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Complaint by Korea
On 30 June 2003, Korea requested consultations with the
United States concerning the US authoritiesí affirmative preliminary and
final countervailing duty determinations, the preliminary injury
determination and any subsequent determinations that may be made during
the injury investigation, on DRAMs and DRAM modules from Korea. Korea is
also challenging all related laws and regulations, including Section 771
of the US Tariff Act of 1930 and 19 CFR 351 respectively.
Korea claimed that the above determinations are
inconsistent, inter alia, with Articles VI:3 and X:3 of the GATT
1994 and Articles 1, 2, 10, 11, 12, 14, 17, 22, 32.1 of the SCM Agreement.
On 18 August 2003, Korea requested further
consultations with regard to the US authoritiesí countervailing duty
determinations on DRAMs and DRAM modules from Korea. This request concerns
the USITCís affirmative final injury determination and
the DOCís final
countervailing duty order, both of which were published on 11 August
2003, that is, after the first request for consultations was made by
Korea. Korea claimed that the determinations mentioned above are
inconsistent, inter alia, with Articles 15.1, 15.2, 15.4, and 15.5
of the SCM Agreement.
On 19 November 2003, Korea requested the establishment
of a panel. At its meeting on 1 December 2003, the DSB deferred the
establishment of a panel.
Panel and Appellate Body proceedings
Further to a second request to establish a panel
by Korea, the DSB established a panel at its meeting on 23 January 2004.
China, the EC, Japan and Chinese Taipei reserved their third-party rights.
On 23 February 2004, Korea requested the
Director-General to compose the panel. On 5 March 2004, the
Director-General composed the panel.
On 16 August 2004, the Chairman of the Panel informed
the DSB that it would not be able to complete its work in six months in
light of the schedule which was agreed after consultations with the
parties, and that the Panel expected to complete its work in December
On 21 February 2005, the Panel report was circulated to
- Concerning the DOCís finding of financial contribution
to Hynix Inc., the Panel found that the DOC did not properly demonstrate
that the Korean Government availed itself of that capacity to entrust and
direct all Group B and C creditors (i.e., two groups of creditors
which were not 100% owned by the Korean Government) to participate
in all financial contributions at issue in this case. The Panel therefore
found that there was insufficient evidence to support a generalized
finding of entrustment or direction with respect to all private bodies and
the multiple transactions over the period of investigation. Thus, the
Panel concluded that the DOCís determination of entrustment or direction
of those creditors is inconsistent with Article 1.1(a)(1)(iv) of the SCM
- Concerning the DOCís finding of benefit conferred to
Hynix, the Panel found that, since Group B and C creditors were not found
to be entrusted or directed by the Korean Government (and therefore their
financial relationship with Hynix was not considered a financial
contribution), they could have been used as possible benchmarks for the
determination of benefit. Thus, the Panel found that the DOCís benefit
determination is inconsistent with Articles 1.1(b) of the SCM Agreement.
- Concerning specificity, the Panel found that the DOCís
finding of entrustment or direction cannot provide a proper basis for the
determination of specificity in respect of alleged subsidies provided by
Group B and C creditors. However, to the extent that the DOCís finding of
specificity in respect of Group A creditors was based on the Government of
Koreaís activity specifically focused on Hynix, the Panel considered that
such finding was consistent with Article 2 of the SCM Agreement.
- Concerning the ITCís injury determination, the
Panel rejected all but one claim by Korea, related to non-attribution.
The Panel found that the ITC did not properly ensure that injury caused by
one known factor other than the allegedly subsidized imports was not
attributed to the allegedly subsidized imports. Therefore, the Panel found
a violation of the ITCís obligation under Article 15.5 of the SCM
- The Panel either rejected or exercised judicial economy
on all other claims by Korea related to verification meetings, burden of
proof, Article 4.4 of the DSU, the levying of countervailing duties
(Article 19.4 of the SCM Agreement and Article VI.3 of the GATT
1994), Articles 10 and 32.1 of the SCM Agreement and Article 22.3
of the SCM Agreement
On 29 March 2005, the United States notified its intention to appeal
certain issues of law and legal interpretations developed by the Panel. (The United States appealed with regard to the DOC’s subsidy determination, but not with regard to the ITC’s injury determination.) On 27 June 2005, the Appellate Body circulated its report to Members. In its Report:
- The Appellate Body modified the Panel’s interpretation of Article 1.1(a)(1)(iv) and found errors in the Panel’s review of the evidence underlying the USDOC’s finding of entrustment or direction. The Appellate Body concluded that these errors undermined the Panel’s conclusion that the evidence could not support the USDOC’s finding of entrustment or direction and, therefore, reversed this conclusion, as well as the Panel’s finding of inconsistency with Article 1.1(a)(1)(iv). The Appellate Body further determined that it could not arrive at a conclusion, based on its own analysis, as to whether the USDOC’s subsidy determination was consistent with Article 1.1(a)(1)(iv).
- The Appellate Body also reversed the Panel’s findings of inconsistency with Article 1.1(b) (benefit) and Article 2 (specificity) of the SCM Agreement because they were premised on the finding of inconsistency with Article 1.1(a)(1)(iv). The Appellate Body determined that there were neither sufficient factual findings by the Panel nor undisputed facts in the record to allow it to complete the analysis.
- The Appellate Body also found that the Panel had failed to comply with its obligations under Article 11 of the DSU to “make an objective assessment of the matter before it, including an objective assessment of the facts of the case”, inter alia, by failing to apply the proper standard of review.
- As a result of the Appellate Body’s reversals, there remain no findings of WTO-inconsistency with respect to the USDOC’s subsidy determination.
At its meeting on 20 July 2005, the DSB adopted the Appellate Body report and the Panel report as modified by the Appellate Body report.
Implementation of adopted reports
At the DSB meeting on 3 August 2005, the United States announced its intention to implement the DSB’s recommendations and rulings in this case, and said that it would need a reasonable period of time to do so. On 7 November 2005, the parties notified the DSB that they had mutually agreed that the reasonable period of time shall be 7 months and 16 days, expiring on 8 March 2006.
At the DSB meeting on 14 March 2006, the United States informed the DSB that it had implemented the DSB's recommendations and rulings in this case.
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