exceptions to this 
policy are provided where a company has a long record of not using a 
program (see section III.A.3.b of the Sunset Policy Bulletin).
    In its final determination, Treasury determined that the 
restitution payments made upon exportation to sugar growers and 
processors in the EC under the CAP constitute a bounty or grant, the 
net amount of which was determined to be 10.8 cents/pound of sugar (see 
Final Countervailing Duty Determination, 43 FR 33237 (July 31, 1978)). 
The Department has conducted several administrative reviews of this 
outstanding countervailing duty order and, in each review, determined a 
net subsidy rate from this program (see footnote 1).
    Because the Commission specifically acknowledged that the export 
restitution program remains in place, and on the basis of the 
information presented by the parties, the Department preliminarily 
determines that the program continues to exist and, therefore, if the 
order were to be revoked, a countervailable subsidy would continue or 
recur.

Net Countervailable Subsidy

Party Comments

    In their substantive response, the Associations argued that the 
countervailing duty rate likely to prevail if the order is revoked 
would be at least as large as that existing at the time of the original 
order, and would probably be significantly larger since the difference 
between the EU and world price has increased. The Associations argued 
that since the restitution payments are provided to compensate sugar 
producers for the difference between the higher EU price and the lower 
prevailing world market price, as the world market sugar price 
declines, there is a corresponding increase in the amount of the export 
subsidies payable to European sugar producers under the CAP. 
Specifically, the Associations stated that, if the order were to be 
revoked, the net countervailable subsidy that is likely to prevail, 
based on current subsidy levels and pricing, would be 27.97 cents per 
pound of sugar.6
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    \6\ The Associations cite an October 28, 1998, article from 
Bloomberg News, in which the EU's sugar management committee is 
reported as agreeing to pay traders an export subsidy of 513.00 
European currency units per ton on 120,250 tons of sugar exported to 
non-EU markets. Using the Federal Reserve Bank of New York October 
28, 1998, exchange rate of ECU 1 = $1.1918, the Associations 
calculated the subsidy to be $61.66 per 220.46 pounds or $0.2797 per 
pound. See Associations' Substantive Response, at 35 and Appendix 12 
(November 2, 1998).
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    In its substantive response, the Commission provided the average 
export refund per marketing year for the years 1995/96 through 1997/98. 
The average export refund for marketing years 1997/98 was reported as 
44.01 ECU per 100 kg (which is 18.61 cents per pound). This is 
consistent with information provided by the Associations.7
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    \7\ In their substantive response, the Associations provided 
copies of The Czarnikow Sugar Review published September 9, 1998, 
which reported the ``weighted average of export refunds at the 
tenders was 44.012 ecu per 100 kg.'' See Substantive response at 
Appendix 6.
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    In its substantive response, the Commission stated that the export 
refund bridges the gap between the world market price (as quoted in the 
future white sugar quotations in Paris or London) and the Community 
effective support price (composed of the intervention price plus a 
storage levy) plus a lump sum amount to cover the transport costs for 
bringing the sugar to a Community port. Further, although this 
calculation results in the maximum theoretical export refund that can 
be granted, the actual refund granted to exporters (normally fixed on a 
weekly basis) is always at a lower level. The Commission noted that not 
all sugar exported from the EU is entitled to an export refund; 
specifically, sugar produced in excess of production quotas is not 
entitled to export refunds. The Commission noted that if the world 
market price exceeds the internal EU price, no refunds are paid; on the 
contrary, an export levy is charged on all export shipments from the 
EU. The Commission concluded by stating that because the export refund 
covers the difference between the internal EU price and the world price 
for sugar, it is not feasible to establish the level of export 
restitution in advance.

Department's Preliminary Determination

    Drawing on the guidance provided in the legislative history 
accompanying the Uruguay Round Agreements Act (``URAA''), specifically 
the Statement of Administrative Action (``the SAA''), H.R. Doc. No. 
103-316, vol. 1 (1994), the House Report, H.R. Rept. No. 103-826, pt.1 
(1994), and the Senate Report, S. Rept. No. 103-412 (1994), the 
Department issued its Sunset Policy Bulletin providing guidance on 
methodological and analytical issues, including the basis for 
determinations of the net countervailable subsidy. In the Sunset Policy 
Bulletin, the Department stated that, consistent with the SAA and House 
Report, ``the Department normally will select a rate `from the 
investigation, because that is the only calculated rate that reflects 
the behavior of exporters and foreign governments without the 
discipline of an order or suspension agreement in place.' '' The 
Department noted that this rate may not be the most appropriate rate 
if, for example, the rate was derived from subsidy programs which were 
found in subsequent reviews to be terminated, if there has been a 
program-wide change, or if the rate ignores a program found to be 
countervailable in a subsequent administrative review. (See section 
III.B.3 of the Sunset Policy Bulletin).
    In its final countervailing duty determination, Treasury determined 
that the net amount of the bounty or grant provided by this program was 
10.8 cents/pound of sugar. This amount represented the average maximum 
restitution level set by the EC for sugar exports during the first half 
of 1978. Although noting that sugar exporters could, on particular 
shipments, receive less than the maximum restitution, the level of 
which was set at least every three weeks by the EC, Treasury determined 
that this figure represented an accurate approximation of the subsidy 
being paid on recent shipments to the United States (see Final 
Countervailing Duty Determination, 43 FR 33237 (July 31, 1978)).
    As noted above, the Department has conducted several administrative 
reviews of this order (see footnote 1). In the first administrative 
review conducted by the Department, the Department noted that export 
restitution payments on sugar are adjusted constantly to reflect the 
movement in world market sugar prices (see Sugar From the European 
Communities; Final Results of Administrative Review of Countervailing 
Duty Order, 46 FR 46984 (September 23, 1981)). Since that time, the 
Department determined the level of subsidy on the basis of information 
obtained from various independent statistical gathering organizations 
as well as from the United States Department of Agriculture, the 
Federal Republic of Germany, and the Journals of the EC (see footnote 
1). The Department never calculated an ad valorem subsidy rate. Rather, 
the

[[Page 20261]]

subsidy was always expressed in terms of cents per pound of sugar. We 
note that in the Sunset Policy Bulletin we clarified that, in a sunset 
review of a countervailing duty order where the original investigation 
was conducted by Treasury, the Department normally will provide to the 
Commission the net countervailable subsidy from the first final results 
of administrative review published in the Federal Register by the 
Department, where the net countervailable subsidy was first calculated 
on an ad valorem basis. (See section III.B.1 of the Sunset Policy 
Bulletin.) As discussed above, however, the Department has never 
calculated an ad valorem subsidy rate in this proceeding.
    As discussed in the Sunset Policy Bulletin, the Department normally 
will report to the ITC an original subsidy rate as adjusted to take 
into account terminated programs, program-wide changes, programs found 
to be countervailable in subsequent reviews. Since the original 
investigation the export restitution program has not been terminated. 
Further, the changes in the world market and EU prices of sugar do not 
constitute a program-wide change. Finally, no other countervailable 
programs have been found in subsequent administrative reviews of the 
countervailing duty order. Therefore, consistent with the Sunset Policy 
Bulletin, we preliminarily determine that the 10.80 cents/pound rate 
from the investigation is the net countervailable subsidy likely to 
prevail if the order were revoked.

Nature of the Subsidy

    In the Sunset Policy Bulletin, the Department stated that, 
consistent with section 752(a)(6) of the Act, the Department will 
provide information to the Commission concerning the nature of the 
subsidy and whether it is a subsidy described in Article 3 or Article 
6.1 of the Subsidies Agreement. Neither party specifically addressed 
this issue, although the Commission did state that the system for 
granting sugar export refunds is WTO-compatible.
    Although the export restitution payments on sugar fall within the 
definition of an export subsidy under Article 3.1(a) of the Subsidies 
Agreement, Article 3.1 does not apply to products covered by the 
Agreement on Agriculture. Similarly, in accordance with Article 13(c) 
of the Agreement on Agriculture, export subsidies that conform fully to 
the provisions of Part V of the Agreement on Agriculture, are exempt 
from the provisions of Article 6 of the Subsidies Agreement. However, 
export subsidies, including the export restitution payments, are 
subject to countervailing duties, as provided in Article 13(c) of the 
Agreement on Agriculture.

Preliminary Results of Review

    As a result of this review, the Department preliminarily finds that 
revocation of the countervailing duty order would be likely to lead to 
continuation or recurrence of a countervailable subsidy. The net 
countervailable subsidy likely to prevail if the order were revoked is 
10.80 cents per pound. Although qualifying as a countervailable export 
subsidy, Article 3 of the Subsidies Agreement does not apply to the 
export restitution payments program under the EC's CAP.
    Any interested party may request a hearing within 30 days of 
publication of this notice in accordance with 19 CFR 351.310(c). Any 
hearing, if requested, will be held on June 15, 1999. Interested 
parties may submit case briefs no later than June 8, 1999, in 
accordance with 19 CFR 351.309(c)(1)(i). Rebuttal briefs, which must be 
limited to issues raised in the case briefs, may be filed not later 
than June 14, 1999, in accordance with 19 CFR 351.309(d). The 
Department will issue a notice of final results of this sunset review, 
which will include the results of its analysis of issues raised in any 
such comments, no later than August 27, 1999.
    This five-year (``sunset'') review and notice are in accordance 
with sections 751(c), 752, and 777(i)(1) of the Act.

    Dated: April 19, 1999.
Robert S. LaRussa,
Assistant Secretary for Import Administration.
[FR Doc. 99-10288 Filed 4-23-99; 8:45 am]
BILLING CODE 3510-DS-P