WT/DS296/R
Page 1
Organization
WT/DS296/R
21 February 2005
(05-0600)
UNITED STATES – COUNTERVAILING DUTY INVESTIGATION ON DYNAMIC RANDOM ACCESS MEMORY SEMICONDUCTORS (DRAMS) FROM KOREA(DS 296)
Report of the Panel
WT/DS296/R
Page 1
TABLE OF CONTENTS
Page
I.introduction
A.complaint of korea
B.establishment and composition of the panel
C.panel proceedings
II.FACTUAL ASPECTS
III.parties' requests for findings and recommendations
A.Korea
B.United States
IV.ARGUMENTS OF THE PARTIES
V.ARGUMENTS OF THE THIRD PARTIES
VI.interim review
A.us comments
B.korean comments
VII.FINDINGS
A.standard of review
B.burden of proof
C.doc's subsidy determinations
1.Entrustment or Direction......
(a)Is an investigating authority required to demonstrate an explicit and affirmative government action addressed to a particular entity, entrusting or directing a particular task or duty?
(i)Arguments of the parties
(ii)Evaluation by the Panel
(b)Did the DOC properly find that there was sufficient evidence to support a generalized finding of entrustment or direction with respect to private bodies spanning multiple creditors and multiple transactions over the period of investigation?
(i)Policy to Support Hynix and Prevent its Failure
(ii)GOK Control Over Hynix's Creditors
The GOK's role as lender/signalling
The GOK's role as owner
The GOK's role as legislator
The GOK's role as regulator
(iii)GOK Coercion
Threats against creditors
Disciplining credit rating agencies
Mandating attendance at creditor meetings
(iv)The DOC's single programme approach
(v)The Kookmin Prospectus
(vi)Expert Opinion
(vii)Conclusion
2.Benefit
(i)Arguments of the parties
(ii)Evaluation by the Panel
3.Specificity
(i)Arguments of the parties
(ii)Evaluation by the Panel
4.Conclusion
D.ITC injury investigation
1.Did the ITC properly assess the volume of subject imports?
(i)Arguments of the parties
(ii)Evaluation by the Panel
2.Did the ITC properly assess the price effects of subject imports?
(i)Arguments of the parties
(ii)Evaluation by the Panel
3.Did the ITC properly consider all factors relevant to the overall condition of the domestic industry?
(i)Arguments of the parties
(ii)Evaluation by the Panel
4.Did the ITC properly demonstrate the requisite causal link between subject imports and injury?
(i)Arguments of the parties
(ii)Evaluation by the Panel
5.Did the ITC properly comply with its obligation not to attribute to subject imports injury caused by other factors ?
(i)Arguments of the parties
(ii)Evaluation by the Panel
6.Did the ITC properly define domestic industry, subject imports and non-subject imports?
(i)Arguments of the parties
(ii)Evaluation by the Panel
7.Conclusion
E.Verification Meetings
(i)Arguments of the Parties
(ii)Evaluation by the Panel
F.burden of proof during the doc’s investigation
G.Article 4.4 of the DSU
H.the levy of countervailing duties – article 19.4 of the scm agreement and articlevi.3 of the gatt 1994
I.articles 10 and 32.1 of the scm agreement
J.Article 22.3 of the SCM Agreement
VIII.conclusions and recommendation
TABLE OF ANNEXES
ANNEX A
SUBMISSION OF PARTIES AND THIRD PARTIES FOR THE
FIRST SUBSTANTIVE MEETING
Contents / PageAnnex A-1Executive Summary of the Submission of Korea / A-2
Annex A-2Executive Summary of the Submission of the United States / A-11
Annex A-3Executive Summary of the Third Party Submission of China / A-20
Annex A-4Executive Summary of the Third Party Submission of the European Communities / A-25
Annex A-5Executive Summary of the Third Party Submission of Japan / A-29
ANNEX B
ORAL STATEMENTS OF PARTIES AND THIRD PARTIES AT THE
FIRST SESSION OF THE FIRST SUBSTANTIVE MEETING
Contents / PageAnnex B-1Executive Summary of the Opening Statement of Korea / B-2
Annex B-2Closing Statement of Korea / B-5
Annex B-3Executive Summary of the Opening Statement of the United States / B-7
Annex B-4Closing Statement of the United States / B-12
Annex B-5Third Party Oral Statement of China / B-14
Annex B-6Third Party Oral Statement of the European Communities / B-17
Annex B-7Third Party Oral Statement of Japan / B-20
Annex B-8Third Party Oral Statement of Chinese Taipei / B-23
ANNEX C
REBUTTAL SUBMISSIONS OF PARTIES
Contents / PageAnnex C-1Executive Summary of Korea's Rebuttal Submission / C-2
Annex C-2Executive Summary of the United States Rebuttal Submission / C-12
ANNEX D
ORAL STATEMENTS OF PARTIES AT THE
SECOND SUBSTANTIVE MEETING
Contents / PageAnnex D-1Executive Summary of the Opening Statement of Korea / D-2
Annex D-2Closing Statement of Korea / D-4
Annex D-3Comments of Korea on the US Opening Statement / D-8
Annex D-4Executive Summary of the Opening Statement of the United States / D-10
Annex D-5Executive Summary of theClosing Statement of the United States / D-14
ANNEX E
PANEL'S QUESTIONS, ANSWERS AND COMMENTS OF PARTIES
Contents / PageAnnex E-1Questions to the Parties following the First Substantive Meeting / E-2
Annex E-2Questions to the Parties following the Second Substantive Meeting / E-7
Annex E-3Answers of Korea to Panel Questions, First Meeting / E-10
Annex E-4Answers of the United States to Panel Questions, First Meeting / E-33
Annex E-5Answers of Korea to Panel Questions, Second Meeting / E-64
Annex E-6Answers of the United States to Panel Questions, Second Meeting / E-76
Annex E-7Comments of Korea on Answers of the United States to Panel Questions, Second Meeting / E-115
Annex E-8Comments of the United States on New Factual Information provided in Korea's answers to Panel Questions, Second Meeting / E-121
ANNEX F
LIST OF FIGURES AND EXHIBITS
Contents / PageAnnex F-1List of Figures and Exhibits of Korea / F-2
Annex F-2List of Figures and Exhibits of the United States / F-9
TABLE OF KEY ABBREVIATIONS USED IN THIS REPORT
Abbreviation / Full Title / MeaningAD Agreement / Agreement on Implementation of ArticleVI of the General Agreement on Tariffs and Trade 1994
ASP / Average Selling Price
BOK / Bank of Korea
CBO / Collateralized Bond Obligation
CHB / Choheung Bank
CLO / Collateralized Loan Obligation
CRA / Agreement of Financial Institutions for Promoting Corporate Restructuring (Corporate Restructuring Agreement)
CRPA / Corporate Restructuring Promotion Act
CVD / Countervailing Duties
D/A / Document against Acceptance
DDR / Double Data Rate
DOC / United States Department of Commerce
DRAM / Dynamic Random Access Memory Chips
DRAMS / Dynamic Random Access Memory Semiconductors
DSB / Dispute Settlement Body
DSU / Understanding on Rules and Procedures Governing the Settlement of Disputes
EC / European Communities
FAB / Fabrication Facilities or Plants
FSC / Financial Supervisory Commission
FSS / Financial Supervisory Service
GATT 1994 / General Agreement on Tariffs and Trade 1994
GDS / Global Depositary Shares
GOK / Government of Korea
H&CB / Korea Housing and Commercial Bank
HSMA / Hynix Semiconductor Manufacturing America
HYNIX / Hynix Semiconductor, Inc.
IAS / International Accounting Standards
IBK / Industrial Bank of Korea
IMF / International Monetary Fund
ITC / United States International Trade Commission
KCGF / Korea Credit Guarantee Fund
KDB / Korea Development Bank
KEB / Korea Exchange Bank
KEIC / Korea Export Insurance Corporation
KFB / Korea First Bank
KRW / Korea Won
MOU / Memorandum of Understanding
OEM / Original Equipment Manufacturer
Panel Request / Request for the Establishment of a Panel contained in document WT/DS296/2
ROA / Return on Assets
ROK / Republic of Korea
SEC / United States Securities and Exchange Commission
SCM Agreement / Agreement on Subsidies and Countervailing Measures
SSB / Salomon Smith Barney
Vienna Convention / Vienna Convention on the Law of Treaties
WTO / World Trade Organization
WTO Agreement / Marrakesh Agreement Establishing the World Trade Organization
TABLE OF CASES CITED IN THIS REPORT
Short Title / Full Case Title and Citation of CaseArgentina - Footwear (EC) / Appellate Body Report, Argentina – Safeguard Measures on Imports of Footwear, WT/DS121/AB/R, adopted 12January2000, DSR2000:I,515
Panel Report, Argentina – Safeguard Measures on Imports of Footwear, WT/DS121/R, adopted 12January2000, as modified by the Appellate Body Report, WT/DS121/AB/R, DSR2000:II,575
Argentina – Poultry Anti-Dumping Duties / Panel Report, Argentina – Definitive Anti-Dumping Duties on Poultry from Brazil, WT/DS241/R, adopted 19May2003
Brazil – Aircraft
(Article 21.5 – CanadaII) / Panel Report, Brazil – Export Financing Programme for Aircraft – Second Recourse by Canada to Article21.5 of the DSU, WT/DS46/RW/2, adopted 23August2001, DSR 2001:X, 5481
Canada – Aircraft / Panel Report, Canada – Measures Affecting the Export of Civilian Aircraft, WT/DS70/R, adopted 20August1999, as upheld by the Appellate Body Report, WT/DS70/AB/R, DSR1999:IV,1443
EC–Bed Linen
(Article21.5 – India) / Appellate Body Report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India – Recourse to Article 21.5 of the DSUby India, WT/DS141/AB/RW, adopted 24April2003
EC - Tube or Pipe Fittings / Panel Report, European Communities – Anti-Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, WT/DS219/R, adopted 18August 2003, as modified by the Appellate Body Report, WT/DS219/AB/R
Guatemala – CementII / Panel Report, Guatemala – Definitive Anti-Dumping Measures on Grey Portland Cement from Mexico, WT/DS156/R, adopted 17November2000, DSR2000:XI, 5295
Mexico - Corn Syrup / Panel Report, Mexico – Anti-Dumping Investigation of High Fructose Corn Syrup (HFCS) from the United States, WT/DS132/R and Corr.1, adopted 24February2000, DSR2000:III,1345
Thailand - H-Beams / Appellate BodyReport, Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland, WT/DS122/AB/R, adopted 5April2001, DSR 2001:VII, 2701
Panel Report, Thailand – Anti-Dumping Duties on Angles, Shapes and Sections of Iron or Non-Alloy Steel and H-Beams from Poland, WT/DS122/R, adopted 5April2001, as modified by the Appellate Body Report, WT/DS122/AB/R, DSR 2001:VII, 2741
US – Countervailing Measures on Certain EC Products / Appellate Body Report, United States – Countervailing Measures Concerning Certain Products from the European Communities, WT/DS212/AB/R, adopted 8 January 2003
Panel Report, United States – Countervailing Measures Concerning Certain Products from the European Communities, WT/DS212/R, adopted 8 January 2003, as modified by the Appellate Body Report, WT/DS212/AB/R
US - Export Restraints / Panel Report, United States – Measures Treating Exports Restraints as Subsidies, WT/DS194/R and Corr.2, adopted 23August2001, DSR 2001:XI, 5767
US - Hot-Rolled Steel / Appellate Body Report, United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/AB/R, adopted 23 August 2001, DSR 2001:X, 4697
US – Lamb / Appellate Body Report, United States – Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia, WT/DS177/AB/R, WT/DS178/AB/R, adopted 16May2001, DSR 2001:IX, 4051
US - Line Pipe / Appellate Body Report, United States – Definitive Safeguard Measures on Imports of Circular Welded Carbon Quality Line Pipe from Korea, WT/DS202/AB/R, adopted 8March2002
US - Steel Safeguards / Panel Report, United States – Definitive Safeguard Measures on Imports of Certain Steel Products, WT/DS248/R, WT/DS249/R, WT/DS251/R, WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R, WT/DS259/R, adopted 10 December 2003, as modified by the Appellate Body Report, WT/DS248/AB/R, WT/DS249/AB/R, WT/DS251/AB/R, WT/DS252/AB/R, WT/DS253/AB/R, WT/DS254/AB/R, WT/DS258/AB/R, WT/DS259/AB/R
US- Softwood Lumber VI / Panel Report, United States – Investigation of the International Trade Commission in Softwood Lumber from Canada ("US – Softwood LumberVI"), WT/DS277/R, adopted 26 April 2004.
US - Wheat Gluten / Appellate Body Report, United States – Definitive Safeguard Measures on Imports of Wheat Gluten from the European Communities, WT/DS166/AB/R, adopted 19January2001, DSR2001:II, 717
US- Wool Shirts and Blouses / Appellate Body Report, United States – Measure Affecting Imports of Woven Wool Shirts and Blouses from India ("US – Wool Shirts and Blouses"), WT/DS33/AB/R and Corr.1, adopted 23May1997, DSR1997:I,323.
WT/DS296/R
Page 1
I.introduction
A.complaint of korea
1.1On 30 June 2003, Korea requested consultations with the USpursuant to Article 4 of the DSU, Article 30 of the SCM Agreement, and Article XXIIof the GATT 1994, with regard to the DOCPreliminary and Final subsidy determinationson Dynamic Random AccessMemory Semiconductors from Korea, published in the Federal Registeron 7 April 2003 and23June 2003, respectively,the ITCPreliminary injury determination published in the Federal Registeron 27 December 2003, and any subsequent determinations made during the ITC's injury investigation onDRAMS and DRAM Modules from Korea.[1]
1.2On 18 August 2003, Korea requested further consultations with the US pursuant to the same provisions cited in its initial request, with regard to the ITC's Final determination of material injury, and the DOC's Final countervailing duty order, both published in the Federal Register on 11August2003. According to Korea, both of these actions relate to the same underlying measures at issue in Korea's initial request for consultations.[2]
1.3Korea and the US held consultations on 20 August 2003 and 1 October 2003, but failed to reach a mutually satisfactory resolution of the matter.With respect to the ITC preliminary injury determination and the DOC countervailing duty order, the US maintained that Korea's consultation requests did not conform with Article 4.4 of the DSU because Korea did not identify any provisions with which the preliminary determination or order were inconsistent. The US asserted that, as a result, it did not agree to consult on either the preliminary determination or the order.[3]
1.4On 19 November 2003, Korea requested the establishment of a Panel to examine the matter.[4]
B.establishment and composition of the panel
1.5At its meeting on 23 January 2004, the DSB established a Panel in accordance with Article 6 of the DSU and pursuant to the request made by Korea in document WT/DS296/2.
1.6At that meeting, the parties to the dispute also agreed that the Panel should have standard terms of reference. The terms of reference are, therefore, the following:
[t]o examine, in the light of the relevant provisions of the covered agreements cited by Korea in document WT/DS296/2, the matter referred by Korea to the DSB in that document, and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements
1.7On 23 February 2004, Korea requested the Director-General to determine the composition of the Panel, pursuant to paragraph 7 of Article 8 of the DSU. This paragraph provides:
If there is no agreement on the panelists within 20 days after the date of the establishment of a panel, at the request of either party, the Director-General, in consultation with the Chairman of the DSB and the Chairman of the relevant Council or Committee, shall determine the composition of the panel by appointing the panelists whom the Director-General considers most appropriate in accordance with any relevant special or additional rules or procedures of the covered agreement or covered agreements which are at issue in the dispute, after consulting with the parties to the dispute. The Chairman of the DSB shall inform the Members of the composition of the panel thus formed no later than 10 days after the date the Chairman receives such a request.
1.8On 5 March 2004, the Director-General accordingly composed the Panel as follows:[5]
Chairman:Mr. Hardeep Puri
Members:Mr. John Adank
Mr. Michael Mulgrew
1.9China, the European Communities, Japan and Chinese Taipei reserved their third-party rights.
C.panel proceedings
1.10The Panel met with the parties on 23-24 June 2004 and on 21-22 July 2004. The Panel met with third parties on 24 June 2004.
1.11The Panel submitted its Interim Report to the parties on 17 November 2004. The Panel submitted its final report to the parties on 21 December 2004.
II.FACTUAL ASPECTS
2.1This disputearises out of a countervailing duty investigationby the US on imports of DRAMS and Memory Modules containing DRAMS[6] from Korea. Korea alleges that both the determination of existence of a countervailable subsidy by the DOC and the determination of material injury by the ITC, which led to the US countervailing duty order against DRAMS from Korea, and the order itself, are inconsistent with certain US obligations under the SCM Agreement and the GATT1994.
2.2On 1 November 2002, Micron Technology, Inc. filed a petition with the investigating authorities of the US (DOC and ITC) regarding imports of allegedly subsidised DRAMS from Korea. On 8 November 2002, the ITC published a notice of initiation of an investigation of the injury allegations.[7] The ITC's final injury determination covered the full years 2000, 2001 and 2002, as well as the first quarters of 2002 and 2003.[8] On 27 November 2002, the DOC initiated an investigation of the subsidy allegations. The DOC investigation covered the period of1 January 2001 through 30June2002.[9]
2.3The two products concerned by the investigations were (1) DRAMS, subheading 8542.21.80 of the Harmonized Tariff Schedule of the US (HTSUS); and (2) Memory modules containing DRAMS, subheading 8473.30.10 of the HTSUS[10]as described more specifically in the DOC's countervailing duty order.
2.4Exporters concerned were Hynix Semiconductor, Inc. and Samsung Electronics Co., Ltd.[11]
2.5The ITC published a Preliminaryinjury determination on 27 December 2002[12] and a Final injury determination on 11 August 2003.[13] The DOC published a Preliminary Determinationon 7April 2003with an affirmative finding for Hynix Semiconductors, Inc. (provisional duties of 57.37per cent) and a negative finding for Samsung Electronics Co., Ltd.[14] The DOC published a Final subsidy determination on 23 June 2003[15], amended on 28 July 2003, with an affirmative finding for Hynix Semiconductors, Inc. (final countervailable subsidy of 44.29 per cent) and a negative finding for Samsung Electronics Co., Ltd. (de minimis countervailable subsidy of 0.04 per cent).[16]Because of the DOC's negative finding for Samsung Electronics Co., Ltd., the ITC's final injury determination concerned subject DRAMS produced by Hynix Semiconductor Inc.[17] On 11August2003, the DOC published a final countervailing order[18], requiring at the same time as importers would normally deposit estimated duties, a cash deposit equal to a net subsidy rate of 44.29per cent, for all entries of DRAMS from Korea, except Samsung entries, as described more specifically in the countervailing duty order.
III.parties' requests for findings and recommendations
A.Korea
3.1In its first submission[19], Korea requests the Panel to make findings that the US acted inconsistently with its obligations under Articles 1, 2, 10, 12, 14, 15, 19, 22 and 32 of the SCM Agreement, as well as Article VI:3 of the GATT 1994. Specifically, Korea requests the Panel to find that the US acted inconsistently with:
(a)Article 15.1 because inter alia, the ITC injury determinations and causation were not based on positive evidence and an objective assessment of the effects of allegedly subsidized imports;
(b)Article 15.2 because inter alia, the ITC injury determinations improperly assessed the significance of the volume effects of subject imports;
(c)Article 15.2 because inter alia, the ITC injury determinations improperly assessed the significance of the price effects of subject imports;
(d)Article 15.4 because inter alia, the ITC failed to consider all factors relevant to the overall condition of the domestic industry;
(e)Article 15.5 because inter alia, the ITC failed to demonstrate the requisite causal link between subject imports and injury;
(f)Article 15.5, because inter alia, the ITC improperly assessed the role of other factors, and improperly attributed the effect of other factors to the allegedly subsidized imports;
(g)Article 15.2 and 15.4 because inter alia, the ITC improperly and inconsistently defined the domestic industry;
(h)Article 22.3 because inter alia, the ITC’s injury determination did not set forth in sufficient detail the ITC's findings and conclusions on all material issues of fact and law;
(i)Article 1.1 because inter alia, the DOC failed to demonstrate the existence of a financial contribution by the Government of Korea with respect to the October 2001 restructuring at issue in its subsidy investigation;
(j)Article 1.1 because inter alia, the DOC failed to demonstrate the existence of a financial contribution with respect to the other discrete transactions at issue;