Import Categories Problem - categories not created from GIFT attached

Dear Howard,

I set up a new 1.7+ (yesterdays) and I tried to do this (with and without a space after the colon in $category in a gift utf8 encoded file

$CATEGORY: 12_B_Failed_Exams/Vars_Have_you_had_some_bad_new

Have you had some bad news?{
~Yes, I did not get into the university that I wanted to.#?????
~Yes, my high school teacher did not like my report. #?????
~Yes, I hated my second year at college. #?????
=Yes, I did not pass some tests. #???
}

Have you had some bad news?{
~Yes, I got a very bad mark in an essay. #?????
=Yes, my attempt to pass some tests was not successful.#???
~Yes, I passed up an opportunity to take an exam.#?????
~Yes, I forgot the time of my first exam. #?????
}

But either way all the questions were imported to the default category and no categories were created.

I did check the categories "import from file" checkbox. A screen shot of the input screen and a GIFT file is attached.