Complaint by Korea
On 30 June 2003, Korea requested consultations with the United States concerning the US authorities' 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 authorities' countervailing duty determinations on DRAMs and DRAM modules from Korea. This request concerns the USITC's affirmative final injury determination and the DOC's 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. 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 2004.
On 21 February 2005, the Panel report was circulated to Members.
* Concerning the DOC's finding of financial contribution to Hynex 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 DOC's determination of entrustment or direction of those creditors is inconsistent with Article 1.1(a)(1)(iv) of the SCM Agreement.
* Concerning the DOC's finding of benefit conferred to Hynex, 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 DOC's benefit determination is inconsistent with Articles 1.1(b) of the SCM Agreement.
* Concerning specificity, the Panel found that the DOC's 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 DOC's finding of specificity in respect of Group A creditors was based on the Government of Korea's activity specifically focused on Hynix, the Panel considered that such finding was consistent with Article 2 of the SCM Agreement.
* Concerning the ITC's 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 ITC's obligation under Article 15.5 of the SCM Agreement.
* 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 Status 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.
| Brief Date | Brief Description |
|---|---|
| 05/11/2005 | Oral Statement of the United States at the Oral Hearing (pdf) |
| 04/25/2005 | Appellee Submission of the United States (pdf) |
| 04/05/2005 | Appellant Submission of the United States (pdf) |
