WORLD TRADE
ORGANIZATIONWT/DS163/R
1 May 2000
(00-1679)
Original:  English
KOREA – MEASURES AFFECTING GOVERNMENT
PROCUREMENT
Report of the Panel
The report of the Panel on Korea – Measures Affecting Government Procurement  is being circulated
to all Parties to the Government Procurement Agreem ent, pursuant to the DSU.  The report is being
circulated as an unrestricted document from 1 May 2000 pursuant to the Procedures for the
Circulation and Derestriction of GPA Documents (GPA/1/Add.2).  Parties to the GPA are reminded
that in accordance with the DSU only parties to the dispute may appeal a Panel report, an appeal shall
be limited to issues of law covered in the Panel report and legal interpretations developed by thePanel, and that there shall be no ex parte  communications with the Panel or Appellate Body
concerning matters under consideration by the Panel or Appellate Body.
Note by the Secretariat:  This Panel Report shall be adopted by the Dispute Settlement Body (DSB) within 60 days after the date
of its circulation unless a party to the dispute decides to appeal  or the DSB decides by consensus not to adopt the report.  If  the
Panel Report is appealed to the Appellate Body, it shall not be  considered for adoption by the DSB until after the completion o f
the appeal.  Information on the current status of the Panel Report is available from the WTO Secretariat.WT/DS163/R
Page i
TABLE OF CONTENTS
I. PROCEDURAL BACKGROUND ........................................................................................................ ...... 1
II. FACTUAL ASPECTS ............................................................................................................. ..................... 2
A. INTRODUCTION ............................................................................................................................... ............. 2
B. THE AGREEMENT ON GOVERNMENT PROCUREMENT .................................................................................... 2
1. Uruguay Round Negotiati ons of the GPA ........................................................................................ ......... 2
2. Overview of the Scope and Coverage of the GPA ................................................................................ ..... 3
C. K OREA 'S ACCESSION TO THE AGREEMENT ON GOVERNMENT PROCUREMENT ............................................ 3
1. Korea's Application for Accession ............................................................................................ ................ 3
2. Korea's Accession Offers..................................................................................................... ...................... 4
3. Communication between the Parties During Korea's Accession ............................................................ 104. Korea's Accession............................................................................................................ ........................ 11
D. K
OREA 'S IMPLEMENTATION OF THE GPA.................................................................................................. 11
1. Modification of Korea's Appendix I ........................................................................................... ............. 11
2. Notification of National Im plementing Legislation ............................................................................ ..... 11
E. T HE INCHON INTERNATIONAL AIRPORT PROJECT ..................................................................................... 11
1. General Description of the Project ........................................................................................... .............. 11
2. Chr onology ................................................................................................................... ........................... 12
III. FINDINGS AND RECOMMENDATIONS RE QUESTED BY TH E PARTIE S.............................. 24
A. U NITED STATES ............................................................................................................................... .......... 24
B. K OREA ............................................................................................................................... ....................... 25
IV. ARGUMENTS OF THE PARTIES .................................................................................................... .. 25
A. E NTITIES COVERED UNDER KOREA 'S APPENDIX I OF THE GPA ................................................................. 25
1. Interpretation of Appendix I and Notes ....................................................................................... ............ 25
2. Appendix I, Annex 1:  Branch O ffices and Subsidiary  Organizations..................................................... 26
3. Appendix I, Annex 1:  The Scope of "Central Gover nment Entities" ...................................................... 32
4. Appendix I, Annex 1:  Note 1................................................................................................. .................. 56
5. Responses to Panel Qu estion Regardi ng KAA .................................................................................... .... 65
6. Appendix I:  General Note 1(b)............................................................................................... ................ 73
7. Appendix I:  Annex 3 ......................................................................................................... ...................... 75
8. Coverage of Entities versu s Coverage of  Projects ............................................................................. ..... 82
9. Amendments to Appendix under Article XXIV:6 .................................................................................. ... 82
B. P REPARATORY WORK AND OTHER EVIDENCE .......................................................................................... 83
1. Negotiation of the GPA ....................................................................................................... .................... 83
2. History of Korea's Accession................................................................................................. .................. 90
3. Subsequent Practice .......................................................................................................... .................... 109
4. Press Releases and Other Publications........................................................................................ ......... 110
5. MOCT's Website and Other Entities' Websites .................................................................................. ... 112
C. P RACTICES IN VIOLATION OF THE GPA................................................................................................... 115
1. Bid Deadlines ................................................................................................................ ........................ 115
2. Qualification requirements................................................................................................... ................. 115
3. Domestic Partnering Requirements ............................................................................................. ......... 118
4. Absence Of Access To Challenge Procedures.................................................................................... ... 120
5. Korea's Response to the Violation Claim...................................................................................... ........ 121
D. N ON-VIOLATION CLAIM :  NULLIFICATION OR IMPAIRMENT OF BENEFITS .............................................. 121
1. Details of the Non-Violation Claim........................................................................................... ............ 121
2. Concession ................................................................................................................... ......................... 123
3. Measure...................................................................................................................... ........................... 127
4. Reasonable Expecta tion of a Benefit.......................................................................................... ........... 129
V. ARGUMENTS OF THIRD PARTIES (EUROPEAN COMMUNITIES) ........................................... 146
A. E NTITIES COVERED UNDER KOREA 'S APPENDIX I OF THE GPA ............................................................... 146
1. Interpretation of Appendix I and Notes ....................................................................................... .......... 146
2. Annex 1, Appendix I: The Scope of "Central Gover nment En tities" ..................................................... 147WT/DS163/R
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(a) The Ordinary Meani ng of "Central Go vernment En tities" .................................................................... 147
3. Annex 1, Appendix I:  Note 1................................................................................................. ................ 148
4. Appendix I:  Note 1(b)....................................................................................................... .................... 150
5. Amendments to the Appendix under Article XXIV:6.............................................................................. 151
(a) The Obligations Under Article XXIV:6 ........................................................................................ ......... 151
VI. INTERIM REVIEW.............................................................................................................. ............... 153
VII. FINDINGS ................................................................................................................... ......................... 160
A. CLAIMS OF THE PARTIES .......................................................................................................................... 160
B. GPA COVERAGE OF THE INCHON INTERNATIONAL AIRPORT PROJECT ....................................................... 161
1. General...................................................................................................................... ............................ 161
2. Covered Entities under Korea's Annex 1....................................................................................... ........ 163
3. Negotiations for Korea's GPA Accession....................................................................................... ....... 176
C. ALLEGATION OF NON -VIOLATION NULLIFICATION OR IMPAIRMENT ......................................................... 179
1. General...................................................................................................................... ............................ 179
2. Non-violation Claims in the Context of Principles of Cu stomary International Law ........................... 181
VIII. CONCL USIO NS............................................................................................................... .................... 189
ANNEX 1........................................................................................................................ .................................... 190WT/DS163/R
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I. PROCEDURAL BACKGROUND
1.1 On 16 February 1999, the United States requested Korea to hold consultations pursuant to
Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes
("DSU") and Article XXII of the Agreement on Government Procurement (WT/DS163/1 andGPA/D4/1) regarding certain procurement practices of entities concerned with the procurement of
airport construction for Inchon International Airport ("IIA") in Korea.  The European Communities
requested to join in the consultations on 8 March 1999 (WT/DS163/2) and Japan made the same
request on 9 March 1999 (WT/DS163/3).  Korea accepted neither of these requests.
1.2 A mutually satisfactory solution was not reached during the consultations held between the
United States and Korea on 17 March 1999.  In a communication dated 11 May 1999, the United
States requested the Dispute Settlement Body (DSB) to establish a panel to examine the matter.
1
1.3 At its meeting on 16 June 1999, the Dispute Settlement Body agreed to establish a panel in
accordance with the provisions of Article 6 of the DSU and Article XXII of the GPA, with the
following standard terms of reference pursuant to Article XXII:4 GPA:
"To examine, in the light of the relevant provisions of the Agreement on Government
Procurement, the matter referred to the DSB by the United States in documentWT/DS163/4, and to make such findings as will assist the DSB in making the
recommendations or in giving the rulings provided for in that Agreement."
2
1.4 The European Communities and Japan reserved third party rights.
1.5 The Panel was composed on 30 August 1999 (WT/DS163/5).  The composition of the Panel
was as follows:
Chairman : Mr. Michael D. Cartland
Panelists : Ms. Marie-Gabrielle Ineichen-Fleisch
Mr. Peter-Armin Trepte
1.6 The Panel heard the parties to the dispute on 19 October 1999 and 11 November 1999. The
interim report was issued to the parties on 3 March 2000.
                                                     
1 WT/DS163/4 reproduced in Annex 1 to this report.
2 WT/DSB/M/64.WT/DS163/R
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II. FACTUAL ASPECTS3
A. INTRODUCTION
2.1 This dispute relates to the Inchon Internatio nal Airport (IIA) project, which is being
constructed in the Republic of Korea.  At issue is whether the entities that have had procurement
responsibility for the project since its inception are "covered entities" under the Agreement onGovernment Procurement.  The United States also raised the issue of whether the procurement
practices of these entities are or have been inconsistent with Korea's obligations under the Agreement
on Government Procurement and whether they nullify or impair benefits accruing to the United States
under that Agreement.
B. 
THE AGREEMENT ON GOVERNMENT PROCUREMENT
1. Uruguay Round Negotiations of the GPA
2.2 The original Agreement on Government Procurement was negotiated during the Tokyo
Round of trade negotiations and was done in Geneva on 12 April 1979 ("Tokyo Round Agreement").
This Agreement was amended following negotiations in pursuance of Article IX:6(b) through a
Protocol which entered into force on 14 Febr uary 1988.  During the Uruguay Round of Trade
Negotiations, Parties to the Tokyo Round Agreement held further negotiations in the context of an
Informal Working Group4, which involved the broadening of entity coverage, expansion of the
coverage to services and construction services and further improvements of the text of the Agreement.
2.3 Coverage negotiations were initiated through a bilateral request/offer process in
September 1990.  These negotiations involved the tabling of offers and the submission of requests by
interested Parties to their trading partners.
2.4 Following the bilateral negotiations for improvement and the finalization of specific offers
which occurred in 1993, the final text of the Agreement with the attached draft schedule of parties
was issued on 15 December 1993.  On that date, the Informal Working Group adopted a Decision
concluding negotiations and agreeing that the text entitled Agreement on Government Procurement,
together with Annexes 1-5 of Appendix I of each of the participants embodied the results of their
negotiations as at that date.5  The Decision further specified procedures relating to outstanding work
to be completed prior to the en try into force of the Agreement.6
                                                     
3 All Korean legislation referred to in this report was translated into English by the Government of the
Republic of Korea.
4 The Informal Working Group on Negotiations was originally established in May 1985 to improve the
text of the Tokyo Round Agreement.
5 GPR/SPEC/77.
6 Specifically, paragraph 4 of the Decision stated:
Participants will submit to the S ecretariat by 31 January 1994 the texts of their Annexes in final form
for circulation to all participants.  Those Anne xes will be considered accep ted by participants as
corresponding to what had been negotiated and agreed, unless the Secretariat is notified to the contrary
prior to 28 February 1994.  In the event of problems, consultations will be held to resolve the matter.Further, paragraph 6 of the Decision stated:
Proposed modifications of the Annexes to Appendix I of participants that expand the
coverage of the Agreement and that result from further negotiations between now and
the date of signature of the Agreement will be deemed part of the agreed results ofthe negotiations provided that no participant objects to such modifications.  Toenable all participants to examine any such modifications in advance of the date ofsignature, modifications should be notified to other participants through theSecretariat by 31 March 1994.WT/DS163/R
Page 3
2.5 Further, a decision of the Informal Working Group on negotiations, dated 17 January 1994,
entitled "Modifications of the Annexes to Appendix I to the Agreement on Government Procurement
before its Entry into Force on 1 January 1996", set out procedures for the incorporation into the
Agreement of modifications expanding coverage that were agreed and resulted from negotiations
between the date of signature of the Agreement and the date of its entry into force.
2.6 The Agreement on Government Procurement (1994 ) (the GPA) was signed in Marrakesh on
15 April 1994.  The GPA entered into force on 1 January 1996.
2. Overview of the Scope and Coverage of the GPA
2.7 The GPA establishes an agreed framework of rights and obligations among its Parties with
respect to their national laws, regulations, procedures and practices in the area of government
procurement.
2.8 The obligations under the Agreement apply to procurement:
(a) by procuring entities that each Party has listed in Annexes 1 to 3 of Appendix I
relating respectively to "central government entities," "sub-central government
entities" and "other entities";
(b) of all products;  and(c) of services and construction services that are specified in lists found respectively in
Annexes 4 and 5 of Appendix I.
2.9 Furthermore, GPA coverage under each of the Annexes is contingent upon certain threshold
values being exceeded.  These threshold values are expressed in terms of Special Drawing Rights
(SDRs).  GPA coverage under each of the Annexes is also contingent upon the various notes found in
the Annexes.
C. K
OREA 'S ACCESSION TO THE AGREEMENT ON GOVERNMENT PROCUREMENT
1. Korea's Application for Accession
2.10 Korea was not a Party to the Tokyo Round Agreement.  However, in a communication dated
25 June 1990, the Government of the Republic of Korea indicated its interest in exploring the
possibility of acceding to the GPA. Attached to this communication was a note containing a list of
purchasing entities and products for which coverage was proposed together with explanatory notes.7
2.11 Further, in a communication dated 20 September 19918, the Government of the Republic of
Korea indicated that following submission of its initial offer to the Committee on Government
Procurement on 25 June 1990, it had held bilateral consultations with the Parties in relation to its offerlist.  The communication also requested permission to participate in the Uruguay Round negotiations.
This request was acceded to.
9
                                                     
7 Letter from the Permanent Mission of the Repu blic of Korea to the Director-General, GATT,
dated 25 June 1990.
8 Communication from the Delegation of the Republic of Korea, Document GPR/W/109,
dated 20 September 1991.
9 GPR/M/50 indicates that the Republic of Korea was a full participant in the Uruguay Round
negotiations.WT/DS163/R
Page 4
2.12 Leading up to its accession to the GPA on 15 April 1994, Korea submitted to the Committee
on Government Procurement, a series of offers concerning its commitments under the GPA upon
accession.10
2. Korea's Accession Offers
(a) Offer of 25 June 1990
2.13 In its initial offer11, Korea listed the purchasing entities for which GPA coverage would be
provided without categorizing those entities.  The offer did not contain thresholds above which the
GPA would apply.
(i) Coverage of Entities
2.14 Korea's initial offer included primarily government ministries.12  However, the offer also
proposed coverage of a number of boards13, agencies14, offices15 and administration bodies.16  It also
proposed coverage of one corporation (the Korea National Housing Corporation) and one authority
(the Korea Telecommunication Authority).
2.15 Relevantly, Korea's offer proposed coverage of the Ministry of Construction, the Ministry of
Transportation and the Office of Supply.  The offer specified that the Office of Supply was onlycovered in relation to purchases made by the Office of Supply in its capacity as a central purchasing
entity on behalf of entities referred to elsewhere on Korea's proposed list of covered entities.
17
(ii) Coverage of Products and Services
2.16 By implication, the initial offer applied to all products.  However, a limited list of products
specified in Annex A applied to the Korea Telecommunication Authority.18
(iii) Explanations and Qualifications
2.17 Notes appeared at the end of the list of covered entities.  Note 1 to the offer stated that:
                                                     
10 The original offer was attached to a communication to the Director-General, dated 25 June 1990.
Subsequent offers were submitted on 14 August 1992 in document GPR/Spec/73 and on 14 December 1993.
11 Document accompanying Korea's letter to the GATT, dated 25 June 1990.
12 Specifically, of the 37 entities that were proposed to  be covered by Korea in its initial offer, 19 were
ministries.  Ibid.  pp. 2-3.
13 The Board of Audit and Inspection, the Econom ic Planning Board and the National Unification
Board.
14 The Government Legislation Agency and the Patriots and Veterans Affairs Agency.
15 The Office of Supply, the Supreme Public Prosecutors Office and the Korea Industrial Property
Office.
16 The National Tax Administration, the Customs Administration, the Military Manpower
Administration, the Rural Development Administration, the Forestry Administration, the FisheriesAdministration, the Industrial Advancement Administration and the Korea Maritime and Port Administration.
17 Footnote 3 of document accompanying Korea's letter to the GATT, dated 25 June 1990.
18 The listed products were vehicles, clothing, paper and stationery, tools, poles, conduits, cable
splicing materials, line distributing materials, wi re (except cables), power supplies and accessories, air
conditioning and control equipment, circuit protective devices, test and measuring instruments, telegraph ortelephone-type terminals (except for public terminals), other miscellaneous machinery, appliances and materials,computers (off-line or stand-alone use) and peripherals for off-line computer systems, data terminal equipment
and modems, word processors and keyboard printers.WT/DS163/R
Page 5
"Purchasing entities include all their subordinate linear organizations, special local
administrative organs and attached organs as prescribed in the Government
Organization Act of the Republic of Korea."
2.18 Note 2 stated that:
"This Agreement shall not apply to the procurements with regard to which special
procurement procedures are required and/or permitted in accordance with the laws
and regulations of the Republic of Korea which are effective at the time of entry into
force of this Agreement for the Republic of Korea."
2.19 The initial offer also contained four footnotes that qualified the scope of coverage in respect
of some of the listed entities.  Footnote 1 excluded coverage of procurement by the Ministry of Home
Affairs for the purpose of maintaining public order.  Footnote 2 excluded coverage of procurement by
the Ministry of Agriculture, Forestry and Fisheries for the purposes of stabilizing the demand andsupply situation of agricultural products and en suring provision of basic national foodstuffs.
Footnote 3 stated that procurement by the Offi ce of Supply was only covered when the Office of
Supply was acting for a listed centralized purchasing entity.  Footnote 4 noted that the Korea
Telecommunication Authority was covered only in relation to the goods listed in Annex A except for
goods procured by the local branch offices of that Authority.
(b) Supplementary Explanation  of Offer of 25 June 1990
2.20 By a communication, dated 28 February 1991, which was circulated at least to the United
States19 and the European Communities20, Korea provided a S upplementary Explanation  of its initial
offer of 25 June 1990.21
(i) Entities
2.21 This Supplementary Explanation  identified entities that had not been specifically listed in the
initial offer but were proposed to be covered under the entities that had been listed in that offer.  The
Supplementary Explanation  listed the following entities for which coverage was proposed under the
Ministry of Transportation22:  Regional Aviation Bureaus (2);  CHEJU Regional Aviation Office;
Flight Inspection Office;  VOR-TAC Stations (5 );  and Marine Accident Inquiry Office (5).
2.22 The following entities were proposed to be covered under the Ministry of Construction23:
National Construction Research Institute;  Ce ntral Equipment Management Office;  Regional
Construction and Management Institutes;  District Construction Offices;  Cheju-do Development
Construction Office;  Flood Control Offices;  Construction Officials Training Institute;  and the
National Geography Institute.
2.23 The following entities were proposed to be covered under the Ministry of Communications24:
Regional Communications Offices;  Post Offices;  Communications Officials Training Institute;
Postal Service Research Institute;  Radio Research Laboratory;  Postal Money Order and Giro Center;
Central Radio Monitoring Office;  a nd the Supply and Construction Office.
                                                     
19 Questions 9, 10 and 14 of the United States' questions, entitled "Questions Relating to Korea's
Request to Accede to the Agreement on Government Pr ocurement," sent to Korea on 1 May 1991 indicate that
the United States received a copy of this communication.  (US Exhibit 4)
20 Annex II to the European Communities' Answers to the Panel's Questions, dated 3 November 1999.
21 Supplementary Explanation of the Note by the Republic of Korea, dated 29 June 1990, relating to the
Agreement on Government Procurement, dated February 1991.  (Exhibit Kor-117)
22 Ibid.  p. 11.
23 Ibid.  p. 10.
24 Ibid.  p. 11.WT/DS163/R
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2.24 The following entities were proposed to be covered under the Office Supply25:  Central
Supply Office;  and Regional Supply Offices (10).
(ii) Notes
2.25 The Supplementary Explanation  also elaborated on the notes to Korea's initial offer.26
Specifically, the explanation stated the following in relation to Note 1:
"Note 1 is established to clarify the coverage of central government organs, which
come under 35 of 37 purchasing entities.
The meaning and categories of subordinate linear organizations, special local
administrative organs and attached organs are prescribed in the Government
Organization Act of Korea as follows:
- Subordinate linear organizations: offi ce of the minister, vice-minister,
assistant minister, director general, director etc.
- Special local administrative organs: the organs established in local regions by
central government organs when necessary, for example, local tax offices by
the National Tax Administration and local post offices by the Ministry of
Communication.
- Attached organs: the organs established by central government organs for the
purpose of R&D, training and education, culture, medical care, and
consulting.  These include the Central Officials Training Institute by the
Ministry of Government Administration and the National Film Production
Center by the Ministry of Information."
(c) Offer of 14 August 1992
2.26 The second offer made by Korea was first circulated informally to members of the Informal
Working Group on 12 May 1992 and then formally to the Committee on Government Procurement on
14 August 1992 in document GPR/Spec/73.  The offer was stated to be made in substitution for theinitial offer made on 25 June 1990.
27  Korea further stated that it reserved the right to withdraw,
amend or supplement its offer in the future taking into account the offers made by other Parties and
the progress made during negotiations on the expansion of the Agreement.28
2.27 The offer listed the purchasing entities for which GPA coverage would be provided and
specified the GPA Annexes under which coverage woul d be provided for those entities.  The offer did
not specify the products that would be covered by Korea's offer but, by implication, the offer applied
to all products.  The offer specified the services that would be covered in Annex 4 and constructionservices that would be covered in Annex 5.  The of fer also contained thresholds in Annexes 1, 2 and 3
above which the GPA would apply for all products and for the services and construction services
referred to in Annexes 4 and 5.
                                                     
25 Ibid.
26 Ibid.  pp. 26 –28.
27 Document GPR/Spec/73, p. 2.
28 Ibid.WT/DS163/R
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(i) Coverage of Entities
2.28 The entities that were proposed to be covered under Annex 1 in Korea's offer of
14 August 1992 were substantially the same as the entities for which Korea proposed coverage in its
initial offer.  As in the case of the initial of fer, Korea proposed coverage under Annex 1 of the
Ministry of Construction, Ministry of Communicat ion and the Ministry of Transportation.  It also
continued to propose coverage of the Office of Supply subject to the same limitation that was
expressed in Korea's initial offer, namely that procurement by the Office of Supply was only covered
in relation to purchasing undertaken on behalf of entities listed in Annex 1.
2.29 Korea also proposed coverage of entities at the sub-central level that had not been included in
its initial offer.  Specifically, Korea proposed coverage under Annex 2 of the Seoul Metropolitan
Government, City of Pusan, City of Taegu, City of Inchon, City of Kwangju and City of Taejon.29
The offer indicated that the Offices of Subw ay Construction were not covered under Annex 2.
2.30 Finally, Korea proposed coverage under Annex 3 of the Office of Waterworks, Seoul
Metropolitan Government;  Office of Waterworks, City of Pusan;  Office of Waterworks, City of
Taegu;  Office of Waterworks, City of Inchon;  Office of Waterworks, City of Kwangju;  Office of
Waterworks, City of Taejon.  It also proposed coverage of Korea Telecom, Korea National Railroad,Korea Container Terminal Authority, Korea Development Bank, Korea National Housing Corporation
and Agricultural and Fishery Mark eting Corporation under Annex 3.
30
(ii) Coverage of Products and Services
2.31 Korea's offer of 14 August 1992 applied to all products except for goods referred to in
parentheses next to the names of some of the listed entities.  Further, unlike the initial offer, the offer
of 14 August 1992 did propose coverage of services.  It proposed coverage of a list of services
specified in Annex 4.  The offer also proposed coverage of construction services listed in Annex 5.
(iii) Explanations and Qualifications
2.32 Note 1, which appeared at the end of Korea's initial offer and stated that listed purchasing
entities include "subordinate linear organizations, special local administrative organs and attached
organs as prescribed in the Government Organization Act, " was repeated in identical terms in Korea's
offer of 14 August 1992.  However, in the case of the later offer, the qualification appeared as a
preface to the list of entities contained in Annex 1 and purported to relate exclusively to "central
government entities."31  Note 2, which concerned procurements that were subject to special
procurement procedures and qualified Korea's initial offer, appeared in similar terms in the offer of
14 August 1992 but only applied to Annex 5.32
2.33 In the offer of 14 August 1992, Annexes 4 and 5 were made subject to a new qualification
which provided that the exceptions and restrictions contained in the Revised Conditional Offer of the
Republic of Korea Concerning Initial Commitments on Trade in Services33 would apply to services
listed in those Annexes and that the Korean Government may impose restrictions on qualification,registration, licensing and/or other authorization requirements on service providers according to
domestics laws and regulations.
34
                                                     
29 Ibid.  p. 5.
30 Ibid.  p. 6.
31 Ibid.  p. 3.
32 Ibid.  p. 8.
33 MTN.TNC/W/61/Rev.1, dated 19 February 1992.
34 Document GPR/Spec/73, pp. 7-8.WT/DS163/R
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2.34 The qualifications that had appeared in footnotes 1 and 2 in the initial offer did not appear in
the offer of 14 August 1992.  However, other qualifications appeared in the later offer in parentheses
next to the names of some listed entities.
(d) Offer of 14 December 1993
2.35 Korea made its final formal offer prior to accession on 14 December 1993.35  The offer again
stated that Korea reserved the right to make techni cal changes to the offer and to correct any errors,
omissions or inaccuracies prior to 15 April 199436, being the date by which the Agreement on
Government Procurement (1994) and the Final Act Embodying the Results of the Uruguay Round of
Multilateral Trade Negotiations were scheduled to be signed.
2.36 The structure of Korea's final offer was largely the same as for Korea's offer dated
14 August 1992.  Specifically, the offer again listed the purchasing entities for which GPA coveragewould be provided and specified the GPA Annexe s under which coverage would be provided for
those entities.  The offer purported to apply to all products.  Further, it specified the services that
would be covered in Annex 4 and construction services in Annex 5.  The offer again contained
thresholds in Annexes 1, 2, 3 and 4 and specified in Annex 5, a threshold for construction services of
5,000,000 SDR for Annex 1 entities, 15,000,000 SDR for Annex 2 entities and 15,000,000 SDR forAnnex 3 entities.
(i) Coverage of Entities
2.37 Korea's final offer and its previous offer of 14 August 1992 were the same in all relevant
respects in respect of coverage under Annex 1.  However, the lists of entities covered underAnnexes 2 and 3 were expanded in the final offer.
2.38 Specifically, in addition to the entities for which coverage was proposed under Annex 2 in its
offer of 14 August 1992, Korea also proposed coverage of the following entities in its final offer:
Kyonggi-do, Kang-won-do, Chungchongbuk-do, Chungchongnam-do, Kyongsangbuk-do,
Kyongsangnam-do, Chollabuk-do, Chollanam-do and Cheju-do.  Unlike the offer of 14 August 1992,the final offer did not state that the Offices of Subway Construction were not covered under Annex 2.
2.39 In relation to Annex 3, the final offer did not include the various Office of Waterworks that
had been specified in the offer of 14 August 1992.  However, the final proposal for Annex 3
37
included four banks (Korea Development Bank, Small and Medium Industry Bank, Citizens NationalBank and Korea Housing Bank) and 17 corporations (Korea Tobacco & Ginseng Corporation, Korea
Security Printing and Minting Corporation, Korea Electric Power Corporation, Dai Han Coal
Corporation, Korea Mining Promotion Corporati on, Korea Petroleum Development Corporation,
Korea General Chemical Corporation, Korea Tr ade Promotion Corporation, Korea Highway
Corporation, Korea National Housing Corporation, Korea Water Resources Corporation, Korea Land
Development Corporation, Rural Development Cor poration, Agricultural and Fishery Marketing
Corporation, Korea National Tourism Corporati on, Korea Labor Welfare Corporation, Korea Gas
Corporation).  It also included Kore a Telecom and National Textbook Ltd.
(ii) Coverage of Products and Services
2.40 As in the case of Korea's offer of 14 August 1992, the final offer applied to all products
except for goods referred to in parentheses next to the names of some of the listed entities.  It also
applied to a list of services specified in Annex 4 which was broader than the list of services that were
                                                     
35 "Korea's Offer in the Agreement on Government Procurement", dated 14 December 1993.
36 Ibid.  p. 1.
37 Ibid.  p. 9.WT/DS163/R
Page 9
included in the offer of 14 August 1992.38  Korea's final offer also included a range of construction
services to be covered under Annex 5.39
(iii) Explanations and Qualifications
2.41 The note concerning the application of Annex 1 to "subordinate linear organizations, special
local administrative organs, and attached organs as prescribed in the Government Organization Act "
that appeared in Korea's initial offer and its offer of 14 August 1992 also appeared in its final offer as
Note 1 to Annex 1.
2.42 The Note that appeared in Annex 5 of Korea's offer of 14 August 1992 concerning special
procurement procedures was deleted from the final offer.  The qualifications to Annexes 4 and 5 in
the offer of 14 August 1992 regarding "the Revised Conditional Offer of the Republic of Korea
Concerning Initial Commitments on Trade in Services" were also deleted from the final offer.
2.43 The final offer additionally contained the following note (Note 1) which applied to Annex 2:
"The above sub-central administrative government entities include their subordinate
organizations under direct control and offices as prescribed in the Local Autonomy
Law of the Republic of Korea."
2.44 The final offer also introduced general notes that applied to all the Annexes.40  General Note 1
provided:
"Korea will not extend the benefit of this Agreement
(a) as regards the award of contracts by National Railroad Administration,
(b) as regards procurement for airports by the entities listed in Annex 1,(c) as regards procurement for urban transportation (including subways) by the
entities listed in Annexes 1 and 2
to the suppliers and service providers of member states of the European Community,
Austria, Norway, Sweden, Finland and Switzerland, until such time as Korea hasaccepted that those countries give comparable and effective access for Korean
undertakings to their relevant markets."
2.45 In the final offer, qualifications again appeared in parentheses next to the names of some
listed entities.
(e) The Government Organization Act
2.46 As noted above at paragraph 2.41, Korea's final offer provided in Note 1 to Annex 1 that all
central government entities listed in Annex 1 included their "subordinate linear organizations, special
local administrative organs and attached organs as prescribed in the Government Organization Act  of
the Republic of Korea".  This qualification also appeared in Korea's previous accession offers.41
2.47 As at 30 December 1989, Article 2 of the Government Organization Act  entitled
"Establishment and Organization of Central Administ rative Organs" provided in sub-article (3) that:
                                                     
38 Ibid. p. 13.
39 Ibid.  p. 17.
40 Ibid.  p. 18.
41 See paragraphs 2.17 and 2.32.WT/DS163/R
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"The subordinate linear organizations of the central administrative organs shall be
Cha-Gwan (Vice-Minister), Cha-Jang (Deputy Administrator), Sil-Jang (Office
Director), Guk-Jang (Bureau Director) or Bu-Jang (Department Director) and
Gwa-Jang (Division Director), under Vice- Minister or Deputy Administrator, as
division not belonging to Office, Bureau or Department may be set up except thoseotherwise prescribed by special provisions in this Act or any other laws.  The
subordinate linear organizations undertaking national police affairs under the
Ministry of Home Affairs, however shal l be Bon-Bu-Jang (Chief Commissioner of
Policy), Bu-Jang (Department Director) an d Gwa-Jang (Division Director);  and for
those undertaking civil defense affairs, Bon-Bu-Jang (Chief of Civil Defense
Headquarters), Guk-Jang (Bureau Direct or) and Gwa-Jang (Division Director)."
2.48 Article 3 of the 1989 Government Organization Act  entitled "Establishment of Special Local
Administrative Organs" provided in sub-article (1) that:
"Each central administrative organ may have local administrative organs as
prescribed by Presidential Decree except those especially prescribed by laws, in case
they are necessary for the implementation of the duties under its jurisdiction."
2.49 Article 4 of the 1989 Government Organization Act  entitled "Establishment of Attached
Organizations" provided that:
"In an administrative organ, there may be established by the Presidential Decree
organizations for experiment and research, education and training, culture, medicine,
manufacturing or advice, respectively, if necessary for the fulfilment duties under its
jurisdiction."
2.50 The above provisions remained largely the same in all relevant respects despite various
changes that were made to the Government Organization Act  from 30 December 1989 until Korea's
GPA obligations came into effect.  However, the English translation of the title of Article 2(3) was
amended to prescribe "subsidiary organs of central administrative agencies" rather than "subordinate
linear organizations of the central administrative organs", the latter phrase being used in the 1989version of the Act.
3. Communication between the Parties During Korea's Accession
2.51 The United States began bilateral negotiations with Korea regarding its accession bid on
22 April 1991.  During the course of these negotiations, the United States put a series of questions to
Korea regarding its offer.
42  Question 6 asked:
"How does the Airport Development Group relate to the Ministry of
Communications?  Does Korea's offer of coverage of the Ministry ofCommunications include purchases for the Airport Development Group?  Please
identify all Ministries that will be responsible for the procurement of goods and
services related to new airport construction."
2.52 In response, Korea answered
43:
"The new airport construction is being conducted by the New Airport Development
Group under the Ministry of Transportation.  The new airport construction project is
scheduled to be completed by 1997 after the completion of the basic plan by 1992 and
                                                     
42 Letter from the US Trade Mission to the Mission of the Republic of Korea, dated 1 May 1991.
43 Korea's Answers to Questions from the USTR delivered on 1 May 1991, dated July 1991.WT/DS163/R
Page 11
the working plan by 1993.  The US company, Bechtel, is taking part in the basic plan
projects.
The responsible organization for procurement of goods and services relating to the
new airport construction is the Office of Supply.  But at present, the concrete
procurement plan has not been fixed because now the whole airport constructionproject is only in a basic planning stage."
4. Korea's Accession
2.53 Korea became a signatory to the Agreement on Government Procurement signed at
Marrakesh on 15 April 1994.  There were no further changes made to Korea's accession offer between
the date of Korea's final offer, namely, 14 December 1993, and the signing of the new GPA at the
Marrakesh Ministerial Conference in April 1994.
2.54 While the GPA entered into force for existing Parties on 1 January 1996, it entered into force
for Korea on 1 January 1997.
44
2.55 In its final form at accession, Korea's Appendix I to the GPA was identical in all relevant
respects to Korea's final offer of 14 December 1993.
D. KOREA 'S IMPLEMENTATION OF THE GPA
1. Modification of Korea's Appendix I
2.56 On 24 October 1997, Korea notified the Committee on Government Procurement of a
proposed modification to Appendix I pursuant to Article XXIV:6(a) of the GPA.45  Paragraph 3 of the
relevant communication stated:
"Delete "Ministry of Construction" and "Ministry of Transportation."  Add "Ministry
of Construction and Transportation" instead.  This rectification is based on the factthat the "Ministry of Construction" and the "Ministry of Transportation" have been
merged to form the "Ministry of Construction and Transportation"."
2.57 In accordance with procedures of Article XXIV:6, the changes proposed by Korea entered
into force on 23 November 1997.
46
2. Notification of National Implementing Legislation
2.58 Korea notified its national implementing legislation to the Committee on Government
Procurement in accordance with the Committee's Decision of 4 June 1996.47
E. THE INCHON INTERNATIONAL AIRPORT PROJECT
1. General Description of the Project
2.59 The project in question concerns the construction of Inchon International Airport.  The airport
is being built on reclaimed land between two islands, Yongjong and Yongyu48, and is 52 kilometres
                                                     
44 Article XXIV:3(a) of the GPA.
45 Document GPA/W/59, dated 24 October 1997.
46 WT/Let/207.
47 GPA/1/Add.1 and GPA/12/Rev.1, dated 9 June 1997.
48 "Inchon International Airport:  A Future-Oriented Airport, Increasing the Value of Time," p. 3.WT/DS163/R
Page 12
west of the centre of the Republic of Korea's capital, Seoul.  More specifically, it is located in the
official district of Unsee-Dong, Chung-Ku, Inchon City.
2.60 The project commenced in 1990.  The first phase of construction (which includes airport
start-up and commissioning) is scheduled to be completed by the end of 2000.  Later phases of airport
construction will continue until 2020 and will be based on future traffic demand.49
2.61 It is estimated that the first phase of construction will cost W 300.9 billion.  This includes the
cost of land acquisition, compensation for fishing rights, the actual cost of construction and support
expenses including design and supervision.  The total cost of the project is estimated to be in the
vicinity of W 2,964 billion.  According to a publication regarding the IIA project, the government
contribution to the cost of the project is projected to be 40 per cent of the total cost and the remainder
will come from other sources including domestic and overseas capital markets.50
2. Chronology
(a) Project Stages
2.62 On 14 June 1990 the site for the IIA project was selected.51  In November 1990, the
preparation of the Master Plan commenced.52  On 24 December 1991, the Master Plan was
completed53 and was announced on 16 June 1992.54  On 12 November 1992, the ground-breaking
ceremony occurred at the IIA site and site preparation commenced.55  As at February 1999, the first
phase of construction (airport start-up and commissioning) was 62.7 per cent complete.56
(b) Entities
(i) Introduction
2.63 An act regarding the IIA project, entitled the Act on the Promotion of a New Airport for Seoul
Metropolitan Area Construction  ("Seoul Airport Act "), was enacted on 31 May 1991.  Article 1 of the
Seoul Airport Act provides that:
"The purpose of this Act is, by specifying the matters necessary for the speedy
construction of a new airport in the Seoul Metropolitan area, to push ahead efficiently
with the new airport construction project to meet the rapidly growing demands for air
transport service in the Seoul Metropolitan area and to contribute to the development
of national economy."
2.64 While the Ministry of Transportation and, more specifically, the New Airport Development
Group under that Ministry, was originally responsible for the IIA project57, the Seoul Airport Act
contemplated the appointment of an operator for the IIA project.  However, the Act did not specify theidentity of the operator.  Rather, it left this issue open.  Specifically, it provided in Article 6(1) that:
                                                     
49 Ibid.  p. 14.
50 Ibid.  p. 41.
51 History of KOACA (Document from KOACA website) and "Inchon International Airport:  A
Future-Oriented Airport, Increasing the Value of Time," p. 42.
52 Timeline of events relating to Inchon International Airport construction prepared by the US.
53 History of KOACA and "Inchon International Airport:  A Future-Oriented Airport, Increasing the
Value of Time," p. 42.
54 History of KOACA.
55 History of KOACA  and "Inchon International Airport:  A Future-Oriented Airport, Increasing the
Value of Time," p. 42.
56 "Inchon International Airport:  A Future-Oriented Airport, Increasing the Value of Time," p. 42.
57 Korea's Answers to Questions from the USTR delivered on 1 May 1991, dated July 1991.WT/DS163/R
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"The new airport construction project shall be implemented by the state, local
governments, or a government-invested institution as determined by the Presidential
Decree."
2.65 Further, Article 6(2) provided that:
"The Minister of Construction and Transportation may, where he deems it necessary
for efficient execution of the new airport construction project, arrange for a person
other than those referred to in paragraph (1) to implement part of the project."
2.66 Since the inception of the project, authority for the IIA project has been assigned to various
authorities or "operators" by the Korean National Assembly.  On 14 December 1991, authority was
assigned to Korea Airports Authority (KAA).  On 1 September 1994, authority was transferred to
Korea Airport Construction Authority (KOACA).  Finally, authority was transferred to the Inchon
International Airport Corporation (IIAC) on 1 February 1999.
(ii) MOCT
2.67 The Ministry of Transportation originally had jurisdiction over the IIA project.  Pursuant to
Article 40 of the Government Organization Act as it existed in June 1993, it derived its authority from
Article 40 of the Government Organization Act .  Article 40(1) provided that:
"The Minister of Transportation shall have jurisdiction over the affairs relating to
land, air and marine transportation and tourism."
2.68 The current version of the Government Organization Act  contains a similar provision in
Article 42.
2.69 Of relevance is the Aviation Act , which was wholly amended on 14 December 1991.
Article 1 of the Act as it then existed provided that:
"The purpose of this Act is to contribute to the development of aviation and the
promotion of public welfare by determining methods to assure the safety in air
navigation, increasing the efficiency of installation and management of air navigation
facilities, and establishing the order in the air transportation services, pursuant to theprovisions of the International Civil Aviation Treaty and in conformity with standards
and ways as adopted by the Annex to the said Treaty."
2.70 Article 1 of the current version of the Aviation Act  contains a similar provision.
2.71 Additionally, Article 94(1) of the 14 December 1991 version of the Aviation Act  provided
that:
"Except as provided otherwise by this Act or other laws and regulations, the airport
development projects shall be carried out by the Minister of Transportation."
2.72 Article 94(1) of the current version of the Aviation Act  which incorporates amendments up to
and including 13 December 1997 contains a similar provision.
2.73 "Airport development projects" to which Article 94(1) of the December 1991 version of the
Aviation Act referred was defined in Article 2(14) of the Aviation Act  as "projects related to new
construction, enlargement or improvement of airport facilities, executed under this Act".  The currentAviation Act  defines "airport development projects" in identical terms.WT/DS163/R
Page 14
2.74 Article 94(2) of the December 1991 version of the Aviation Act  provided that:
"Any person other than the Minister of Transportation who desires to operate the
airport development projects, shall obtain the permission of the Minister of
Transportation under the conditions as prescribed by the Presidential Decree."
2.75 Article 94(2) of the current Aviation Act  contains a similar provision but requires the operator
to obtain permission from the Minister of Construction and Transportation rather than the Minister of
Transportation.
2.76 The Ministry of Transportation and the Ministry of Construction merged on
23 December 199458 to create the Ministry of Construction and Transportation (MOCT).
Accordingly, references to the Ministry of Tr ansportation in Korean legislation including the
Government Organization Act  and the Aviation Act  were replaced by references to MOCT.
2.77 The Seoul Airport Act  also refers to the MOCT's role in relation to the IIA project.
Article 3(1) of the Act provides:
"The Minister of Construction and Transportation is empowered to designate an area
necessary for the execution of the new airport construction project as the projected
area for the construction of the new airport for the Seoul Metropolitan area … or to
effect a change in the already designated projected area."
2.78 Article 4(1) of the Seoul Airport Act  vests MOCT with the responsibility for drawing up the
Master Plan for the IIA project.  It provides that:
"Where the Minister of Construction and Transportation has designated and
announced publicly the projected area pursuant to Article 3, he shall draw up a master
plan relating to the new airport construction … ."
2.79 Article 4-2 also empowers MOCT to make alterations to the master plan and Article 4-3
obliges MOCT to publicly notify the master plan upon its completion.
2.80 MOCT is required to approve execution plans prepared by the operator.59  M O C T  i s  a l s o
required to certify completion of the work undertaken by the project operator.60  MOCT has the power
to grant a subsidy or loan to the operator to he lp finance expenses associated with the project.61
Further, MOCT may cancel or suspend permission of approval granted under the Act in certain
circumstances.62  Finally, Article 12-3(1) of the Act provides that:
"The title to the land and facilities created or built as a consequence of the new airport
construction project shall vest in the State upon completion … ."
(iii) New Airport Development Group (NADG)
2.81 In June 1990, MOCT created an internal organization, which is generally referred to as the
New Airport Development Group (NADG), to assume responsibility for the IIA project.  NADG was
created pursuant to the Regulation on Establishment of the New International Airport Construction
Working Group , which was enacted by Ministerial Order of the Minister of Transportation on
1 June 1990.  NADG has been referred  to by a variety of names including the "New International
                                                     
58 Excerpt from MOCT website, p. 2.
59 Ibid.  Article 7(1).
60 Ibid.  Article 12-2.
61 Ibid.  Article 15.
62 Ibid.  Article 13(1).WT/DS163/R
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Airport Construction Working Group," "Corps of the New International Airport Construction
Project," the "New Airport Construction Planni ng Team" and the "IIA Construction Corps."
2.82 At present, 30 government employees are assigned to NADG.63  Specifically, 1 director
general, 3 directors, 10 deputy directors, 14 assistant directors and 2 secretaries have been assigned
from the current operator to NADG.
2.83 NADG is divided into two divisions – a planning division and a technology division.
Pursuant to Article 6(1) of NADG's Regulations, the planning division is responsible for a number of
matters including those concerning the establishment, inspection, and analysis of the basic operation
plan for the IIA project;  the coordination and control of matters related to the project;  the funding for
construction of the project;  and the development of laws and systems for the airport's construction.
2.84 Further elaboration of the role of the NADG in relation to the IIA project is found in the Rules
of the Corps of New International Airport Construction Project and Rapid Railway ConstructionProject Foundation , which were created by a directive of MOCT on 3 November 1996.  Among other
matters, the Rules prescribe the structure of NADG.  Specifically, Article 3 of the Rules provides that
the Corps is to be comprised of a planning depart ment, a facility department and an operation support
team.  Article 3 of the Rules also makes it clear that members of the Corps are MOCT public officials.
2.85 Article 6 of the Rules defines the responsibilities of the three departments of the Corps.
Article 6(1) provides that the planning division has responsibility for various types of "work" related
to a range of topics including the establishment and modification of the master planning for the IIA
project;  budgeting;  IIA project funding;  and IIA project control and analysis.
(iv) The Korean Airports Authority (KAA)
Origins
2.86 The predecessor to the KAA was the Korea International Airports Authority.64  Th e  K o r e a
International Airports Authority was renamed as the Korea Airports Authority on 7 April 199065 but is
referred to in all the relevant legislation as the Korea Airport Corporation.
2.87 The Korea Airport Corporation Act,  which was originally enacted on 28 December 1979,
constitutes and regulates the KAA.  Article 1 of the 3 August 1994 version of the Korea Airport
Corporation Act  provides:
"The purpose of this Act is to ensure smooth air transportation and to contribute to the
totally integrated development of aviation by establishing the Korea Airport
Corporation … [which will be responsible fo r] constructing airport facilities, and
managing and operating them efficiently."
Scope of Responsibility
2.88 The Korea Airport Corporation Act  defines the rights and responsibilities of the KAA.
Specifically, Article 7 provides that the Corporation shall carry out a range of projects including the
management, operation, repair and maintenance of passenger and freight terminals, and their ancillaryand supporting facilities;  the management, operation, repair and maintenance of runways and
moorings;  the repair and maintenance of aeronautical communication facilities and aviation security
facilities;  landscaping and beautification of airports and installations;  incidental projects;  and other
                                                     
63 Korea's Answer to Question 14 from the Panel, dated 29 November 1999.
64 KAA History from KAA website.
65 Ibid.WT/DS163/R
Page 16
projects entrusted to KAA by the Minister of Construction and Transportation for management,
operation and improvement of airport facilities.
2.89 The provisions in the Act are supplemented by the By-Laws of Korea Airport Corporation ,
the most recent amendment to which was made on 30 December 1991.  Article 2 of the
30 December 1991 version of the By-Laws  states that the objectives of KAA "shall be to build airport
facilities and manage the airport, promoting smooth operation of air transportation, developing
comprehensive air transportation businesses."  Article 4 further elaborates on the projects that KAA is
required to undertake.
Relationship with MOCT
2.90 Article 28 of the Korea Airport Corporation Act , entitled "Direction and Supervision,"
prescribes the relationship between KAA and MOCT.  Specifically, it provides that:
(1) The Minister of Construction and Transportation shall direct and control the
Corporation, and if it is deemed necessary to do so, he may have the
Corporation report matters concerning its affairs, accounting and property, or
have a public official under his control inspect books, documents, facilities
and other things of the Corporation.
(2) If it is found that any unlawful or unreasonable acts are committed as a result
of the inspection under the provisions of paragraph (1), the Minister of
Construction and Transportation may order the Corporation to take corrective
measures.
(3) Any public official who conducts the inspection under the provisions of
paragraph (1), shall produce a certificate indicating his competence to the
persons concerned.
2.91 Among other things, MOCT is empowered to pe rmit use of, lend or concede gratuitously any
state property to KAA.66  In addition, KAA is required to annually prepare business plans67 and
statements of account68 for approval by the Minister of Construction and Transportation.  Funds can
be borrowed by KAA from various bodi es with the approval of MOCT.69
Legal Status
2.92 Article 3 of the Korea Airport Corporation Act  states that the Korea Airport Corporation (that
is, KAA) is a juristic person.  Article 4(1) fu rther states that the "Corporation shall come into
existence by making a registration of incorporation at the location of its principal office."
Composition
2.93 Article 8 of the Korea Airport Corporation Act prescribes the composition of the Corporation.
Specifically, it provides that:
(1) The Corporation shall be composed of officers falling under each of the
following subparagraphs:
                                                     
66 Korea Airport Corporation Act , Article 16.
67 Ibid. Article 19.
68 Ibid. Article 20.
69 Ibid.  Article 23.WT/DS163/R
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1. A president of the board of directors;
2. A vice-president;3. Not more than five directors;  and4. An auditor.
(2) The president, vice-president and auditor shall be appointed and dismissed by
the Minister of Construction and Transportation.
2.94 KAA's board of directors
70 is required to decide on "important matters."71  The Act provides
that "the board of directors shall be composed of the president, vice-president and directors".72
Article 8(3) of the Act provides that:
"The directors shall be appointed and dismissed by the president with the approval of
the Minister of Construction and Transportation."
2.95 The members of KAA's board of directors are not government employees.73  Further, KAA
employees are not government employees.  However, Article 30 of the Korea Airport Corporation
Act provides that officers and employees of KAA are to be considered public officials in the
application of certain provision of Korea's Criminal Act .  Further, Article 13 of the Korea Airport
Corporation Act  provides that the employees are employed and dismissed as prescribed by KAA's
articles of incorporation.
Role in Relation to Inchon International Airport Project
2.96 On 14 December 1991, the Korea Airports Corporation or KAA was listed as a potential
operator for the IIA project.  This was achieved through an amendment to Article 6(1) of the Seoul
Airport Act .  Article 6(1) as amended provided:
"The new airport construction project shall be implemented by the state, local
governments, the Korea Airport Corporation established pursuant to the Korea
Airport Corporation Act, or a government-invested institution as determined by the
Presidential Decree."
2.97 Simultaneously, the Korea Airport Corporation Act was amended.  As amended, Article 7,
which defined the projects for which KAA is respon sible, provided in sub-article 5-2 that KAA was
responsible for:
"New airport construction project pursuant to paragraph 2 of Article 2 of Act on the
Promotion of a New Airport for Seoul Metropolitan Area Construction."
2.98 Article 2 of the Seoul Airport Act  was also amended on 14 December 1991 to provide that:
"2. The term "new airport construction project" means any of the following
activities:
                                                     
70 Exhibit Kor-110 lists KAA directors.
71 Korea Airport Corporation Act , Article 12(1).
72 Ibid. Article 12(2).
73 Korea's Answer to Question 10 from the Panel, dated 3 November 1999.WT/DS163/R
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(a) Construction of such airport facilities as stipulated in subparagraph 6 
of Article 2 of the Aviation Act …
(c) Construction of urban railways, roads and port facilities etc. which 
are necessary to transport passengers and cargo using the Seoul 
Metropolitan area new airport
(d) Creation of the infrastructure connected with airport services such as 
convenience facilities for airport users and persons etc. engaged in air
transport service and such other aviation-related services as 
determined by the Presidential Decree … air cargo distribution 
facilities and information communication facilities etc.
(e) Creation of infrastructure for facilities beneficial to the living such as
accommodation facilities, etc., in favor of persons engaged in aviation-related services and persons who will be deprived of their 
residence because of the new airport construction project;  and
(f) Reclamation of public water surface to create the projected area for 
the construction of the new airport."
2.99 Further, Article 4(6) of the By-Laws of Korea Airport Corporation
74 was amended with the
approval of the Minister of Transportation on 30 December 1991 to provide that KAA was required
to, among other things, "build the new capital area airport."
2.100  On 31 January 1992, KAA established the New Airport Construction Office to implement the
IIA project.
Funding
2.101  During KAA's term as operator of the IIA project (that is, from 14 December 1991 until
14 August 1994), it exclusively relied upon government funds for the IIA project in 1992;  78 per
cent government funds, 3.5 per cent debts and bonds and 18 per cent other means in 1993;  77 per
cent government funding, 21 per cent debts and bonds and 1 per cent other means in 1994.75
Procurement
2.102  The rules according to which the Korea Airport Corporation procures are set out in the
Contract Procedure Rules of Korea Airport Authority .76  In addition, Article 90 of these rules provide
that:
"With respect to the provisions not stipulated herein, the government contract related
laws, regulations and so on shall be applied."
2.103  Teams of approximately 23 KAA employees are used for the opening and evaluation of bids
for contracts tendered by KAA.77
                                                     
74 Exhibit Kor-15.
75 Sources of Fund for KAA (Exhibit Kor-109).
76 Exhibit Kor-18.
77 Korea's Answer to Question 15 from the Panel, dated 29 November 1999.WT/DS163/R
Page 19
(v) The Korea Airport Construction Authority (KOACA)
Origins
2.104  The Korea Airport Construction Authority (KOACA) was created pursuant to the Korea
Airport Construction Authority Act,  which was enacted on 3 August 1994 and entered into force on
1 September 1994.78  That Act purported to transfer KAA's rights and responsibilities in relation to the
IIA project to KOACA.  Specifically, Article 5 of the Addenda to the Act provided that:
"(1) Property and rights/obligations of Korea Airport Corporation related to the
New Airport Construction Project before the enforcement of this Act, shall be
entirely assigned to KOACA…
(4) Any acts conducted by Korea Airport Corporation or taken upon Korea
Airport Corporation in relation to New Airport Construction Project before
[KOACA's] foundation, shall be considered as those conducted by or taken
upon Korea Airport Corporation."
Scope of Responsibility
2.105  Article 1 of the Korea Airport Construction Authority Act provided that KOACA:
"… will carry out the New International Airport Construction Project … around the
Seoul metropolitan area for ensuring smooth air transportation and contributing to the
national economic development."
2.106  Article 7 of the Act defines the projects for which KOACA is responsible.  That Article
specifically referred to the IIA project but also listed "other airport construction related projects
entrusted by the government."79
2.107  Article 1 of the By-Laws (Articles of Authority) of Korea Airport Construction Authority80
further provides that:
"The object of this Authority is to facilitate the air transportation and further to
contribute to the development of national economy by efficiently propelling the New
Capital Airport Construction Project … ."
2.108  The By-laws further elaborate on KOACA's responsibilities.
Relationship with MOCT
2.109  Article 31 of the Korea Airport Construction Authority Act , entitled "Direction and
Supervision" is identical in all rele vant respects to Article 28 of the Korea Airport Corporation Act
which prescribes the relationship between MOCT and KAA and which is referred to above in
paragraph 2.90.
2.110  MOCT's power and KOACA's responsibilities vis-à-vis  MOCT are essentially the same as for
KAA.81  In addition, the Korea Airport Construction Authority Act  provides that "the title the land and
                                                     
78 Korea Airport Construction Authority Act , Article 1 of Addenda.
79 Sub-articles 2 and 3 are blank.
80 Exhibit Kor-45.
81 See paragraph 2.91.WT/DS163/R
Page 20
facilities of new airport created or built as the consequence of the new airport construction project by
KOACA … shall be vested to the State upon completion."82
Legal Status
2.111  As in the case of KAA, KOACA is a juristic person and has corporate status.83
Composition
2.112  The composition of KOACA's board of directors is identical in all relevant respects to KAA.84
As with KAA, KOACA's board of directors (which, according to the Korea Airport Construction
Authority Act , shall be composed of the president, vice-president and directors)85 is required to decide
on "important matters."86
2.113  As in the case of KAA, KOACA's board of directors are not government employees87 and
neither are its employees.  Again, similarly with  KAA's empowering legislation, Article 35 of the
Korea Airport Construction Authority Act  provides that officers and employees of KOACA are to be
considered public officials in the application of certain provision of Korea's Criminal Act  and
Article 15 provides that the employees are empl oyed and dismissed as prescribed by KOACA's
articles of incorporation.
Role in Relation to Inchon International Airport Project
2.114  KOACA's role in relation to the IIA project was defined by the Korea Airport Construction
Authority Act  and the By-Laws (Articles of Authority) of Korea Airport Construction Authority .
Further, at the time that KOACA was created, the Korea Airport Corporation Act  was also amended.
Specifically, Article 7(5-2) which vested KAA with jurisdiction in respect of "the new airport
construction project" was deleted.
Funding
2.115  During KOACA's term as operator of the IIA project (that is, from September 1994 until
1 February 1999), it relied upon 78 per cent government funding, 14 per cent domestic and foreign
debt, 7 per cent bonds and 1 per cent other means for the IIA project in 1994;  80 per cent government
funding, 19 per cent domestic and foreign debt, 2 per cent bonds in 1995;  69 per cent government
funding, 28 per cent domestic and foreign debt, 4 per cent bonds in 1996;  38 per cent government
                                                     
82 Korea Airport Construction Authority Act , Article 19(1).
83 Article 3 of the Korea Airport Construction Authority Act  states that the KOACA is a juristic person.
Article 4(1) states that "KOACA shall come into existence by making a registration of incorporation at thelocation of its principal office".
84 Article 8 of the Korea Airport Construction Authority Act  prescribes the composition of the KOACA.
Specifically, it provides that:
(1) Officers of KOACA shall be composed of five directors including a president of the board of
directors and a vice president and an auditor.
(2) The president and auditor shall be appointed and dismissed by the Minister of Construction
and Transportation.
(3) The vice president and auditor shall be appointed and dismissed by the president of KOACA
with the approval of the Minister of Construction and Transportation.
85 Korea Airport Construction Authority Act,  Article 14(2).  Exhibit Kor-110 lists KOACA directors.
86 Korea Airport Construction Authority Act , Article 14(1).
87 Korea's Answer to Question 10 from the Panel, dated 3 November 1999.WT/DS163/R
Page 21
funding, 58 per cent domestic and foreign debt, 2 per cent bonds in 1997;  41 per cent government
funding, 46 per cent domestic and foreign debt, 14 per cent bonds in 1998.88
Procurement
2.116  The rules according to which the KOACA procures are set out in the Contract Administration
Regulations of Korea Airport Construction Authority .89  In addition, Article 3 of these regulations
provide that:
"With respect to all contract administration matters of the KOACA, it shall be
governed by the provisions of this contract administration regulations.  Matters not
stipulated in this contract administrations regulations shall be governed by Contracts
to which the State is a Party…such as government procurement contracts."
2.117  As in the case of KAA, teams of approx imately 23 KOACA employees are used for the
opening and evaluation of bids for contracts tendered by KOACA.90
(vi) The Inchon International Airport Corporation (IIAC)
Origins
2.118  The Inchon International Airport Corporat ion (IIAC) was created on 1 February 1999
pursuant to the Law on Inchon International Airport Corporation .  That law also purported to amend
the Korea Airport Corporation Act  and the Seoul Airport Act.91  It was enacted on 26 January 1999
and came into effect on 1 February 1999.92  The effect of those amendments was that KOACA was
reconstituted as IIAC.  This is evident from Article 5 of the Additional Rule contained in the Law on
Inchon International Airport Corporation , which provides that:
"(1) The IIAC inherits the assets, right and responsibilities of the Metropolitan
New Airport Public Corporation (KOACA) when this law is enforced the
moment the IIAC is established…
(4) All the activities related with the Metropolitan New Airport Public
Corporation (KOACA) and activities performed toward this IIAC are
regarded as the ones that the IIAC conducted or are conducted toward the
IIAC."
Scope of Responsibility
2.119  Article 1 of the Law on Inchon International Airport Corporation  provides that:
"This law is focused on effective operation of air freight delivery and improvement of
national economy by managing efficiently Inchon International Airport … with [the]
establishment of Inchon International Airport Corporation."
2.120  Article 10(1) of the Law defines the projects for which IIAC is responsible.  Specifically it
states that the IIAC is responsible for, among other things, "construction business" associated with the
IIA project;  management, operation and maintenance of IIA;  the development of businesses in areas
                                                     
88 Sources of Fund for New Airport Construction (KOACA and IIAC) (Exhibit Kor-109).
89 Exhibit Kor-47.
90 Korea's Answer to Question 15 from the Panel, dated 29 November 1999.
91 Law on Inchon International Airport Corporation , Article 10 of the Additional Rule.
92 Ibid.  Article 1 of the Additional Rule.WT/DS163/R
Page 22
adjacent to the airport to ensure the efficient management and operation of the IIA;  and "other
business" related to construction, management and operation, for which it has a licence from the
Korean Government or other autonomous entities.
2.121  Article 2(1) of the By-Laws (Articles of Incorporation) of Inchon International Airport
Corporation93 further provides that the IIAC has authority, among other things, to construct the IIA in
accordance with Article 2 of the Seoul Airport Act ;  to maintain, operate and repair the IIA;  to
develop neighbouring areas which are necessary for the effective operation and maintenance of the
IIA;  and "other businesses" related to construction and operation of the IIA which are delegated to
IIAC by national local governments.
Relationship with MOCT
2.122  Article 16 of the Law on Inchon International Airport Corporation , entitled "Direction and
Supervision," prescribes the relationship between IIAC and MOCT but in somewhat different terms to
that prescribed as between MOCT and KAA94 and also as between MOCT and KOACA.95
Specifically, Article 16 provides that:
"The Minister of Construction and Transportation can direct and supervise the IIAC
about the matters that are necessary for increase of public goods which are designatedby the Presidential Decree in managing the Airport.  However, this isn't applied to the
jobs related with the managing object promised by the law of the paragraph 1 of
Article 13 which is about the improvement of the corporation's managing
environment and about privatization."
2.123  Moreover, MOCT is empowered to permit the use of, lend or concede gratuitously national
assets to IIAC.
96
Legal Status
2.124  Article 2 of the Law on Inchon International Airport Corporation  provides that "IIAC is
supposed to be incorporated body."  IIAC's corporate status is confirmed in Article 1 of By-Laws
(Articles of Incorporation) of Inchon International Airport Corporation  which provides that :
"This Corporation is established by Inchon International Airport Corporation Law
and shall be called … Inchon International Airport Corporation … ."
Composition
2.125  According to Article 6(1) of the Additional Rule of the Law on Inchon International Airport
Corporation , the composition of the IIAC, at least at the time of it creation, was identical to the
composition of KOACA.  Article 6(1), entitled "Interim measures for staffs and workers of the
KOACA" provides that:
"(1) The president, chief director and the auditor of the Metropolitan New Airport
Public Corporation (KOACA) shall be regarded as the president, chief
director and auditor according to this law, however the term of office shall betill new president, chief director and auditor are newly appointed.
                                                     
93 Exhibit Kor-54.
94 See paragraph 2.90.
95 See paragraph 2.109.
96 Law on Inchon International Airport Corporation , Article 11.WT/DS163/R
Page 23
(2) The workers of the Metropolitan New Airport Public Corporation (KOACA)
shall be employed as the workers of the IIAC."
2.126  The Law additionally provides that the board of directors is "implemented to process the
works related with establishing the corporation"97 and that "the board [of directors] for establishment
consists of less than seven members appointed by the Minister of Construction and Transportation,and he becomes the chairman of the board."
98
2.127  Under IIAC's articles of incorporation, the Corporation is governed by twelve directors, six of
whom, as non-standing directors, are elected by th e Corporation's stockholders and constitute the
board of directors.  IIAC's president, as one of  the six standing directors, is nominated by a
nominating committee and elected by the stockholders, while the remaining five standing directors are
simply elected by stockholders.99
2.128  Again, as in the case of KAA and KOACA, neit her IIAC's members of its board of directors
are government employees100 nor are its staff.  IIAC currently employs 557 persons.
Role in Relation to Inchon International Airport Project
2.129  On 26 January 1999, IIAC was listed  as a potential operator for the Inchon International
Airport through an amendment to Article 6(1) of the Seoul Airport Act .  Article 6(1) as amended
provides:
"The new airport construction project shall be implemented by the state, local
governments, the Inchon International Airport Corporation established pursuant to the
Inchon International Airport Corporation Act, or a government-invested institution as
determined by the Presidential Decree."
Funding
2.130  During IIAC's term as operator of the IIA project (that is, from 2 February 1999 onwards), it
relied upon 25 per cent government funding, 24 per cent domestic and foreign debt, 41 per cent bonds
and 10 per cent other means in 1999.101
Procurement
2.131  The rules according to which the IIAC procures are set out in the Contract Administration
Regulations of Inchon International Airport Corporation .102  In addition, Article 3 of these regulations
provides that:
"With respect to all contract administration matters of the IIAC, it shall be governed
by the provisions of this contract administration regulations.  Matters not stipulated inthis contract administrations regulations shall be governed by Contracts to which the
State is a Party … such as government procurement contracts."
                                                     
97 Law on Inchon International Airport Corporation , Article 3(1) of the Additional Rule.
98 Ibid.  Article 3(2).
99 IIAC Articles of Incorporation, Articles 26, 27, 35.
100 Exhibit Kor-110 lists IIAC directors.  In Korea's Answers to Question 10 from the Panel, dated
3 November 1999, Korea notes that none of these directors are government employees.
101 Sources of Fund for New Airport Construction (KOACA and IIAC).
102 Exhibit Kor-55.WT/DS163/R
Page 24
2.132  Again, as in the cases of KAA and KOACA, a "Property Management & Contract" team of
approximately 23 IIAC employees is used for th e opening and evaluation of bids for contracts
tendered by the IIAC.103
(vii) Office of Supply
2.133  The Procurement Fund Act  provides that the Office of Supply is primarily responsible for
procurement using government procurement funds ("the Fund").104  The projects for which the Fund
may be used are set out in Article 6 of the Act:
"The Fund shall be used for the following projects:
1. Purchasing, transport, manufacturing, storing, supplying and their
accompanying projects
2. Management and operation of facilities and their accompanying projects3. Other projects necessary in operation of the Fund."
2.134  The procurement procedures, which the Office of Supply is obliged to follow are referred to
in Article 13 of the Procurement Fund Act .  Specifically, Article 13 provides:
"Matters necessary for the procurement procedures and ranges, such as purchasing,
saving for emergency, manufacturing, and supplying of procurement goods andcontracts for construction of facilities shall be provided for by the Presidential
Decree."
2.135  The bodies for which the Office of Supply is required to procure are defined pursuant to a
series of provisions in the Procurement Fund Act .  First, the goods procured are defined in
Article 2(2) and 2(3) of the Act:
"(2) Procurement goods refers to goods demanded…
(3) Goods demanded refers to goods required by a demanding agency pursuant to
paragraph 5 and designated by Presidential Decree."
2.136  Secondly, Article 2(5) defines a "demanding agency" as a national agency, a local
government organization or other agencies designated by Presidential Decree.
III. FINDINGS AND RECOMMENDATIONS REQUESTED BY THE PARTIES
A. U
NITED STATES
3.1 The United States requested the Panel to make the following findings:
"That MOCT (including the New Airport Development Group under MOCT), KAA,
KOACA, and IIAC, all of which are or have been in the past Korean Government
entities involved in procurement for the Inchon International Airport project, are
covered under Korea's Appendix I of the GPA and:
                                                     
103 Korea's Answer to Question 15 from the Panel, dated 29 November 1999.
104 Procurement Fund Act , Article 4(1).WT/DS163/R
Page 25
(a) That by imposing bid deadlines for the receipt of tenders that are shorter than
the GPA-required 40 days, Korea is in violation of Article XI:1(a) and
XI:2(a) of the GPA.
(b) That by imposing qualification requirements specifying that an interested
foreign supplier must have a licence that in turn requires that supplier to buildor purchase manufacturing facilities in Korea, just so the supplier may be
eligible to bid as a prime contractor, Korea is in violation of Articles III:1(a),
VIII first sentence, and VIII(b) of the GPA.
(c) That by imposing domestic partnering requirements that force foreign firms
to partner with, or act as subcontractors to, local Korean firms, just so the
foreign firms may participate in tendering procedures, Korea is in violation of
Articles III:1(a), VIII first sentence, and VIII(b) of the GPA.
(d) That by not establishing effective domestic procedures enabling foreign
suppliers to challenge alleged breaches of the GPA for procurements related
to the Inchon International Airport project, Korea is in violation of
Article XX of the GPA."
3.2 The United States also requested the Panel to make the following finding:
"That should the Panel determine that the above measures do not violate the GPA, the
measures nevertheless nullify or impair benefits accruing to the United States under
the GPA, pursuant to Article XXII:2 of the GPA."
B. K
OREA
3.3 Korea requested the Panel to reject the complain ts to the United States on the basis of the
following finding:
"That the entities conducting procurement for the Inchon International Airport are not
covered entities under Korea's Appendix I of the GPA."
IV. ARGUMENTS OF THE PARTIES
A. ENTITIES COVERED UNDER KOREA 'S APPENDIX I OF THE GPA
1. Interpretation of Appendix I and Notes
4.1 Both parties argue  that regard should be had to the Vienna Convention on the Law of
Treaties  in interpreting Korea's Appendix I to the GPA.
4.2 In support of its argument that regard should be had to Articles 31 and 32 of the Vienna
Convention on the Law of Treaties  in interpreting Korea's Appendix I to the GPA, the United States
notes  that the Appellate Body and previous panels have consistently looked to Articles 31 and 32 of
the Vienna Convention on the Law of Treaties for guidance in interpreting the provisions of the WTO
agreements and that these articles have "attained the status of a rule of customary or general
international law."105
                                                     
105 The United States refers to Appellate Body report on Japan - Taxes on Alcoholic Beverages ,
(Adopted 1 November 1996) WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R (" Japan - Alcoholic
Beverages "), pp. 9-10 and to Appellate Body report on United States - Standards for Reformulated and
Conventional Gasoline  (Adopted 20 May 1996) WT/DS2/AB/R (" United States - Reformulated Gas "),WT/DS163/R
Page 26
4.3 Korea agrees  that the Vienna Convention on the Law of Treaties  contains customary rules of
interpretation that should be used in interpreting Korea's Note 1 to Annex 1.106
2. Appendix I, Annex 1:  Branch Offices and Subsidiary Organizations
(a) Status of Notes, Annexes and Appendices to the GPA
4.4 Both parties argue  that, according to Article XXIV:12 of the GPA, which states that the
"Notes, Appendices and Annexes to this Agreement constitute an integral part thereof," Annex 1 and,
specifically, the term "central government entity," must be interpreted "in accordance with customary
rules of interpretation of public internationa l law," pursuant to Article 3:2 of the DSU.107
(b) Interpretation of "Central Government Entity" according to the Ordinary Meaning
4.5 The United States argues  that when interpreted according to its ordinary meaning, in its
context and in light of the object and purpose of the GPA, the scope of "central government entity" in
Annex 1 of the GPA includes coverage of its branch offices and subsidiary organizations unless
otherwise provided for in the GPA.  The United States asserts that its argument is based on a textual
interpretation of the GPA, pursuant to Article 31 of the Vienna Convention on the Law of Treaties .
4.6 To further explain its argument, the United States contends that since all "central government
entities" are composed of branch offices and subsidiary organizations, a fortiori , the scope of
coverage of a "central government entity" must include these subordinate units, unless otherwise
specified.  The United States further argues that coverage of an entity that excludes its subordinate
units actually amounts to no coverage at all.  In support, the United States refers to its arguments in
paragraphs 4.323 and 4.324.
4.7 In response, Korea  argues  that the claim that, "the coverage of a 'central government entity'
under Annex 1 of the GPA includes coverage of its subordinate units, i.e. its branch offices and
subsidiary organizations" is unsupported by any text of the GPA.  Korea notes in this respect that the
words "branch office" or "subsidiary organization" do not appear anywhere in the text of the GPA or
in Korea's Appendix I.
4.8 Korea states that the United States is using the rules of the Vienna Convention on the Law of
Treaties  to interpret the "ordinary meaning" of treaty language that does not appear in the treaty.
According to Korea, the terms "branch office" an d "subsidiary organization," are terms that do not
appear in the GPA and are, instead, merely labels with no significance in and of themselves.
4.9 The United States argues in response that the terms "branch offices" and "subsidiary
organizations" are merely used as generic terms to depict the different types of subdivisions within a
given entity.  In support of this assertion, the United States notes that, as quoted often by Korea froma United States International Trade Commission Report, the GPA "is aimed at government ministries
                                                                                                                                                                    
pp. 16-17, and panel report on United States - Reformulated Gas  (Adopted 20 May 1996) WT/DS2/R,
paragraph 6.7.
106 Korea further notes that the Appellate Body has stated that tariff concessions in a Member's
Schedule – much like commitments in a GPA signatory's Appendix I – are "part of the terms of the treaty," to beinterpreted by resort to the rules of interpretation included in the Vienna Convention.  European Communities –
Customs Classification of Certain Computer Equipment , WT/DS62/AB/R, WT/DS67/AB/R, WT/DS68/AB/R
("EC-LAN" )(Adopted 22 June 1998), paragraph 84.  Korea also refers to United States - Import Prohibition of
Certain Shrimp and Shrimp Products , WT/DS58/AB/R (Adopted 6 November 1998), paragraph 114 ("A treaty
interpreter must begin with, and focus upon, the text of the particular provision to be interpreted").
107 Appellate Body report on EC-LAN , (WT/DS62, 67, 68/AB/R), paragraph 84.WT/DS163/R
Page 27
[sic] and their subdivisions,"108 and these subdivisions necessarily include branch offices and
subsidiary organizations.
4.10 In support of its argument that branch offices and subsidiary organisations are not covered
under the GPA, Korea uses  an analogy to corporate law.  Korea states that, in that field, a "branch" is
defined as a "division, office, or other unit of business located at a different location from main officeor headquarters."
109  Korea states that a subsidiary corporation, on the other hand, is "one in which
another corporation (i.e. parent corporation) owns at least a majority of the shares and thus has
control."110  Korea argues that what is significant about these definitions, for the purposes of this case,
is that a "branch" normally is not an independent entity, but is simply a division, office or other unit
located somewhere else.  Korea states that specia l local administrative organs could be considered
branches, because they generally are located at some place other than the main office or headquarters.
4.11 Korea further argues that a branch has the same GPA obligations as the parent entity.  On the
other hand, it is Korea's view that a subsidiary is a separate legal entity.  According to Korea, a
subsidiary does not necessarily acquire the GPA obligations of another entity, even another entity that
controls it to some extent.
(c) Application of the Ordinary Meaning of "Central Government Entity" to the Present Case
4.12 The United States argues  that MOCT, like all other Korean "central government entities," is
composed of branch offices and subsidiary organizations.  In support, the United States refers to its
arguments in paragraphs 4.435 and 4.436.  The Unit ed States further argu es that since the NADG,
KAA, KOACA, and IIAC are either branch offices or subsidiary organizations of a covered "central
government entity," namely, MOCT, coverage of MOCT under the GPA includes coverage of
NADG, KAA, KOACA, and IIAC.
(i) NADG
4.13 The United States notes  that the ordinary meaning of "entity" is an organization, a
"being...the existence of a thing...all that exists...a thing that has a real existence."111  The United
States further notes that "central government" de scribes the level within a government structure at
which the entity exists, i.e., at the national level as opposed to the state or local level.  The United
States argues that MOCT is, therefore, a GPA-covered entity at the national level of the Korean
government structure.  The United States argues that as with most, if not all, national-level entities in
Korea, MOCT is organized into many branch offices and that the NADG is such an office.  The
United States asserts that it is undisputed that a listing of a "central government entity" under Annex 1
encompasses its branch offices, unless otherwise specified because, according to the United States,the two cannot be naturally separated for the purposes of GPA coverage.  The United States refers to
its arguments in 4.344.
4.14 In response, Korea argues  that NADG is a not a "branch office" of MOCT and that the term
"branch office" is not used by Korea for NADG.  Korea states that NADG is, in fact, specially
organized, ad hoc MOCT task force, and is not itself a legal person under Korean law.
112  Korea states
that, as a result, NADG has no authority to undertake binding legal actions, such as contracting, on its
own behalf.  Korea further notes that NADG's regulations do not provide authority for procurement
                                                     
108 Agreements Being Negotiated at the Multilateral Trade Negotiations in Geneva , US International
Trade Commission Investigation No. 332-101 (MTN Studies, August 1979).
109 Black's Law Dictionary (1990).
110 Ibid.
111 The New Shorter Oxford English Dictionary (1993 ed.), p. 830.
112 Regulation on Establishment of the New International Airport Construction Working Group , MOT
Order No. 902, 1 June 1990, Article 2 ("The Working Group is to be established under the authority of theMinister of Transportation.").WT/DS163/R
Page 28
by NADG for IIA.  Korea states that, therefore, both as to procurement and all other activities, NADG
is MOCT itself – the entity listed on Annex 1.  In support of this argument, Korea notes that Article 3
of NADG's regulations names MOCT's Assistant Minister of Planning and Management as the head
of the task force, and MOCT's Director General of MOCT's Civil Aviation Bureau as the second in
charge.
4.15 In response to Korea's argument that NADG is MOCT itself,  the United States
questions  why the New Airport Development Group has a different name than MOCT, why did
Korea in 1991 refer to the New Airport Developm ent Group as "the New Airport Development Group
under" MOCT, and not just as MOCT and ho w can the New Airport Development Group be
"established within" MOCT in one instance yet be MOCT in another?
(ii) KAA, KOACA and IIAC
4.16 Korea argues  that KAA, KOACA and IIAC are not su bsidiary organizations of MOCT.  In
support of this argument, Korea notes that KAA,  KOACA and IIAC are independent legal persons
under Korean law.  Korea further states that KAA, KOACA and IIAC, like the entities included on
Korea's Annex 3, were established individually by special law.  Korea states that each is identified as
a legal or "juristic" person, rather than as an agency or instrumentality of MOCT or any otherministry.  Korea further states that, as a separate legal person, each entity contracts on its own behalf,
pursuant to its own bid announcements and its ow n procurement regulations.  Each has its own
officers and directors, and its employees are not government civil servants or employees.
4.17 In response, the United States refers to its arguments in paragraph 4.587.  The United
States also notes that, in fact, the affairs of K AA have always been the responsibility of the Civil
Aviation Bureau, a branch office of MOCT.
113
4.18 In response to a question from the United States, Korea asserts  that all non-listed entities
that are "independent legal persons" under domestic law are not covered under Annex 1 of the GPA.
Korea states in this respect that Article I of the GPA and Annex 1 speak of "entities."  Korea notes
that the New Shorter Oxford English Dictionary defines "entity" as a "thing that has a real existence."In the context of the GPA, in Korea's view, an "entity" has real existence when it is a juristic or legal
person in its own right, with its own officers, its own directors, its own rules and regulations.  Korea
argues that KAA, KOACA, IIAC are such entities.
4.19 In response, the United States argues  that, merely because an entity is a separate legal
person does not automatically mean it cannot be a subsidiary organization of another entity.  The
United States refers to its arguments in paragraph 4.435 for support.  In support of its argument, the
United States notes that "subsidiary" is defined as "serving to help, assist, or supplement, auxiliary,supplementary . . . subordinate, secondary."  Thus, according to the United States, if one entity is
supplementary or subordinate to another entity, it is a subsidiary organization of that other entity,
regardless of its domestic legal status.  The United States also refers to its arguments in
paragraph 4.252.
(d) Significance of Note 1 to Annex 1
4.20 Korea argues  that even if the ordinary meaning of "central government entity" includes
"branch offices" and "subsidiary organizations," the United States' argument must be rejected because
it ignores the ordinary meaning of Note 1 to Korea's Annex 1, which identifies the universe of bodies
included within an entity listed on Annex 1, and which renders the ordinary meaning of the term"central government entity" irrelevant.  Korea further argues that its commitments in Note 1 do not
                                                     
113 The Presidential Order on the Organization of the Ministry of Construction and Transportation,
Article 16 (US Exhibit 71).WT/DS163/R
Page 29
permit expansion of GPA coverage beyond those entities identified as "subordinate linear
organizations, special local administrative organs, and attached organs as prescribed in the
Government Organization Act  of the Republic of Korea."  In support of this argument, Korea states
that Note 1 provides specific, textual evidence of the intent and the agreement of the parties to the
GPA, and as an "integral part"114 of the GPA, it must be accorded both its ordinary meaning, and the
"special meaning" it imposes upon the term "central government entity" for the purposes of Korea's
Annex 1.  Korea further states that Note 1 evidences and itself provides a "special meaning," under
Article 31(4) of the Vienna Convention on the Law of Treaties , for the term "central government
entity."115
4.21 The United States responds that, in its view, the text of Korea's Annex 1 fully supports the
interpretation put forward by the United States.  The United States asserts that it is wrong to argue that
Note 1 exclusively governs the means of identifying the universe of entities internal to an Annex 1
entity that, while not themselves listed in Annex 1, are nevertheless covered under Annex 1 by virtue
of their relationship to listed "central government entities."  In support of its argument, the United
States refers to the fact that Korea has admitted coverage of branch offices, such as the New Airport
Development Group, which are neither "subordinate linear organizations," "special local
administrative organs," nor "attached organs."  Thus, according to the United States, these three termscannot be exhaustive with regard to the "universe" of subordinate units within Korean "central
government entities."
4.22 Further, the United States argues that Note 1 does not define the scope of "central government
entity."  Rather, according to the United States, Note 1 expands it.  The United States contends that
such an interpretation is consistent with the princi ple of effectiveness.  The United States further
asserts that such an interpretation is also consiste nt with the reasoning that Note 1 cannot both define
and expand the scope of "central government entity."  The United States refers to its arguments in
paragraphs 4.159 and 4.161 and 4.163.
(e) Relevance of the Annex 1 List
(i) Explicit Listing
4.23 The United States notes  that it is undisputed that the New Airport Development Group, a
branch office of MOCT, is covered by virtue of th e listing of MOCT in Annex 1, and not by its own
listing.  The United States argues that, therefore, the mere fact that the name of a branch office or a
subsidiary organization is not explicitly listed in Annex 1 does not automatically mean that the branch
office or subsidiary organization is outside the purview of the GPA.
4.24 The United States further argues that if all unlisted branch offices of enumerated "central
government entities" were deemed excluded from Annex 1 coverage, then most Korean "central
government entities" would not be effectively covered, since most of these entities are made up of
branch offices, of which none are listed by name in Korea's Annex 1.  The United States contends
that, moreover, if the GPA only applied to enumer ated subsidiary organizations, a Party, after
agreeing to cover a "central government entity,"  could then unilaterally and without compensatory
adjustments transfer procurement authority from the "central government entity" to its unlisted
subsidiary organization, all the while retaining control of the procurements by this subsidiary
organization within the "central government entity."  According to the United States, the result would
be a GPA emptied of its substance.
4.25 In response, Korea refers  to its arguments in paragraphs 4.160, 4.31 and 4.290.
                                                     
114 GPA Article XXIV:12.
115 Vienna Convention , Article 31(4) ("A special meaning shall be given to a term if it is established
that the parties so intended.").WT/DS163/R
Page 30
(ii) Transfer of Procurement Authority
4.26 Korea notes  that since the United States considers KAA, KOACA and IIAC to be the same
and interchangeable, "transfers" between them could have no cognizable effect under the terms of the
GPA at issue in this case.  Korea asserts that th e only remaining "transfer" about which the United
States apparently complains, must be the Korean National Assembly's decision to assign
responsibility for the IIA project to KAA.  Korea st ates that it was fully within its right to undertake
this so-called "transfer unilaterally and without compensatory adjustments" because it occurred in
December 1991, two years before Korea submitted its final offer for accession to the GPA, and five
years before the effective date of the GPA for Korea.  Korea notes that if a similar "transfer" occurred
today, a GPA signatory w ould not be able to accomplish it "unilaterally and without compensatory
adjustments."  It would be required, under Article XXIV:6(a), to address claims for compensatoryadjustments.  Korea further asserts that it is one thing to transfer procurement authority from a not yet
covered entity (MOCT in 1991) to a non-covered entity (KAA), and something else to transfer it from
a covered entity to a non-covered entity.  Korea states that the United States submissions do not
appear to make this distinction, or to allow for the application of Article XXIV:6.
4.27 In response, the United States argues  that it is irrelevant that Korea did not make its final
offer until three years after the shift of procurement authority to KAA.  As a subsidiary organization
of MOCT, KAA remains covered under Annex 1 of the GPA because (1) all branch offices and
subsidiary organizations of "central government entities" are automatically covered under Annex 1,
unless otherwise specified, and (2) procurements by a subsidiary organizations are in fact
procurements by a listed "central government entity" – pursuant to Article I of the GPA.  Furthermore,the United States argues that pursuant to Article I, KAA remains covered regardless of whether or not
it is a subsidiary organization of MOCT because KAA was merely the operator of the IIA
construction project, and MOCT remained the entity responsible for IIA construction.
4.28 Korea also states that it has demonstrated that the Korean National Assembly made the
various transfers of responsibility for the IIA project for entirely legitimate reasons.  To illustrate thatgovernments transfer authority over projects or portfolios for many legitimate reasons, Korea states
that prior to passage of the Energy Policy Act of 1992
116, the United States Department of Energy was
responsible for the production and sale of uranium fuel enrichment services for commercial nuclear
power plants.117  Korea states that this responsibility in volved procurement authority for the various
facilities associated with uranium enrichment, including the Department of Energy's gaseous diffusion
enrichment plants.118  Korea notes that the Energy Policy Act of 1992  created the United States
Enrichment Corporation, and transferred the Energy Department's responsibility for the sale andproduction of uranium enrichment services to the Corporation.  Korea further notes that the transfer
took effect when the Corporation commenced operations on 1 July 1993.
119  Korea states that the
transfer from the Energy Department extended the procurement authority associated with the project
to the Corporation, although the Act exempted the Corporation from many of the federal procurement
requirements included in the Federal Property and Administrative Services Act of 1949, as amended,
and the Competition in Contracting Act of 1984, as amended.120  The Corporation issued its own
                                                     
116 Public Law No. 102-486, Title IX.
117 The testimony of William H. Timbers, Jr., President and Chief Executive Officer, United States
Enrichment Corporation, before the Subcommittee on Energy and Power of the House Committee onCommerce, 21 February 1995, pp. 3, 4 (Testimony of USEC President and CEO); Uranium EnrichmentActivities Leading to Establishment of the US Enrichment Corporation, GAO Report GAO/RCED-94-227FS,27 July 1994, p. 4 (1994 GAO Report); United States General Accounting Office, Status of Open
Recommendations FY97 , at http://www.gao.gov/openrecs97/abstracts/rc95245.htm.
118 Uranium Enrichment:  Process to Privatize the US Enrichment Corporation Needs to be
Strengthened, GAO Report GAO/RCED-95-245, 14 September 1995, p. 5 (1995 GAO Report).
119 1994 GAO Report, p. 4.
120 Energy Policy Act , Section 1312(f) and 1994 GAO Report, p. 7 and Testimony of USEC President
and CEO, p. 6.WT/DS163/R
Page 31
procurement policies and procedures, which it contends, adhere to the United States' Federal
Acquisition Regulations.121
4.29 Korea further states that subsequent to this transfer, and pursuant to the United States
Enrichment Corporati on Privatization Act  of 1996 (passed on 26 April 1996, months after the
effective date of the GPA), the United States privatized the Corporation, ultimately selling its sharesin the Corporation on the New York Stock Exchange on 23 July 1998.
122
4.30 Korea notes that this involved, effectively, two transfers and three entities for the same
activity in a period of five years.  Korea further notes that there is nothing unusual or dubious about
these transfers and nor is there anything unusual or dubious about the transfer of responsibility for the
IIA project between the various Korean entities.
(f) Article I:3 of the GPA
4.31 Korea argues  that the GPA does, in fact, provide a means of attaining coverage for
procurements by non-listed entities.  More specifically, Korea refers to Article I:3 which provides as
follows:
"Where entities, in the context of procurement covered under this Agreement, require
enterprises not included in Appendix I to award contracts in accordance withparticular requirements, Article III shall apply mutatis mutandis  to such
requirements."
4.32 Korea interprets this Article as meaning that where covered entities ("entities, in the context
of a procurement covered by this Agreement")
123 require non-covered entities ("enterprises not
included in Appendix I")124 to adhere to particular requirements in awarding contracts pursuant to the
latter's procurement responsibilities, the substantive national treatment and non-discrimination
obligations included in Article III of the GPA must be observed.  In Korea's view, Article I:3
effectively provides a standard to convert non-covered entities into de facto covered entities.
4.33 Further, in response to a question from the Panel, Korea argues that Article I:3 provides, "a
formulation which offers a way of distinguishing be tween those [non-listed] 'organs' or 'organisations'
which are 'attached/connected/affiliated' etc. to MOCT and are, therefore, covered entities for the
purposes of the GPA and those which are not."125
4.34 Korea notes that if MOCT required KAA to award contracts with particular requirements,
then, by operation of Article I:3, KAA would be covered by the national treatment and
non-discrimination requirements of Article III of the GPA.  However, Korea argues that there is no
                                                     
121 1994 GAO Report, p. 7.
122 United States Enrichment Corporation website,
http://www.usec.com/Content/ThirdTier/whoweare/cnt_about_privatization.html.
123 Korea argues that the GPA does not use the term s "covered" versus "non-covered" entities.  The
terms "covered" and "non-covered" are shorthand terms adopted by the parties to this dispute.  In the GPA, theuse of the term "entity" automatically signifies coverage.  See, e.g., the reference to simply "entities" in GPAArticles III:2(a), III:2(b), VI:1, VI:2, VI:4.  The phra se "in the context of a procurement covered by this
Agreement," therefore, clarifies that the procurement at issue, besides being conducted by a covered entity, must
also be for a good or service for which the signatory has committed.
124 Korea argues that the use of the term "entity" in the GPA automatically signifies coverage.
Therefore, the term "enterprises" was most likely adopted in Article I:3 to distinguish such bodies from"entities," and to convey the intent to address in that Ar ticle the relevance of requirements imposed by covered
entities upon bodies that are not covered.
125 Korea's Answer to Question 11 from the Panel, dated 29 November 1999.WT/DS163/R
Page 32
evidence suggesting that MOCT requires KAA, KOACA or IIAC to award IIA procurement contracts
in accordance with Article I:3.
4.35 In response, the United States argues  that Article I:3 cannot be used in this dispute because
KAA, KOACA, and IIAC are not entities "not included in Appendix I."  The United States further
argues that a plain reading of Article I:3 makes it clear that it addresses the issue of subcontracts, notprimary contracts.  The United States questions how else can a non-covered entity be conducting a
"procurement covered under this Agreement"?  Further, the United States argues that adopting the
approach proposed by Korea in relation to Article I:3 would mean that rectifications and
modifications could be effected without the use of Article XXIV:6.  The United States contends that
this would render Article XXIV:6 an inutility.  The United States emphasizes that Article I:3 cannot
be interpreted as a means of expanding GPA coverage "beyond the list of entities included in a
signatory's Appendix I."
4.36 The United States also contends that Korea's arguments contained in paragraphs 4.20, 4.31
and 4.296 regarding Article I:3 would lead to the resu lt that, with the exception of Korea, every GPA
Party's non-listed subdivisions of its "central government entities" would not be covered, because
"only named entities, not other entities over which they may exert some control, are covered."  The
United States further contends that because these "non-covered" subdivisions are required by theircovered "central government entities" "to award contracts in accordance with particular
requirements," these subdivisions would then be subject to Article III of the GPA
(non-discrimination), but not to the rest of the GPA disciplines.  In contrast, Korea's non-listed
subdivisions ( i.e., the "subordinate linear organizations," "special local administrative organs," and
"attached organs" of listed entities) would be subject to all GPA disciplines, because "centralgovernment entity" for Korea – according to its Note 1 to Annex 1 – encompasses the entities'
subdivisions.  The United States concludes that, in short, Korea's arguments would result in major
reductions of concessions for all GPA Parties, while singling out Korea as the sole Party providing
full coverage of its non-listed entities.  The United States argues that the text of the GPA does not
support such a conclusion.
126
3. Appendix I, Annex 1:  The Scope of "Central Government Entities"
(a) The "Control" Test
4.37 Article I:1 of the GPA provides as follows:
"This Agreement applies to any law, regulation or practice regarding any procurement by
entities covered by this Agreement as specified in Appendix I."
4.38 The United States argues  that Article I:1 should be considered to determine whether
procurements by KAA, KOACA, and IIAC  are in fact procurements by MOCT.
4.39 The United States contends that a textual interpretation of Article I:1, and specifically of the
word, "by," suggests an analysis of the relationship between MOCT and these three entities vis-à-vis
the procurement of IIA construction.  According to th e United States, in making this analysis, factors
such as control, funding, ownership, and benefit may be considered.  The United States argues that inthe present dispute, MOCT controls, finances, benefits from, and owns the procurements of KAA,
KOACA, and IIAC.  The United States refers in this  respect to a list of provisions from Korean law
that, according to the United States, evidences MO CT's ultimate control and responsibility over the
IIA project, the entities related to this project, and the procurements of these entities.
127
                                                     
126 US Response to Korea's Answer to Question 5 from the Panel, dated 29 November 1999.
127 US Exhibit 77.WT/DS163/R
Page 33
4.40 The United States concludes that procur ements by KAA, KOACA, and IIAC are
procurements by MOCT and that, therefore, they are covered under Annex 1 of the GPA pursuant to
Article I:1 of the Agreement.
(b) Factors Illustrating Control
(i) Status of Project Operators
4.41 The United States notes  that the term "project operators" is defined in Article 95(1) of
Korea's Aviation Act , which states:
"Any operator of the airport development proj ects as prescribed in Article 94(2) [is]
(hereinafter referred to as "project operator")... ."128
4.42 The United States also notes that Article 94(2) of that Act, in turn, describes a "project
operator" as "any person other than the Minister of Construction and Transportation" who has
obtained "the permission of the Minister of Construction and Transportation" "to operate the airport
development projects."129
4.43 The United States contends that in further defining "project operator," the Aviation Act  goes
into explicit detail regarding the role and duties of project operators and the authority of MOCT overproject operators carrying out airport development projects.  The United States notes that, for
example, project operators can only carry out airport development projects with the approval,
permission, and consent of MOCT.
130  The United States further notes that the Aviation Act requires
potential project operators to obtain approval from MOCT of their proposed operational plan, which
must "specify or be accompanied by design drawings necessary for operating the projects, financingscheme, period of operation, and other matters prescribed by the Ordinance of the Ministry of
Construction and Transportation."
131  The United States notes that, moreover, project operators must
obtain approval from MOCT that the work performed conforms to project requirements.132
4.44 The United States further notes that the Enforcement Decree of the Aviation Act  supplements
the Aviation Act  as follows:
"Any person who desires to execute the airport development projects under
Article 94(2) of the [Aviation] Act, shall submit to the Minister of Construction and
Transportation an application for permission specifying the following matters . . .
[o]bject and details of projects, [p]eriod and method of execution of projects;  and
[o]ther matters necessary for executing projects ... ."133
4.45 Furthermore, according to the United States, the Act on the Promotion of a New Airport for
the Seoul Metropolitan Area Construction  notes that MOCT may designate a "project operator" to
                                                     
128 US Answer to Question 19 from the Panel, dated 29 November 1999.
129 Ibid.   The United States also notes that "airport development projects" are defined in Article 2(8) of
the Aviation Act  as "projects related to new construction, enla rgement or improvement of airport facilities... ."
130 Aviation Act , Article 96 (describing MOCT approval of a project operator's "operational plan."
Article 95(1) indicates that the purpose of an operational plan is to obtain the permission of the Minister ofConstruction and Transportation with regard to an airport development project).
131 Ibid.  Article 95.
132 US Answer to Question 19 from the Panel, dated 29 November 1999, citing Article 104 of the
Aviation Act.
133 US Answer to Question 19 from the Panel, dated 29 November 1999, citing Article 27 of the
Enforcement Decree of the Aviation Act.WT/DS163/R
Page 34
implement the Inchon International Airport construction project.134  However, "the operator of the
new airport construction project as provided for in Article 6 (hereinafter referred to as the "project
operator") shall draw up the execution plan for the new airport construction project (hereinafter
referred to as the "execution plan") containing the scale and contents of the project, the execution
period, a financing scheme and such other matters as determined by the Presidential Decree, andobtain approval from the Minister of Construction and Transportation.  The same shall apply where he
intends to modify the matters already approved ... ."
135
4.46 The United States argues that aside from the Aviation Act , no other law submitted in this case
defines the term "project operators."  Instead, argues the United States, they merely confirm the
designation of KAA, KOACA, and IIAC as IIA project operators.  Specifically, the United States
notes that the Seoul Airport Act , lists the "Operator[s] of New Airport Construction Project."136  The
United States notes that the relevant article of the Seoul Airport Act  was revised on a number of
occasions since its passage in 1991 to include KAA and KOACA in the list of potential IIA project
operators.137  The United States notes that Korea confirms KAA, KOACA and IIAC as IIA project
operators by specifically referring to them as "project operators" throughout Korea's submissions.
4.47 Finally, the United States argues that consistent with Article 94 of the Aviation Act , the Seoul
Airport Act  gives MOCT authority to choose a different procurement operator at any time, stating
that, "[t]he Minister of Construction and Transportation may, where he deems it necessary for the
efficient execution of the new airport construction project, arrange for a person other than those
referred to in paragraph (1) to implement part of the project."138  The United States argues that MOCT
did just that when it made KAA the IIA proj ect operator in December 1991, KOACA the project
operator in August of 1994, and IIAC the project operator in 1999.  However, the United Statesasserts that it is clear that throughout this eight-year period of switching project operators, MOCT
retained statutory authority and ultimate control over the entire IIA airport development project.
139
4.48 Korea notes  that according to Article 6(1) of the Seoul Airport Act , "[t]he new airport
construction project shall be implemented by" the operator identified therein.  Korea states that
although the term "operator" is not defined beyond the entity identified in Article 6(1), the term  "newairport construction project" is defined, in Article 2(2) of the Seoul Airport Act  to include various
types of construction.  In their respective authorizing statutes, KAA, KOACA and IIAC are charged
with undertaking these types of construction projects.
140
4.49 Korea further notes that the title of Article 6 of the 1991 Seoul Airport Act  – which gave KAA
responsibility for the IIA project – is "Operator of New Airport Construction Project."141  K o r e a
asserts that the wording of this title, and not anything from the Aviation Act , is precisely why Korea
                                                     
134 Act on the Promotion of a New Airport for the Seoul Metropolitan Area Construction,
US Exhibit 11, Article 6.
135 Ibid.   at Article 7(1).
136 Seoul Airport Act , Article 6.
137 US Answer to Question 19 from the Panel, dated 29 November 1999.
138 Seoul Airport Act , Article 6(2).
139 US Answer to Question 19 from the Panel, dated 29 November 1999.
140 Korea's Answer to Question 10 from the Panel, dated 29 November 1999, citing Korea Airport
Corporation Act , Article 7(5-2) (assigning KAA responsibility for "New airport construction projects as referred
to subparagraph 2 of Article 2 of the Act on the prom otion of New Airport Construction in Seoul Metropolitan
Area.");   Korea Airport Construction Authority Act , Article 2 (defining "project" for which KOACA is
responsible as "any of the activities stipulated in the subparagraph 2, Article 2, ' Seoul Airport Act .'"); Law on
Inchon International Airport Corporation , Article 10(1)(1) (assigning IIAC responsibility for "Construction
business of the Metropolitan New Airport (hereinafter refe rred to as Inchon International Airport) in accordance
with the Article 2 of the promotional law on Metropolitan New Airport Construction.").
141 1991 Seoul Airport Act , Article 6.WT/DS163/R
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and the United States used the shorthand term "project operator" when referring to KAA's role.142
Korea asserts that the United States has specifically stated that a "project operator" may be designated
for IIA construction under Article 6 of the Seoul Airport Act .  Korea further asserts that the United
States did not rely on the Aviation Act  as its source for the term "project operator."143
(ii) Independent Legal Persons
4.50 Korea argues that MOCT does not control procurements by KAA, KOACA and IIAC.  In
support of this argument, Korea states that, as specified in their authorizing statutes, KAA, KOACA
and IIAC were established by an act of the National Assembly as separate legal persons144 and are,
therefore, independent legal persons under Korean law.  Korea further states that these entities
authored and adopted their own by-laws, th ey authored and adopted their own Contract
Administration Regulations governing all procurement matters145, they issue their own requests for
proposals and bid announcements, they publish bid announcements and requests for proposals of their
own accord, and they conclude contracts with successful bidders on their own behalf.  Korea argues
that MOCT does not ask these entities, much less require them, to award contracts in accordance with
particular requirements.
4.51 The United States argues , on the other hand, that a separate legal person may still be an
agent or instrumentality of another entity.  The United States refers to Black's Law Dictionary, which
notes that an "agent" can be an "independent contractor," - that is, a separate legal entity.  Further, in
the view of the United States, merely having the status of a separate legal person does not in and of
itself guarantee independence. The United States refers to its arguments in paragraph 4.424.
4.52 The United States continues by stating that "c ontrol" has nothing to do with an entity's legal
status.  According to the United States, a separate legal entity can be controlled.  The United States
refers in this respect to the concept of "subsidiary corporation" in corporate law, in which a separate
legal entity is a subsidiary by means of control.  The United States argues that this does not mean that
the subsidiary corporation ceases to be a separate legal entity.  The United States contends that while
it agrees with Korea that MOCT's control would not lead to the surrender of KAA, KOACA, andIIAC's status as separate legal entities, this fact does not mean that the existence of separate legal
entities make them per se  incapable of being controlled.  The United States further argues that laws
creating KAA, KOACA and IIAC demonstrate that MOCT "guides", "supervises", "inspects" and
"directs" the New Airport Development Group, KAA, KOACA and IIAC.
146
4.53 The United States also states that if Korea's argument were to be accepted, then any Party to
the GPA could unilaterally transform one of its covered entity's subdivisions into a "separate 'juristic'
person" and then claim successfully that this "separate juristic" subdivision is no longer covered underthe GPA.  The United States further states that if ot her Parties were to object to this unilateral erosion
of bargained-for coverage, the Party making this transformation could – according to Korea – simply
claim that the objecting Parties have no rights in the matter because "separate 'juristic' persons" cannot
possibly be subdivisions of "central government entities."  The United States argues that this would
                                                     
142 Korea's Response to the US Answer to Question 19 from the Panel, dated 29 November 1999.
143 Korea’s Response to the US Answer to Question 19 from the Panel, dated 29 November 1999,
quoting  US First Written Submission, paragraph 20.
144 Korean Airport Corporation Act , Article 3; Korea Airport Construction Authority Act , Article 3;
Law on Inchon International Airport Corporation , Article 2.
145 KAA Contract Administration Regulations , Article 90; KOACA Contract Administration
Regulations , Article 3; IIAC Contract Administration Regulations , Article 3.
146 In support of this argument, the United States refers to Article 28 of the Korea Airport Corporation
Act, Article 31 of the Korea Airport Construction Authority Act  and Article 16 of the Law on Inchon
International Airport Corporation .WT/DS163/R
Page 36
reduce Article XXIV:6 – and the schedules – to inutility, contrary to the customary rules of
interpretation of public international law.147
(iii) Oversight for Public Safety and Fiscal Propriety
4.54 Korea also argues  that "control" exercised by a central government entity does not
undermine the independence of separate legal persons such as KAA, KOACA and IIAC and, rather, is
the minimum degree of oversight required to fulfill a government's fiduciary duty.  Korea notes that
constructing an airport, like any other public purpose project, is intimately linked to public welfare,
safety and finance.  In Korea's view, any responsible government will maintain oversight over the
entities responsible for the project in order to gu arantee to the public that the highest standards of
safety and fiscal propriety are observed.  Korea argues that this type of oversight does not surrender
an entity's status as a separate legal person.
4.55 Korea argues that the MOCT's authority to appoint board members, the reporting
requirements incumbent upon KAA, KOACA and IIAC, MOCT's oversight of fiscal decision-making,
and its maintenance of blue-ribbon consultative commissions regarding the IIA project is consistent
with the nature of the task with which KAA, KOACA and IIAC have been charged.  Korea further
argues that, apart from the obvious public safety issues associated with the construction of an airport,a certain amount of government oversight is justified to ensure that appropriate standards of fiscal
propriety are observed.  Korea notes that the budget for the IIA project stands at approximately
$6 billion, with 40 per cent derived from public funds.  According to Korea, accountability is needed
to guarantee the observation of the highest standards of fiscal responsibility.
4.56 Additionally, Korea argues that the type of oversight referred to by the United States – the
requirement that KAA, KOACA or IIAC seek approval  for and report on certain of its actions – also
ensures accountability.  Korea argues that the approval and reporting requirements to which KAA,
KOACA and IIAC are subject ensures that there is a public record evidencing their accountability for
what they do.  Korea states that they do not surrender their status as separate legal persons merely
because they are called to account for their actions.
4.57 Finally, Korea argues that, even assuming for the sake of argument that the United States'
control test applies, KAA, KOACA and IIAC cannot be considered to be controlled by MOCT under
this test.  Korea argues that this follows from the fact that the degree of control is not extreme but,
rather, is only the degree of control necessary to ensure that the interests of the public are reflected in
the operations of each corporation. Korea asserts that the United States itself, in discussing the control
exercised over its own Amtrak and Comsat by central government entities, reasoned that "the retained
links with the government may be seen as only those necessary to ensure that the interests of thepublic are reflected in the operations of [Amtrak and Comsat]," and that these links do not support the
extension of GPA coverage to Amtrak and Comsat si nce "the code is aimed at government ministeries
[sic] and their subdivisions – not the myriad organizations tangential to the essential function of
government."
148
4.58 In response, the United States  argues  that there is no support for the argument that MOCT's
direction and supervision of KAA a nd KOACA are merely aimed at public policy matters in the texts
of the Korea Airport Corporation Act , the Korea Airport Construction Authority Act , and the Inchon
International Airport Corporation Act .
                                                     
147 US Response to Korea's Answer to Question 2 from the Panel, dated 29 November 1999.
148 Agreements Being Negotiated at the Multilateral Trade Negotiations in Geneva , US International
Trade Commission Investigation No. 332-101 (MTN Studies, August 1979), p. 44.WT/DS163/R
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(iv) Master Plan for IIA Project
4.59 In support of its argument that MOCT remains in ultimate control of the IIA project,  the
United States refers to Article 4(1) of the Seoul Airport Act , which requires the MOCT to establish
the "master plan" for the IIA project.  The United States notes that Article 4(2) stipulates that themaster plan includes:  1. General direction of construction;  2. Outline of the construction plan;
3. Construction period;  4. Financing plan;  and 5. Such other matters as the Minister of Construction
and Transportation deems necessary.
4.60 Korea argues in response  that Article 4 of the Seoul Airport Act  does not authorize MOCT
to undertake procurement for IIA or to require the project operator to award contracts for IIA
procurements in accordance with any particular requirements.
4.61 The United States also notes  that as project operators, NADG, KAA, KOACA and IIAC
were and are required to follow the "master plan."  The United States further notes that the NADG,
KAA, KOACA, and IIAC are required to obtain MOCT approval for their project execution plans.
(v) Reporting Obligations
4.62 In further support of its argument that MO CT controls the IIA project operators, the United
States notes  that MOCT may:
"where necessary for the implementation of the Act, order the project operator to
make necessary reports on the new airport construction project or to submit necessary
data, and may have public officials serving at his Ministry enter the project operator's
office, the workplace or other relevant places to inspect the business of the newairport construction project"
149
4.63 The United States also notes that if and when the project operator:
"has completed the work on the new airport construction project, [he shall] submit a
work completion report to the Minister of Construction and Transportation and obtain
confirmation of the completion of work"150
(vi) Appointment and Dismissal
4.64 Also, in further support of its argument that MOCT controls each of the IIA "project
operators," the United States contends  that directors of NADG are accountable to the MOCT.
Further, the presidents, vice-presidents, and auditors of KAA, KOACA, and IIAC are appointed and
dismissed by MOCT while the rest of their boards are appointed and dismissed by the president "with
the approval of" MOCT.
4.65 In response, Korea argues that KAA, KOACA and IIAC are governed by their own boards
of directors that control all matters related to major corporate investments and all other major
corporate issues of any significance.151  Further, Korea states that KAA, KOACA and IIAC hire and
fire a workforce that is not in the government's employ.152
                                                     
149 US Answer to Question 19 from the Panel, dated 29 November 1999, citing Article 14(1) of the
Seoul Airport Act.
150 Ibid.  citing Article 12-2(1) of the Seoul Airport Act.
151 Korea refers to, for example, KAA By-laws , Articles 4(3), 4(1)(6), 14, 25; KOACA By-laws ,
Articles 7(1), 30; IIAC Articles of Incorporation , Articles 17, 47.
152 Korea Airport Corporation Act , Article 13;  Korea Airport Construction Authority Act , Article 15;
Law on Inchon International Airport Corporation , Additional Rule Article 6(2) (KOACA employees, who wereWT/DS163/R
Page 38
(vii) Power to Cancel Permission or Approval
4.66 In further support of its control argument,  the United States notes that Article 13(1) of the
Seoul Airport Act  provides that the MOCT retains final authority to:
"cancel the permission or approval granted pursuant to this Act or order the
suspension of or alteration in the work, or the reconstruction, modification or
relocation of facilities:
1. Where the operator has obtained permission or approval under this Act by
deceit or other wrongful means;
2. Where the operator has breached an order or disposition issued under this
Act;  and
3. Where continued execution of the new airport construction project has been
made impossible owing to change of circumstances"153
4.67 Korea argues in response  that MOCT's oversight authority is related to MOCT's mandate to
police any potential criminal conduct by KAA, KOACA and IIAC.  More specifically, Korea argues
that MOCT is able to cancel, suspend or alter any action undertaken by KAA, KOACA or IIAC only
where conduct by those entities is illegal or otherwis e wrongful.  Korea notes in this respect that it is
only in exceptional situations, where KAA employees have committed certain criminal violations,
that they will be treated as public officials.  Korea further notes that under Article 30 of the Korea
Airport Corporation Act , this "legal fiction" will result in the application of Chapter VII of the Korean
Criminal Act  to KAA employees.154  Korea argues that MOCT oversight of the type described in
Article 8(2) of the Korea Airport Corporation Act  is aimed at policing such conduct.  Korea states
that it is "good government" to police the conduct of KAA, KOACA or IIAC officials, routing out any
potential criminal conduct, or cancelling or suspen ding any "wrongful" or "deceitful" actions that
might be undertaken by those officials.
(viii) Power to Dictate Technical and Non-Technical Requirements
4.68 In further support of its argument that MOCT controls the IIA procuring entities, the United
States argues that MOCT dictates what technical or non-technical requirements are necessary for
each procurement, the decision of which determines the final selection of the products or services.
The United States notes that through its New Airport Development Group and its "New Airport
Construction Deliberation Commission", MOCT inter alia  deliberates on "important issues relating to
building techniques, construction technology and traffic impact, etc. of the new airport construction
project";  researches and develops "systems and regulations" concerning the airport;  and plans,designs and oversees "actual works of [the airport's] civil engineering facilities, site preparation,
supporting complex construction supporting facilities and accessible transport facilities."
4.69 In response, Korea notes  that there is no evidence to demonstrate that MOCT dictates
technical or non-technical requirements for procurements by KAA, KOACA or IIAC.  Korea argues
that the United States has not established that KAA, KOACA or IIAC are "required" by MOCT or anyother covered entity "to award contracts in accordance with particular requirements," which is the
standard provided in Article I:3 of the GPA to extend coverage to unlisted entities.  According to
Korea, neither the statutory provisions regarding MOCT's responsibility for the Inchon airport's basic
                                                                                                                                                                    
by virtue of Article 15 of the Korea Airport Construction Authority Act  not government employees, became
employees of IIAC).
153 US Answer to Question 19 from the Panel, dated 29 November 1999.
154 Criminal Act , Act No. 293, 14 September 1953 (as amended by Act No. 2745, 25 March 1975).WT/DS163/R
Page 39
plan, nor the statutory provisions requiring KAA,  KOACA and IIAC to request approval for and
report on certain of their actions, instruct MOCT to require KAA, KOACA or IIAC to award Inchon
airport contracts in accordance with any particular requirements.  Korea argues that it has in fact
demonstrated that no such requirements exist, given its demonstration that KAA, KOACA and IIAC:
are separate legal persons;  have adopted their own procurement regulations;  are empowered to and
have in fact conducted procurements on their own behalf;  and, have signed contracts on their own
behalf.
(ix) Financing of IIA Project
4.70 The United States also argues  that MOCT is responsible for all budget and funding matters
related to the airport and, more particularly, that MOCT finances all IIA procurements.  In support of
this argument, the United States refers to Article 15 of the Seoul Airport Act,  which, it argues, permits
the Government of Korea - that is, MOCT - to grant a subsidy or a fiscal loan to the project operator
to help him finance all or part of the expenses needed for the new airport construction project. The
United States further argues that MOCT provides free loans of national assets, it concedes
gratuitously any state property to KAA, KOACA and IIAC, it guarantees the bonds issued by these
entities, and establishes the financial plans for the repayment of debt incurred by these entities fromthe construction of the airport.  The United States al so states that if these entities attempt to collect
rents or charges for the use of airport facilities, borrow funds, or sell airport property, they must
obtain MOCT's approval.  Finally, the United States argues that MOCT funds the NADG.
4.71 Korea argues in response  that there is no evidence indicating that MOCT finances all IIA
procurements.  Further, Korea argues that KAA,  KOACA and IIAC fund portions of IIA procurement
with their own funds.
4.72 In support of its argument regarding finance of the IIA project,  the United States refers  to a
document entitled, "Inchon International Airport:  A Future-Oriented Airport, Increasing the Value of
Time."  The United States contends that this docu ment shows that 40 per cent of the funding for the
IIA construction project will come from government grant.  The United States further states that theremaining IIA funding will come from borrowing guaranteed by the government, government land
sales, and KAA.  The United States notes that Korea is anticipating at this time that only 11.7 per cent
of the IIA funding will come from private inve stment and that IIAC may not be privatized.
(x) Property in IIA Project
4.73 The United States also argues  that MOCT retains possession of all products or services
procured for the IIA project.  The United States argues that the Seoul Airport Act  confirms that the
title to the land and facilities created or built as a consequence of the new airport construction project
shall vest in the State upon completion.  The United States also notes that the Korea Airport
Construction Authority Act  states that the ownership of new airport facilities constructed through the
new airport construction project belongs to MOCT as soon as the construction is finished.
4.74 The United States also notes that the Seoul Airport Act  provides that if the project operator
chooses to "set up or expand in or relocate to the projected area or its adjoining area such facilities for
the production of various construction materials as are required for the new airport construction
project,"
155 "receive advance money for all or part of the land price from the persons who will be
provided with a portion of the land to be created by the implementation of the new airport
                                                     
155 Seoul Airport Act , Article 8-2(3).WT/DS163/R
Page 40
construction project,"156 or "issue bonds convertible to land (hereinafter referred to as the "land
redemption bonds")157 the project operator must obtain the approval of MOCT."158
(c) Is Control Related to Procurement?
4.75 Korea asserts  that the "control" factors identified by the United States are essentially two-
fold:  "control" stemming from MOCT's responsibility for formulating and amending the basic plan;
and, "control" stemming from the statutory requirement that KAA, KOACA and IIAC request
approval for and report on certain of their actions.
4.76 Korea argues that these factors are not related to procurement.  Further, Korea argues that
these factors do not demonstrate that MOCT requires KAA, KOACA and IIAC to award contracts in
accordance with particular requirements.
4.77 Regarding the first category of control referred to in paragraph 4.75, Korea notes that
Article 4(2) of the Seoul Airport Act  describes what should be included in the basic or master plan.
Korea argues that the Act does not direct or authorize MOCT to undertake procurement for IIA nor
does it instruct MOCT to require KAA, KOACA or IIAC to award IIA contracts in accordance with
any particular requirements.
4.78 Regarding the second category of MOCT control referred to in paragraph 4.75, Korea states
that the United States only provides one example where MOCT oversight was connected to
procurement by KAA, KOACA and IIAC.  Korea makes specific reference to the assertion by the
United States that MOCT's authority to cancel, suspend or alter actions undertaken by KAA, KOACA
or IIAC, under Article 13(1) of the Seoul Airport Act , includes the right to cancel, suspend, or change
any procurement decision.  Korea argues that MOCT is authorized to exercise this discretionaryauthority only in instances where conduct by KAA, KOACA or IIAC is illegal, otherwise wrongful or
unenforceable.
159  Korea reiterates that this power is related simply to MOCT's task to police any
potentially criminal conduct by KAA, KOACA or IIAC.
4.79 The United States argues that MOCT is responsible for all "affairs relating to air
transportation" and it oversees the "construction and administration of…airports and all other mattersconcerning construction and transport safety affairs."  The United States asserts that although the New
Airport Development Group, KAA, KOACA or IIAC may purport to have the procuring authority for
the IIA project, they are merely procurement agenci es acting on behalf of MOCT.  The United States
maintains that such procurements are, in fact, conducted by MOCT and, therefore, are within the
scope and meaning of Korea's Annex 1 of the GPA.
(d) Relevance of the Aviation Act to the IIA Project
(i) MOCT and the Aviation Act
4.80 The United States argues  that Article 94(1) of the Aviation Act  confers on MOCT authority
over airport development projects. The United States also argues that the Aviation Act  confirms
                                                     
156 Ibid.  Article 11.
157 Ibid.
158 US Answer to Question 19 from the Panel, dated 29 November 1999.
159 Seoul Airport Act , Article 13(1). Article 13(1)(3) lists impossibility owing to changed circumstances
as a reason justifying MOCT cancellation, suspension or alteration of action by KAA, KOACA or IIAC.
"Impossibility" is a general term of contract law dictating that in exceptional circumstances, changed
circumstances can excuse a party from performance of a contract.  See generally E. Allan Farnsworth,C
ONTRACTS , § 9.5 (2nd Ed., 1990) (Little, Brown, Boston).  Thus, "impossibility" owing to changed
circumstances leads to the same result as illegality or other wrong – the action by KAA, KOACA or IIAC isunenforceable  as a matter of law.WT/DS163/R
Page 41
MOCT's control.  The United States refers to the following provisions of that Act in support of its
argument:160
"The airport development projects shall be carried out by the Minister of Constructionand Transportation . . . Any person other than the Minister of Construction and
Transportation, who desires to operate the airport development projects, shall obtainthe permission of the Minister of Construction and Transportation ... .
161
Any operator of the airport development projects . . . shall make an operational planbefore he undertakes the work under the conditions as prescribed by the Presidential
Decree.  In this case, the project operator as prescribed in Article 94(2) shall produce
an operational plan to obtain the permission of the Minister of Construction and
Transportation . . . The operational plan . . . shall specify or be accompanied by
design drawings necessary for operating the projects, financing scheme, period ofoperation and matters as prescribed by the Ordinance of the Ministry of Construction
and Transportation . . ."
162
4.81 The United States notes that the Aviation Act defines "airport development projects" as
"projects related to new construction, enlargement or improvement of airport facilities."163
4.82 Further, the United States relies upon the Enforcement Decree of the Aviation Act  which, it
says, supplements the Aviation Act :
"Any person who desires to execute the airport development projects under
Article 94(2) of the Act, shall submit to the Minister of Construction and
Transportation an application for permission specifying the following matters . . .
[o]bject and details of projects, [p]eriod and method of execution of projects; and[o]ther matters necessary for executing projects ... ."
164
4.83 The United States argues that, according to the Aviation Act , MOCT not only carried out past
"projects related to new construction, enlargement or improvement of airport facilities," but is also
presently carrying out the IIA construction project.165  The United States notes that MOCT has the
authority to choose and transfer the project operators of the construction project at will:  it was MOCTthat transferred IIA procurement responsibility from KAA to KOACA and from KOACA to IIAC.
As project operators, according to the United States, KAA, KOACA amd IIAC are mere tools used by
MOCT to construct the IIA.
4.84 Finally, the United States argues that various provisions in the Aviation Act  confirm the
subordinate nature of project operators.
166
4.85 In response, Korea argues  that although some Articles of the Aviation Act  were incorporated
by reference into the Seoul Airport Act , the Articles mentioned by the United States – Articles 2(8),
94(1), 94(2), 103, 103(1), 104(2), 107 and 108 of the Aviation Act  – were not so incorporated.  Korea
concludes that the United States' arguments must, therefore, be rejected.167
                                                     
160 US Answer to Question 18 from the Panel, dated 29 November 1999.
161 Aviation Act , Article 94.
162 Ibid.  Article 95.
163 US Answer to Question 18 from the Panel, dated 29 November 1999, citing Article 2(8) of the
Aviation Act.
164 Enforcement Decree of  the Aviation Act , Article 27.
165 Aviation Act , Articles 94 and 2(8).
166 Articles 95, 96, 103, and 104 of the Aviation Act .
167 Korea's Response to the US Answer to Question 18 from the Panel, dated 29 November 1999.WT/DS163/R
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(ii) Applicability of the Aviation Act
Later Act Supersedes the Former
4.86 Korea argues  that the Aviation Act  is not applicable to the IIA project because, in May 1991,
the National Assembly enacted the Seoul Airport Act .  Korea argues that this Act governs the IIA
project.
4.87 In support of its argument, Korea notes that Article 1 of the Seoul Airport Act  provides that:
"The purpose of this Act is, by specifying the matters necessary for the speedy
construction of a new airport in the Seoul Metropolitan area, to push ahead efficiently
with the new airport construction project to meet the rapidly growing demands for air
transport service in the Seoul Metropolitan area and to contribute to the development
of national economy."168
4.88 Korea notes that one reason to consider the Seoul Airport Act , rather than the Aviation Act , as
determinative for questions regarding the construction of IIA, is that the Seoul Airport Act  was
enacted subsequent to the Aviation Act .169
4.89 Korea notes as a matter of clarification that the Aviation Act  was superseded by the Seoul
Airport Act for the purposes of IIA construction only.  Korea notes that the Aviation Act  still exists
and is operative for other purposes.170  Specifically, Korea states that apart from Section 2 of its
Chapter V, titled "Airport," the Aviation Act  regulates a variety of areas irrelevant to an airport like
IIA that is not yet completed or operating:  Chapter II, regarding "Aircraft";  Chapter III, "Airman";
Chapter IV, "Operation of Aircraft";  Chapter VI, "Air Transportation Business, Etc.";  Chapter VII,
"Aircraft Handling Business, Etc.";  Chapter VIII, "Foreign Aircraft";  Chapter VIII-2, "Investigationof Aviation Accident";  Chapter IX, "Supplementary Provisions";  and, Chapter X, "Penal
Provisions".  Korea states that, furthermore, th e provisions of Section 2 of Chapter V of the Aviation
Act continue to apply to other airport construction proj ects in Korea, in the absence of "other Acts" or
"other laws" providing otherwise.
171
4.90 In response, the United States argues  that Korea cites no provision in the Seoul Airport Act
that would support a conclusion that the Seoul Airport Act  supersedes the Aviation Act .172
4.91 The United States notes specifically that nowhere in Article 8 of the Seoul Airport Act  entitled
"Relations with Other Acts" does it say that the Seoul Airport Act  supersedes the Aviation Act .  On the
contrary, the United States argues that Article 8 of the Seoul Airport Act  specifically cross-references
the Aviation Act  and states that the approval of the "execution plans" under the Seoul Airport Act  shall
constitute approval under the Aviation Act .173
                                                     
168 1997 Seoul Airport Act , Article 1.
169 Korea's Answer to Question 9 from the Panel, dated 29 November 1999.
170 Korea's Answer to Question 1 from the Panel, dated 29 November 1999.
171 Korea's Answer to Question 9 from the Panel, dated 29 November 1999.
172 US Response to Korea's Answer to Question 1 from the Panel, dated 29 November 1999.
173 US Response to Korea's Answer to Question 1 from the Panel, dated 29 November 1999, citing
Article 8 of the Seoul Airport Act  which states, in relevant part:
Article 8 (Relations with Other Acts)
(1) Where the project operator obtains approval for the execution plan pursuant to Article 7, it
shall be presumed that the following approval, permission, authorization, decision,designation, licensing, consultation, consent...have been granted or made...and where theMinister of Construction and Transportation brings to public notice of the approval of theexecution plan, it shall be presumed that a public notification or announcement ofWT/DS163/R
Page 43
4.92 The United States argues that if the Seoul Airport Act  were intended to supersede provisions
of the Aviation Act  relating to airport development projects, as Korea argues, there would be no need
for the Seoul Airport Act  to indicate that approval of the execution plan would also constitute approval
under Article 95(1) of the Aviation Act , i.e., Article 95(1) of the Aviation Act  would simply not apply
to the IIA project.  Thus, according to the United States, Article 8 of the Seoul Airport Act  clearly
demonstrates first, that the Aviation Act  is not superseded by the Seoul Airport Act , and secondly, that
the IIA project is included in the airport development projects to which the Aviation Act applies.174
4.93 The United States notes that other Korean statutes illustrate that when one law "replaces" or
"supersedes" another, this change is clearly and unambiguously stated in law as a matter of statutory
drafting.  The United States notes that, for example, when Korea enacted the law creating the IIAC,
which superseded the KOACA law and transferred the duties of IIA project operator from KOACA to
IIAC, the new IIAC law made it clear that the IIAC law displaced the KOACA law.  The UnitedStates refers for support of its argument to Article 2 (Additional Rule) of the Law on Inchon
International Airport Corporation  which states:
"Article 2.  (Abolition of other law)  The law on Metropolitan New Airport Public
Corporation shall be abolished."
175
4.94 The United States concludes that there is no indication in the Seoul Airport Act , the laws
establishing KAA, KOACA, or IIAC (or any of the by-laws for those entities), or in any other law or
regulation that the Seoul Airport Act  supersedes the Aviation Act  in any way.176
Specific Act Takes Precedence over General
4.95 Korea argues  that the material articles of the Seoul Airport Act  replace often in virtually
verbatim form parallel Articles in the Aviation Act  dealing with the construction of an airport.  Korea
argues that it is axiomatic that a more specific rule, i.e., one narrowly targeted at a particular project
like the IIA, replaces a more general, albeit co-existing rule, i.e., one broadly addressed to any airport
project.177
4.96 Korea also submits that as to construction of the IIA, where the Seoul Airport Act  contains
Articles corresponding directly with identical or similar Articles contained in the Aviation Act  – the
purpose of which is, considerably more general, "to contribute to the development of aviation and the
promotion of public welfare" – the provisions of the Seoul Airport Act  apply.178
4.97 Korea notes that, for example, Article 94 of the 1997 Aviation Act , entitled "Operator of
Airport Development," states at subparagraph (1) that MOCT shall carry out airport development
projects.179  Korea notes that Article 6 of the 1997 Seoul Airport Act , not coincidentally entitled
"Operator of New Airport Construction Project," states at subparagraph (1) that KOACA (by its alias,
the Seoul Metropolitan Area New Airport Construction Corporation) shall implement the IIAproject.
180
                                                                                                                                                                    
authorization and permission, etc. has been made or granted pursuant to on the of following
Acts:
…16. Approval of an execution plan as stipulated in Article 95(1) of the Aviation Act...
174 US Response to Korea's Answer to Question 1 from the Panel, dated 29 November 1999.
175 Ibid.
176 Ibid.
177 Korea's Answer to Question 9 from the Panel, dated 29 November 1999.
178 Ibid.
179 Ibid.  citing 1997 Aviation Act , Article 94(1).
180 Ibid.  citing Article 6(1) of the 1997 Seoul Airport Act .WT/DS163/R
Page 44
4.98 Korea notes that, similarly, the 1991 Aviation Act , at Article 94(1), under the title "Operator
of Airport Development Projects," states that MOCT shall carry out airport development projects181
while the 1991 Seoul Airport Act , at Article 6(1), under the title "Operator of New Airport
Construction Project," states that KAA shall implement the IIA project.182
4.99 Korea argues that, therefore, with regard to the IIA project, the more specific provision of
Seoul Airport Act  take precedence over the more general provision of the Aviation Act , with the result
being that KAA, KOACA or IIAC, rather than MOCT, carry responsibility for the IIA project.183
4.100  Korea notes that examples of the National Assembly's substitution of Articles in the Aviation
Act with Articles from the Seoul Airport Act  are plentiful.  Korea refers to the charts below, which
compare the two Acts in 1997 and 1991.  Korea notes that the Korean National Assembly elected, for
the purposes of IIA construction, to replicate and replace the terms of Section 2 of Chapter V of the
Aviation Act  with the terms of the Seoul Airport Act .  Korea notes that the titles of the corresponding
articles are often virtually identical, which, according to Korea, establishes the clear intent of the
National Assembly to replace the regulatory framework of the Aviation Act , for purposes of
construction of the IIA, with the new framework of the Seoul Airport Act .184
1997 Aviation Act 1997 Seoul Airport Act
Article 89 (Establishment of Basic Airport
Development Plan)Article 4 (Drawing-up of Master Plan for New
Airport Construction)
Article 90 (Modification, etc. of Basic Plan) Article 4-2 (Alterations, etc. to Master Plan)
Article 91 (Public Announcement on Basic Plan) Article 4-3 (Public Notice of Master Plan)
Article 92 (Contents of Basic Plan) Article 4 (Drawing-up of Master Plan for New
Airport Construction)
Article 93 (Restriction on Act, etc.) A rticle 5 (Restriction on Acts, etc.)
Article 94 (Operator of Airport Development
Projects)Article 6 (Operator of New Airport Construction
Project)
Article 95 (Establishment, Approval, etc. of
Operational Plan)Article 7 (Approval of Execution Plan)
Article 96 (Relations With Other Acts) Article 8 (Relations With Other Acts)
Article 97 (Access to and Use of Land) Article 9 (Entry Into and Use of Land)
Article 98 (Expropriation of Land, etc.) Ar ticle 10 (Expropriation of Lands, etc.)
Article 99 (Restriction, etc. on Disposal of State-
owned Land)Article 12 (Restriction, etc. on Disposal of State
and Public Lands)
Article 100 (Entrustment With AffairsConcerning Land Purchase, etc.)Article 16 (Entrustment of Land Purchase
Business, etc.)
Article 101 (Execution of Appurtenant Work) Article 7-2 (Execution of Appurtenant Work)
Article 104 (Inspection of Completion) Article 12-2 (Confirmation of Completion of
Work)
Article 104 (Inspection of Completion) Article 14 (Report and Inspection, etc.)
Article 105 (Reversion of Airport Facilities andExemption From Rent)Article 12-3 (Title, etc., to Facilities)
Article 110 (Supervision) Article 13 (Supervision)
                                                     
181 1991 Aviation Act , Article 94(1).
182 Korea's Answer to Question 9 from the Panel, da ted 29 November 1999, citing Article 6(1) of the
1991 Seoul Airport Act.
183 Ibid.
184 Korea's Answer to Question 9 from the Panel, dated 29 November 1999.WT/DS163/R
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1991 Aviation Act 1991 Seoul Airport Act
Article 89 (Establishment of Basic Airport
Development Plan)Article 4 (Drawing-up of Master Plan for New
Airport Construction)
Article 93 (Restriction on Act, etc.) A rticle 5 (Restriction on Acts, etc.)
Article 94 (Operator of Airport Development
Projects)Article 6 (Operator of New Airport Construction
Project)
Article 95 (Establishment, Approval, etc. of
Operational Plan)Article 7 (Approval of Project Plan)
Article 96 (Relations With Other Laws) Article 8 (Relations With Other Acts)
Article 97 (Access to and Use of Land) Article 9 (Entry Into and Use of Land)
Article 98 (Expropriation of Land, etc.) Ar ticle 10 (Expropriation of Lands, etc.)
Article 99 (Restriction, etc. on Disposal of State-
owned Land)Article 12 (Restriction, etc. on Disposal of State
and Public Lands)
Article 100 (Entrustment with AffairsConcerning Land Purchase, etc.)Article 16 (Entrustment of Land Purchase
Business, etc.)
4.101  In response, the United States argues  that, first, there is an inherent contradiction in Korea's
argument that the articles of the Seoul Airport Act  " replace" certain articles in the Aviation Act , when
these very articles in the Aviation Act  are still in force today.185  The United States contends that
Korea cites no provision in any act that suggests this to be true, nor can Korea provide evidence that
the provisions of the Aviation Act  apply to all airport development projects except the IIA project.186
4.102  Second, the United States refers to the above charts in which Korea points to 17 articles in the
1997 Aviation Act that have "similar" titles to Articles in the 1997 Seoul Airport Act .  The United
States argues that, however, given that the 1997 Aviation Act  contains 184 Articles (not including six
addenda articles), the mere fact that 17 of these 184 articles (less than 10 per cent) have "similar"
titles to another act is not persuasive.  According to  the United States, if a Korean statute could "take
precedence over," "supersede," or "replace" another statute, simply by showing that its article titles
are "similar" to 10 per cent of the titles in the second statute, then a large number of Korea laws would
no longer be in existence.  In addition, contends the United States, many of the "similar" titles inKorea's chart can be found in acts other than the Aviation Act .  The United States notes, for example,
such article titles as "Relations With Other Acts," "Restriction, etc. on Disposal of States and Public
Lands," "Entrustment of Land Purchase Business, etc.," and "Supervision" can be found in the KAA
law, the law establishing KOACA, and the IIAC law.  Moreover, the United States submits that many
of the titles of Korea's 17 articles are neither similar, nor virtually identical.  For example, "Reversionof Airport Facilities and Exemption From Rent" is not identical to "Title, etc., to Facilities."
Likewise, "Contents of Basic Plan" is not identi cal to "Drawing up Master Plan for New Airport
Construction."
187
4.103  The United States notes, third, that the substance of the articles that Korea maintains as
"similar" or "identical" are not always so.  The United States notes that, for example, while the titlesof Article 104 of the Aviation Act  (Inspection of Completion) and Article 14 of the Seoul Airport Act
(Report and Inspection, etc.) appear similar, their texts are quite different.  The United States refers to
the following side-by-side chart of the two articles
188:
                                                     
185 The US notes that in its Response to Question 9 from the Panel, dated 29 November 1999, Korea
states that, "The Aviation Act  is, of course, still in effect."
186 US Response to Korea's Answer to Question 9 from the Panel, dated 29 November 1999.
187 Ibid.
188 Ibid.WT/DS163/R
Page 46
1997 Aviation Act 1997 Seoul Airport Act
Article 104 (Inspection of Completion)
(1) When a project operator, as
described in Article 94(2) has completed
the work, he shall submit without delay a
report on work completion to the Minister
of Construction and Transportation to
undergo the inspection of completion.Article 14 (Report of Inspection, etc.)
(1) The Minister of Construction and
Transportation may, where necessary for
the implementation of the Act, order the
project operator to make necessary reports
on the new airport construction project or
to submit necessary data, and may havepublic officials serving at his Ministry enter
the project operator's office, the workplace
or other relevant places to inspect the
business of the new airport construction
project.
(2) The Minister of Construction andTransportation shall, upon receiving an
application for inspection and completion
under paragraph (1), conduct the inspection
of completion, and in a case where he
deems that the work has been executed in
conformity with the permission on the
work, he shall deliver a certificate ofcompletion to the applicant.
(3) When the certificate of completion
inspection is delivered under paragraph (2),
the inspection, authorization, etc. ofcompletion on the work according to
approval, permission, license, etc. under the
subparagraphs of Article 96(1) shall be
considered to be obtained.
(4) The land and airport facilities
which are created or installed by the airport
development projects, shall not be used
before a certificate or completion
inspection as referred to in paragraph (2) isdelivered: Provided, That this shall not
apply in a case where a permission on use
prior to completion is granted by the
Minister of Construction and
Transportation.(2) The public officials conducting an
inspection of the affairs pertaining to the
new airport construction project under
paragraph (1) shall carry a certificate
indicating his mandated powers and
produce it to relevant personnel.
(3) Matters necessary for the
certificate as provided for in paragraph (2)
shall be determined by the Ordinance of the
Ministry of Construction and
Transportation.
4.104  The United States asserts that each of the examples above shows the weaknesses in Korea's
argument , and reinforces the US position that the Seoul Airport Act  does not replace the  Aviation Act .
The United States reiterates that the acts are entire ly consistent with one another.  The United States
concludes that, indeed, to the extent that certain articles are similar, it is because the Aviation Act  is
the foundation upon which supplementary laws like the Seoul Airport Act  are based.189
                                                     
189 Ibid.WT/DS163/R
Page 47
Incorporation by Reference
4.105  Korea acknowledges that the National Assembly chose to incorporate certain provisions of
the Aviation Act  into the Seoul Airport Act , placing occasional specific references to the former in the
latter.  Korea notes that the 1997 Seoul Airport Act  does, for example, at Article 2(2)(a), list
Article 2(6) of the Aviation Act  as the source for the definition of the term "airport facilities."  Korea
notes that, similarly, Article 2(1) of the 1997 Seoul Airport Act  incorporates Article 111 of the
Aviation Act ; Article 111 in turn refers to certain of the Articles in Section 1 of Chapter V of the
Aviation Act, concerning "Aerodrome and Navigation Aids" (navaids).  Korea states that pursuant to
Article 111, Article 75 of the Aviation Act , regarding the installation of navaids by MOCT or another
entity granted permission to so install, does not apply.  Korea states that Articles 77(1), 81 or 87, each
of which address subsequent acts regarding entities granted permission to install navaids, also do not
apply.  However, Korea notes that Article 111 of the Aviation Act  refers to and thus incorporates into
the Seoul Airport Act , Article 76 of the Aviation Act , regarding public notice of navaid installation;
Article 77(2), regarding inspection and further public announcement of installed navaids;  Article 79,
regarding delayed or discontinued use of navaids;  Article 80, regarding management of navaids;
Article 82, regarding the restriction of various "obstacles";  Article 83, regarding the requirement of
aviation obstacle lights and beacons;  Article 85, regarding forbidden or illegal acts;  and, Article 86,regarding rent due to parties using navaids once they are installed.  Finally, Korea notes that
Articles 105(3) and 105(4) of the 1997 Aviation Act , by virtue of Article 12-3(2) of the 1997 Seoul
Airport Act , permit investors or project operators to operate and derive revenue from airport
facilities.
190
4.106  Korea notes that the 1991 Seoul Airport Act  similarly incorporates by reference several
provisions of the 1991 Aviation Act .  Article 2(2)(b) of the 1991 Seoul Airport Act  turns to the 1991
Aviation Act  for a definition of the term "aircraft handling business."191  Korea states that, moreover,
the reference in Article 2(1) of the 1991 Seoul Airport Act  to Article 111 of the 1991 Aviation Act  is
identical to the parallel reference in the 1997 Acts, incorporating by reference Articles 76, 77(2), 79,
80, 82, 83, 85 and 86 of the 1991 Aviation Act .  Korea states that, finally, by virtue of Article 8(1) of
the 1991 Seoul Airport Act , subparagraph 16, KAA's "operational plan" is to be approved by the
Minister of Transportation under Article 95(1) of the 1991 Aviation Act .  Korea notes that such
approval was already required under Article 7 of the 1991 Seoul Airport Act .192
4.107  Korea argues that these specific Articles of the Aviation Act , while incorporated by reference
into the Seoul Airport Act , do not demonstrate that MOCT, rather than KAA, KOACA or IIAC, is the
entity responsible for procurement for the IIA construction project.  Korea argues that even if the
United States' "control" test was determinative of GPA coverage, these specific Articles do notdemonstrate "control" by MOCT over KAA, KOACA or IIAC.  Further, Korea argues that they do
not demonstrate, under the test included in Article I:3 of the GPA, that MOCT "requires" KAA,
KOACA or IIAC "to award contracts in accordance with particular requirements."  In support of its
argument, Korea refers to evidence showing that KAA, KOACA and IIAC conduct their own
procurements and conclude their ow n contracts, pursuant to their own Contract Administration
Regulations .
193
4.108  Korea concludes that it has demonstrated that the National Assembly enacted amendments to
the Seoul Airport Act  and the Korea Airport Corporation Act , rather than the Aviation Act , in order to
appoint KAA as the entity responsible for IIA construction in December 1991.  Korea further states
                                                     
190 Korea's Answer to Question 9 from the Panel, dated 29 November 1999.
191 Korea notes that there appears to be a typogra phical error in Article 2(2)(b).  Rather than
Article 2(26) of the 1991 Aviation Act , the definition of the term "aircraft handling business" is found at
Article 2(30) of the 1991 Aviation Act.
192 Korea's Answer to Question 9 from the Panel, dated 29 November 1999.
193 Ibid.WT/DS163/R
Page 48
that along with Article 6(1) of the Seoul Airport Act , which was amended in December 1991 to
appoint KAA to the IIA project, amendmen ts to KAA's authorizing statute, the Korea Airport
Corporation Act , assigned to KAA the IIA project "as referred to [in] subparagraph 2 of Article 2 of
the Seoul Airport Act ."194
4.109  In response, the United States argues  that the Seoul Airport Act  does not appoint the entity
responsible for the IIA project — it merely lists a range of entities that could be IIA project operators.
It then grants MOCT ultimate authority to select  any entity to be the project operator for the IIA
project.
4.110  The United States further argues that the Aviation Act  is the primary Korean law relating to
aviation matters, and it addresses a range of aviation-related issues, including aircraft registration,
aviation safety, air transportation businesses, and airport development projects.  According to the
United States, this Act is then supplemented by a host of additional Korean laws and measures in
these areas.195  The United States argues that the Seoul Airport Act  is just one such law, that it
provides ancillary rules for the IIA project.196
4.111  As such, the United States argues that the Seoul Airport Act  is entirely consistent with the
Aviation Act .  The United States notes that, for instance, Article 2(2) of the Seoul Airport Act  cross-
references the Aviation Act by defining the term "new airport construction project" as "[c]onstruction
of such airport facilities as stipulated in subparagraph 6 of Article 2 of the Aviation Act.  In fact, the
United States notes that there is no provision in either act (or in any other Korean law) that expressly
or implicitly suggests that the Seoul Airport Act "replaces" or "supersedes" the Aviation Act . 197
(iii) Proviso in Article 94(1) of the Aviation Act
4.112  Korea notes  that Article 94(1) of the 1997 Aviation Act  states that MOCT shall carry out
airport development projects, "provided that this shall not apply in case (of) provided otherwise by
this Act or other Acts and subordinate statutes."  Korea notes that, similarly, Article 94(1) of the 1991
Aviation Act  states that "[e]xcept as provided otherwise by this Act or other laws and regulations,"
MOT shall carry out airport development projects.198
4.113  Korea states that the "other Acts" and "other laws" providing that an entity other than MOCT
is to implement IIA construction are the Seoul Airport Act , the Korea Airport Corporation Act , the
Korea Airport Construction Authority Act , and the Law on Inchon International Airport Corporation .
Korea also notes that December 1991 amendments to the Seoul Airport Act  and the Korea Airport
Corporation Act  appointed KAA as the entity responsible for the IIA project, August 1994
amendments to the Seoul Airport Act  and the September 1994 enactment of the Korea Airport
Construction Authority Act  appointed KOACA to that role and February 1999 amendments to the
Seoul Airport Act , together with passage of the Law on Inchon International Airport Corporation ,
similarly appointed IIAC to perform this task. Korea argues that in each case, the proviso  in
Article 94(1) of the Aviation Act  was triggered.199
4.114  In response, the United States argues  that this argument is inconsistent with Korea's
argument that the Aviation Act  was "replaced" and "superseded by the Seoul Airport Act ."  The United
States asserts that Korea now argues that the Aviation Act  in fact does apply to the Inchon
                                                     
194 Korea's Response to the US Answer to Questio n 18 from the Panel, dated 29 November 1999, citing
Korea Airport Corporation Act , Article 7(5-2).  Korea also notes that Footnotes 46 and 47 to Korea’s response
to Question 9 make the same point with regard to KOACA and IIAC.
195 Articles 15, 24, 39, 74, 108, and 112 of the Aviation Act .
196 US Response to Korea's Answer to Question 9 from the Panel, dated 29 November 1999.
197 Ibid.
198 Korea's Answer to Question 9 from the Panel, dated 29 November 1999.
199 Ibid.WT/DS163/R
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International Airport project, and that the Seoul Airport Act  and other laws "trigger" the proviso in
Article 94(1).  The United States argues that neither the Aviation Act was replaced and superseded by
the Seoul Airport Act , nor was the proviso  in Article 94(1) triggered by the Seoul Airport Act .  The
United States notes in this respect that Korea concedes that KAA, KOACA, and IIAC are "project
operators," as designated by the Seoul Airport Act .  The United States argues that if the Seoul Airport
Act designates these entities as "project operators," then this Act cannot trigger the proviso in
Article 94(1) of the Aviation Act as Korea suggests, because the proviso  relates to MOCT's authority
over airport development projects and not to the designation of project operators.  The United States
asserts that the designation of project operators is addressed in Article 94(2).200
4.115  The United States acknowledges that the proviso contained in Article 94(1) of the Aviation
Act appears to indicate that the statutory authority of MOCT over airport development projects can be
modified when specifically provided for in the Aviation Act or other statutes.  However, the United
States argues that there is nothing in the Aviation Act  or any other Korean law that indicates that
MOCT no longer has statutory authority over the IIA project or that this authority has been granted to
any entity other than MOCT.  Instead, the United States  argues that the Korean laws that relate to the
IIA project merely confirm the designation of entities such as KAA, KOACA, and IIAC as "project
operators" of the IIA project pursuant to Article 94(2) of the Aviation Act .  The United States further
argues that Article 94(2) is separate and distinct from Article 94(1), and does not affect MOCT's
statutory authority over the airport construction project.201
4.116  The United States argues that the Aviation Act  provides support that MOCT retains authority
over airport development projects following the selection of a project operator.  The United States
notes that Article 103(1) of the Aviation Act states, for example, that: "[i]f there is a person who
performs a work or an act to damage or destroy the airport facilities under control of the Minister of
Construction and Transportation, the Minister may have the operator of such work or the person doing
such act bear the whole or part of the expenses..."  According to the United States, this provision
recognizes that even when there is a project operator on an airport development project, MOCT
maintains its statutory authority over the project.  The United States contends that, moreover, after thedesignation of a project operator, MOCT continues to have authority to direct the project operator
202
and ultimately is responsible for making the determination as to whether the project operator's work
"has been executed in conformity with the permission on the work."203
(e) Is the Control Test Justified Under the GPA?
(i) Does a Control Test Exist in the GPA?
4.117  Korea argues  that the United States' test does not exist in the GPA.  More specifically, Korea
argues that the test itself, the categories of "control" identified by the United States as relevant and the
degree of control identified by the United States as sufficient to deem an entity "controlled" are not
referred to anywhere in the GPA.  Korea further argues that the non-textually-based test proposed by
the United States would have the effect of overriding the basis upon which signatories negotiated theirGPA commitments – that is, the specific enumeration of lists of entities to which the substantive
obligations of the Agreement were to apply.  Korea refers to its arguments in paragraphs 4.291 -
4.312.
4.118  In response, the United States acknowledges  that the Vienna Convention  requires first and
foremost a textual interpretation of a treaty, which would ensure that an explicit enumeration of lists
                                                     
200 US Response to Korea's Answer to Question 9 from the Panel, dated 29 November 1999.
201 US Answer to Question 18 from the Panel, dated 29 November 1999.
202 Aviation Act , Articles 103, 107, 108.
203 US Answer to Question 18 from the Panel, dated 29 November 1999, citing Article 104(2) of the
Aviation Act.WT/DS163/R
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of entities would override everything else.  However, the United States argues that the relationship
between a listed entity and a non-listed entity is a legi timate factor to consider in determining whether
certain procurements are covered under the GPA.
4.119  The United States further argues that the notion of "control" does exist in the current GPA.  In
addition, although it is not applicable to this disput e, the United States notes that Article XXIV:6(b)
also relies on the concept of "control":
Where a Party wishes, in exercise of its rights, to withdraw an entity from Appendix I
on the grounds that government control or influence over it has been effectively
eliminated, that Party shall notify the Committee . . . In considering the proposed
modification to Appendix I and any consequential compensatory adjustment,
allowance shall be made for the market-opening effects of the removal of government
control or influence.
4.120  The United States contends that, indeed, if "control" did not exist in the Agreement, then the
coverage of non-listed entities that are "'attached/connected/affiliated' etc." to a listed entity ( e.g.,
branch offices, subsidiary organizations, and other subdivisions) wo uld not be achieved.204
4.121  The United States further argues that if the notion of control did not exist in the GPA, the
GPA would be rendered a nullity, in contrave ntion of numerous Appellate Body decisions.
According to the United States, the implication of Korea's "no control" interpretation would be to
allow GPA Members to transfer procurement authority from a listed entity to a non-listed entity that is
controlled by the listed entity, thus effectively avoiding being subject to GPA disciplines.  The United
States argues that, in the context of this dispute, Korea's argument would allow a covered entity such
as MOCT to simply designate a new project manager to avoid subjecting the IIA project to the GPA.According to the United States, such a result would be contrary to the object and purpose of the GPA
as reflected in its text and context, and cannot be what the drafters of the GPA intended.  The United
States argues that such an interpretation would have significant negative ramifications on the future
applications and interpretations of the Agreement.
205
4.122  Korea argues in response  that the United States is wrong when it argues that without a
"control" test, GPA signatories would be able to transfer procurement authority from a listed entity to
a non-listed entity that is controlled by the listed entity, thus effectively avoiding being subject to
GPA disciplines.  Korea reiterates that Article I:3 of the GPA in fact provides for the extension of
coverage to non-listed bodies where those non-listed bodies are required by covered entities to award
contracts in accordance with particular requirements.206
4.123  Korea notes that, moreover, the United States contended previously that the concept of
"compensatory adjustments" under Article XXIV:6 of the GPA would provide a remedy in thesecircumstances.
207  Korea refers to its arguments contained in paragraphs 4.26 and 4.560.
(ii) Relevant Appellate Body Decisions
4.124  The United States emphasizes that the absence of the word "control" in the GPA text does
not mean that such a test cannot and should not be applied.  To support this argument, the UnitedStates refers to Canada - Measures Affecting the Importation of Milk and the Exportation of Dairy
Products (Canada - Dairy ).
208  The United States contends that in the Canada - Dairy  decision, the
                                                     
204 US Response to Korea's Answer to Question 5 from the Panel, dated 29 November 1999.
205 US Answer to Question 20 from the Panel, dated 29 November 1999.
206 Korea's Response to the US Answer to Question 20 from the Panel, dated 29 November 1999.
207 Ibid.
208 Canada – Dairy , WT/DS103/AB/R, WT/DS113/R (adopted on 27 October 1999).WT/DS163/R
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Appellate Body applied a control test to determine whether a provincial board made up of milk
producers was actually a "government" for the purposes of Article 9.1(a) of the Agreement on
Agriculture .  The United States argues that there is no reference to "control" in Article 9.1(a), yet the
Appellate Body applied such a test to pierce throug h the fiction created by the provincial board to find
that the board was actually a "government."  In the view of the United States, the instant case isclosely analogous.
4.125  The United States also asserts that the Appellate Body decision provides guidance on the
determination of "control" in its report.  The United  States makes reference to the following excerpts
from that decision:
"A "government agency" is, in our view, an entity which exercises powers vested in it
by a "government" for the purpose of performing functions of a "governmental"
character, that is, to "regulate," "restrain," "supervise" or "control" the conduct ofprivate citizens.  As with any agency relationship, a "government agency" may enjoy
a degree of discretion in the exercise of its functions . . .
The "governmental" character of the boards' functions, as well as the extent of their
regulatory control is underlined by the fact that their orders and regulations are
enforceable in courts of law.  Thus, the powers of the provincial boards areaugmented by the machinery of the State itself, and the boards have at their disposal
the public force to ensure that their regulatory functions and decisions are carried out.
Although the provincial boards enjoy a high degree of discretion in the exercise of
their powers, governments retain "ultimate control" over them.  The Panel was,
therefore, correct to conclude that th e provincial milk marketing boards are
"government agencies.""
209
4.126  The United States argues that the Appellate Body in the Canada – Dairy case agreed with the
panel's analysis that the Government of Canada had "ultimate control" over Canada's provincial milk
marketing boards based on two factors:  delegation of power (that is, whether the marketing boards
acted under explicit authority granted to them by the government), and function (that is, whether themarketing boards acted in the manner in which the government would have acted otherwise).
4.127  The United States asserts that the Appellate Body decision supports the United States'
interpretation of Article I:1.  Further, the United States argues that it uses the same analysis in this
dispute as the Appellate Body in the Canada - Dairy case to determine whether KAA, KOACA and
IIAC are subdivisions of MOCT.  The United States ar gues that it verified, through the use of Korea's
laws, that KAA's, KOACA's and IIAC's powers derive from authority explicitly delegated to them as
project operators by MOCT and that they cannot act outside the purview of their delegated powers.The United States also argues that its "control" analysis confirms that KAA, KOACA and IIAC are
only performing functions that, had the authority not been delegated to them, MOCT would itself be
performing.
4.128  In response, Korea notes  that there is no evidence to indicate that the authority of KAA (and
KOACA and IIAC) has been delegated from MOCT.  Korea argues that, rather, the authority of KAAand its successors was derived from legislation, passed by the National Assembly.
4.129  Korea also notes that in Canada – Dairy , the issue was whether provincial milk marketing
boards, composed in part of private citizens, that exercised government power, were "government" for
purposes of the Agreement on Agriculture .  Korea argues that this issue is very different from the
issue presented by MOCT and KAA.  According to Korea, the question is not whether KAA (and
                                                     
209 Appellate Body report in Canada - Dairy , paragraphs 97 and 100.WT/DS163/R
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KOACA and IIAC) are government entities.  Rather, the question is whether they are covered
government entities.
4.130  Korea further notes that the United States cites the opinion of the Appellate Body in the
Canada – Dairy case for the proposition that the degree of control allegedly exercised by MOCT over
KAA, KOACA and IIAC requires a determination that those independent entities are MOCT.  In
Korea's view, in fact, Canada – Dairy  establishes the opposite.
(f) The Implications of a Control Test for Parties' Annex 1
(i) Amtrak
4.131  Korea argues  that if the United States' "control test" were to prevail, a signatory's express
decision to leave entities off its lists of commitments would have no effect.  To illustrate its point,Korea considers the case of Amtrak, an entity created by the US Congress in 1970 for the purpose of
operating the nation's intercity passenger rail service.  Amtrak is not included in the United States'
commitments.  Korea argues that Amtrak is, nonet heless, subject to the control of the Executive
Office of the President, which is itself an Annex 1 covered entity.  Korea makes the following
comments in support of its argument.
4.132  First, Korea notes that Amtrak's board, consists of seven voting members, all of whom are
appointed by the Executive Office of the President.  Korea states that the Secretary of Transportation,
head of another Annex 1 covered entity, the US Department of Transportation, is a voting member of
the Amtrak board.
4.133  Secondly, Korea notes that Amtrak is required to submit an annual report to the Executive
Office of the President detailing its operations, activities, revenues, expenditures and
accomplishments for the previous fiscal year.  Korea states that the Secretary of Transportation is also
required to prepare an annual report on Amtrak's effectiveness in helping to meet the requirements for
a balanced US transportation system.  Korea further states that this report is to include
recommendations for further legislation regulating Amtrak's activities.
4.134  Thirdly, Korea notes that the Executive Office of the President submits a proposed budget to
the US Congress on Amtrak's behalf, and any congressional appropriation is made to the Secretary of
Transportation, rather than to Amtrak itself.  Korea states in this respect that federal subsidies for
Amtrak's operation are massive.  Korea specifically states that since 1971, the United States
Government has provided a total of $21 billion in federal subsidies to Amtrak.  Most recently, the
Amtrak Reform and Accountability Act  of 1997 authorized appropriations to Amtrak of over $5 billion
in capital and operating funds for the period 1998-2002 alone.
4.135  Korea further states that despite the fact that KAA, KOACA and IIAC are independent legal
persons under Korean law, each of the factors discussed above in relation to Amtrak – authority to
appoint board members, composition of the board, reporting requirements, oversight of fiscal
decision-making and source of funding – was used by the United States to argue that KAA, KOACA
and IIAC are subject to control by MOCT, and by virtue of that control should be considered coveredentities.  Korea concludes that, similarly, under the United States' test, Amtrak would, by virtue of the
control exercised by the Executive Office of the President and the Department of Transportation, be
considered a covered entity.
4.136  Korea argues that this outcome would, presumably, prove problematic for the United States
since Amtrak's procurement authority includes an explicit requirement that it exclusively buy"unmanufactured articles, material, and supplies mined or produced in the United States," and
"manufactured articles, material, and supplies manufactured in the United States substantially from
articles, material, and supplies mined, produced, or manufactured in the United States."  Korea alsoWT/DS163/R
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argues that the United States' proposed "control" te st would have a broad effect on GPA signatories'
commitments generally.
(ii) Comsat
4.137  To further illustrate its argument, Korea notes  the impact of the United States' "control"
test on Comsat, another entity not included in the United States' GPA commitments.  Korea states that
pursuant to the Communication Satellite Act  of 1962, the US Congress authorized the creation of
Comsat, for the purpose of facilitating the establishment of a commercial communications satellite
system.  Korea asserts that like Amtrak's authorizing statute, the Communication Satellite Act  of 1962
states that Comsat "will not be an agency or establishment of the United States Government."210
4.138  Korea states that along with the appointment of members to Comsat's board, the Executive
Office of the President, an Annex 1 covered entity, undertakes considerable oversight of Comsat'sactivities.  Korea specifically, notes that the Pres ident shall "provide for continuous review of all
phases of the development and operation of [a communications satellite] system, including the
activities of [Comsat]."
211  Korea further notes that Comsat is also required to provide to the
Executive Office of the President "annually and at such other times as it deems desirable, a
comprehensive and detailed report of its operations, activities, and accomplishments."212
4.139  Korea states that, additionally, the US Federal Communications Commission ("FCC"),
another Annex 1 covered entity, is directed to perform a number of oversight functions regarding
Comsat.  Korea notes that, for example, the FCC is empowered "to authorize [Comsat] to issue any
shares of capital stock . . . or to borrow any moneys, or to assume any obligation in respect of the
securities of any other person, upon a finding that such issuance, borrowing, or assumption iscompatible with the public interest, convenience, and necessity."
213
4.140  Korea further notes that the FCC's control extends to Comsat's procurement.  Korea states,
more specifically, that the FCC shall "insure effec tive competition, including the use of competitive
bidding where appropriate, in the procurement by [Comsat] . . . of apparatus, equipment, and services
required for . . . the communications satellite system."214  The FCC shall also "approve technical
characteristics of the operational communications satellite system to be employed by [Comsat]."215
4.141  Korea argues that under the United States' "control" test, the control exercised by the
Executive Office of the President and the FCC would make Comsat a covered entity.  Korea states
that as with Amtrak, the factors mentioned with regard to Comsat – authority to appoint board
members, reporting requirements, oversight and virtual direction of fiscal decision-making and
oversight of the technical and procedural aspects of procurement – were specifically used by the
United States to argue that KAA, KOACA and IIAC are subject to control by MOCT, and by virtue ofthat control should be considered covered entities. Korea argues that, in contrast to the FCC's control
over Comsat, MOCT does not require KAA, KOACA or IIAC to award contracts in accordance with
particular requirements.
                                                     
210 47 U.S.C. § 731.
211 47 U.S.C. § 721(a)(2).
212 47 U.S.C. § 744.
213 47 U.S.C. § 721(c)(8).
214 47 U.S.C. § 721(c)(1).
215 47 U.S.C. § 721(c)(6).WT/DS163/R
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(iii) Conclusions from Amtrak and Comsat Examples
4.142  Korea  argues  that it is clear from the Amtrak and Comsat examples that, were the United
States' "control" test to be accepted, it would have broad, unintended and unpredictable effects upon
signatories' express decisions to leave entities off their Appendix I lists of commitments.
4.143  Korea refers to the fact that in discussing the control exercised by central government entities
over Amtrak and Comsat, the United States has noted that "the retained links with the Government
may be seen as only those necessary to ensure that the interests of the public are reflected in the
operations of each corporation."216  Korea further notes that the United States has observed that a
strong and logical argument against coverage of Am trak and Comsat is that "the code is aimed at
government ministries [sic] and their subdivisions – not the myriad organizations tangential to the
essential function of government."217  Korea states that it agrees with this observation and on the basis
of these comments made by the United States, argues that the broad expansion of GPA signatories'
commitments that would result from the imposition of the United States' "control" test should be
rejected.
(g) Implications of a Control Test for Annex 3
4.144  Korea notes  that every entity on Korea's Annex 3 is controlled by an Annex 1 entity in the
same sense that KAA is "controlled" by MOCT.  Korea refers to several examples discussed in
paragraphs 4.262 - 4.269.  Korea states that it believes that most, if not all, Annex 3 entities of other
parties are also controlled by their Annex 1 entities.  In support of this belief, Korea refers to the
control exercised by Japan's Ministry of Transport, an Annex 1 entity, over the New TokyoInternational Airport Authority, an Annex 3 entity.  Korea refers to paragraph 4.250 where this
example is further discussed.
4.145  Korea argues that, if control converts an entity not on Annex 1 into an Annex 1 entity, then
Annex 3 would be greatly diminished, if not reduced to a nullity.  First, Korea argues that under the
US "control" test, entities listed on a Member's Annex 3 will be considered covered under Annex 1 byvirtue of the "control" over them by Annex 1 entities.  Korea cites Japan's New Tokyo International
Airport Authority as an example.  Second, Korea argu es that separate and distinct entities, like the
United States' Amtrak and Comsat, will be nonetheless subject to the same degree of control by
Annex 1 entities as that allegedly exercised by MOCT over KAA despite their intentional exclusion
from Annex 3.
218  Korea further argues that given the differences in thresholds between Annex 1 and
Annex 3, this would have the effect of greatly changing the commitments of the parties to the GPA
and this is a result to be avoided.  Korea notes that all GPA signatories except Japan committed tosubstantially lower thresholds for goods and servic es procurements by Annex 1 entities than for such
procurements by Annex 3 entities.
4.146  In response, the United States argues  that a control analysis will not reduce Annex 3 to a
nullity because, pursuant to Articles 31 and 32 of the Vienna Convention , an interpretation of the GPA
will be first and foremost based on its text.  The United States contends that, therefore, the text ofAnnex 3 will always take precedence over any control analysis.  The United States reiterates that
"control" is useful in determining whether non-listed entities should be covered under the GPA
because they are "'attached/connected/affiliated' etc." to a listed entity.  The United States argues that
this in no way expands any GPA Party's obligati ons beyond what was agreed to at the close of
negotiations on 15 April 1994.  The United States asserts that, in fact, it ensures that the balance of
                                                     
216 Agreements Being Negotiated at the Multilateral Trade Negotiations in Geneva , US International
Trade Commission Investigation No. 332-101 (MTN Studies, August 1979), p. 44.
217 Ibid.
218 Korea’s Answer to Question 11 from the Panel, dated 29 November 1999.WT/DS163/R
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rights and obligations and the comparable level of mutually agreed coverage among the Parties, as
provided in the GPA, are preserved.219
(h) Article I:3
4.147  Korea argues  that the "control" test proposed by the United States does not comport to the
standard included in Article I:3.  More specifically, Korea argues that none of the factors submitted by
the United States as illustrative of the "control" exercised by MOCT over KAA, KOACA and IIAC
suggests that MOCT requires those three entities to adhere to any particular requirements in awarding
contracts for the IIA project.
4.148  Korea further argues that it has demonstrated that KAA, KOACA and IIAC are separate legal
persons under Korean law, that each entity has adopted its own procurement regulations, and that each
entity is, as a result of its status as a legal person, empowered to and has in fact conductedprocurements and signed contracts on its own behalf.
4.149  Korea also reiterates that the United States has offered no evidence supporting a conclusion
that MOCT or any other covered entity has ever "required" KAA (or KOACA or IIAC) "to award
contracts in accordance with particular requirements."  Korea states that it has, in fact, affirmatively
demonstrated that no such requirements exist.
220
(i) Relevance of Lists in Annexes
4.150  Korea argues  that the control test cannot be sustained because, according to that test, entities
need not be listed in Annex 1 or included via any notes thereto, for their procurements to be subject to
the GPA.  Rather, under the United States' test, if a central government entity listed on a signatory'sAnnex 1 "retain[s] control of the procurements by" another entity, or "remains in ultimate control" of
"procurement authority," procurements are de facto made by that central government entity.  In
Korea's view, "de facto" coverage of unlisted entities would undermine the entire basis upon which
signatories negotiated their GPA commitments – the specific enumeration of lists of entities to which
the substantive obligations of the Agreement were to apply.  It would, according to Korea, havebroad, unintended effects upon signatories' express decisions to leave entities off their Appendix I lists
of commitments.  Korea also refers to its arguments in paragraphs 4.31, 4.117 and 4.142.
(j) Relevance of Note 1 to Annex 1
4.151  Korea argues  that the US "control" test does not exist in the language of the GPA and that,
instead, Note 1 to Korea's Annex 1 specifically, and exclusively, governs the means of identifying
"covered entities," which, while not themselves listed on Annex 1, are nonetheless consideredcovered.  Note 1 states that "subordinate linear organizations, special local administrative organs, and
attached organs as prescribed in the Government Organization Act " are such entities.
(k) Relevance of Domestic Practices and Laws
4.152  Korea also argues  that the "control" test proposed by the United States in these proceedings
is inconsistent with the test that would apply under US procurement law to determine whether a
private entity undertaking procurement for a central government entity is effectively under the control
of that central government entity, as an "agent" or "conduit."
4.153  Korea argues that even where a central government entity:  (i) approved the private entity's
decision to conduct the procurement;  (ii) was the final selection authority for the procurement;
                                                     
219 US Response to Korea's Answer to Question 22 from the Panel, dated 29 November 1999.
220 Korea's Response to the US Answer to Question 20 from the Panel, dated 29 November 1999.WT/DS163/R
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(iii) would take title to the material procured;  and (iv) would pay for the system procured with
government funds, US courts have held that the private procurement entity was not sufficiently
controlled by the central government entity to confer jurisdiction over challenges to allegedly
unlawful procurement practices undertaken by the private procurement entity.221  Korea further argues
that for jurisdiction to attach, the private procurement entity would have to have been identifiedcontractually as an "agent" for the central government entity.
4.154  Korea argues that under this standard, KAA, KOACA and IIAC could not be considered
"stand-ins" for MOCT, and considered covered entities  by virtue of their relationship thereto.  Korea
contends that IIA procurements by KAA, KOACA and IIAC are not nearly as closely tied to MOCT
as are procurements by the US private procurement entities to US central government entities in the
cases described above, under factors (i) – (iv).
4.155  In support of its argument, Korea notes that it has demonstrated that KAA, KOACA and IIAC
are the "final selection authorities" for IIA procurements rather than MOCT.  Moreover, MOCT does
not finance all of the procurements related to the Inchon project.  Korea states that, moreover, and
most importantly, the authorizing statutes for KAA, KOACA and IIAC – like a contract governing the
relationship between a private US procurement entity and a US central government entity – expressly
state that those three entities are legal persons under Korean law.
222  For all of these reasons, Korea
asserts that they are not agents for MOCT or any other Korean central government entity.  Korea
concludes that under the test imposed under US law, KAA, KOACA and IIAC could not be
considered covered entities via MOCT.
4.156  In response to Korea's argument that US courts have held that one cannot challenge a
"central government entity" over "unlawful procurement practices undertaken by a private entity"under its control, the United States  notes  that Korea's argument merely confirms that control is
unrelated to an entity's legal status.  According to the United States, no matter how much the control,
an entity's separate legal status cannot be pierced, unless for non-control reasons.  Thus, the United
States argues that not only is US case law irrelevant to the interpretation of the GPA, this particular
case does not even support Korea's position in this di spute.  The United States also responds by noting
that the relationship between a listed and non-listed entity is a legitimate factor to consider in
determining whether certain procurements are covered under the GPA.  According to the United
States, Korea itself uses this factor when, in discussing its position regarding Note 1, it mentions
Note 1 to Korea's Annex 1 provides the exclusive means by which to identify as Annex 1 covered
entities those entities that, while not literally listed on Annex 1, are nonetheless considered Annex 1
covered entities by virtue of their relationship with entities listed on Annex 1.
4. Appendix I, Annex 1:  Note 1
(a) Interpretation of Note 1
4.157  Korea argues  that the Vienna Convention on the Law of Treaties  contains customary rules of
interpretation that should be used in interpreting Korea's Note 1 to Annex 1.  Korea further argues that
pursuant to Article 31 of the Vienna Convention on the Law of Treaties , the first step is to consult the
ordinary meaning of Note 1.223
                                                     
221 US West Communications Services, Inc. v. United States , 940 F.2d 622, 629-630 (Fed. Cir. 1991).
See also Phoenix Engineering, Inc. v. M-K Ferguson of Oak Ridge Co. , 966 F.2d 1513, 1526 (6th Cir. 1992),
cert. denied , 507 US 984 (1993).
222 Korean Airport Corporation Act , Article 3;  Korea Airport Construction Authority Act , Article 3;
Law on Inchon International Airport Corporation , Article 2.
223 United States - Import Prohibition of Certain Shrimp and Shrimp Products , WT/DS58/AB/R
(adopted on 6 November 1998), paragraph 114 ("A treaty interpreter must begin with, and focus upon, the textof the particular provision to be interpreted").WT/DS163/R
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4.158  The United States argues  that the fundamental principle of effet utile  ("principle of
effectiveness") applies to the interpretation of Note 1.  The United States claims that, according to this
principle, "a treaty interpreter is not free to adopt a meaning that would reduce parts of a treaty to
redundancy or inutility."224  The United States further argues that this principle must apply to any
interpretation of Note 1.
(b) Expansive or Restrictive Interpretation of Note 1 to Annex 1?
4.159  The United States further states  that it is arguable that Note 1 serves both to clarify that
Annex 1 covers all possible categories of subordinate units of "central government entities,"
particularly given Korea's exclusive terminology of certain subordinate units and also to expand
Korea's Annex 1 coverage to include those entities that may not be subordinate units, but may
nevertheless be considered "subordinate linear organizations," "special local administrative organs,"or "attached organs."
4.160  On the other hand, Korea argues  that Note 1 to Korea's Annex 1 specifically, and
exclusively, governs the means of identifying "covered entities," which while not themselves listed on
Annex 1, are nonetheless considered covered.  Korea notes in this respect that Note 1 states that
"subordinate linear organizations, special local administrative organs, and attached organs asprescribed in the Government Organization Act " are such entities.
4.161  The United States notes in response  that Annex 1 cannot contain the universe of bodies
internal to central government entities under Korean law because it does not contain the New Airport
Development Group.  The United States argues that th is is obvious since Korea acknowledges that the
New Airport Development Group is internal to MOCT.  However, the New Airport Development
Group is not included within Annex 1.  The United States argues that, similarly, the entirety of the
Korean central government structure cannot be embodied in the Government Organization Act
because Korea further admits that the New Airport Development Group is neither a "subordinate
linear organization," a "special local administrative organ," or an "attached organ" of MOCT.  The
United States asserts that these statements are inconsistent with each other.
4.162  The United States further argues that Note 1 cannot define "central government entity" by
giving the term a special meaning, unique only to Korea thus displacing the ordinary meaning of
"central government entity."  In support of its argument, the United States notes that nowhere in this
provision is there any indication, explicit or implicit, that Note 1 is meant to define "central
government entity."
4.163  The United States additionally argues that the verb "includes" in Note 1 makes clear that
Korea's Annex 1 entities cover more than just the three categories of sub-entities referred to in theNote.  The United States argues that Korea's interpretation, therefore, suggests that every single party
to the GPA has agreed to provide Korea with its ow n unique definition of "central government entity",
different from the common definition of "central government entity" they use.  The United States
questions whether the European Communities, Hong Kong, Japan, Liechtenstein, Norway and
Switzerland agreed to this and notes that the United States did not.  The United States argues thatKorea offered no supplementary means of interpretation to back this claim up. Further, the United
States argues that Note 1 does not define the scope of "central government entity."
                                                     
224 Appellate Body report on  Canada - Dairy , WT/DS103/AB/R, WT/DS113/AB/R, paragraph 133;
Appellate Body report on United States - Reformulated Gas  (adopted on 20 May 1996), WT/DS2/AB/R, p. 23;
and Appellate Body report on Japan - Alcoholic Beverages  (adopted on 1 November 1996), WT/DS8/AB/R,
WT/DS10/AB/R, WT/DS11/AB/R, p. 12.WT/DS163/R
Page 58
(c) Ordinary Meaning of "Prescribed in the Government Organization Act"
(i) Status of Government Organization Act in the context of Note 1 to Annex 1
4.164  The United States argues  that KAA, KOACA and IIAC are covered under Annex 1 on the
ground that they are "subordinate linear organizations" within the meaning of Korea's Note 1 to
Annex 1 of the GPA.
4.165  In support of its argument, the United States contends that Note 1 explains that the term,
"subordinate linear organization," is "prescribed in the Government Organization Act  of the Republic
of Korea."  According to the United States, the or dinary meaning of "prescribe" is conveyed by the
definition of "prescriptive," which means "giving definite precise directions or instructions . . . laying
down rules of usage ... ."225  The United States argues that, therefore, the Government Organization
Act in Note 1 merely lays down the rules of usage for "subordinate linear organization."
4.166  The United States argues that Article 1 of the Government Organization Act  confirms the
interpretation that the Government Organization Act  merely lays down the rules of usage for
"subordinate linear organizations" by stating that its aim is to provide "guidelines for the
establishment, organization and the scope of function of national administrative organs for thesystematic and efficient execution of national administrative affairs."
226  The United States contends
that, further, Article 2 of the Government Organization Act  does not define "subordinate linear
organization," but instead offers a list of what "s ubordinate linear organizations" "shall be" for all
"central government entities."  According to the Un ited States, Korea itself admits that the Act does
not provide a definition for "subordinate linear organizations" but instead offers a list that "identifiesnot entities but officials within a ministry's hierarchy".  Article 2 of the Act states that the subordinate
linear organizations of the central administra tive organs shall be Cha-Gwan (Vice-Minister),
Cha-Jang (Deputy Administrator), Sil-Jang (Office Director), Guk-Jang (Bureau Director) or Bu-Jang
(Department Director) and Gwa-Jang (Division Director), under Vice-Minister or Deputy
Administrator, as division not belonging to Office, Bureau or Department may be set up except those
otherwise prescribed by special provisions in this Act or any other laws.  The subordinate linear
organizations undertaking national police affairs under the Ministry of Home Affairs, however, shall
be Bon-Bu-Jang (Chief Commissioner of Policy), Bu-Jang (Department Director) and Gwa-Jang
(Division Director); and for those undertaking civil defense affairs, Bon-Bu-Jang (Chief of Civil
Defense Headquarters), Guk-Jang (Bureau Di rector) and Gwa-Jang (Division Director).
227
4.167  The United States argues that Note 1 of Korea's Annex 1 of the GPA expands Korea's
Annex 1 coverage by including "subordinate linear organizations," a category of subdivisions inKorea.  The United States argues that according to the Vienna Convention  rules of interpretation,
"subordinate linear organization" is virtually synonymous with subsidiary organization.  Therefore, as
subsidiary organizations of MOCT, KAA, K OACA and IIAC are also "subordinate linear
organizations" of MOCT.
4.168  In response, Korea argues  that the ordinary meaning of Note 1 is such that the Government
Organization Act  "limits," "restricts," "imposes authoritatively," "appoints," "dictates" and "directs"
the identification of those entities that constitute subordinate linear organizations, special local
administrative organs and attached organs.  Korea further argues that the Government Organization
Act does not have mere suggestive force.  Korea states that, rather, it carries "imperative force," and
offers "definite precise directions or instructions" regarding the identification of subordinate linearorganizations, special local administrative organs and attached organs.  The ordinary meaning of
                                                     
225 The New Shorter Oxford English Dictionary (1993 ed.), p. 2339.
226 Government Organization Act , Article 1.
227 Article 2(3) of the Government Organization Act  of the Republic of Korea (version submitted by
Korea in 1991, official English translation).WT/DS163/R
Page 59
"subordinate linear organizations, special local administrative organs and attached organs" is
irrelevant;  the only relevant meaning is that prescribed by the Government Organization Act .
4.169  In support of its argument, Korea notes that the verb "prescribe" means to "[l]imit, restrict;
confine within bounds," or to "[w]rite or lay down as a rule or direction; impose authoritatively;
appoint, dictate, direct."228  Korea argues that, similarly, somethin g that is "prescriptive" is something
that "giv[es] definite precise directions or instructions," or "ha[s] or impl[ies] an imperative force."229
(ii) "Prescribe" versus "Define"
4.170  The United States argues  that Korea is essentially arguing that the term "subordinate linear
organizations" is defined by the Government Organization Act .  However, according to the United
States "prescribe" and "define" are not synonyms.  In support of this argument, the United States
refers to The New Shorter Oxford English Dictiona ry for the ordinary meanings of "prescribe" and
"prescriptive" none of which, according to the United States, define "prescribe" as "define."
According to the United States, the ordinary meaning of "prescribe" means "giving definite precise
directions or instructions" and "laying down rules of usage."
4.171  The United States argues that it is clear from considering the text of the Government
Organization Act  itself that the Act does not provide a definition for "subordinate linear organization."
The United States notes that all the Act does is, in  Korea's words, to identify "officials within a
ministry's hierarchy."
4.172  The United States further argues that the textua l interpretation that "prescribed in" is not the
same as "defined by" is further supported by Note 1 of Korea's Annex 2, which states, "The above
sub-central administrative government entities include their subordinate organizations under directcontrol and offices as prescribed in the Local Autonomy Law of the Republic of Korea."  The United
States argues that, analogous to Note 1 of Korea's Annex 1, the two terms used in Korea's Note 1 of
Annex 2 are "subordinate organizations under direct control" and "offices."  The United States notes
that these terms are found in Articles 104 and 105 of the Local Autonomy Law , respectively.
230  The
United States further notes that, like the Government Organization Act , the Local Autonomy Law  does
not define the two terms.  In the view of the Unit ed States, these terms are not terms of art and should,
therefore, be interpreted according to their ordinary meanings.
4.173  In response, Korea states  that the United States makes too much of the minor difference
between the verbs "prescribe" and "define."  Korea notes that, in fact, the definition of the verbs
"prescribe" and "define" employ many of the same terms, challenging the argument that they are not
synonymous.  Korea further notes that both definitions refer to the drawing of "bounds" or
"boundaries," both make ample use of the term "precise" or "precisely," and both contain the term"restrict."
231  Korea finally notes that the definition of "define" includes the verb "prescribe," and the
definition of "prescriptive" includes the term "definitive."232
4.174  Second, Korea asserts that the fact that Article 2(3) of the Government Organization Act  lists
officials within a ministry's hierarchy, does not mean that Article 2(3) fails to provide a definition for
the term "subordinate linear organizations."  Korea argues that the Act does provide a definition of theterm "subordinate linear organization" and that Article 2(3) of the Act is that definition.
                                                     
228 The New Shorter Oxford English Dictionary (1993 ed.), p. 2339.
229 Ibid.
230 Local Autonomy Law  Act. No. 4004.
231 The New Shorter Oxford English Dictionary (1993 ed.), pp. 618 and 2339.
232 Ibid.WT/DS163/R
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4.175  Korea further argues that it had every right to define a term in its GPA commitments by
reference to domestic law.  Korea notes in this respect that it has been joined in so doing by the
European Communities, Hong Kong, Japan, Liechtenstein, Norway, Switzerland and the United
States, which, according to Korea, confirms the legitimacy of this practice.  More specifically, Korea
notes that within the context of the GPA, Anne x 1 to the United States' GPA Appendix I defines
certain excepted Department of Energy procurements with reference to the Atomic Energy Act .  Korea
further notes that, similarly, US Annex 2 commitments regarding the state of Oklahoma likewise
identify covered entities as those "state agencies and departments subject of the Oklahoma Central
Purchasing Act. "233
                                                     
233 See also European Communities' GPA Appendix I, General Note 11 (refers to the Public
Procurement Act for the meaning and identification of entities which are themselves contracting authorities);
Hong Kong, China's GPA Appendix I, General Note 2 ("Hong Kong's commitments on telecommunicationsservices are subject to the terms of the licence held by Hong Kong Telecommunications International Ltd. ... .");Japan's GPA Appendix I, Annex 1, Note 1 ("Entities covered by the Accounts Law include all their internalsub-divisions, independent organs, attached organizations and other organizations and local branch offices
provided for in the National Government Organization Law.");  Japan's GPA Appendix I, Annex 2, Note 1
("'To', 'Do', 'Fu', 'Ken' and 'Shitei-toshi' covered by the Local Autonomy Law include all internal sub-divisions,attached organizations and branch offices of all their governors or mayors, committees and other organizationsprovided for in the Local Autonomy Law.");  Liechtenstein's GPA Appendix I, Annex 3, Title II (DefinesAnnex 3 covered entities associated with the provision of electricity as those "[p]ublic authorities and publicundertakings . . . operating on the basis of authorizations for expropriation pursuant to the Gesetz vom 16.Juni
1947 betreffend die 'Liechtensteinischen Kraftwerke' (LKWG).");  Liechtenstein's GPA Appendix I, Annex 3,
Title III (Defines certain Annex 3 covered entities in the field of transport services with reference to "Vertragvom 9.Januar 1978 zwischen dem Fürstentum Liechtenstein und der Schweizerischen Eidgenossenschaft überdie Besorgung der Post- und Fernmeldedienste im Fürstentum Liechtenstein durch die Schweizerischen Post-,Telefon- und Telegrafenbetriebe (PTT).");  Norway's GPA Appendix I, Annex 3, Number 1 (Defines Annex 3covered entities in the electricity sector as those "[p]ublic entities producing, transporting or distributing
electricity pursuant to Lov om Bygging og drift av elektriske anlegg (LOV 1969-06-19), Lov om erverv av
vannfall, bergverk og annen fast wiendom m.v., Kap. I, jf. Kap. V (LOV 19-17-24 16, kap. I), orVassdragsreguleringsloven (LOV 1917-12-14 17) or Energiloven (LOV 1990-06-29 50).");  Norway's GPAAppendix I, Annex 3, Number 2 (Defines Annex 3 covered entities in the urban transport sector as those publicentities "providing a service to the public in the field of transport . . . according to Lov om anlegg og drift avjernbane, herunder sporvei, tunellbane og forstadsbane m.m. (LOV 1993-06-11 100), or Lov om samferdsel
(LOV 1976-06-04 63) or Lov om anlegg av taugbaner og løipestrenger (LOV 1912-06-14 1).");  Norway's GPA
Appendix I, Annex 3, Number 3 (Defines Annex 3 covered entities as those "[p]ublic entities providing airportfacilities pursuant to Lov om luftfart (LOV 1960-12-16 1).");  Norway's GPA Appendix I, Annex 3, Number 4(Defines Annex 3 covered entities providing port services as those "[p]ublic entities operating pursuant toHavneloven (LOV 1984-06-08 51).");  Norway's GPA Appendix I, Annex 3, Number 5 (Defines Annex 3
covered entities as those "[p]ublic entities producing or distributing water pursuant to Forskrift om Drikkevann
og Vannforsyning (FOR 1951-09-28).");  Norway's GPA Appendix I, General Note 6 (States that with regard toAnnex 4, the GPA is not applicable to "contracts awarded to an entity which is itself a contracting authoritywithin the meaning of the Public Procurement Act:  'Lov om offentlige anskaffelser m.v.' (LOV 1992-11-27116) on the basis of an exclusive right which it enjoys pursuant to a published law, regulation or administrativeprovision.");  Switzerland's GPA Appendix I, Annex 3, Title II (Defines Annex 3 covered entities in the
electricity sector as those "[p]ouvoirs publics ou entreprises publiques" operating "conformément à la 'loi
fédérale du 24 juin 1902 concernant les installations électriques à faible et à fort courant'" or "conformément à la'loi fédérale du 22 décembre 1916 sur l'utilisation des forces hydrauliques' et á la 'loi fédérale du23 décembre 1959 sur l'utilisation pacifique de l'énergie at omique et la protection contre les radiations'.");
Switzerland's GPA Appendix I, Annex 3, Title III (Defines Annex 3 covered entities in the transport as thoseentities operating "au sens de l'article 2, 1er alinéa, de la 'loi fédérale du 20 décembre 1957 sur les chemins de
fer,'" "au sens de l'article 4, 1er alinéa, de la 'loi fé dérale du 29 mars 1950 sur les entreprises de trolleybus,'" "au
sens de l'article 2 de la 'loi fédérale du 18 juin 1993 sur le transport de voyageurs et les entreprises de transportpar route,'" and "au sens de l'article 4 de la 'loi fédérale du 18 juin 1993 sur le transport de voyageurs et lesentreprises de transport par route.'");  Switzerland's GPA Appendix I, Annex 3, Title IV (Defines Annex 3covered entities providing airport services as those "[p]o uvoirs publics ou entreprises publiques exploitant desWT/DS163/R
Page 61
4.176  Korea states that in proposing and accepting the incorporation by reference of provisions of
domestic law in each of these instances, GPA signatories agreed to the meaning ascribed to a
particular term in domestic law.  Korea states that this was also the case with the signatories'
acceptance of the meaning accorded by Korea's circumscription of the term "central government
entity" to include listed entities and their subordinate linear organizations, special local administrativeorgans and attached organs, "as prescribed in the Government Organization Act of the Republic of
Korea."
4.177  Korea finally argues that it has the right to define "subordinate linear organization" in the way
that it has in Article 2(3) of the Government Organization Act .  Nothing in the GPA requires that
Korea define the term "subordinate linear organization" in its domestic law in any particular way.
(d) Ordinary Meaning of "Subsidiary Linear Organizations"
4.178  The United States argues  that the interpretation of Note 1 to Korea's Annex 1, based on
Articles 31 and 32 of the Vienna Convention , confirms that in "prescribing" the terms "subordinate
linear organization," "special local administrative organ," and "attached organ," the Government
Organization Act  does not define these terms.  Hence, according to the United States, a textual
interpretation is to be applied.  The United States argues that in doing so, "subordinate linearorganization" is found to be synonymous with subsidiary organization.
4.179  The United States argues that the ordinary meaning of "subordinate," according to The New
Shorter Oxford English Dictionary, is "of inferior rank;  dependent upon the authority or power of
another . . . dependent on or subservient to a chief or principle thing of the same kind . . . submissive
. . . of inferior importance;  secondary, minor ... ."
234  The United States further argues that the
ordinary meaning of "linear" is, inter alia , "progressing in a single direction by regular steps or stages,
sequential."235  Finally, the United States argues that the ordinary meaning of "organization" is "an
organized structure, body, or being."236  The United States asserts that, taken together, the term
"subordinate linear organization" suggests an organization that is directly controlled by, dependent
upon, and secondary to another organization – that is, it is a subsidiary organization.
4.180  In response, Korea  argues  that to suggest that the term "subordinate linear organization" is
synonymous with the terms "subsidiary organizations" or "subsidiary or subordinate body" is not
possible given the ordinary meaning of Note 1 which states that the term "subordinate linear
organization" is "prescribed in the Government Organization Act of the Republic of Korea."  Korea
also questions the United States' use of the principles of interpretation of the Vienna Convention of the
Law of Treaties  to determine the ordinary meaning of a term such as "subsidiary organization," which
is not in fact found in the GPA.
4.181  In support of its argument that the term, "subordinate linear organization," is synonymous
with "subsidiary organization,"  the United States refers  to the fact that Korea re-translated
"subordinate linear organization" as "subsidiary organs."  The United States quotes Korea: "The
re-translation did not, however, alter the substantive effect of Note 1 to Annex 1."  The United States
argues that by amending its English translation, Korea determined that the English phrase, "subsidiaryorgans," is not only synonymous with "subordinate linear organizations," but is probably a better
representation of what "subordinate linear organizations" was originally intended to mean.  The
United States also refers to its arguments in paragraph 4.435.
                                                                                                                                                                    
aéroports en vertu d'une concession au sens de l'ar ticle 37 de la 'loi fédérale du 21 décembre 1948 sur la
navigation aérienne.'").
234 The New Shorter Oxford English Dictionary (1993 ed.), p. 3121.
235 Ibid.  p. 1596.
236 Ibid.  p. 2020.WT/DS163/R
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4.182  The United States concludes that given that KAA, KOACA and IIAC are subsidiary
organizations of MOCT then they are also "sub ordinate linear organizations" of MOCT and are,
therefore, covered under Annex 1 of the GPA.
4.183  In response, Korea argues  that KAA, KOACA and IIAC were not converted to GPA
covered entities when the term "subordinate linear organizations" was re-translated in English to"subsidiary organs" in Article 2(3) of the Government Organization Act .  Korea notes in this respect
that the term "subordinate linear organization" was re-translated by the Korean Legislation Institute as
"subsidiary organs" by an amendment to the Government Organization Act  that was enacted on
28 February 1998.  Korea notes that the Korean version of the term remained the same, as did, the
Korean and English versions of the enumerated list of "subordinate linear organizations" included in
Article 2(3) of the Act.
(e) Subordinate Linear Organizations:  Officials or Entities?
4.184  In response to a question from the Panel, Korea notes  that it is Korean practice to refer to
an organization through its head.  For example, rather than say that a particular "Ministry" has
authority to take certain action, Korea notes that it  would say that a particular "Minister" has the
authority.237  Korea further notes that, in Korean law as embodied in the Government Organization
Act, authority is delegated from the chief of a government agency to individual officials in the vertical
chain of command, who are in some instances, in turn, authorized to delegate to other individual
officials further down the chain of command.  Korea notes that, in addition to the Minister and
Vice-Minister, all divisions, offices and bureaus are led by "Division Directors," "Office Directors" or
"Bureau Directors" listed in Article 2(3) of the Government Organization Act  as "subordinate linear
organizations."238  Korea further notes that all legislatio n envisions government activity in terms of
the people undertaking that activity and the chain of command under which decisions regarding that
activity is made.  Korea finally notes that this system may be divergent from western legal systems,
but nothing in the WTO Agreements, including the GPA, prohibits it.  Korea also refers to its
arguments in paragraphs 4.175, 4.177 and 4.376.
4.185  In response to Korea's argument, the United States asserts  that Korea's description of the
relationship between the chief of a government agency and subsidiary linear organizations is precisely
what "control" is all about.  The United States argues that control exists when one entity's power to act
is delegated to it by another entity, and when these acts are done on behalf of this other entity.  The
United States notes that this analysis was affirmed by the Appellate Body in the recent Canada -
Dairy  dispute.239  The United States contends that KAA, KOACA and IIAC are mere project
operators of the IIA project whose authorities are delegated from MOCT, and whose acts are onlydone on behalf of MOCT, for the benefit of MOCT.  The United States further states that if
"subordinate linear organizations" also act in this manner, then KAA, KOACA and IIAC must be
"subordinate linear organizations" of MOCT.
4.186  In response to a question from the Panel regarding MOCT's organization chart, Korea
notes that all of the "organs" or "organizations" incl uded on the chart are in fact prescribed in the
Government Organization Act .  The listed "divisions, offices and bureaus" are according to Korea
covered under the GPA because they are led by "Division Directors," "Office Directors" or "Bureau
Directors," which are listed in Article 2(3) of the Government Organization Act  as "subordinate linear
organizations" and therefore covered by virtue of Note 1 to Korea's Annex 1.  The other organizations
                                                     
237 Korea's Answer to Question 11(b) from the Panel, dated 3 November 1999.
238 Korea's Answer to Question 11 from the Panel, dated 29 November 1999, citing the Government
Organization Act.
239 Appellate Body report on  Canada - Dairy , WT/DS103/AB/R, WT/DS113/AB/R (issued on
13 October 1999) paragraphs 96-102.  Also see panel report on Canada - Dairy , WT/DS103/R, WT/DS113/R
(issued on 17 March 1999) paragraph 7.78.WT/DS163/R
Page 63
listed on page 2 of the chart are MOCT's "special local administrative organs" and "attached organs"
under the Government Organization Act .240
4.187  The United States argues  that Korea's argument that the divisions, offices, and bureaus of
MOCT are covered under Annex 1 of the GPA because they are "subordinate linear organizations" of
MOCT is flawed.  The United States notes that MOCT's divisions, offices, and bureaus are already
covered under Annex 1 of the GPA because they are "'attached/connected/affiliated' etc. to MOCT."
According to the United States, for Korea to now interpret the term, "subordinate linear
organizations," as encompassing these entities would make this term redundant, because "subordinate
linear organization" would merely provide for the coverage of entities that are already covered.
According to the United States, such an interpretation is contrary to the "principle of effectiveness."241
4.188  In response to a question from the Panel, Korea also notes  that the reference to individuals
in Article 2(3) of the Government Organization Act  is not a reference to these people as natural
persons, but as titles of officials who head an office or bureau in the line of command within a
government agency.242  Further, in response to a question from the United States, Korea states that in
Korea's terminology, reference to an "official" with in the hierarchy is a reference to the position and
the office itself.243  Korea notes that the officials listed as "subordinate linear organizations" in
Article 2(3) of the Government Organization Act  are those authorized to act on behalf of the chief of
the government agency concerned.  Korea further states that the "subordinate linear organizations" are
not the "organizations" that report to a listed indivi dual but, rather, they are the titles of officers who
report on behalf of the division or bureau.  Thus, in interpreting the term "subordinate linear
organization" Korea suggests that the organizational unit (ministry, bureau, division, etc.) represented
by the title should be considered.244  Korea also argues that the structure of Article 2(3) does not mean
that only procurements undertaken personally by an official in Article 2(3) are covered under
Annex 1.  Korea argues that, rather, the entirety of that official's office is considered covered.  Finally,
Korea notes that all central government entities may not necessarily have each of the listed
subordinate linear organizations provided for in Article 2(3) of the Government Organization Act .245
4.189  In response, the United States argues  that the organizational units that represent the titles
referred to in Article 2(3) of the Government Organization Act  are merely branch offices of "central
government entities," and are already covered pursuant to the ordinary meaning of "central
government entity."
(f) Are KAA, KOACA and IIAC "Subor dinate Linear Organizations"?
4.190  In response to the argument by the United States that KAA, KOACA and IIAC are
"subordinate linear organizations" of MOCT under Note 1 to Korea's Annex 1 in paragraph 4.164,Korea notes  that KAA, KOACA and IIAC are not identified as "subordinate linear organizations" (or
the re-translated term, "subsidiary organs") in Article 2(3) of the Government Organization Act .
Note 1 to Korea's Annex 1 states that Korea's Annex 1 includes those "subordinate linear
organizations . . . prescribed in the Government Organization Act of the Republic of Korea."  Korea
further notes that both in its current form and as it existed during the negotiations leading up to the
                                                     
240 Korea's Answer to Question 11 from the Panel, dated 29 November 1999.
241 US Response to Korea's Answer to Question 11 from the Panel, dated 29 November 1999, citing
Appellate Body report on  Canada - Dairy (issued on 13 October 1999), WT/DS103/AB/R, WT/DS113/AB/R,
paragraph 133;  Appellate Body report on United States - Reformulated Gas  (adopted on 20 May 1996)
WT/DS2/AB/R, p. 23;  and Appellate Body report on Japan - Alcoholic Beverages  (adopted on
1 November 1996) WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, p. 12.
242 Korea's Answer to Question 11(b) from the Panel, dated 3 November 1999.
243 Korea's Answer to Question 3 from the US, dated 3 November 1999.
244 Korea's Answer to Question 11(b) from the Panel, dated 3 November 1999.
245 Korea's Answer to Question 6 from the US, dated 3 November 1999.WT/DS163/R
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submission by Korea of its final offer list for accession to the GPA, Article 2(3) identifies not entities,
but officials within a ministry's hierarchy.
4.191  In response, the United States argues that it is illogical for Korea to make the claim that
KAA, KOACA and IIAC are not identified as "subordinate linear organizations," given the structure
of and information in the Government Organization Act .  Specifically, the United States refers to the
fact that that the Government Organization Act  does not identify entities as "subordinate linear
organizations," but only as "officials within a ministry's hierarchy."  The United States additionally
notes that the Government Organization Act  does not specifically name any entities as "special local
administrative organs" or "attached organs."
(g) Is NADG a " Subordinate  Linear Organization"?
4.192  In response to a question from the United States, Korea states  that the New Airport
Development Group was established within the Ministry of Transportation.  Korea further states that
it drew personnel from several subordinate linear organizations, as defined in the Government
Organization Act , within the Ministry.  Korea notes that NADG is not a separate legal person but,
rather, it is an ad hoc group within the Ministry .  Korea concludes that NADG is not a subordinate
linear organization as defined in Article 2(3) of the Act.246
(h) Ordinary Meaning of "Special Local Administrative Organs"
4.193  Korea discusses  those entities identified as MOCT's "special local administrative organs,"
which are by virtue of Note 1 to Korea's Annex 1 considered covered entities.  Korea states that
among MOCT's special local administrative organs are its two Regional Aviation Offices – the SeoulRegional Aviation Office and the Pusan Regional Aviation Office.
247  Korea notes that these regional
aviation offices conduct procurement for existing airports in their regions.  Korea further notes that
where not otherwise provided by special law, as in the case of the legal authority for the construction
of IIA248, these Offices are responsible for construction and maintenance of Korean airports, including
Yangyang, Yeosoo, Muan, Daegu, Pohang, Yecheoon and Uljin Airports.
4.194  The United States argues  that Korea, by implication, uses the ordinary meaning to interpret
"special local administrative organ," and that, therefore, it is not a term of art.  The United States
points out that in defining "special local administrative organs", Korea chooses to use the ordinary
meaning by stating, "As the term suggests, special local administrative organs carry regional
portfolios".  By doing so, according to the United States, Korea essentially confirms that Note 1 does
not require "subordinate linear organizations", "special local administrative organs" or "affiliate
organs" to be defined by the Government Organization Act .  The United States further asserts that,
indeed, "subordinate linear organization," "special local administrative organs," and "attached organs"
are used uniquely by Korea to categorize the subordinate units of its "central government entities."
However, according to the United States, since they are not unique terms of art and they are not
defined by the Government Organization Act , their ordinary meaning should apply.  Further, the
United States notes that the Government Organization Act  does not identify the Seoul Regional
Aviation Office and the Pusan Regional Aviation Office as "special local administrative organs."
                                                     
246 Korea's Answer to Question 7 from the US, dated 3 November 1999.
247 Korea states that, as the term suggests, special lo cal administrative organs carry regional portfolios.
MOCT maintains other special local administrative organs, including five National Territory Management
Offices (Seoul, Wonju, Taejon, Iksan and Pusan) and five River Flood Control Offices (Han River, Nakdong
River, Keum River, Sumjin River and Yeongsan River).
248 See, e.g., the Seoul Airport Act , Article 7(5-2) of the Korea Airport Corporation Act , Article 7 of the
Korea Airport Construction Authority Act , or Article 10 of the Law on Inchon International Airport
Corporation.WT/DS163/R
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4.195  Korea argues  that the terms "subordinate linear organization," "special local administrative
organ" and "attached organ" are in fact "unique terms of art" found in the Government Organization
Act.
4.196  In response to a question from the United States  requesting Korea to reconcile its statement
that the Seoul Regional Aviation Office and the Pusan Regional Aviation office are special localadministrative organs although they are not identified in the Government Organization Act  and its
statement that Note 1 to Korea's Annex 1 provides the exclusive means by which to identify as
Annex 1 covered entities those entities, Korea makes the following argument.  First, Korea argues that
Article I:1 of the GPA limits coverage to "entities."  Korea states that one of the "entities" covered by
Korea's commitment is MOCT, which is a central government entity within the meaning of Annex 1
to Appendix I of Korea's GPA Schedule.  Korea fu rther states that the Seoul Regional Aviation Office
and the Pusan Regional Aviation Office, which conduct the implementation of the affairs of MOCT intheir respective regions, are special local administrative organs of MOCT.  Korea asserts that, unlike,
for example, KAA, KOACA and IIAC, they are not  separate legal entities in their own right.
According to Korea, MOCT has determined that it s aviation responsibilities in those regions will be
most efficiently administered by the use of these regional offices, as provided for in Article 3(2) of the
Government Organization Act .  Korea concludes that any body identified as a special local
administrative organ pursuant to Article 3(2) of the Government Organization Act  i s  a n  A n n e x  1
covered entity by virtue of Note 1.
249
5. Responses to Panel Question Regarding KAA
(a) Arguments by the United States
4.197  The Panel asked both Parties to explain why KAA should or should not be considered as
"'attached/connected/affiliated' etc." to MOCT and, therefore, a covered entity for the purposes of the
GPA.250
4.198  In response to the Panel's question, the United States argues  that KAA should be
considered "'attached/connected/affiliated' etc." to MOCT because of MOCT's pervasive links to,
authority over, and control of KAA.251
4.199  In support of its argument, the United States notes that KAA, formerly known as the
"International Airport Management Committee," was created in 1979 "under the Construction and
Transportation Ministry . . . to bring about efficiency of International Airport management ... ."252
4.200  The United States refers to the composition of the KAA and the projects for which KAA is
responsible.253  The United States notes that KAA may "establish a branch office,"254 "lend or
sublease any property contributed or leased,"255 "collect rents or charges for use from those who use
or utilize airport facilities managed and operated by it,"256 "borrow funds257, "have beneficiaries of its
                                                     
249 Korea's Answer to Question 1 from the US, dated 3 November 1999.
250 Question 20 from the Panel, dated 15 November 1999.
251 US Answer to Question 22 from the Panel, dated 29 November 1999.
252 US Answer to Question 22 from the Panel, dated 29 November 1999, citing Article 1 of the
International Airport Management Act , Presidential Decree 9549.
253 US Answer to Question 22 from the Panel, dated 29 November 1999.
254 International Airport Management Act Article 5.
255 Ibid.  Article 17.
256 Ibid. Article 18.
257 Ibid.  Article 23.WT/DS163/R
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projects bear expenses required for the projects,"258 and "dispose of important property,"259 but only
with the approval of MOCT.260
4.201  The United States also notes that KAA must: 261
prepare a business plan and budget bill for each business year . . . and submit them to
the Minister of Construction and Transportation to obtain his approval.  The sameshall also apply, if it wishes to modify them . . .
262
[and] prepare a settlement of accounts on revenues and expenditures for each businessyear . . . and submit it to the Minister of Construction and Transportation after
undergoing an audit by a certified public accountant designated by the Minister of
Construction and Transportation . . .
263
[and] make rules relating to organization, accounting, personnel affairs, remuneration,etc. and obtain the approval of the Minister of Construction and Transportation.  Thesame shall also apply, if [KAA] wishes to modify such rules.
264
4.202  The United States refers to Article 28 of the Korea Airport Corporation Act  which states:
"The Minister of Construction and Transportation shall direct and control [KAA], and
if it is deemed necessary to do so, he ma y have [KAA] report matters concerning its
affairs, accounting and property, or have a public official under his control inspectbooks, documents, facilities and other things of [KAA]."
265
4.203  The United States notes that the Civil Aviation Bureau within MOCT provides "guidance and
supervision" for KAA266, that KAA is listed on MOCT's Internet website as a "subsidiary
organization" of MOCT267 and that during the time-period KAA supposedly had procurement
authority for the IIA project, procurements related to the project were announced as MOCTprocurements.
268  The United States contends that, moreover, during the period KAA was involved in
the IIA project, MOCT retained ultimate authority and control over the project.  According to the
United States, this further confirms that KAA is "'attached/connected/affiliated' etc." to MOCT.  The
United States notes that during the period KAA was involved in the IIA project the United States
argues that MOCT retained jurisdiction "ove r the affairs relating to land, air and marine
transportation, and tourism,"269 pursuant to the Government Organization Act of the Republic of
                                                     
258 Ibid.  Article 24.
259 Ibid.  Article 26.
260 US Answer to Question 22 from the Panel, dated 29 November 1999.
261 US Answer to Question 22 from the Panel, dated 29 November 1999.
262 International Airport Management Act,  Article 20.
263 Ibid. Article 20.
264 Ibid. Article 22.
265 US Answer to Question 22 from the Panel, dated 29 November 1999.
266 See Duties of Civil Aviation Bureau, in MOCT Internet website document,
http://www.moct.go.kr/mcte/  mct_about/aboutml/mcthpg_air.htm.
267 See MOCT List of Subsidiary Organizations, from the MOCT Internet website,
http://www.moct.go.kr/ ours/e-o023.html.   MOCT's website is also discussed at paragraph 4.432 et seq.
268 See, e.g ., Transportation Department Announcement 1993-33 , from MOCT for a procurement
relating to railway connection from the Inchon Airport.
269 Government Organization Act , Article 40. The most recent version of the Government Organization
Act states in its Article 42:
"The Minister of Construction and Transportation sh all take charge of the affairs relating to the
establishment and adjustment of comprehensive plans for construction in national territory, theWT/DS163/R
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Korea and that it was the responsibility of MOCT to inter alia  "designate" and "publicly announce"
the Inchon Airport construction project270 to "designate an area necessary for the execution of the new
airport construction project as the project area for the construction of the new airport"271 and to "draw
up a master plan relating to the new airport construction."272  The United States notes that the "master
plan" shall include the following matters: General direction of construction; outline of theconstruction plan; construction period; financing plan; and such other matters as the Minister of
Construction and Transportation deems necessary.
273  The United States also notes that MOCT could
"change the master plan formulated pursuant to the provisions [of the Act on the Promotion of a New
Airport for the Seoul Metropolitan Area Construction , and] make alterations therein."274
4.204  The United States contends that Korea's Aviation Act  confirmed that:
"The airport development projects shall be carried out by the Minister of Construction
and Transportation . . . Any person other than the Minister of Construction andTransportation, who desires to operate the airport development projects, shall obtain
the permission of the Minister of Construction and Transportation ... ."
275
4.205  The United States argues that MOCT has ultimate authority to carry out the IIA project.276
KAA was merely a project operator, designated and used by MOCT to construct the Inchon
International Airport.277
4.206  The United States also notes that the New Airport Construction Deliberation Commission
under MOCT was established:
"to deliberate on important issues relating to building techniques, construction
technology and traffic impact, etc. of the new airport construction project . . .278
[The Commission] comprised of members, including Chairman, not exceeding one
hundred persons who shall be appointed or commissioned by the Minister of
Construction and Transportation from among persons coming under one of the
following subparagraphs:
1. Public officials in the fourth grade or above serving at a central or local
administrative organ or a local government concerned with the affairs of thenew airport construction project;
2. Members on the board of directors of public entities or research institutions;
and
                                                                                                                                                                    
conservation, utilization, and development of national territory and water resources, the construction of
cities, roads, and housing, coasts, rivers, and r eclamation, land transportation, and air services."
270 Seoul Airport Act , Article 2(1).
271 Ibid. Article 3(1).
272 Ibid.  Article 4(1).
273 Ibid.  Article 4(2).
274 US Answer to Question 22 from the Panel, dated 29 November 1999, citing Seoul Airport Act
Article 4-2(1).
275 US Answer to Question 22 from the Panel, dated 29 November 1999, citing Aviation Act  Article 94.
276 See Articles 94 and 2(8) of the Aviation Act.
277 US Answer to Question 22 from the Panel, dated 29 November 1999, referring to, e.g., Articles 95,
96, 103, and 104 of the Aviation Act .  The United States contends that these and other provisions confirm the
subordinate nature of project operators.
278 Seoul Airport Act , Article 7-3(1).WT/DS163/R
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3. Persons of such professional learning and experience in airport, building,
civil engineering, fire fighting and the environment, etc. as determined by the
Minister of Construction and Transportation."279
4.207  According to the United States, many of the exhibits provided by Korea corroborate the
United States argument that regardless of KAA, KOACA and IIAC's status as subsidiary
organizations of MOCT, they nevertheless remain covered under the GPA because procurements by
KAA, KOACA and IIAC are, in fact, procurements by MOCT.  The United States notes that MOCT
not only controls procurements by KAA, KOACA and IIAC, but it also funds, owns and benefits from
these procurements.
4.208  The United States refers also to the Rules of the New Airport Development Group  which state
in Article 5 that the "head of the Aviation Office sh all assume the overall authority to supervise and
control the construction and operation of the New International Airport."280  The United States notes
that the New Airport Development Group under MOCT retained the following responsibilities:
establishing and coordinating basic plans for the airport;  budget and funding matters related to the
airport; researching and developing "systems and regulations" concerning the airport;  planning,
designing and overseeing "actual works of [the airport's] civil engineering facilities, site preparation,
supporting complex construction supporting facilities and accessible transport facilities"; analysingand controlling "all [airport] work processes;"  planning, designing and overseeing "actual works of
the [airport's] structural, mechanical, communication electronics and power facilities;  supervising the
operation of the "[t]he New Airport Construction Deliberation Commission;"  and establishing
"financial plans for repayment of debt incurred from the construction [of the airport] and securing . . .
funds for operation" of the airport.
4.209  The United States notes that a Korean business guide touted MOCT as the entity controlling
the IIA project
281, that KAA utilized the Office of Supply and its regulations for procurement
purposes, just as MOCT would and that employees of KAA in certain circumstances were "treated as
public officials."282
4.210  In response to this argument, Korea states  that there is no evidence that even remotely
suggests that KAA has, as the United States argues , "utilised the Office of Supply and its regulations
for procurement purposes, just as MOCT would."283  Korea states that the procurements referred to by
the United States for which KAA requested Office of Supply assistance, were not for the IIA – which
is, exclusively, the subject of the Panel's terms of reference in this case.  In any event, Korea notes
that Korea's Annex 1 specifically states that Office of Supply coverage is "limited to purchases for
entities in this [Annex 1] list only."  Korea further notes that KAA is not listed on Annex 1.284
4.211  Korea argues that a publication by the US Foreign Commercial Service of the American
Embassy, Seoul, produced in conjunction with a Korean trade association (the Association of Foreign
Trading Agents) can scarcely be considered to bind the Korean Government to GPA obligations,
                                                     
279 US Answer to Question 22 from the Panel, dated 29 November 1999, citing the Seoul Airport Act,
Article 7-3(3).
280 US Answer to Question 22 from the Panel, dated 29 November 1999.
281 American Business in Korea:  Guide & Directory 1992-93, p. 126.  This guide was published by the
Association of Foreign Trading Agents of Korea, a Korean business associatio n, in conjunction with the Foreign
Commercial Service of the American Embassy, Seoul.  The United States notes that the Inchon InternationalAirport is also known as the "Youngjong-do" project, as it is being constructed on Youngjong Island nearInchon.
282 US Answer to Question 22 from the Panel, dated 29 November 1999.  Further arguments regarding
publications that the US argues evidence MOCT's control over the IIA project are contained in paragraph 4.420.
283 Korea's Response to the US Answer to Question 22 from the Panel, dated 29 November 1999,
quoting US Answer to Question 22.
284 Korea's Response to the US Answer to Question 20 from the Panel, dated 29 November 1999.WT/DS163/R
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including the proposition offered by the United States that this joint US-private sector publication
proves MOCT's role "as the entity controlling the IIA project."285
4.212  The United States concludes  that, therefore, due to the fact that KAA is
"'attached/connected/affiliated' et c." to MOCT, KAA should be considered a covered entity for the
purposes of the GPA because:
(1) Annex 1 of the GPA, which covers MOCT as a "central government entity,"
also covers the subdivisions of MOCT.  KAA is a subdivision of MOCT
because it is "'attached/connected/affiliated' etc." to MOCT.
(2) Article I:1 of the GPA, which states that the GPA "applies to any law,
regulation, procedure or practice regarding any procurement by entities
covered by this Agreement," applies to KAA because, as an entity
"'attached/connected/affiliated' etc." to MOCT, any procurement by KAA isin fact a procurement by MOCT.
(3) Note 1 of Korea's Annex 1 of the GPA, which states that coverage of the
listed "central government entities" "include[s] their subordinate linear
organizations, special local administrative organs, and attached organs as
prescribed in the Government Organization Act of the Republic of Korea,"also covers KAA because – as an entity "'attached/connected/affiliated' etc."
to MOCT – KAA is a "subordinate linear organization" of MOCT.
286
4.213  The United States argues that KAA is covered pursuant to: Korea's Annex 1 of the GPA,
which lists MOCT as a covered "central government entity;"  Note 1 to Korea's Annex 1 of the GPA,
which states that "subordinate linear organizations" of MOCT are also covered;  and Article I:1 of theGPA.  The United States further argues that given that KAA is a covered entity, as a factual matter,
any procurement conducted by KAA that is within the scope of the GPA ( i.e., above the Agreement's
thresholds and not subject to any of the exceptions enumerated in the Agreement's text) is covered.
This includes procurements related to the other regional airports for which KAA is responsible.
287
4.214  The United States notes that KAA was involved in the IIA airport development project from
1992 until KOACA's creation in 1994.  The United States contends that, apparently, this was the only
"new airport construction" which KAA participated i n.  With regard to the procurement for this "new
airport construction," the United States contends that it expected KAA to be covered, given its
May 1991 question288 to Korea.  The United States also notes that as for the rest of KAA's work,
which according to Korea, "has traditionally b een limited to the management and maintenance of
[existing] Korean airports," the US May 1991 question did not focus on these procurements.
However, the United States argues that they are nevertheless covered by the GPA because of thecoverage of KAA as a subdivision of MOCT.
4.215  In response, Korea argues  that the US May 1991 question was not about just any generic
airport procurement.  Korea notes that the actual text of the United States' question was:
"How does the Airport Development Group re late to the Ministry of Communication?
Does Korea's offer of coverage of the Ministry of Communications include purchasesfor the Airport Development Group?  Please identify all Ministries that will be
                                                     
285 Ibid.
286 US Answer to Question 22 from the Panel, dated 29 November 1999.
287 US Answer to Question 16 from the Panel, dated 29 November 1999.
288 The US May 1991 question is discussed further below at paragraph 4.328 et seq.WT/DS163/R
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responsible for the procurement of goods and services related to new airport
construction."
4.216  Korea states that its reasonable interpretation of this question was that the United States was
interested in the NADG – the New Airport Development Group.289  Korea states that, therefore, its
response dealt with NADG and its relationship with MOCT, and the Office of Supply, as the entitythat would in principle be responsible for procurement for the IIA under the terms of the Government
Procurement Fund Act , had there even been any procurements for IIA construction at the time.  Korea
states that it reasonably considered that the United States was not asking a question about airport
procurement in general.
4.217  The United States further argues  that the coverage of procurement resulting from KAA's
management and maintenance of Korea's regional airports is similar to the coverage of procurement
by the Seoul and Pusan Regional Aviation offices which are covered under Korea's GPA obligations.The United States contends that these regional offices conduct procurement for new airport
construction of certain airports other than the IIA.  In addition, they also conduct procurement for the
maintenance of these airports. The United States argues that regardless of whether the Seoul and
Pusan Regional Aviation offices are procuring for the construction or the maintenance of these
airports, their procurements are covered under the GPA because they, as subdivisions of MOCT, arecovered under the GPA.
290
4.218  The United States notes that it has not uncovered any additional documentation not already
provided that demonstrates the contemplation of the coverage of KAA over the "management and
maintenance" of these other regional airports.  However, it notes that it is not unheard of for a country
to find that it has "GPA benefits" that "it had not anticipated," due to the coverage of an entity that,although originally covered for a particular purpose, engages in the procurement of other projects or
sectors that were not explicitly excluded from GPA coverage.
291
4.219  In response to a question from the Panel regarding evaluation of the Korean accession offer
by the United States, the United States notes that throughout the GPA accession process, it has
analysed the offers of countries acceding to the GPA on an ongoing basis but does not routinelyprepare formal "studies".  With regard to asse ssment of the value of Korea's accession offer, the
United States notes that the potential monetary value of a country's GPA accession offer is often not
as important to the United States as the quality of the overall package (including coverage of key
entities and projects/sectors of interest).  The United States recognizes that the US procurement
market is substantially larger than that of most of its trading partners and that the monetary value of
the opportunities offered by an acceding country is unlikely to be equivalent to the monetary value of
opportunities offered by the United States.  Therefore, the United States notes that its acceptance ofanother country's accession package is often based on the extent to which the offer includes coverage
of areas of key interest to US suppliers and services providers, i.e., the coverage of key entities,
projects and sectors of interest to the United States.  The United States argues that airport was such a
priority.
292
                                                     
289 Further discussion of Korea's interpretation of the US May 1991 question is contained below at
paragraph 4.343.
290 US Answer to Question 16 from the Panel, dated 29 November 1999.
291 Ibid.
292 US Answer to Question 24 from the Panel, dated 29 November 1999.WT/DS163/R
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(b) Arguments by Korea
4.220  In response to the Panel's question referred to above in paragraph 4.197 Korea, on the
other hand, argues  that KAA should not be considered as "'attached/connected/affiliated' etc. to
MOCT" for the purposes of determining GPA coverage, for the following reasons.293
4.221  First, Korea states that Note 1 to its Annex 1 governs the determination of which non-listed
entities are covered by virtue of their relationship with entities listed on Annex 1.  Korea states that,
specifically, Note 1 refers to the Government Organization Act of the Republic of Korea , which
"prescribes" those entities that, as "subordinate linear organizations," "special local administrative
organs" or "attached organs," are considered covered despite their absence from Annex 1.294
4.222  Korea notes that Note 1, with its incorporation by reference of the Government Organization
Act, evidences and itself provides a "special meaning," under Article 31(4) of the Vienna Convention
on the Law of Treaties .  According to Korea, Note 1 provides specific, textual evidence of the intent
and the agreement of the parties to the GPA, and as an "integral part" of the GPA, under Article
XXIV:12 thereto, must be accorded both its ordinary meaning, and the "special meaning" it imposes
upon the term "central government entity" for the purposes of Korea's Annex 1.295
4.223  Korea argues that KAA is not considered a covered entity by virtue of Note 1.  Specifically,
Korea argues that KAA is not a "subordinate linear organization," "special local administrative organ"
or "attached organ," within the meaning of the Government Organization Act , and its status as a
separate legal person with the authority to conduct its own procurements distinguishes it from a body
such as NADG, which is effectively MOCT itself.296
4.224  Korea also notes that unlike the entities prescribed by the Government Organization Act ,
KAA has the following characteristics297:  KAA was established by an act of the National Assembly
as a separate legal person298;  KAA authored and adopted its own by-laws299;  KAA is governed by its
own board of directors that controls all matters related to major corporate investments and all other
major corporate issues of any significance300;  KAA hires and fires its own workforce that is not in the
government's employ301;  KAA authored and adopted its own Contract Administration Regulations302
distinct from the government procurement rules included in the Korean Budget and Accounting Act
and used those Regulations for IIA procurements;  KAA published bid announcements and requests
for proposals of its own accord303;  and, KAA concluded contracts with successful bidders on its own
behalf.304
4.225  Korea argues that each of these factors demonstrates that KAA is an entity in its own right,
separate and distinct from MOCT.  Korea also argues, in response to a question from the Panel, that
all of the "organs" or "organizations" included on the MOCT organization chart are in fact prescribed
                                                     
293 Korea's Answer to Question 22 from the Panel, dated 29 November 1999.
294 Ibid.
295 Ibid.
296 Korea's Answer to Question 22 from the Panel, dated 29 November 1999.
297 Korea's Answer to Question 11 from the Panel, dated 29 November 1999.
298 Korea Airport Corporation Act , Article 3.  See also Notification of Act No. 3219, Official Gazette ,
28 December 1979, p. 5892.
299 KAA By-laws.
300 Ibid. Articles 4(3), 4(1)(6), 14, 25.
301 Korea Airport Corporation Act , Article 13.
302 KAA Contract Administration Regulations, Article 90.
303 Exhibits Kor-19A through Kor-19D.
304 Ibid.WT/DS163/R
Page 72
by the Government Organization Act , and covered under the GPA, as subordinate linear
organizations, special local administrative organs or attached organs.305
4.226  Second, Korea argues that even if Note 1 is not controlling, the "control" test proposed by the
United States enjoys no support in the GPA.  Although Article I:1(c) of the Tokyo Round GPA306
included what the United States has styled a "normative" control test307 this test was not included in
the Uruguay Round GPA308, in either a normative or a binding form.  Korea argues that according to
the Appellate Body, the disappearance of a provision during negotiations "strongly reinforces the
presumption" that prior practice has changed.309  Quoting the Appellate Body, Korea states that
rejecting prior practice in these circumstances "i s the commonplace inference that is properly drawn
from such disappearance," and an interpreter is "not entitled to assume that that disappearance was
merely accidental or an inadvertent oversight on the part of either harassed negotiators or inattentive
draftsmen."310
4.227  Korea states that the United States itself agrees that the "control" test included in
Article I:1(3) of the Tokyo Round GPA was "exc luded" from the Uruguay Round GPA, but argues
that rather than rejecting the "'c ontrol' concept, . . . Annex 3 made it unnecessary."  Korea states that
this argument does not explain why the United States argues in these proceedings for importation of
the "control" test into Annex 1 , which is the locus of its claim for KAA coverage.  Korea states that,
more importantly, if Annex 3 made the Tokyo Round "control" test unnecessary, then reference to
Annex 3 for evidence of KAA coverage is appropriate.  Korea notes that KAA is not included on
Korea's Annex 3.311
4.228  Korea argues that in either case, whether the Tokyo Round "control" test was rejected
altogether by the Uruguay Round GPA negotiators, or whether the negotiators intended Annex 3 toencompass the concept of "control," the importation by the United States of a "control" test into
Annex 1, and its claim that KAA is an Annex 1 covered entity by virtue of the control allegedly
exercised over it by MOCT, must be rejected.
312
4.229  Third, Korea argues that the test included in the Uruguay Round GPA to extend coverage
beyond the list of entities included in a signatory's Appendix I – Article I:3 – is not met in thecircumstances of this case.  Korea argues that the United States' "control" test, either as drafted or as
applied by the United States, does not comport to the requirements of Article I:3, and that there is no
evidence that suggests that KAA was even asked by MOCT or any other covered entity, let alone
required, to award contracts for IIA procurements in accordance with particular requirements.  Korea
states that the United States' list of "control" factors speaks largely to the statutory requirement that
KAA request approval for and report on certain of its actions.  Korea argues that neither of these
                                                     
305 Korea Answer to Question 11 from the Panel, dated 29 November 1999.
306 The Tokyo Round GPA and, more particularly, Article I:1(c) is discussed below at paragraph 4.291
et seq.
307 Agreements Being Negotiated at the Multilateral Trade Negotiations in Geneva , US International
Trade Commission Investigation No. 332-101 (MTN Studies, August 1979), pp. 26, 27-28, 38, 44.
308 The removal of the control test from the Uruguay Round GPA is discussed below at
paragraph 4.296 et seq.
309 See paragraph 4.300 et seq.
310 Korea's Answer to Question 22 from the Panel, dated 29 November 1999, quoting United States –
Restrictions on Imports of Cotton and Man-made Fibre Underwear , WT/DS24/AB/R (adopted on
25 February 1997), p. 17.
311 Korea's Answer to Question 22 from the Panel, dated 29 November 1999.  The Annex 3 issue is
discussed further at paragraph 4.307 et seq.
312 Ibid.WT/DS163/R
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factors, nor any other evidence offered by the United States, demonstrate that KAA is required to
apply particular requirements in awarding IIA procurements.313
4.230  Fourth, Korea argues that considering KAA to be a covered entity by virtue of a "control" test
that (i) utilizes categories of "control" without textual basis in the GPA, and (ii) adopts an arbitrary
degree of "control," also without any textual base, sufficient to deem an entity controlled and,therefore, covered, will seriously disrupt the delicate balance of rights and obligations agreed to by
signatories to the GPA.  Korea states that a decision that this non-textually-based test should trump
the entire basis upon which signatories negotiated their GPA commitments – the positive enumeration
of entities subject to the terms of the GPA – will have effects well beyond KAA.
314
4.231  Korea states that each entity included on Korea's Annex 3 is controlled by an Annex 1 entity
in the same sense that KAA is "controlled" by MOCT.315  Korea states that whether discussing entities
included on Annex 3, or entities excluded from but susceptible to inclusion on Annex 3 such asAmtrak, Comsat and KAA, the result of the United States' "control" test would be to subject those
entities to coverage under Annex 1.  Given the lower thresholds applicable to procurements by
Annex 1 entities, the result of the United States' te st would be not only to reduce Annex 3 to a nullity,
but also to expand greatly signatories' GPA obligations.
316
4.232  Korea argues that for the four reasons mentioned above, KAA should not be considered
covered by virtue of its "attachment," "connection" or "affiliation" to MOCT.  Korea states that there
is no textual basis in the GPA to expand Korea's GPA commitments to KAA in the manner proposed
by the United States, and the test provided by the GPA to secure coverage of non-listed entities –
Article I:3 – is not satisfied under the factual circumstances of this case.317
4.233  In response, the United States refers  to its arguments in paragraphs 4.118 and 4.146.
4.234  Further, Korea argues  that it did not commit, or intend to commit, to GPA coverage for
KAA, whether procurements were for the IIA or "other regional airports for which KAA is
responsible."  Korea reiterates that KAA is responsible for the management of existing regional
airport operations, a task that may involve incidental repair and maintenance, and procurements
therefor.  Korea states that the only significan t construction authority possessed by KAA was its
responsibility for procurement for the IIA project, during the period December 1991 – August 1994.
Korea argues that there is no evidence suggesting that Korea committed to coverage for KAA's
procurements.  Korea also argues that it did not commit to coverage for procurements undertaken on
KAA's behalf by the Office of Supply since Korea's commitment to Annex 1 coverage for the Office
of Supply is limited to purchases for entities on Annex 1 only and KAA is not on Annex 1.318
6. Appendix I:  General Note 1(b)
(a) Ordinary Meaning of Note 1(b)
4.235  The United States argues  that General Note 1(b) confirms that there are in fact "entities
listed in Annex 1" responsible for "procurement of airports."  The United States asserts that the
reference to airport procurement entities can only be a reference to MOCT given that it is the only
enumerated entity under Korea's Annex 1 with a mandate to oversee "all matters concerning publicroads, railways, air and maritime transport . . . [such as the] construction and administration of roads
                                                     
313 Ibid.
314 Ibid.
315 Ibid.
316 Ibid.
317 Ibid.
318 Korea's Answer to Question 21 from the Panel, dated 29 November 1999.WT/DS163/R
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and airports and all other matters concerning construction and transport safety affairs . . . [including]
the construction of the . . . Inchon International Airport"319 and MOCT, the NADG, KAA, KOACA,
and IIAC are the only entities Korea has held out as being "responsible" for procurements of airports.
4.236  In response, Korea argues  that General Note 1(b) to Korea's GPA Appendix I does not
convert KAA, KOACA or IIAC into covered entities.  Korea notes in this respect that sinceDecember 1991, KAA, KOACA and IIAC have been the entities responsible for IIA procurement,
and that KAA, KOACA and IIAC are not covered enti ties by virtue of Korea's Annex 1 or the Notes
thereto.  Korea argues that even an a contrario  reading of General Note 1(b) does not imply that IIA
procurement is extended to US suppliers and service providers under the terms of the GPA since the
Korean entities conducting such procurements are not "entities listed in Annex 1."
4.237  Korea further notes that as a matter of reciprocity, General Note 1(b) withholds GPA benefits
for "procurement for airports by the entities listed in Annex 1" from suppliers and service providers ofthe member States of the European Communities, Norway and Switzerland.
(b) Entities to Which General Note 1(b) Refers
(i) Seoul and Pusan Regional Aviation Offices
4.238  Korea states  that the reference to airport procuring authorities in General Note 1(b) is a
reference to the Seoul and Pusan Regional Aviation Offices.  Korea notes that these are MOCT's
"special local administrative organs," and, therefore, as covered entities pursuant to Note 1 to Korea's
Annex 1, are charged with procurement responsibility associated with construction and maintenance
of Yangyang, Yeosoo, Muan, Daegu, Pohang, Yecheoon and Uljin Airports.  Korea further notes thatthe Regional Aviation Offices may conduct such procurement or request that Office of Supply
procure on their behalf.  Korea asserts that, in either case, procurement for these airports is subject to
the GPA.
4.239  In response to a question from the Panel, Korea provides details of the construction projects
(including value) that have been undertaken by the Seoul and Pusan Regional Aviation Offices since1990.
320  Further, Korea refers to examples of contracts awarded by the Office of Supply, in
conjunction with MOCT's Seoul and Pusan Regional Aviation Offices.321
4.240  In response, the United States refers to its arguments in paragraphs 4.340, 4.402 and 4.403.
(ii) Covered and Uncovered Entities
4.241  Korea explains  its rationale for dividing airport procurement between various entities and,
for submitting some, rather than all, of those proc urement entities to coverage under Annex 1 of the
GPA.  Korea states that there are differences between construction of and attendant procurement for a
$6 billion off-shore airport on reclaimed land, and procurement for the considerably smaller projects.
4.242  Korea also states that it had a right to commit to coverage for certain entities, and to exclude
others.  Korea asserts that every single GPA signatory did likewise.  Korea notes that the United
States, for example, excluded the Federal Aviation Administration ("FAA") and its Office of Airports
from coverage under Annex 1, but included other airport procurement authorities such as the Port
Authority of New York and New Jersey under Anne x 3.  Korea further notes that although both the
FAA's Office of Airports and entities like the Port Authority of New York and New Jersey each have
                                                     
319 "History of the Ministry of Construction and Transportation," found on MOCT's Internet website at
http://www.moct.go.kr/mcte/mct_about/mctha2.htm.
320 Korea's Answer to Question 17 from the Panel, dated 3 November 1999.
321 Exhibits Kor-61A – Kor-61B.WT/DS163/R
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airport procurement responsibilities, the United St ates considered it legitimate to exclude the FAA
from coverage while including the Port Authority.
4.243  In response to a question from the Panel concerning the difference in categorization of the IIA
authorities on the one hand and Seoul and Pusan Regional Airport Authorities on the other, Korea also
states that the procurement responsibility associated with construction and maintenance of existingairports conducted by the Regional Aviation Offices is in the nature of routine maintenance and
relatively minor construction, which is not on the scale of the construction of a new airport of the
magnitude of IIA.  Korea further states that since this construction and maintenance is well within the
capabilities of the Regional Aviation Offices, Korea has lodged it there, along with the authority for
any necessary procurement.  Korea finally states that, because of the magnitude of the IIA project,
Korea found that an entirely separate entity, devoted only to that task, was needed.  Korea also refers
to its arguments in paragraphs 4.443 - 4.445.
(c) Coverage of "New Airport Construction" under Korea's Annex 1
4.244  In response to a question from the Panel, the United States says  that it interpreted the
reciprocal derogations between the EC and Korea re garding airports as an indication that Korea and
the EC could not agree that each was offering "comparable and effective access [to their] relevantmarkets."
322  The United States further states that, moreover, the United States interpreted these
derogations as a confirmation that Korea's GPA of fer indeed included coverage of "new airport
construction" under its Annex 1, consistent with Korea's July 1991 statement regarding the coverage
of MOCT and the Office of Supply – as entities responsible for the IIA project – under Annex 1.  The
United States contends that it was able to draw this conclusion because Korea's country-specificderogation, which listed the EC and others, did not include the United States when carving out
"procurement for airports by the entities listed in Annex 1."
323
4.245  Korea argues that  it is not at all apparent why Korea's General Note 1(b) is confirmation that
Korea's GPA offer indeed included coverage of "new airport construction" under its Annex 1 as
postulated by the United States.  Korea argues that if an a contrario  interpretation of General
Note 1(b) is adopted, one could presume that "procurement for airports by the entities listed in
Annex 1" – the actual language of General Note 1(b) – would be subject to GPA-consistent terms for
US suppliers and service providers.  However, Korea states that there is no specification of "new
airport construction," as asserted by the United States;  rather, any "procurement for airports" by any
Annex 1 entity is covered.324
7. Appendix I:  Annex 3
(a) Procuring Entities under Annex 3
4.246  Korea argues  that if, in fact, it had intended to cover KAA, KOACA and the IIAC under the
GPA, it would have listed those entities under Anne x 3 rather than Annex 1 of Appendix I to the GPA
given their independent legal existence and their association with a public-purpose project.
(i) Independent Legal Persons
4.247  Korea argues  that like KAA, KOACA and IIAC, each of the entities listed on Annex 3 of
Korea's Appendix I were established by a special legislative act, rather than by an order or directive
issued by an entity included on Annex 1 and were created to engage in particular public-purpose
commercial or non-commercial tasks.
                                                     
322 See EC General Note 1 and Korea General Note 1 to Appendix I of the GPA.
323 US Answer to Question 17 from the Panel, dated 29 November 1999.
324 Korea's Response to the US Answer to Question 17 from the Panel, dated 29 November 1999.WT/DS163/R
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4.248  Korea also argues that the entities listed on Annex 3 are, like KAA, KOACA and IIAC,
independent legal or "juristic" persons under Korean law, as stated in their authorizing statutes.  Korea
states that this is not the case with an entity, such as NADG, established by an Annex 1 entity on its
own authority.
4.249  Korea argues that as legal persons under Korean law, Annex 3 entities, like KAA, KOACA
and IIAC, are able to enter into binding legal commitments on their own behalf.  Each has its own
officers and directors, and its employees are not government civil servants or employees.
4.250  In support of its argument, Korea notes that Japan's New Tokyo International Airport
Authority ("NTIAA"), like KAA, KOACA and IIAC, is a "juridical person."325  Korea notes that
NTIAA is led by officers who are appointed and di smissed by, or subject to the approval of, the
Japanese Minister of Transport.326  Korea further notes that NTIAA employees are not government
civil servants but, rather, are hired and fired by the president of NTIAA itself.  Finally, Korea notesthat despite their private sector status, NTIAA officers and employees are considered "employees
engaged in public duties" for the purposes of the Japanese Criminal Act .
327
4.251  In response, the United States argues  that whether an entity is a separate legal entity or not
is irrelevant.  In support of its argument, the United States asserts that a GPA member can choose to
put any of its entities in Annex 1 or Annex 3, pr ovided that the other GPA members agree to this.
Therefore, whether an entity is a separate legal entity or not is irrelevant.
4.252  Further, the United States argues that a separate legal entity is normally created for the
purposes of limiting liability and providing continuity.  The United States also argues that an
organization need not possess this legal fiction to be considered an "entity."  The United States refers
to Black's Law Dictionary which defines a separate legal entity of a corporation as follows:
"An artificial person or legal entity created by or under the authority of the laws of a
state.  An association of persons created by statute as a legal entity.  The law treats
the corporation itself as a person, which can sue and be sued.  The corporation is
distinct from the individuals who comprise it . . . [and it] survives the death of its
investors, as the shares can usually be transferred."328
4.253  Accordingly, the United States argues that applying these notions to the facts of this case,
subdivisions such as the New Airport Development Group are "entities," even though they are not
separately legal.  The United States additionally argues that, in fact, the New Airport Development
Group has its own director and its own regulations.  The United States asserts that an Annex 1 entity
does not automatically become an Annex 3 entity because it becomes a separate legal entity.  The
United States asserts that Korea's own National Railway Administration confirms this principle.  The
United States concludes that, thus, the status of an entity is irrelevant to the determination of thisdispute.
(ii) Specific Task or Purpose
4.254  Korea argues  that like KAA, KOACA and IIAC, the entities included on Korea's Annex 3
list were established to engage in tasks that, while closely linked to the public interest, are forself-evident reasons generally considered better or more efficiently performed by an entity outside the
traditional central government apparatus.  Korea states that constructing or maintaining major utility
or transportation projects is just such a task.  Korea notes that Korea's Annex 3 list includes the Korea
                                                     
325 New Tokyo International Airport Authority Act , Article 3.
326 Ibid. Articles 11, 14.
327 Ibid. Article 19.
328 Black's Law Dictionary (6th ed., 1990), p. 340.WT/DS163/R
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Highway Corporation and the Korea Gas Corporation.  Korea also notes that, similarly, the United
States' Annex 3 list includes the Port Authorit y of New York and New Jersey, which, among other
things, oversees metropolitan New York's three major airports – JFK International, Newark
International and LaGuardia.  Korea asserts that building or maintaining an airport fits in this
category.
4.255  To elaborate on this point, Korea also notes th at each Annex 3 entity, as with KAA, KOACA
and IIAC, is associated with a relatively narrow task or large-scale public project, rather than with the
broad portfolio typically associated with a government ministry.  Korea further notes that, like the IIA
project, the tasks or projects with which Annex 3 entities are charged, while closely linked to the
public interest, are still rather "tangential to the essential function of government," in the words of the
United States itself.329  Korea states that placing those tasks in the hands of entities isolated from the
constraints of large government bureaucracy and structured to more readily attract private capitalfacilitates prompt completion of the project.
(iii) Subject to Central Government Oversight
4.256  Korea argues  that its Annex 3 entities are, like KAA, KOACA and IIAC, subject to certain
oversight by central government entities, despite their status as independent legal persons underKorean law.  Korea further argues that given their key roles in major public purpose projects, and the
implications of their actions on public safety and welfare, this oversight is necessary and justifiable to
ensure that the public interests inextricably linked  to the performance of their tasks are adequately
protected and observed.  Korea asserts that there is nothing inconsistent with government oversight of
Annex 3 entities.  Korea further asserts that MO CT oversight to which KAA, KOACA and IIAC are
subject would not prevent Korea from placing those entities on its Annex 3 list, had it decided to do
so or had its negotiating partners demanded that it do so.  Korea notes that the IIA project and the
projects with which Korea's Annex 3 entities are charged are linked closely enough to the public
interest to require, as the United States itself has stated, "retained links with the Government"
sufficient "to ensure that the interests of the public are reflected ... ."
4.257  In support of this argument, Korea notes that Japan's New Tokyo International Airport
Authority (NTIAA), is included on Japan's Annex 3 despite the significant oversight by Japan's
Ministry of Transport to which the Authority is subject.  Korea states that reference to the New Tokyo
International Airport Authority Act , which bears remarkable resemblance to the Seoul Airport Act , the
Korea Airport Corporation Act  and the Korea Airport Construction Authority Act , demonstrates this
fact.
4.258  In response, the United States argues  that, as a factual matter, KAA and KOACA are
different in nature from the entities found in Korea's Annex 3.  The United States notes that as the
Panel itself noted in a question to the Parties, "[t]he entities listed in Annex 3 are all referred to as
'Corporations' while the KAA and [KOACA] is an 'Authority'."  The United States refers to its
arguments in paragraph 4.442.
4.259  Korea further states that while the Japanese Minister of Transportation is responsible for
drawing up a "master plan" for the airport
330, NTIAA is charged with executing the plan331, pursuant
to a "Program of Duty" authored by NTIAA and subject to approval by the Minister.332  F u r t h e r ,
                                                     
329 Agreements Being Negotiated at the Multilateral Trade Negotiations in Geneva , US International
Trade Commission Investigation No. 332-101 (MTN Studies, August 1979), p. 44 (describing the activities of
Amtrak, which is charged with development and maintenance of a national railway system, and Comsat, which
is charged with the establishment of a commercial communications satellite system).
330 New Tokyo International Airport Authority Act , Article 21.
331 Ibid. Article 22.
332 Ibid. Article 24.WT/DS163/R
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Korea notes that similar to the entities responsi ble for IIA procurement, NTIAA is subject to the
"supervision and inspection" of the Japanese Minister of Transportation.333  Korea states that like
KAA, KOACA and IIAC, NTIAA is required to observe significant reporting requirements,
submitting for the Minister of Transportation's approval, prospectively, an annual business plan,
budget plan and funding plan334, and retrospectively, detailed financial statements and statements of
accounts.335  NTIAA may also be instructed by the Minister to submit reports on various financial
matters, and must open its books for inspection by individuals sent by the Minister.336  Finally, Korea
states that, like the entities responsible for IIA procurement337, NTIAA may obtain loans or issue
airport bonds338, after receiving approval from the appropriate Minister.
4.260  Korea argues that this example demonstrates that GPA signatories have included airport
authorities on Annex 3 despite the subjection of those authorities to at least the degree of oversight by
an Annex 1 entity as is maintained in the case of  the Korean entities responsible for IIA procurement.
4.261  In response, the United States argues that Korea is one GPA signatory that included airport
authorities in Annex 1 since it has repeatedly maintained that the Seoul and Pusan regional airport
authorities are covered under Korea's Annex 1.339
4.262  In further support of its argument, Korea refers  to the Act authorizing the activities of the
Small and Medium Industry Bank, an entity listed on Korea's Annex 3.340  Korea notes that despite the
Bank's status as an independent legal person341, oversight by the Minister of Finance and Economy, an
Annex 1 entity, is noted in this Act in a number of provisions.342
4.263  Korea notes that, in a similar fashion to KAA and KOACA, officers and directors of the
Small and Medium Industry Bank are appointed and dismissed by either the President of Korea or the
Minister of Finance and Economy.343  Like KAA, KOACA and IIAC, Bank employees are not
government civil service employees, but are appointed and dismissed by the Bank itself.344  Although
not public officials, officers of the Bank, as in the case of the entities responsible for IIA procurement,
are in the case of criminal acts treated as such and subject to the terms of the Korean Criminal Act .345
4.264  Korea notes that to engage in activities beyond those specifically enumerated by the
Industrial Bank of Korea Act , the Small and Medium Industry Bank must obtain the approval of the
Minister of Finance and Economy346;  KAA, KOACA and IIAC must similarly receive MOCT
approval to go beyond the scope of their specifically-enumerated portfolios.347
                                                     
333 Ibid. Articles 36-37.
334 Ibid. Article 26.
335 Ibid. Article 27.
336 Ibid. Article 37.
337 KAA By-laws , Article 7(3); Korea Airport Construction Authority Act , Articles 16, 28, 25.
338 New Tokyo International Airport Authority Act , Article 29.
339 US Response to Korea's Answer to Question 11 from the Panel, dated 29 November 1999.
340 Industrial Bank of Korea Act  Act No. 641, 1 July 1961 (as amended by Act No. 5529,
28 February 1998).
341 Ibid. Article 3(1).
342 Ibid.  Article 6(2), Article 26(1), Article 26(2), Article 26(3), Article 28, Article 33-2(1),
Article 33(2-2), Article 33(9), Article 35(1), Article 35-2, Article 37(2), Article 37(3), Article 44(1),Article 44(2), Article 46(1), Article 46(2), Article 48(1) Article 48(3) Article 48(4) Article 49.
343 Industrial Bank of Korea Act , Article 26.
344 Ibid. Article 31.
345 Ibid. Article 32.
346 Industrial Bank of Korea Act , Article 33(9).
347 Korea Airport Corporation Act , Article 7(7); Korea Airport Construction Authority Act ,
Article 7(4); Law on Inchon International Airport Corporation , Article 10(1)(6).WT/DS163/R
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4.265  Korea further notes that the Bank, KAA, KOACA and IIAC all have provisions in their
respective statutes subjecting them to the "supervision and management" or the "direction and
supervision" of the relevant ministry.348  Korea states that the Bank is also required to prepare for the
Minister's review, and to obtain approval from th e Minister for, its business plans, its operations
manual and its annual budgets and reports.349  Korea also states that the Bank may, moreover, be
instructed by the Minister to submit reports on any matters "as may be deemed necessary," and must
open its books to designated officials upon request by the Minister.350  Korea asserts that the entities
responsible for IIA procurement are subject to nearly identical reporting requirements.351
4.266  As yet another example, Korea refers to the Act authorizing the activities of the Korea
Development Bank, another Annex 3 entity.352  Korea states that despite the Bank's status as an
independent legal person353, oversight by the Minister of Finance and Economy, an Annex 1 entity, is
noted in this Act in a number of provisions.354
4.267  Korea states that, like KAA and KOACA, officers and directors of the Korea Development
Bank are appointed by either the President of Korea or the Minister of Finance and Economy.355
Korea further states that like KAA, KOACA and IIAC, Bank employees are appointed and dismissedby the Bank itself, and therefore are not government employees.
356  Korea notes that Bank officers,
while not public officials, are, like officers of the IIA procurement entities, treated as public officialsand subjected to the terms of the Korean Criminal Act  if criminal acts are committed.
357
4.268  Further, Korea notes that if the Bank wishes to engage in activities beyond those specifically
enumerated by the Korea Development Bank Act,  it must obtain the approval of the Minister of
Finance and Economy.358  The entities responsible for IIA procurement would in this situation also
need MOCT approval.
4.269  Korea states that the Bank is subject to overall supervision by the Minister of Finance and
Economy.359  Korea further states that the Bank must also prepare for the Minister's review, and
obtain approval from the Minister for, its operational programme, its service manual and its annual
budgets and reports.360  Korea notes that the Minister may also instruct the Bank to submit reports on
any matters "as he deems it necessary," and must open its books to designated officials upon request
                                                     
348 Industrial Bank of Korea Act , Article 46;  Korea Airport Corporation Act , Article 28;  Korea
Airport Construction Authority Act , Article 31;  Law on Inchon International Airport Corporation , Article 16.
349 Industrial Bank of Korea Act , Articles 35, 35-2, 37, 49.
350 Ibid. Article 48.
351 Korea Airport Corporation Act , Articles 19, 20;  Korea Airport Construction Authority Act ,
Articles 21, 22;  Law on Inchon International Airport Corporation , Article 17.
352 Korea Development Bank Act , Act No. 302, 30 December 1953 (as amended by Act No. 5505,
13 January 1998).
353 Ibid. Article 2(1).
354 Article 5(2), Article 12(1), Article 12(2), Article 12(3), Article 14, Article 17, Article 18(8),
Article 20(1), Article 21, Article 24, Article 37(2), Article 37(3), Article 37(6), Article 47(1), Article 47(2),Article 48(1), Article 48(2), Article 48(3), Article 49(1), Article 49(2), Article 54-3(2), Article 54-3(3),Article 54-3(4), Article 55(1), Article 55(2), Article 55(3), Article 57.
355 Ibid. Article 12.
356 Ibid. Article 16.
357 Ibid. Article 17.
358 Ibid. Article 18(8).
359 Ibid. Article 47.
360 Ibid. Articles 20, 21, 24, 37.WT/DS163/R
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by the Minister.361  Korea argues that the entities responsible for IIA procurement are subject to nearly
identical reporting requirements.362
(iv) Choice between Annex 1 and Annex 3
4.270  In response to a question from the United States  as to whether members of the GPA could
choose to place any entity within Annex 1 or Annex 3, regardless of the project or sector that entity is
procuring for, Korea  confirms that this was its understanding.
4.271  Korea states that it is aware of nothing in the GPA that, in principle, would control the Annex
in which a covered entity is placed.  However, Korea notes that Annex 1 covers "central government
entities" while Annex 3 covers "other entities."  Korea notes further that Korea and other parties to the
GPA have tended to put ministries and the like in Annex 1 and "other entities," such as Airport
Authorities and government-invested corporations, in Annex 3.363  Korea further notes that Annex 2,
is reserved for specific kinds of entities, while Annexes 4 and 5 are reserved for specific kinds of
procurements.
4.272  Korea argues that it would not have been alone in listing KAA, KOACA and the IIAC under
Annex 3 rather than Annex 1 of Appendix I to the GP A.  In support of this argument, Korea notes that
on their respective Annex 3 lists, the United States has included the Port Authority of New York andNew Jersey, which has jurisdiction over metropolitan New York's three major airports;  Hong Kong
has included its Airport Authority; and Japan has included the New Tokyo International Airport
Authority.  Similarly, on their Annex 3 lists, Israel has included its Airport Authority; Norway has
included its National Civil Aviation Administration;  Switzerland has included its various airport
authorities;  and Belgium, Denmark, Germany, Greece, Spain, France, Ireland, Italy, Luxembourg, theNetherlands, Portugal and the United Kingdom, as  member States of the European Communities,
have listed their airport authorities.
4.273  In response, the United States argues  Korea's assertion that it and other parties to the GPA
have tended to put ministries and the like in Annex 1 and "other entities," such as Airport Authorities
and government-invested corporations, in Annex 3 is contradicted by the fact that Korea's RegionalAviation Authorities are placed in Annex 1.  Further, the United States notes that Korea's attempt to
define Annex 3's "other entity" is without textual support.  The United States argues that it is clear that
the text of the GPA does not define this term, and there is no basis to interpret the term by way of
"trends" that Korea itself does not follow.
4.274  In response to a question from the United States as to why the Seoul and Pusan Regional
Aviation Offices are covered under Annex 1 rather than Annex 3, Korea states  that the procurement
responsibility associated with construction and maintenance of airports conducted by the RegionalAviation Offices is in the nature of routine maintenance and relatively minor construction and not on
the scale of the construction of a new airport of the magnitude of IIA.  Korea states that since the task
is well within the capabilities of those Offices, Korea chooses to assign it to them.  Korea notes that
because they are internal to MOCT, and not separate legal entities, they are covered by the GPA.
364
4.275  In response, the United States notes that, on the one hand, Korea claims that the activities of
building and maintaining an airport must be conducted by Annex 3-type entities and, on the other
hand it represents that the Seoul and Pusan Regional Airport Offices, which are responsible for the
construction and maintenance of airports, are covered under Annex 1.  The United States contends
                                                     
361 Ibid. Article 49.
362 Korea Airport Corporation Act , Articles 19, 20;  Korea Airport Construction Authority Act ,
Articles 21, 22;  Law on Inchon International Airport Corporation , Article 17.
363 Korea's Answer to Question 12 from the US, dated 3 November 1999.
364 Korea's Answer to Question 11 from the US, dated 3 November 1999.WT/DS163/R
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that a GPA Party can choose to place an entity under either Annex 1 or Annex 3, subject to agreement
with other Parties, regardless of the procurement subject-matter or the type of entity.  The United
States notes that Korea has acknowledged this fact.
4.276  The United States argues that, moreover, as a factual matter, KAA and KOACA are different
in nature from the entities found in Korea's Annex 3.  Specifically, the entities listed in Annex 3 areall referred to as "Corporations" while the KAA (and KOACA) is an "Authority".
4.277  In response to a question from the Panel, Korea notes  that there is no significance in the
use of the term "authority" or "corporation" in the context of Korean Government entities.  Korea
states that the terms are used interchangeably.  For example, the English translation of the Korea
Airport Corporation Act of 14 December 1991 refers to the "Korea Airport Corporation" which in fact
is KAA.  Korea notes that KAA (or "KAC") is a separate juridical person, as are the other entities in
its Annex 3.  Under Korean law, both authorities and corporations must have by-laws and beregistered.
365
(b) Shifting of an Entity from Annex 1 to Annex 3
4.278  The Panel pointed out to the Parties that the Korean National Railway Administration is listed
as an Annex 1 entity but with a note that it may be made into a public corporation and shifted toAnnex 3 without further compensation.  The Parties were asked to discuss the relevance of this, if
any, to the interpretation of the Korean Schedule.
366  In response, Korea notes  that the Korean
National Railway Administration was placed in Annex 1 because it is a central government entity.
With privatization (which has not yet occurred) it would become a separate legal person, and
therefore, would be more appropriate for Korea's Annex 3, which consists of separate legal persons.Korea states that it is because KAA is a separate legal person that Korea would have placed it on its
Annex 3 offer had Korea intended KAA to be a covered entity.
367
4.279  In response to Korea's answer, the United States notes  that the "privatization" of an entity
has nothing to do with its becoming a "separate legal entity."  In the view of the United States, these
are two completely different concepts that have no relevance to each other.
4.280  In response to the Panel's question, the United States notes that Korea's explanatory note
concerning the Korean National Railway Administration implicitly recognizes two legal points.  First,
shifting an entity from one Annex to another is a substantive alteration in a mutually agreed balance
of concessions between Members.  Second, if a GPA concession is unqualified, and does not provide
explicitly for the possibility that an entity will be shifted to another Annex, then any such shift in
coverage is inconsistent with the concession.368
4.281  The United States argues that this legal point can be understood all the more clearly by
drawing an analogy to the law of tariff concessions.  According to the United States, it is possible to
make a tariff concession subject to a qualification re garding future changes in treatment.  To illustrate,
the United States considers the example of a US concession on Vitamin B12, which was made subject
to a general note reserving the ability of the importing  country to adjust the duty rate in the event that
a particular customs valuation method was eliminated;  because of this general note (and the factualcircumstances of its application).
369  The United States notes that a panel found that conversion of the
duty rate in question was not inconsistent with US obligations.  The United States further states that
where a tariff concession is unqualified, any excess of the duty rate over the bound rate or a switch in
                                                     
365 Korea's Answer to Question 8 from the Panel, dated 3 November 1999.
366 Panel's Question 30 to the Parties, dated 20 October 1999.
367 Korea's Answer to Question 30 from the Panel, dated 3 November 1999.
368 US Answer to Question 30 from the Panel, dated 3 November 1999.
369 Analytical Index notes at p. 71.WT/DS163/R
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the basis for levying duties ( e.g., from specific to ad valorem  or vice versa) is inconsistent with the
legal obligations of that Member under Article II.370
8. Coverage of Entities versus Coverage of Projects
4.282  The United States argues  that all airport construction in Korea should be covered by Korea's
GPA commitments.  The United States further argues that the GPA covers projects and sectors byway of entities and that all airport construction in Korea should be covered by Korea's GPA
commitments.  The United States asserts that this is apparent throughout the text of the GPA, where
Members often refer to sectors rather than entities.  The United States notes that, for instance, Korea's
General Note 1(b) refers to "procurement for airports by the entities listed in Annex 1," Korea's
General Note 1(c) refers to "procurement for urban transportation," and Korea's Annex 3 refers to
"purchases of common telecommunication commodity products."  The United States notes that in all
three cases, entities are identified by what they procure, that is, their projects or sectors, and not bytheir names.  The United States notes that, likewise, exceptions to coverage under the GPA are often
expressed in terms of projects or sectors, rather than entity names.  Finally, Annex 4 of the GPA does
not even refer to entities, but solely to sectors.
4.283  Korea argues  that the United States' claim that "all airport construction in Korea" should be
covered by Korea's GPA commitments, regardless of which entity conducts procurement for suchconstruction, must be rejected as anathematic to the underlying premises of the GPA.  In Korea's
view, the United States argues that it bargained for coverage of IIA procurement under Korea's
Annex 1.  However, Korea asserts that Korea's Anne x 1 does not identify projects subject to the GPA.
Korea further argues that the GPA does not identify  "covered projects."  Rather, according to Korea,
Korea's Annex 1 and the Notes thereto identify "covered entities."
4.284  The United States argues in response  that if the GPA merely covers particular entities and
not particular projects, Members could then transfer procurement authority out of a covered entity
without notification or compensation, and still claim to be acting consistently with the Agreement.
According to the United States, this would render the GPA a nullity, because the GPA would only end
up covering entities that lack procurement authority.
4.285  In response, Korea refers  to its arguments in paragraph 4.26.
9. Amendments to Appendix under Article XXIV:6
4.286  The United States argues  that Article XXIV:6 provides the only procedure within the GPA
according to which a Party may alter its annexes.  The United States contends that any changes to a
Party's schedule of concessions, no matter how minor, must be notified to the WTO Committee on
Government Procurement.  This includes transfers of procurement authority from a covered entity to a
non-covered entity, since such transfers will disrupt the balance of rights and obligations between theParties to the GPA.  The United States argues that Korea has never used Article XXIV:6 to notify the
Committee of any of its transfers of procurement authority for the IIA construction project.  The
United States argues that, by not notifying the Committee (assuming Korea did not violate
Article XXIV:6), Korea is in essence confirming that these transfers took place within one "central
government entity" – namely, MOCT.
4.287  The United States further argues that any transfer of procurement authority from a branch
office of a covered entity to a subsidiary organization of the same entity or from a subsidiary
organization of a covered entity to another subsidiary organization of the same entity, need not be
notified to the Committee, for the procurement authority remains within that covered entity.  The
schedule of concessions do not change and the "balance of rights and obligations" is not disrupted.
                                                     
370 US Answer to Question 30 from the Panel, dated 3 November 1999.WT/DS163/R
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The United States concludes that Korea need not utilize the procedures of Article XXIV:6 for no
changes were made to its schedule of concession s with regard to airport procurement for the IIA
project.
4.288  Korea argues  in response that Article XXIV:6 of the GPA does not apply given that
authority had been transferred from a non-covered entity to other non-covered entities.  It argues thatKorea has not shifted procurement responsibilities from covered to non-covered entities in order to
circumvent its obligations under the GPA.  Rather, Korea asserts that those procurement
responsibilities have, since December 1991, always rested with non-covered entities.
371
4.289  Korea argues that neither the United States nor the European Communities claim that the
transfer of responsibility for IIA procuremen t from KAA to KOACA, or from KOACA to IIAC,
effected any change cognizable under the provisions  of the GPA since, for the purposes of the United
States' and the European Communities' claims, KAA, KOACA and IIAC are essentially the same.
Korea states that it agrees with this position.  Korea argues that, accordingly, the only remaining
transfer of responsibilities about which the United States and the European Communities apparently
complain is the "transfer" of responsibility for IIA procurement from MOCT to KAA.  Korea
reiterates that that event occurred in December 1991, five years before the effective date of the GPA
for Korea, and two years before Korea submitted its final offer for accession to the GPA on15 December 1993.  Korea states that no GPA commitments were incumbent upon Korea at that time.
4.290  Finally, Korea notes that any alleged violation of Article XXIV:6 is not within the Panel's
terms of reference.
B. P
REPARATORY WORK AND OTHER EVIDENCE
1. Negotiation of the GPA
(a) Article I:1(c) of the Tokyo Round GPA and Annex 3 of the Uruguay Round GPA
4.291  Korea notes  that like the Uruguay Round GPA, the Tokyo Round GPA applied only to
procurements "by the entities subject to this Agreement."372  Article I:1(c) of the Tokyo Round GPA,
however, spoke directly to the issue of "control" raised by the United States' proposed "control" test:
"1. This Agreement applies to:
. . . .
(c) procurement by the entities under the direct or substantial control of Parties
and other designated entities, with respect to their procurement procedures
and practices.  Until the review and further negotiations referred to in the
Final Provisions, the coverage of this Agreement is specified by the list of
entities, and to the extent that rectifications, modifications or amendmentsmay have been made, their successor entities, in Annex I."
373
4.292  Korea states that the United States discussed the implications of Article I:1(c) extensively in a
report issued by its International Trade Commission regarding the Tokyo Round GPA.374  According
                                                     
371 Korea notes that since obligations under the GP A were not effective until 1 January 1997, it is more
accurate to state that IIA procurement has since December 1991 rested with entities that would not have been
covered entities, had the GPA been effective at the time.
372 Tokyo Round GPA, Article I:1(a).
373 Ibid. Article I:1(c).
374 Agreements Being Negotiated at the Multilateral Trade Negotiations in Geneva , US International
Trade Commission Investigation No. 332-101 (MTN Studies, August 1979), pp. 26-28, 38-46.WT/DS163/R
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to Korea, in that report, the United States concludes that the "direct or substantial control" test
included in Article I:1(c) was merely a "normative rule" and that "Annex I is clearly the sole
determinant of entities covered."375
4.293  Korea states that, according to the United States, however, the "normative" control test in
Article I:1(c) was important, as it was to be "the guide for future negotiations on expandedcoverage."
376  Korea further quotes: "the code is aimed at government ministries [sic] and their
subdivisions – not the myriad organizations tangential to the essential function of government."377
Korea states that the United States cited in the USITC report examples including the United States'National Rail Passenger Corporation, known as "Amtrak," and the Communications Satellite
Corporation, known as "Comsat."
378  Determining whether coverage should be extended to these types
of "myriad organizations tangential to the essential function of government," the United States
concluded, was to be left to future negotiations;  "negotiations rather than normative rules will alwaysbe determinative."
379
4.294  Korea states that, thus, while the control test included in Article I:1(c) of the Tokyo Round
GPA was, according to the United States, not binding, the United States characterized it as "the guide
for future negotiations" and "perhaps . . . the objective to which parties will refer when establishing
the initial list and later in review and negotiation."380
4.295  The United States notes that Article I:1(c) did "serve as the starting point for future
negotiations," for it was during the Uruguay Round that a new category of covered entities, Annex 3,
was conceived.  Article I:1(c) was excluded from the new GPA, not because the negotiators rejected
the "control" concept, but because Annex 3 made it unnecessary.
(i) Deletion of Article I:1(c)
4.296  Korea agrees that while there was a control test in Article I:1(c) of the Tokyo Round GPA
and despite the fact that the "control" concept was to serve as the starting point for future negotiations,
the negotiators excluded such a test for the Uruguay Round GPA.  Korea notes that, in other words,
the Uruguay Round negotiators rejected the notion of covering unnamed entities based on theircontrol by named entities.
4.297  Korea also argues that not even the "normative" version of the "control" test included in
Article I:1(c) of the Tokyo Round GPA was retained in the Uruguay Round GPA and that no remnant
of the "control" test remains.  In Korea's view, if the negotiators of the Uruguay Round GPA had
intended to take up the invitation from the Tokyo Round negotiators to change the merely
"normative" version of the control test included in Article I:1(c) of the Tokyo Round GPA into a
binding, determinative test in the Uruguay Round GPA, they would have made some indication that
they so intended in the text of the Agreement.  Instead, states Korea, they rejected even the Tokyo
Round's "normative" control test.
4.298  Korea states that it is implausible to accept that the GPA negotiators, who thought the
"control" test important enough even in its strictly "normative" form to include it in the text of the
Tokyo Round GPA, would have eliminated any mention of such a test from the text of the Uruguay
                                                     
375 Ibid. p. 26.  See also Ibid. pp. 27-28 ("The Annex is in fact the exclusive rule for code
application.");  p. 28 ("The control test thus appears to impose no real obligation in implementation of the code. . .");  p. 38 (Covered entities "are only those found in Annex I.");  p. 44 ("[T]he operations of entities not onAnnex I will continue unaffected by the agreement.").
376 Ibid. p. 26.
377 Ibid. p. 44.
378 Ibid.
379 Ibid.
380 Ibid. pp. 26, 28.WT/DS163/R
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Round GPA while still intending to impose it as binding upon signatories to that Agreement.  Korea
states that in these circumstances, the United St ates' assertion that KAA, KOACA and IIAC should be
subject to the GPA by virtue of a "control" test must be rejected.
4.299  In response, the United States argues  that the language in Article I:1(c) of the Code is not
found in the new GPA because it is no longer needed in the new Agreement.  The United Statesreiterates that Article I:1(c) is merely a "guide for future negotiations on expanded coverage."
381  The
United States contends that these "future negotiations" had already taken place in the Uruguay Round,
during which time the goals that Article I:1(c) set forth were fulfilled when additional annexes to the
GPA were agreed upon to cover "quasi-governmental purchasing agents" and other entities such as
"political subdivisions" and "provincial government s."  According to the United States, in other
words, Article I:1(c) no longer exists in the new GPA, not because the Uruguay Round negotiators
rejected the "control" concept, but because the additional annexes of the GPA made the provisionredundant and unnecessary.
382
4.300  In response, Korea refers to its arguments in paragraphs 4.310 and 4.311.  Further, in
support of its argument  regarding the deletion of Article I:1(c) of the Tokyo round GPA, Korea notes
that a similar situation was presented in United States – Restrictions on Imports of Cotton and
Man-made Fibre Underwear.   Korea, noting that a provision of the prior MFA  was not carried over
into the Agreement on Textiles and Clothing , states that the Appellate Body said that the
disappearance of the provision "strongly reinforces the presumption" that a prior practice no longer
was permissible.  "This is the commonplace inference that is properly drawn from such
disappearance," the Appellate Body observed.  "We are not entitled to assume that that disappearance
was merely accidental or an inadvertent oversight on the part of either harassed negotiators orinattentive draftsmen."
383
4.301  Korea argues that the disappearance of the control test was not accidental or inadvertent
oversight either.  Korea argues that it was tried and found wanting, and was not continued.  In Korea's
view, the message from its disappearance is that only named entities, not other entities over which
they may exert some control, are covered.
4.302  In response, the United States argues that Korea wrongly suggests that, on the basis of the
United States - Underwear Appellate Body decision, a "presumption" exists in this case that a control
test is not included in the GPA.  First, the United States argues that such presumptions cannot be
independently derived from the disappearance of language but must, instead, come from a Vienna
Convention  interpretation of the GPA.  With the disappearance of the language acting as mere
"reinforcement" of the presumption384 the above explanation regarding the fulfilment of the goals of
Article I:1(c) in the new GPA can easily di stinguish the present dispute from that of United States -
Underwear .385
4.303  Secondly, the United States argues that the "presumption" identified by the Appellate Body in
United States - Underwear  resulted from the Appellate Body's interpretation of Article 6.10 of the
ATC386 and not from the absence of language on retroactive application that had been in the
Multifiber Arrangement.387  Thus, according to the United States, the issue is whether the absence of a
                                                     
381 USITC Report, p. 26.
382 US Answer to Question 20 from the Panel, dated 29 November 1999.
383 WT/DS24/AB/R (adopted on 25 February 1997), p. 17.
384 Appellate Body report on United States - Restrictions on Imports of Cotton and Man-Made Fibre
Underwear , WT/DS24/AB/R (adopted on 25 February 1997) (" US - Underwear "), p. 17.
385 US Answer to Question 20 from the Panel, dated 29 November 1999.
386 Appellate Body report on United States - Restrictions on Imports of Cotton and Man-Made Fibre
Underwear , WT/DS24/AB/R, p. 14.
387 Ibid.  pp. 16-17.WT/DS163/R
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provision in a new text is evidence (not a presumption) that the new text does not include the meaning
or concepts in the old text.
4.304  The United States notes that it believes that the instant case is distinguishable from the United
States - Underwear  case for the reasons set forth in the 1979 USITC report and, more specifically, the
explanation regarding the fulfilment of the goals of Article I:1(c) in the new GPA.  The United Statesnotes that in United States - Underwear , the Appellate Body stated that when:
"The above underscored clause of Article 3(5)(i), MFA, . . . disappeared with the
supersession of the MFA by the new ATC; no comparable clause was carried over
into Article 6.10 of the ATC.  [Also, t]he Panel did not draw any operable inference
from the disappearance of the MFA clause."
388
4.305  However, according to the United States, unlike United States - Underwear , Article I:1(c) of
the Code was in fact replaced by the additional annexes in the new GPA.  The United States assertsthat these annexes are "comparable clauses" that allow for the coverage of "quasi-governmental
purchasing agents" and "political subdivisions."  The United States further states that, unlike United
States - Underwear , an "operable inference" may be drawn from the disappearance of Article I:1(c) of
the Code, for with the creation of the additional annexes in the new GPA, Article I:1(c) – if
maintained – would be redundant.
389
4.306  The United States contends that, in addition, in this case, the absence of direct references to
control in the GPA that had existed in the Tokyo Round GPA does not mean that the notion of control
cannot exist in determining the coverage of entities  under the GPA.  The United States further states
that, indeed, if the notion of control did not exist in the GPA, such an interpretation would render the
interpretation of the GPA a nullity in contraventio n of numerous Appellate Body decisions.  The
United States argues that the implication of Korea's "no control" interpretation would be to allow
GPA members to create new entities with exactly the same functions, personnel, and operation as
listed entities.  The United States contends that by eliminating the old listed entities, and preventing
the piercing of the legal fiction of the new entity, Members could effectively avoid GPA disciplines.
According to the United States, such a result would be contrary to the object and purpose of the GPA
as reflected in its text and context.
(ii) Annex 3
4.307  Korea notes  that, in relation to the comment by th e United States referred to above at
paragraph 4.295, the reason the Uruguay Round negotiators rejected the control test is "because
Annex 3 made it unnecessary," Korea submits that this can only mean that entities controlled by
Annex 1 entities are not subject to GPA coverage by virtue of that control, but by virtue of their
inclusion in Annex 3.
4.308  Korea states, in agreeing with this conclusion, that at least four entities, legal persons in their
own right but subject to the same supervisory co ntrol by MOCT that KAA, KOACA and IIAC are
subject, are on Korea's Annex 3.  Korea notes that they are the National Housing Corporation, the
Water Resources Corporation, the Land Corporation and the Highway Corporation.  Korea furthernotes, however, that KAA, KOACA and IIAC are not  on Annex 3 and never have been.  Korea argues
that, by the analysis proposed by the United States and agreed to by Korea, the only place they could
be listed is Annex 3, and because they are not there, they are not and never have been covered entities.
                                                     
388 US Answer to Question 20 from the Panel, dated 29 November 1999 citing Appellate Body report
on United States - Restrictions on Imports of Cotton and Man-Made Fibre Underwear , WT/DS24/AB/R,
pp. 16-17.
389 US Answer to Question 20 from the Panel, dated 29 November 1999.WT/DS163/R
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4.309  The United States  argues that a GPA Party can choose to place an entity under either
Annex 1 or Annex 3, subject to agreement with ot her Parties, regardless of the procurement subject
matter or the type of entity.  According to the United States, the negotiating history of Annex 3
confirms this:
"The definition of Group C entities is of interest.  The heading of Group C (or
Annex 3) entities in the new Agreement, reads:  "Other entities which procure in
accordance with the provisions of this Agreement."  The title suggests problems in
defining what Annex 3 (Group C) would eventually cover.  In the end, this heading
was chosen as a compromise to refrain from defining Group C (Annex 3) entities and
to leave it up to each delegation to list in Annex 3 what is wished to list, subject of
course, to acceptance by its negotiating parties."390
4.310  Korea states  that the United States' assertion that the additional annexes of the Uruguay
Round GPA made Article I:1(c) of the Tokyo Round GPA redundant and unnecessary are
unsupported by any evidence.  Korea states that the United States proposes to overturn the principles
of treaty interpretation included in the Vienna Convention , and the Appellate Body's reasoning
regarding "the commonplace inference that is properly drawn from [the] disappearance" of the "direct
or substantial control" test from the GPA, on the basis of nothing more than its own unsupported
assertion that the drafters of the Uruguay Round GPA theoretically could have meant for Annexes 2
or 3 to replace or encompass the "control" concept.391
4.311  Korea states that, assuming, however, that the United States is correct, it has not explained
why the result of its analysis is not merely to refer the Panel to the lists of Korean entities included in
Annexes 2 or 3 of the Uruguay Round GPA.  Korea no tes that KAA does not appear on either of these
lists.  Korea asks why the United States insists that KAA is included on Annex 1 by virtue of the
"control" allegedly exercised over it by MOCT, an Annex 1 entity, if the negotiators of the Uruguay
Round GPA intended, when they "excluded" the control test included in Article I:1(c) of the Tokyo
Round GPA to incorporate the concept of "control" in Annexes 2 or 3.  Korea asserts that the result of
the United States' theory should rather be to direct  an interpreter of the GPA, and Korea's Appendix I,
to Korea's Annexes 2 and 3.392
4.312  In response, the United States argues  that Korea's argument takes the United States'
comments out of context, and attributes an incorrect conclusion to its analysis of Article I:1(c) of the
Code.393
(b) Relevance of Control to 1991 Amendments to IIA Legislation
4.313  In response to a question from the Panel, Korea argues  that the reference to control in the
Tokyo Round GPA, and its absence from the Uruguay Round GPA, is fatal to the US claim that KAA,
KOACA and IIAC are covered under the GPA by virtue of the "control" allegedly exercised over
them by MOCT.  In Korea's view, even if, when responsibility for the Inchon airport project was
assigned to KAA in December 1991, the United States relied on the Tokyo Round "control" test to
assume that MOCT "control" over KAA would subject KAA to GPA coverage, everything changedwhen the Uruguay Round negotiators subsequently dropped the "control" test from the GPA.  From
that point on, the United States could no longer have reasonably expected that unlisted entities, not
                                                     
390 Blank and Marceau, "The History of the Government Procurement Negotiations Since 1945,"
p. 113.
391 Korea's Response to the US Answer to Question 20 from the Panel, dated 29 November 1999.
392 Ibid.
393 US Response to Korea's Answer to Question 5 from the Panel, dated 29 November 1999.  The
United States refers to the US Answer to Question 20 from the Panel, dated 29 November 1999, for what it saysis an accurate presentation of its views regarding the no rmative "control" test of Article I:1(c) of the Code.WT/DS163/R
Page 88
themselves listed on an Annex, would be covered by virtue of the control exercised over them by
listed entities.  As a matter of law, according to Ko rea, entities controlled by named entities, but not
themselves named, no longer would be covered.  Korea argues that to the extent the United States
relied on the Tokyo Round GPA's "control" test, it did so at its peril once that test was eliminated by
the Uruguay Round GPA negotiators.394
4.314  In response to the same question from the Panel, the United States argues  that the
reference to control in the Tokyo Round Procurement Code is irrelevant to any analysis about the US
response (or lack thereof) to the 1991 amendments made to the Act on Promotion of a New Airport for
Seoul Metropolitan Area Construction , the Korea Airport Corporation Act  and the By-Laws of Korea
Airport Corporation  since the reference to control, found in Article I:1(c) of the Tokyo Round
Procurement Code ("Code"), is actually unrelated to "central government entities."395
4.315  The United States argues that according to the 1979 USITC report, Article I:1(c) is essentially
a "guide for future negotiations" to expand the Code coverage in two directions.396  First, it suggests
expanding the Code to apply to procurement by the "entities under the direct or substantial control of
Parties."  Secondly, it also suggests expanding the C ode to apply to procurement by "other designated
entities."
4.316  The United States argues that with regard to the expansion of coverage to procurements by
"entities under the direct or substantial control of Parties," the 1979 USITC report states that "[t]he
broader language 'direct or substantial control' apparently is intended to encompass not only
governmental units but quasi-governmental purchasing agents as well."  In other words, this control
reference is not related to the control of "central government entities" over their subdivisions.  Instead,
it is referring to the control of Code parties ( i.e., the governments themselves) over their
"quasi-governmental purchasing agents."397
4.317  As for the expansion of coverage to procurements by "other designated entities," the United
States argues that the USITC report makes clear that this reference is not related to the concept of
control and in addition, this reference is unrelated to  "central government entities."  According to the
United States, instead, it is referring to procurement by those entities that are not "specified by thelists" in the Code
398 and are not "under the direct or substantial control of Parties" to the Code399 but
would nevertheless fall under the rubric of "government" procurement.  The United States further
argues that, according to the USITC report, this reference encompasses such entities as "political
subdivisions" and "provincial governments."400
4.318  The United States concludes that it did not respond to the 1991 amendments made to the Act
on Promotion of a New Airport for Seoul Metropolitan Area Construction , the Korea Airport
Corporation Act  and the By-Laws of Korea Airport Corporation  because these amendments came
about merely as a result of MOCT's decision to designate KAA as a project operator of the IIA
project, with MOCT itself retaining ultimate authority and control over the project and over KAA.
The United States argues that this is an example of an entity being controlled by another entity, and is
irrelevant to the control reference in the Code because Article I:1(c) of the Code has nothing to do
with the control of entities by "other entities."  Instead, according to the United States, Article I:1(c) isreferring to the control of entities by "Parties" to the Agreement.
401  The United States further argues
                                                     
394 Korea’s Answer to Question 20 from the Panel, dated 29 November 1999.
395 US Answer to Question 20 from the Panel, dated 29 November 1999.
396 USITC report, p. 26.
397 US Answer to Question 20 from the Panel, dated 29 November 1999.
398 Article I:1(c) of the Code, second sentence.
399 Ibid. first sentence.
400 US Answer to Question 20 from the Panel, dated 29 November 1999, citing USITC report,
pp. 25-26.
401 Article I:1(c) of the Code.WT/DS163/R
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that it is alluding to the coverage under the GPA of what the USITC calls "quasi-governmental
purchasing agents," i.e., entities that are controlled by the governments themselves, and not by other
entities.402
4.319  In response, Korea argues that , the United States' assertion that the "control" test in
Article I:1(c) of the Tokyo Round GPA "is not related to the control of 'central government entities'over their subdivisions," and instead refers to "the control of Code parties ( i.e., the governments
themselves) over their 'quasi-governmental purchasing agents'" is not supported by the 1979 US
International Trade Commission Repo rt, as the United States claims.
403
4.320  Korea states that the quote extracted by the United States from the Report confirms, first of
all, that Article I:1(c) refers to "governmental units" as well as "quasi-governmental purchasing
agents."404  Korea states that, moreover, in discussing the impact of the "control" test in Article I:1(c),
the Report specifically considers whether Amtrak and Comsat would be covered under "the normative'direct substantial control' rule," and goes on to catalogue the control exercised over those entities by
central government entities listed on the United States' Annex I.
405  Korea states that whether
characterized as "governmental units" or "quasi-governmental purchasing agents," Korea had
demonstrated that the MOCT "control" to which the United States alleges KAA is subject is
remarkably similar to the control to which Amtrak and Comsat are subject by US Annex 1 entities.Korea states that if KAA is subject to GPA coverage by virtue of this "control" test, so are Amtrak,
Comsat, and many other non-listed "myriad organizations tangential to the essential function of
government."
406
(c) Coverage of Entities or Sectors
4.321  The United States asserts  that the GPA's negotiating history confirms the interpretation that
the GPA provides for the coverage of sectors by way of entities.  Specifically, the United States notes
that in the 1979 independent USITC report, the Commi ssion made clear that, with regard to coverage,
"The code approach is to define coverage in terms of procuring entities . . . and value of contracts,
together with numerous exceptions."  However, the goal of "maximum coverage of procuring entitiesmust be attained while achieving an agreeable balance of coverage in terms of quality (type) and
quantity (value) of goods procured," which meant that coverage is actually:
"a function of four factors:  (1) types of procurement actions;  (2) value of the
procured product;  (3) identity of procuring entity;  and (4) specific exclusions from
coverage.  Each of these factors must be taken into account when determining the
applicability of the code to any government contract action."
4.322  The United States argues that it is apparent from this excerpt that entities were covered based
on the sectors and projects that they procure for, and not on the identities of the entities themselves.
In other words, the sectors and projects that an entity was responsible for were the major factors for
countries in considering which entities they would seek to be covered under the GPA.  The United
States contends that when a balance of rights and obligations was established between two of these
negotiating countries, the balance was often considered not in terms of the number or the names of theentities, but in terms of total procurement value and/or the quality (for example, future procurement
opportunities for domestic industry) of the concession packages.  The United States asserts that, in
short, GPA negotiators bargained for what the entities bought, not for who the entities were.
                                                     
402 US Answer to Question 20 from the Panel, dated 29 November 1999.
403 Korea's Response to the US Answer to Question 20 from the Panel, dated 29 November 1999.
404 USITC Report, p. 25.
405 Ibid. pp. 41-44.
406 Korea's Response to the US Answer to Questio n 20 from the Panel, dated 29 November 1999, citing
USITC Report at p. 44.WT/DS163/R
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(d) "The History of the Government Procurement Negotiations Since 1945"
4.323  The United States argues  that when interpreted according to its ordinary meaning, in its
context and in light of the object and purpose of the GPA, the scope of "central government entity" in
Annex 1 of the GPA includes coverage of its branch offices and subsidiary organizations unlessotherwise provided for in the GPA.
4.324  The United States contends that the negotiating history of the GPA confirms this
interpretation.  Specifically, the United States refers to an article entitled, "The History of the
Government Procurement Negotiations Since 1945" which notes that "[i]t was necessary for the
Agreement to have the widest possible coverage.  This principle was agreed in the OECD."
407  The
United States contends that, to now exclude covera ge of a listed entity's subordinate units would not
only be contrary to the above, but would also rid the GPA of most of its substantive coverage, for
coverage of an entity that excludes its subordinate units actually amounts to no coverage at all.
2. History of Korea's Accession
(a) Bilateral Negotiations Prior to Korea's Accession
4.325  In order to confirm its interpretation of "central government entity" in Korea's Annex 1, the
United States looks to the preparatory work of the GPA and the circumstances of its conclusion
pursuant to Article 32 of the Vienna Convention .  According to the United States, during Korea's
accession negotiations, the United States explicitly bargained for and received coverage of all Korean
Government entities responsible for the procurement of products and services related to new airport
construction projects under Annex 1.
4.326  The United States submits that, from the outset of negotiations with Korea, it was made clear
that the United States would only accept from the Government of Korea, a "credible offer with respect
to ongoing negotiations to expand [the Procurement Code's] coverage,"408 which included coverage of
"all entities in the telecommunications, energy, transportation, and water sectors;" as well as "services
and construction contracts."409
4.327  Korea responds that despite the United States' claim that it would have accepted nothing
less, in negotiations with Korea, than coverage of "all entities in the . . . transportation . . . sector[]," it
has acknowledged that it failed to achieve this goal.410
(i) The July 1991 Communication from Korea
Contents of the Communication
4.328  The United States notes that on 1 May 1991, pursuant to issues raised during the 22 April
bilateral negotiations, the United States sent a li st of follow-up questions to Korea regarding its
accession package.411  In it, the United States notes that it explicitly asked:
                                                     
407 Annet Blank and Gabrielle Marceau, "The History of the Government Procurement Negotiations
Since 1945," 5 Public Procurement Law Review  77, p. 99 (1996).  The reference to the OECD alludes to "the
research and negotiating work undertaken by the OECD from 1963 onwards" that attempted "to re-introducegovernment procurement into the general multilateral trade rules."  Ibid.  p. 77.
408 US Department of Commerce Reporting Cable (Geneva 05022, May 91), paragraph 1.  The
"ongoing negotiations" is in reference to the Uruguay Round negotiations to expand coverage of the
Procurement Code.
409 Ibid.  paragraph 5.
410 Korea refers here to the US Department of Commerce Memorandum, referred to below in
paragraph 4.388 et seq.WT/DS163/R
Page 91
"How does the Airport Development Group relate to the Ministry of
Communications?  Does Korea's offer of coverage of the Ministry of
Communications include purchases for the Airport Development Group?  Please
identify all Ministries that will be responsible for the procurement of goods and
services related to new airport construction."
4.329  In response to a question from the Panel as to what prompted these questions, the United
States notes as follows.  To assist US officials negotiating Korea's accession to the GPA following
Korea's initial accession offer of 25 June 1990, the American Embassy in Seoul conducted a survey of
US companies regarding areas of interest in the Korean procurement market.  Specifically mentioned
by American companies as priority areas of interest were coverage of the "Airport Development
Group" with its responsibility over procurement for the new airport construction, as well as
procurement of specific sectors including "airport systems," and "air and maritime communicationand navigation equipment."
412
4.330  The United States refers to Korea's response to the follow-up questions which was received in
July 1991:
"The new airport construction is being conducted by the New Airport Development
Group under the Ministry of Transportation.  The new airport construction project isscheduled to be completed by 1997 after the completion of the basic plan by 1992 and
the working plan by 1993.  The US company, Bechtel, is taking part in the basic plan
projects.
The responsible organization for procurement of goods and services relating to the
new airport construction is the Office of Supply.  But at present, the concreteprocurement plan has not been fixed because now the whole airport construction
project is only in a basic planning stage."
413
Procuring Entities Referred to in Communication
4.331  The United States notes  that at the time the July 1991 response was received from Korea, the
two entities Korea represented as being responsible for new airport construction projects in theresponse – the Ministry of Transportation and the Office of Supply – had already been listed in
Korea's initial GPA offer.  The United States further notes that coverage under Annex 1 of the same
two entities was finalized on 15 April 1994 when Korea became a Party to the GPA.
4.332  The United States argues that following July 1991 when Korea represented that the Ministry
of Transportation and the Office of Supply would be responsible for airport procurement, Korea did
not broach the subject of airport procurement again.  Further, the United States asserts that Korea did
not attempt to amend the statements made in July 1991.  According to the United States, given thisseries of communications and subsequent silence by Korean officials, it is reasonable for the United
States to conclude that MOCT and the Office of Supply were indeed the only entities engaging in
procurements for new airport construction projects.  Korea acknowledges  that its July 1991 response
identified the Office of Supply as the "responsible organization" for IIA procurement.  Korea states
that pursuant to Article 2(5) of the Government Procurement Fund Act
414, the Korean Office of
Supply would in principle have assumed procuremen t responsibility in respect of the IIA project.
                                                                                                                                                                    
411 US Questions Relating to Korea's Reques t to Accede to the Ag reement on Government
Procurement, May 1991.
412 US Answer to Question 21 from the Panel, dated 3 November 1999.
413 Korea's Answers to the Questions from USTR Re lating to Korea's Reques t to Accede to the GPA,
1 July 1991, p. 6.
414 Act No. 3580, 27 December 1982.WT/DS163/R
Page 92
However, Korea argues that since the plan for the IIA project had not been completed and that site
preparation for the project was not to commence for at least 16 months from the time Korea provided
its response to the United States, Korea emphasized in its response that "the concrete procurement
plan has not been fixed because now the whole airport construction project is only in a basic planning
stage."415  In response to a question from the United States, Korea states that these words should have
served to alert any reasonable person that, at that point, nothing with regard to procurement was fixed.
According to Korea, that would include the entity ultimately responsible for procurement.416
4.333  In response, the United States notes  that with regard to the specifics of the 1991 Korean
response, the United States does not consider the Korean statement "[b]ut at present, the concrete
procurement plan has not been fixed…" as indicating a possible change in the entities responsible for
procurement for the IIA project.  According to the United States, Korea's response merely notes that
the specifics of the procurement plan (i.e. the tendering schedule, estimated value of tenders etc.) havenot yet been determined.  The logical reading of Kor ea's statement is that the entities responsible for
the procurement of the new airport construction are the New Airport Development Group under
MOCT and the Office of Supply.  However, exactly how these entities will construct the airport and
what value of the associated procurements will be, has not yet been determined.  The United States
argues that had Korea intended to focus on which entities are responsible for airport procurement, itwould have stated that the "procuring entities ha ve not been fixed…" rather than the "procurement
plan has not been fixed."
4.334  Moreover, the United States argues that Korea was clear and unequivocal regarding which
entities were responsible for IIA procurement.  The United States notes that in response to the United
States question, the statement that the construction "is being conducted by the New AirportDevelopment Group under the Ministry of Transportation," appears in an earlier paragraph before
Korea's "qualification," and precedes a discussion of the possible timetable for the new project.
Finally, the United States argues that by noting in its response that Bechtel was taking part in the basic
plan project, Korea acknowledges that procurement had already begun for the airport project, with the
assumption that the entities named were responsible for conducting this procurement.
4.335  Further, in response to a question from the Panel, Korea notes that the July 1991
communication should be put in context.  Korea states that the inquiry from the United States was to
Korea, largely academic when it was received.  Korea states that its response was an accurate, good
faith, honest response to an inquiry in another language.  Korea further states that it was drafted –
probably dictated to a stenographer in the drafter's second language – without reference to the New
Shorter Oxford English Dictionary.  Korea states that it believed it honestly and reasonably informed
the United States that as of July 1991 the relevant entities were the Ministry of Transportation and theOffice of Supply, but that nothing, as of that date, was fixed, and that a reasonable reader of that
communication would have concluded that the existing situation was temporary.
417  Korea argues that
this interpretation is warranted by the structure of the second paragraph of Korea's July 1991
response.  Korea notes that immediately after the reference to the Office of Supply, Korea wrote, "But
at present the concrete procurement plan … ."  Korea argues that the reference to the entity in
principle responsible for IIA procurement at that tim e, followed immediately by the statement that the
"concrete procurement plan has not been fixed," coupled with the qualifier, "But at present," would
lead any reasonable reader to conclude that the entire IIA project was in its infancy and undecided.418
4.336  The United States responds by arguing  that Korea appears to suggest that it is exempt from
the normal rules of treaty interpretation and of state responsibility with respect to its GPA schedulesand other official documents merely because those documents were translated from Korean to
                                                     
415 Korea's Answers to Questions 15 & 16 from the US, dated 3 November 1999.
416 Korea's Answer to Question 15 from the US, dated 3 November 1999.
417 Korea's Answer to Question 16 from the Panel, dated 3 November 1999.
418 Ibid.WT/DS163/R
Page 93
English.  The United States notes that Korea has already agreed that its schedule to the GPA be
"[a]uthentic in the English language only."  Indeed, the United States notes that all negotiating
documents provided by Korea including the Government Organization Act  were provided in English.
Moreover, according to the United States, Korea has in many other instances argued for precise
textual interpretations of translated Korean documents.
4.337  In further support of its argument that it had not made any commitments regarding
entities responsible for airport procurement, Korea refers to a European Communities report
regarding the progress of the Uruguay Round negotiations dated March 1993.  Korea notes that the
European Communities explicitly stated in the report that Korea had given "no offer regarding
airports."
4.338  In response, the United States notes  that Korea has not reconciled the statement in the EC
report with its earlier statement that the Seoul and Pusan Regional Aviation Offices, responsible forairport projects "during the period 1992-1998," are covered under Annex 1 of the GPA.  The United
States argues that as "special local administrative organs" of MOCT, these Regional Aviation Offices
should have been covered from the time MOCT was first placed on Korea's GPA accession offer in
June of 1990.
4.339  The United States further notes that given the fact that Korea previously represented to the
United States that IIA construction is the only air port project currently underway and that GPA Parties
can choose to cover any entity under Annexes 1 or 3 regardless of the entity's procurement
subject-matter or domestic legal status, Korea's position regarding the Regional Aviation Offices
vis-à-vis  General Note 1 remains highly problematic with respect to Korea's overall defense that
KAA, KOACA and IIAC are not covered under Korea's GPA obligations.
Seoul and Pusan Regional Aviation Offices
4.340  The United States argues  that in 1991, when the United States asked Korea for a list of
entities responsible for new airport construction procurements, Korea made no mention of the Seoul
and Pusan Regional Aviation Offices.  The United States contends that this answer appears to
contradict Korea's present argument that the Regional Aviation Offices have been awarding airportprocurement contracts "during the period 1992-1998."
4.341  Korea argues  that if the United States was intent on achieving GPA coverage for IIA
procurement, it surely would have consulted industry regarding airport procurement.  Korea asserts
that, in that case, the United States would have been aware of the numerous examples of contracts
awarded by the Regional Aviation Offices or the Office of Supply, during the period while the GPA
negotiations were pending, for projects associated with the relevant airports. Korea refers to the
evidence referred to in paragraph 4.239.
4.342  Korea further notes that in describing Korea's alleged failure in July 1991 to mention the
Regional Aviation Offices in response to a question regarding the IIA project, the United States
contends that its question "asked Korea for a list of entities responsible for new airport construction
procurements."  Korea states that this assertion is in error.  Korea notes that the actual text of the
United States' question was:
"How does the Airport Development Group  relate to the Ministry of Communication?
Does Korea's offer of coverage of the Ministry of Communications include purchases
for the Airport Development Group ?  Please identify all Ministries that will be
responsible for the procurement of goods and services related to new airport
construction."WT/DS163/R
Page 94
4.343  Korea argues that its impression was that the United States was not asking about just any
generic airport procurement.  Given the United States' obvious emphasis on the Airport Development
Group, NADG, Korea states th at its response was entirely focused upon the airport with which NADG
was associated – IIA.  Korea states that its entirely reasonable assumption was that the United States'
question was about the IIA project and that its response was to give as much information as wasavailable about what was, at the time, a fledgling project.
Coverage of Entities or Projects
4.344  The United States argues  that, in response to a direct question regarding the coverage of
new airport construction from the United States, Korea explicitly represented that the New Airport
Development Group of MOCT and the Office of Suppl y would be responsible for procurement of new
airport construction.  The United States asserts that by phrasing the question in sectoral terms, it is
clear that the United States was interested in projects related to airport procurements.  The UnitedStates further argues that Korea's response, in entity terms, created an expectation that airport
procurements would be covered through the listing of MOCT and the Office of Supply.  The United
States concludes that it could reasonably expect airport procurement to be subject to the disciplines of
the GPA through coverage of MOCT and the Office of Supply.
4.345  The United States further argues that the sectors and projects that an entity was responsible
for were the major factors for countries in consider ing which entities they would seek coverage for
under the GPA.  In relation to this case, the United States contends that it sought to cover "new airport
construction."  The United States notes that Korea responded in July of 1991 that MOCT and the
Office of Supply were responsibl e for "new airport construction."
419  The United States argues that,
therefore, MOCT and the Office of Supply became co vered, not just for procurements related to "new
airport construction," but, pursuant to Article I:1 of the GPA for "any procurement by [these]
entities," subject to explicit exceptions.420
4.346  In response to a question from the Panel, Korea states  that its Annex 1 commitments were
negotiated on the basis of entities, rather than projects.  Korea notes that Annex 1 does list entities
rather than projects.  Korea states that it fails to see how this fact can be disputed.  Korea further notesthat neither Korea's initial offer nor its second offer nor its third and final offer, submitted in
December 1993, include a list of projects for Annex 1.
421  In any event, Korea argues that since KAA
was the entity responsible for IIA procurement from December 1991 through August 1994, if it was
not covered, then the IIA was not covered.422
4.347  The United States argues in response that to accept Korea's position that the GPA provides
pure entity coverage is to make the GPA a nullity.  According to the United States, a Party could
transfer procurement authority from listed entities to non-listed entities and not have to notify orcompensate other Parties for such transfers because, as an agreement covering purely on the basis of
entities, the listed entities are technically still "covered."  The United States argues that, needless to
say, the GPA would quickly be emptied of substance.
4.348  Further, in response to the United States' argument, Korea reiterates  that procurements
by MOCT and NADG (were any to exist) are indeed subject to the GPA, as are procurements by theOffice of Supply for Annex 1 entities.  However, according to Korea, this result does not flow from
Korea's July 1991 response.  Korea states that its July 1991 response was a reply to a factual question
                                                     
419 The United States notes that both these entities were already in Korea's GPA accession offer, and in
fact MOCT was already responsible for awarding the first IIA procurement contracts for the basic plans.
420 US Answer to Question 16 from the Panel, dated 29 November 1999.
421 Korea's Answer to Question 4 from the Panel, dated 29 November 1999.
422 Korea's Answer to Question 5 from the Panel, dated 29 November 1999.WT/DS163/R
Page 95
from the United States about NADG, and did not speak in any way whatsoever to the question of
GPA coverage.423
4.349  Korea states that, moreover, its July 1991 response did not speak to "new airport
construction."  Korea stresses that neither the ques tion nor the answer spoke to a commitment to GPA
coverage for anything at all – neither an entity, nor a sector called "new airport construction."  Koreaasserts that both the May 1991 question and the July 1991 answer were factual, and spoke to NADG
and the IIA.  Korea further states that the July 1991 response spoke to an entity that would in principle
have been responsible for procurements for a particular airport, had there even been any at the time.
Korea states that it is inaccurate to say that, in  its July 1991 response, made two and one-half years
before it signed the GPA, Korea committed to GPA coverage at all, much less GPA coverage for a
sector called "new airport construction."  Korea argues that the United States is using its own
question, and not Korea's response, as evidence of Korea's commitments.  This, states Korea, is noevidence at all.
424
The February 1991 Supplementary Explanation  of Korea's GPA Offer
4.350  Korea argues that during negotiations regarding Korea's accession to the GPA, the United
States was aware of the existence and activities of Annex 1 entities undertaking "procurement for
airports," whether related to new airport construction or work on existing airports.  Korea furtherargues that the United States was aware that entities other than KAA – namely, the Regional Aviation
Offices – existed, procured for Korean airports other than IIA and were included in Korea's offer.
425
4.351  Korea notes that the Korean cable report426, the questions put to Korea by the United States in
May 1991427 and a May 1991 US Department of Commerce cable report428 all note the United States'
receipt of a February 1991 document entitled " Supplementary Explanation of the Note by the Republic
of Korea, dated 29 June 1990, relating to the Agreement on Government Procurement ."429  K o r e a
further notes that page 11 of this Supplementary Explanation , explaining Korea's initial offer, lists the
Regional Aviation Offices or Bureaus as included within Korea's commitment of the Ministry of
Transportation.  Korea notes that it does not list KAA.
The Act on the Promotion of a New Airport for Seoul Metropolitan Area Construction
Reference to Act in 1991
4.352  In response to a question from the Panel  requesting an explanation why Korea did not
mention the 1991 Seoul Airport Act in its July 1991 response, Korea notes  that the United States
posed 17 questions, which deal with a wide variety of issues.  Korea notes that only one question
deals with the IIA.  Korea asserts that an empl oyee of the Ministry of Commerce provided good faith
answers to all of these questions on 1 July 1991.  Ko rea further states that the answers provided were,
moreover, in depth and thorough.430
4.353  Korea argues that as is evident from Korea's July 1991 responses, it went to considerable
lengths to answer the United States' questions, pr oviding a 29-page response to two pages of questions
from the United States.  Korea states that it took the inquiries seriously, and provided thorough,
detailed responses to anything that was asked of it.  Korea states that it did not read into the United
                                                     
423 Korea's Response to US Answer to Question 17 from the Panel, dated 29 November 1999.
424 Korea's Response to US Answer to Question 16 from the Panel, dated 29 November 1999.
425 Korea's Response to US Answer to Question 17 from the Panel, dated 29 November 1999.
426 Exhibit Kor-118.
427 US Exhibit 4, Questions 9, 10, 11, 14, 15.
428 US Exhibit 2, p. 2.
429 Exhibit Kor-117.
430 Korea's Answer to Question 1 from the Panel, dated 29 November 1999.WT/DS163/R
Page 96
States' inquiry, questions that were not posed, including questions about the Seoul Airport Act  or any
other legislation related to the IIA, such as the Korea Airport Corporation Act .431
4.354  Korea argues that given the diversity of topics raised by the United States, and the breadth of
the answers given, it is not reasonable to expect Ko rea, or any Member, to go well beyond what was
asked, and to provide information in each case about whatever it may have considered that the UnitedStates might possibly have considered interesting.  Korea states that were it or any other Member to
accept such a burden, the virtual impossibility of successfully addressing every possible issue would
virtually guarantee failure, and subject it to certain liability in later disputes.
432
4.355  In support of its position, Korea states that this undoubtedly is one reason why the Appellate
Body, in the Computer Equipment  case, rejected the notion that the "importing party" (here, Korea)
bore the responsibility for the clarity of its tariff schedule.  Korea states that according to the
Appellate Body, "exporting Members" (here, the United States) have to ensure that theircorresponding rights are described in such a manner in the Schedules of importing Members that their
export interests, as agreed in the negotiations, are guaranteed.
433  Korea notes that in July 1991, Korea
offered 29 pages of good faith responses to 17 questions posed by the United States.  Korea asserts
that under the principles enunciated by the Appellate Body in the Computer Equipment  case, it can be
charged with nothing more, without forcing upon it a burden properly put upon the United States.434
Status of Act at Time of July 1991 Response
4.356  In response to a question from the Panel that requested details regarding the progress of the
Seoul Airport Act  from the policy phase to the legislation phase, Korea argues  that, in the abstract, it
is impossible to say with any precision how long it takes for legislation to run its course.  Korea
argues that as with most other Members with legislatures independent of the executive, the timerequired to pass legislation depends on many factors, including the degree and intensity of
opposition.
435
4.357  Korea states that the following timeline, applied to the December 1991 amendments to the
Seoul Airport Act , by which KAA was nominated as the entity responsible for the IIA project:436
26 June 1991: MOT makes an internal decision to recommend that KAA be
assigned by the National Assembly as the entity responsible for theIIA project, in draft legislation proposed to amend the Seoul Airport
Act
10 July 1991: MOT publishes a public notice of draft legislation containing
proposed amendments to the Seoul Airport Act
29 July 1991: Vice-Ministers of concerned Ministries meet to discuss the draft
legislation
6 August 1991: Directors General of these same concerned ministries meet to
discuss the draft legislation
14 August 1991: The draft legislation is approved at a meeting of the Vice-Ministers
of the Economic Ministries
8 October 1991: The draft legislation is approved at a meeting of all Vice-Ministers
9 October 1991: The draft legislation is approved at a Cabinet meeting of the all
Ministers
16 October 1991: The draft legislation is approved by the President of Korea
                                                     
431 Ibid.
432 Ibid.
433 EC – LAN , WT/DS62/AB/R, WT/DS67/AB/R, WT/DS68/AB/R (adopted on 22 June 1998),
paragraph 109.
434 Korea's Answer to Question 1 from the Panel, dated 29 November 1999.
435 Korea's Answer to Question 3 from the Panel, dated 29 November 1999.
436 Ibid.WT/DS163/R
Page 97
21 October 1991: The draft legislation is transferred to the National Assembly
12 November 1991: The draft legislation is tabled with the National Assembly's
Committee on Transport and Communication
19 November 1991: The draft legislation is approved by the National Assembly's
Committee on Transport and Communication
20 November 1991: The legislation is adopted at a plenary session of the National
Assembly
29 November 1991: The legislation is transferred to the President of Korea
14 December 1991: The legislation is signed by the President, promulgated as Law
No. 4436 and published in the Official Gazette
4.358  Korea notes that the legislation in question was not particularly controversial, and, thus, was
enacted in a comparatively short time.  Korea states that, as is evident from this timeline, the Ministry
of Transportation made an internal decision to recommend that the National Assembly appoint KAA
as the entity responsible for the IIA project on 26 June 1991.  Korea notes that a public notice was not
issued by the Ministry of Transportation until 10 July, 10 days after the 1 July response from theMinistry of Commerce, an entirely different agency.  The Ministry of Transportation's decision to
recommend KAA was not discussed with other ministries until the 29 July and 6 August meetings of
interested vice-ministers and directors general.
437
4.359  Korea states that the Ministry of Commerce, which prepared Korea's responses to the United
States' questions, was simply not aware of the Mini stry of Transportation's internal decision when it
provided those responses to the United States on 1 July 1991.  Korea further states that, moreover, the
employee of the Ministry of Commerce who drafted responses to the United States' questions would
have completed a draft before 26 June 1991, to allow for review by his superiors in advance of the
1 July 1991 submission.  Korea argues that for either or both of these reasons, the decision to
recommend KAA's involvement in the IIA project w ould not have been known to the Ministry and
individual preparing Korea's 1 July 1991 response.438
4.360  Korea argues that even if the individual preparing Korea's 1 July 1991 response had been
aware of the Ministry of Transport's 26 June decisi on, it would have been highly presumptuous for an
employee of the Ministry of Commerce to communicat e to the United States the inclusion of KAA in
draft legislation yet to be discussed, let alone approved, by the relevant directors general,vice-ministers and ministers, along with the President of Korea and the National Assembly.  Korea
states that on 1 July 1991, when Korea provided its response to the United States, the draft legislation
with proposed amendments to the Seoul Airport Act  was little more than a proposal.
439
4.361  Korea offers a parallel example to illustrate its point.  In Korea's view, it would be politically
impossible for an employee of the Office of the United States Trade Representative to offerpreliminary information or assurances to a fore ign negotiating partner regarding specific terms of
not-yet-introduced legislation before domestic appr oval of the legislation was secured from the
Cabinet and the President, if not of the Congre ss.  According to Korea, conduct by the USTR
suggesting that any of these approvals was merely a technical formality would engender serious
political ramifications, and would counsel against providing the information to the foreign negotiating
partner in the first place.  Korea states that it should not be held to a different standard.
440
4.362  In response, the United States notes  that Korea's responses themselves do not indicate on
which day in July they were provided.  The United States notes that these responses merely read,
                                                     
437 Ibid.
438 Ibid.
439 Ibid.
440 Ibid.WT/DS163/R
Page 98
"July 1991."  The United States asserts that Korea offers no basis for its arbitrarily determined date of
1 July.441
4.363  The United States further notes that, in any case, it remains uncontested that the Ministry of
Transportation's internal decision to recommend that KAA be assigned as the IIA project operator was
made prior to the date on which Korea provided its responses to the United States, and that Korea didnot inform the United States of MOT's internal decision in its July 1991 responses.  The United States
argues that because it remains unclear on what day in July 1991 Korea provided its responses, it is
quite possible that MOT had already published the public notice of draft legislation containing
proposed amendments to the Seoul Airport Act
442 and that the Vice-Ministers had already met to
discuss this draft legislation443 before Korea provided the United States with its July 1991
responses.444
4.364  The United States argues that, finally, it is important to keep the above discussion in
perspective, and remember that the December 1991 amendment to the Seoul Airport Act  did not alter
MOCT's ultimate authority over the IIA project, and merely added KAA to the list of potential project
operators.445
Completion Date of the Project
4.365  In response to a question from the Panel, Korea notes  that its July 1991 response which
states that the project would be completed by 1997, was provided six months before the basic plan
was completed by a US company, Bechtel, in December 1991.446  Korea notes that even though the
statement in July 1991 regarding the 1997 completion date was apparently for the entire project, it
was obviously based on very preliminary estimates by the Korean Government.  Korea asserts that
1997 was simply a target time.  Korea argues that while the schedule for the IIA project has, as withmost large construction projects, been subject to co nsiderable change over the years, the airport is
currently scheduled to open in January 2001.
447
4.366  The United States argues in response that although the airport is currently scheduled to open
in January 2001, according to a 1998 revision to the airport plan, the Inchon airport development
project will not be fully completed until 2020.448  The United States asserts that, thus, Korea's
discriminatory procurement practices have the pote ntial of adversely affecting US companies for the
next two decades.449
(ii) The May 1991 US Cable Report
Contents of the Cable Report
4.367  The United States argues  that the arguments advanced by Korea would merely diminish
Korea's obligations under Annex 1, which would then be in conflict with Korea's previousrepresentations.  Specifically, the United States refers to a May 1991 US Department of Commerce
reporting cable, which, according to the United States, provides a factual account of the first round of
GPA bilateral negotiations between the United States and Korea, held on 22 April 1991:
                                                     
441 US Response to Korea's Answer to Question 3 from the Panel, dated 29 November 1999.
442 Korea indicates that this took place on 10 July 1999.
443 Korea indicates that this took place on 29 July 1991.
444 US Response to Korea's Answer to Question 3 from the Panel, dated 29 November 1999.
445 Ibid.
446 Inchon International Airport:  A Future-Oriented Airport, Increasing the Value of Time, p. 42.  See
also Exhibit Kor-11 (Contract for the basic plan).
447 Korea's Answer to Question 13 from the Panel, dated 29 November 1999.
448 US Exhibit 18.
449 US Response to Korea's Answer to Question 13 from the Panel, dated 29 November 1999.WT/DS163/R
Page 99
"The Korean Del was asked to clarify Note 1 [of Korea's Annex 1].  The Korean Rep
said that this Note was meant to "explain, not to derogate."  The US Del noted that it
seemed to be obvious that if an entity were covered, then all its subsidiary bodies
would also be covered unless an explicit exception were stated [sic] in the offer.
Therefore, it was unclear what the note was meant to add.  The Korean Rep reiteratedthat the Note was not intended to limit their offer in any way and suggested that if it
was causing concern they could consider dropping it."
450
Meaning of the Cable Report
4.368  According to the United States , the May 1991 US Department of Commerce reporting cable
summarizes the discussion between Korea and the United States as they tried to reach a mutual
understanding regarding the meaning of Note 1.451  The United States contends that the cable records
the parties' agreement regarding Note 1's inte nt to cover all "subsidiary bodies" of "central
government entities" under Korea's Annex 1, unless "an explicit exception were stated in the offer."
The United States asserts that, as Korea represented, Note 1 was not meant to "derogate," nor to "limit
[Korea's] offer in any way;"  Note 1 was never intended to exclude subsidiary organs from Annex 1
coverage.  The United States concludes that, therefore, as subsidiary organizations of MOCT, KAA,
KOACA and IIAC are also covered under Korea's Annex 1 pursuant to Note 1.
4.369  The United States further argues that Note 1 does not embody the "universe of bodies internal
to central government entities under Korean law" and the Government Organization Act  does not
encompass the "entirety of the Korean central government structure".  The United States argues that
Note 1 does not define the scope of "central government entity" but, rather, expands it.  The United
States asserts that this interpretation has been confirmed by Korea when it states that, "Note 1 was notmeant to 'limit' its Annex 1 offer."  The United Stat es argues that such an interpretation is consistent
with the principle of effectiveness.  The United States  further argues that it is also consistent with the
reasoning that Note 1 cannot both define and expand the scope of "central government entity."
4.370  The United States notes that the negotiating history may be used as a supplementary means of
interpretation pursuant to Article 32 of the Vienna Convention  should there remain any uncertainty or
ambiguity about the meaning of Note 1.  For example, in its recent report on Canada – Measures
Affecting the Importation of Milk and the Exportation of Dairy Products , the Appellate Body, after
determining that "the language in the notation in Canada's Schedule is not clear on its face…the
language is general and ambiguous and, therefore, requires special care on the part of the treaty
interpreter," found it "necessary, in this case, to  turn to 'supplementary means of interpretation'
pursuant to Article 32 of the Vienna Convention ."
4.371  According to the United States, in the May 1991 US Department of Commerce reporting
cable, Korea agreed with the United States that, "if an entity were covered, then all its subsidiary
bodies would also be covered unless an explicit exception" were stated otherwise, and then conceded
that Note 1 "is not intended to limit their offer in an y way."  Thus, the United States maintains that it
is clear that Note 1 does not diminish the scope of coverage of Korea's Annex 1, i.e., branch offices
and subsidiary organizations are still covered.  The United States argues that in order to avoidinterpreting Note 1 as being redundant or useless then one must interpret it as expanding Korea's
Annex 1 coverage to include entities that might not be branch offices or subsidiary organizations of
                                                     
450 Department of Commerce Reporting Cable (Geneva 05022, May 1991), paragraph 14.
451 The United States notes that it is the common practice of US government officials to provide just
such a factual report after each negotiating round.  Al though it might be argued that such a description is
one-sided or capable of being inaccurate, the United States  contends that it must be kept in mind that the US
negotiator is under a duty to observe, report, and record these negotiations properly and factually, without anyattempt at analysis.  These reports are made in the "ordinary course" of a negotiator's business, and thereforeshould be considered reliable.WT/DS163/R
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listed "central government entities" but are still a "subordinate linear organization," "special local
administrative organ" or "attached organ" pursuant to Note 1.
4.372  In response, Korea notes  that despite the fact that Note 1 to Korea's Annex 1 specifically
and unambiguously defines the terms "subordinate linear organization," "special local administrative
organ" and "attached organ" by reference to the Government Organization Act , and despite the fact
that the Government Organization Act  does not include KAA, KOACA or IIAC within the definition
of "subordinate linear organization," "special local administrative organ" or "attached organ," the
United States argues that this cable, alone, subjects procurement by KAA, KOACA and IIAC to the
terms of the GPA.  Korea states that this position cannot be accepted.
4.373  Korea argues that the cable does not state, and Korea did not agree, as the United States
alleges, "to cover all 'subsidiary bodies' of 'central government entities' . . . unless 'an explicit
exception were stated in the offer'."  Korea states that Note 1 clarifies and defines the scope of thosebodies internal to ministries listed on Annex 1.  Korea further argues that Note 1 "excludes" or
"excepts" nothing that would otherwise be included in these ministries under Korean law.  Rather, in
listing "subordinate linear organizations, special local administrative organs, and attached organs as
prescribed by the Government Organization Act  of the Republic of Korea," Korea argues that Note 1
includes the universe of bodies that are internal to an Annex 1 entity, and are, therefore, logicallycovered.
Status of the Cable Report
4.374  With respect to the status of the cable, Korea argues  that this document cannot be considered
"preparatory work," for two reasons.  Korea argues that, first, it was not available to Korea before its
accession to the GPA, and as a result cannot possibly be part of the commitments Korea acceptedupon accession.
452  Korea states that had it seen the cable report prior to accession and therefore
known the United States' view, it would have objected to or at least clarified the United States'
interpretation of statements made by Korea at the 22 April 1991 meeting that the US cable purports to
record.  Korea states that, secondly, the cable report speaks only to the United States' expectations of
what it had secured.  Korea notes that the United States' expectations are relevant only in the contextof its non-violation claim.
453
4.375  Korea states that even if the cable report is c onsidered "preparatory work," Article 32 of the
Vienna Convention  provides that "preparatory work" is relevant only where the ordinary meaning of
an agreement is ambiguous, obscure, or leads to an absurd result.  Alternatively, it may be used to
"confirm" an interpretation derived through the application of Article 31.
4.376  Korea states that the circumstances surrounding the United States' reliance on the May 1991
cable do not satisfy the requirements of Article 32.  According to Korea, the reference in Note 1 to theGovernment Organization Act  as the source of the definition for the term "subordinate linear
organizations" is anything but ambiguous.  Further, Ko rea states that Article 2(3) of the Act is clear,
even if it does not correspond to a list the United States might adopt in its own domestic law.  Korea
argues that, furthermore, the fact that the United States, the European Communities, Hong Kong,
Japan, Liechtenstein, Norway and Switzerland all defi ne terms in their respective GPA Appendix I by
                                                     
452 Sir Ian Sinclair, The Vienna Convention on the Law of Treaties (2nd Ed., 1984), p. 144.  Korea
notes that Professor Sinclair reasons that preparatory wo rks must be "in the public domain" so that subsequently
acceding States can know to what they are being bound.  There is no logical reason why original signatory
States should not also have the benefit of knowing about any documents that purport to bind them to something
of which they were not aware.
453 EC - LAN , WT/DS62/AB/R, WT/DS67/AB/R, WT/DS68/AB/R (adopted on 22 June 1998),
paragraph 80 (Reference to a complainant's reasonable ex pectations "in the context of a violation complaint
'melds the legally-distinct bases for violation and non-violation complaints . . . into one uniform cause of action,'and is not in accordance with established GATT practice.").WT/DS163/R
Page 101
reference to provisions of their domestic law indicates that to do so is far from an obscure or an
absurd practice.  Korea also states that the fact that the United States had the Government
Organization Act  at its disposal during negotiations with Korea regarding its GPA commitments
demonstrates that giving the reference in Note 1 to the Government Organization Act  effect is far
from absurd.  Finally, Korea asserts that the United States is not relying on this so-called preparatorywork to "confirm" an interpretation derived through the application of Article 31.  According to
Korea, it is, rather, using the cable in an attempt to  overturn the ordinary meaning of Korea's Note 1.
4.377  Korea states that, at most, the cable constitutes one party's record of discussions regarding the
GPA.  Korea argues that this type of evidence is self-serving.  Korea states that it does not accept the
unilateral characterization of the April 1991 meeting made by the United States.  Korea further argues
that Article 32 of the Vienna Convention  does not, for good reason, permit the notes of a party with a
vested interest in a particular interpretation to trump the unambiguous ordinary meaning of the termsincluded in an agreement, particularly where both the accuracy and the interpretation of those notes is
disputed, as it is in this case.
4.378  In response, the United States argues that the cable report should be taken into account
because Article 32 of the Vienna Convention  explicitly permits the use of "circumstances of [the
GPA's] conclusion" as a supplementary means of interpretation.
4.379  The United States further argues that the Vienna Convention  rightly accords only a
subordinate role to "supplementary means of interpretation" precisely because the documentary record
of preparatory work or the circumstances of a treaty's conclusion may be incomplete, one-sided, or
inconclusive.  The United States argues that the Panel can and should determine through an
interpretation under Article 31 that airport procurement is covered within the scope of Korea's GPAcommitments.  According to the United States, this interpretation is neither ambiguous nor obscure
and does not lead to an absurd or unreasonable result.  The United States asserts that, to the contrary,
an interpretation that this procurement is not covered would be absurd and unreasonable.  The United
States argues that it is not necessary for the Panel to have recourse to any supplementary means to
confirm the reading that the United States has given to Korea's Schedule under Article 31.
Accuracy of the Cable Report
4.380  Regarding the accuracy of the US cable, Korea notes  that the document discussed at the
meeting to which the cable relates was Korea's 25 June 1990 offer, which contained both notes and
footnotes.  Korea states that its notes of the April 1991 meeting, which are included in a Korean
reporting memorandum written the day after the meeting, confirm that the United States indeed asked
a question regarding whether attached organs, supporting organs and offices were included in Korea's
offer.454  Korea states that the notes also confirm that the United States asked a question about "the
reason for setting up 'Footnote 1', 'Footnote 3', and 'Not e 1', 'Note 2', 'Note 3', 'Note 4' and 'Note 5';
and the possibility of removing these 'Footnotes' and 'Notes'."  The specific offer under consideration
was Korea's first offer, dated 25 June 1990.  Korea notes that that offer included a list of "Purchasing
Entities," along with four footnotes and five notes thereto.
4.381  Korea states that the accuracy of the United States' May 1991 cable, however, ends there.
Korea states that it offered to drop footnote 1 and not Note 1.  Korea states that, indeed, footnote 1
was dropped and Note 1 was not dropped.  Korea states that the memorandum containing Korea's
report of the meeting records no discussion about Note 1, and instead includes a conditional offer to
delete Footnote 1, which exempted "purchases for the purpose of maintaining public order" from
                                                     
454 Memorandum from the Permanent Mission of the Republic of Korea, 23 April 1991, p. 2.  Korea
states that the notes contained in this memorandum report on 22 April 1991 bilateral GPA negotiations withboth the European Communities and the United States.WT/DS163/R
Page 102
Korea's offer to include procurements by the Ministry of Home Affairs.  Specifically, the Korean
memorandum states:
"Regarding 'Footnote 1' and 'Note 2' and 'N ote 3,' Korea stated that if Korea and US
had a clear mutual understanding of the GPA and GATT agreements, it may be
possible to delete these points."
4.382  Korea states that it did not, therefore, offer to delete Note 1 from its offer, that any discussion
about the "explanatory" as opposed to the "limiting" effect of its offer was, like its conditional offer
regarding deletion, relevant to Footnote 1, Note 2 and Note 3.  Korea notes that while a slightly
amended version of what was Note 3 to Korea's initial offer appears in Korea's Annex 1 as Note 2,
Footnote 1 and Note 2 to Korea's initial offer were deleted, and do not appear in its Annex 1.
4.383  Korea states that, moreover, and assuming, arguendo , that Korea's offer was to delete Note 1
rather than Footnote 1, the Korean memorandum reporting on this same meeting stated that the offerto do so was conditional on reaching a "clear mutual understanding" with the United States regarding
the GPA.  Korea states that such an understanding would have to include an agreement of the whole
point to Note 1 in the context of the Korean Government system.
4.384  Korea notes that it is true that Note 1 was not meant to "limit" its Annex 1 offer.  Korea notes
that when it committed to coverage for the entities listed on Annex 1, along with their "subordinatelinear organizations, special local administrative organs, and attached organs as prescribed by the
Government Organization Act ," Korea committed the universe of bodies internal to central
government entities under Korean law.
4.385  Korea notes that if, indeed, it stated that Note 1 was "meant to 'explain, not to derogate'" or
"to limit," it said so with the knowledge that it was committing everything that belongs to any of the
central government entities listed on Annex 1, under the Korea system of government represented in
the Government Organization Act .  The entirety of the Korean central government structure is
embodied in the Government Organization Act , and all of it, with regard to the entities listed on
Annex 1, is included in Korea's Annex 1 commitment.
4.386  Korea notes that according to the United States, the May 1991 US cable report indicates an
"agreement" between the parties.  Korea states that the cable report makes clear that Korea made no
such commitment.  Further, Korea states that it does not accept the unilateral characterization of the
April 1991 meeting by the United States.
Timing of Cable Report
4.387  Korea states  that even if it were assumed for the sake of analysis that the May 1991 US cable
report is correct in its description of events, Korea submits that it establishes nothing in relation to
Korea's GPA obligations.  Korea notes in this respect that April 1991 was a full three years before theGPA was signed and July of 1991 was more than tw o and one-half years before the GPA was signed.
Korea further notes that these events were some two years and two and one-half years, respectively,
before Korea's final offer.  Korea notes that it didn't have any GPA obligations at that time.
(iii) US Department of Commerce Memorandum
4.388  Korea also states  that despite the United States' claim that it would have accepted nothing
less, in negotiations with Korea, than coverage of "all entities in the telecommunications, energy,
transportation, and water sectors," it has acknowledged that it did not achieve this goal.  In a
Department of Commerce memorandum regarding the GPA, the United States explains that "major
purchasers of transportation and telecommunications equipment" are absent from its own GPAWT/DS163/R
Page 103
commitments "because other GPA signatory countries were unwilling to offer these entities for
coverage ... ."455
4.389  Korea notes that in similar circumstances, the International Court of Justice has attached
particular significance to "statements against interest," such as these, placing them on equal footing
with evidence offered by disinterested witnesses, and deeming them to be "of superior credibility."456
Korea notes that, for example, in the Nicaragu a case, the Court considered such statements
tantamount to admissions:
"The material before the Court . . . includes statements by representatives of States,
sometimes at the highest political level.  Some of these statements were made before
official organs of the State or of an international or regional organization, and appear
in the official records of those bodies.  Others, made during press conferences or
interviews, were reported by the local or international press.  The Court takes theview that statements of this kind, emanating from high-ranking official political
figures, sometimes indeed of the highest rank, are of particular probative value when
they acknowledge facts or conduct unfavourable to the State represented by the
person who made them.  They may then be construed as a form of admission."
457
4.390  Korea submits that the statements by the United States and the European Communities (in the
EC Commission report of March 1993), as "statements against interest," should be considered as
admissions of the fact that the entities responsible for IIA procurement are not covered entities under
the terms of the GPA.
4.391  In response, the United States argues  that one glance at the Department of Commerce
memorandum will tell the reader that the memorandum is not about what Korea excluded from itscoverage.  The United States asserts that, instead, it is about broader issues, such as the European
Community's General Note 6, which explicitly states that "contracts awarded by entities in Annexes 1
and 2 in connection with activities in the fields of drinking water, energy, transport or
telecommunications, are not included."  In contrast, argues the United States, Korea's argument enjoys
no such textual support.
(b) Communications Following Korea's Accession
(i) July 1998 Communication from the United States
Interpretation of Contents of Letter
4.392  Korea refers to a letter from the United States Embassy in Seoul to the Korean Ministry of
Foreign Affairs and Trade, dated July 1998, in which the United States proposed that:
"During the period before KOACA formally is brought under the GPA, . . .
[KOACA] agree to measures that would bring its procurement policies and practices
de facto into conformity with the internationally-acceptable provisions of the GPA
... ."
4.393  Korea argues that if the time at which the above letter was written, namely, July 1998, was
"before" the entities responsible for IIA procurement were "formally" covered, then those entities
                                                     
455 US Department of Commerce, International Trade Administration, Government Procurement
Agreement, Publication No. 4019, undated, pp. 6 –7.
456 Case Concerning Military and Paramilitary Activities in and against Nicaragua , 1986 I.C.J. 14,
42-43 (paragraph 69).
457 Ibid. paragraph 64, p. 41.WT/DS163/R
Page 104
were not covered at all at that time.  Korea further argues that there is no such thing as informal
coverage and that if the entities referred to in the United States were "formally" covered in July 1998,
the United States would not have requested de facto compliance with the GPA.  Rather, it would have
demanded de jure compliance.
4.394  In response to a question from the Panel requesting clarification of the July 1998 letter, the
United States notes  that at all times, including in the July 1998 letter from the US Commercial
Officer, the United States has maintained that procurement by entities responsible for the construction
of the Inchon International Airport were covered under Korea's obligations under the WTO GPA.
The United States asserts that its position that KOACA was a covered entity has never changed.458
4.395  Further, the United States argues that Korea's argument was based on a single sentence taken
out of context.  The United States notes that had Korea quoted the entire relevant paragraph, it would
have included the sentence indicating that the United States, "hold[s] firm to our position thatKOACA should be covered by GPA disciplines."
459
4.396  The United States also notes that following th is statement of the US position, the letter goes
on to urge the Korean Government to ensure that KOACA bring its procurement policies and
practices de facto into conformity with the GPA.  The United States contends that this is entirely
consistent with the US position that KOACA and other entities procuring for the Inchon InternationalAirport, were, and, as far as is known, continue to be as a matter of fact, acting in violation of the
GPA.  The United States notes that in the letter, the United States urges Korea, as a factual matter, to
discontinue these discriminatory practices.
460
Interpretation in light of the Vienna Convention on the Law of Treaties
4.397  In response to a question from the Panel, Korea argues  that while the July 1998 letter is
not itself treaty language, Korea believes it has great relevance to the interpretation of Korea's
obligations under the GPA in light of Articles 31 and 32 of the Vienna Convention on the Law of
Treaties .  Korea argues that, first, with regard to the good faith requirement of Article 31.1, the United
States cannot now claim that KOACA is a covered entity when only last year the United States
explicitly took the position that KOACA was not covered.  Second, Korea argues that with regard toArticle 31.2(a), the letter is evidence of an agreement (in the sense of a common understanding)
between the parties that KOACA was not covered.  In  Korea's view, this letter, four years subsequent
to the treaty, clearly shows that both parties agreed on an interpretation of the provisions of the GPA
that do not cover KOACA.  Third, Korea states that with regard to Article 31.3(a), the letter is
evidence of subsequent agreement between the parties regarding the interpretation of the GPA or the
application of Article I and Appendix I.  Fourth, Korea states that with regard to Article 31.3(b), the
letter is practice that establishes the agreement of the parties regarding the GPA's interpretation.  Fifth,
Korea states that with regard to Article 31.3(c), the principle of equitable estoppel is a rule of
international law
461;  Korea states that it reasonably relied on the United States' letter as evidence of
its position and argues that the United States should not now be permitted to change its position to the
detriment of Korea.  Sixth, Korea states that it does not believe resort to Article 32 is necessary, but if
it were, the letter clearly is a "supplementary means of interpretation" that confirms Korea's reading ofits GPA obligations.  Finally, Korea states that while not directly relevant to Articles 31 and 32, the
July 1998 letter, in the context of this dispute, constitutes a statement against interest, which, as the
                                                     
458 US Answer to Question 27 from the Panel, dated 3 November 1999.
459 Ibid.
460 Ibid.
461 J.L. Brierly, The Law of Nations 63 (Oxford 1963);  Ian Brownlie, Principles of Public International
Law  18 (Oxford 1990).WT/DS163/R
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International Court of Justice has noted, may be construed as a form of admission, as discussed in
paragraph 4.389.462
4.398  In response to the same question from the Panel, the United States argues  that in its view,
its July 1998 letter does not  fit within the customary rules of treaty interpretation, as set forth in
Articles 31 and 32 of the Vienna Convention on the Law of Treaties .  Article 31 states that a "treaty
shall be interpreted in good faith in accordance with  the ordinary meaning to be given to the terms of
the treaty in their context and in the light of its ob ject and purpose."  The United States contends that
as the letter in question post-dates the concession, it cannot be used to determine the object or purpose
of Korea's concessions.   In addition, the United States contends that this letter does not provide
evidence of "any subsequent practice in the application of a treaty which establishes the agreement of
the parties regarding its interpretation" under Article 31.3(b).  The United States contends that,
indeed, the letter was drafted at a time when Korea and the United States were on a pre-litigationfooting.  The United States contends that, thus, it cannot be construed as evidencing any type of either
agreement or practice between the United States and Korea.  The United States further states that it
does not suggest that there is any "subsequen t agreement between the parties regarding the
interpretation of the treaty or the application of its provisions" as provided for in Article 31.3(a) of the
Vienna Convention , particularly given the clear disagreement between the United States and Korea
regarding what the letter says.  The United States argues that, moreover, the meaning of Korea's
concession in this case is not ambiguous or obscure, so an interpretation under Article 32 is
inappropriate.
463
Impact of Interpretation of Letter on other Arguments
4.399  In response to a question requesting clarification of how the fact that KOACA was not a
covered entity would impact on the argument that KAA and IIAC are covered, the United States
argues as follows.  The United States asserts that if it is determined that KOACA was not a covered
entity, there would be no impact on the US argument that KAA is covered because (1) KAA is still a
subsidiary organization of MOCT, and all subsidiary organizations of "central government entities"
are automatically covered under Annex 1 unless otherwise specified, and (2) KAA's procurements arein fact procurements by MOCT, pursuant to Article I of the GPA.  The United States argues that as to
the question of whether IIAC would be covered, that would depend on the reason why KOACA is not
covered.  In any case, if KOACA was determined not to be covered, the United States asserts that the
result would be a shift in the mutually agreed balance of concession — MOCT responsibility for IIA
procurement was transferred out of a covered entity.  The United States argues that, therefore, Korea
is obliged to make compensatory adjustment for its unilateral exclusion of airport procurement in
order to re-balance the rights and obligations between the two countries.
464
(ii) Letters from US Government Officials to Korean Government Officials
4.400  The United States contends that it has made its position undeniably clear on many occasions
that KOACA is covered under Korea's GPA obligations and that KOACA's discrimination against US
bidders on IIA projects is inconsistent with Korea's GPA obligations.  In this respect, the UnitedStates refers to the fact that senior United States officials sent at least six letters to Korean
Government officials unequivocally asserting the US position that KOACA was covered under
Korea's GPA obligations, and that KOACA's procur ement practices were in violation of Korea's
obligations under the GPA.
465  These letters include: a letter dated 3 June 1997 from Charge d'Affaires
Richard Christenson of the American Embassy in Seoul to KOACA Chairman Kang, Dong-Suk;  a
                                                     
462 Case Concerning Military and Paramilitary Activities in and against Nicaragua , 1986 I.C.J. 14,
42-43 (paragraph 69).
463 US Answer to Question 31 from the Panel, dated 3 November 1999.
464 US Answer to Question 28 from the Panel, dated 3 November 1999.
465 US Answer to Question 27 from the Panel, dated 3 November 1999.WT/DS163/R
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letter sent 17 August 1998 from United States Under Secretary of Commerce David Aaron to Korean
Minister of State for Trade Han, Duck-Soo;  a le tter sent 17 August 1998 from United States Under
Secretary of Commerce David Aaron to KOACA Chairman Kang, Dong-Suk;  a letter dated
11 September 1998 from US Ambassador to the WTO Rita Hayes to Korean Ambassador to the WTO
Man-Soon Chang;  a letter dated 15 September 1998 from United States Under Secretary ofCommerce David Aaron to Minister of Construction and Transportation Lee Jung;  a joint letter dated
14 January 1999 from Secretary of Commerce William Daley and US Trade Representative Charlene
Barshefsky to Korean Minister of Foreign Affairs and Trade Hong Soon-Young.
(iii) Memorandum from Korea's Ministry of Foreign Affairs and Trade to KOACA
4.401  The United States also refers  to a memorandum from Korea's Ministry of Foreign Affairs
and Trade (MOFAT) to KOACA, which it says reveals that Korea never had any misunderstandingregarding the US position that KOACA and IIA procurement are covered under Korea's GPA
obligations.  The United States notes that the memorandum was sent shortly after the July 1998 letter
from the US Commercial Officer, Karen Ware.  The United States further notes that the subject of the
memorandum is "GPA application to KOACA," and states, in relevant part, "Ms. Karen Ware,
Commercial attaché of US Embassy pointed out as per the attached letter that GPA should be appliedby KOACA tender... ."
466
(iv) Representations made in September 1998
4.402  The United States argues  that in September 1998, in response to a question from the United
States regarding the scope of KOACA's responsib ility and whether KOACA was "responsible for all
airport construction projects currently being planned or implemented by government entities in
Korea," Korea did not mention procurements for other airports by the Office of Supply or the
Regional Aviation Offices, and instead replied:
"KOACA is responsible for the construction of the Inchon International Airport.  At
present, there are no other plans for airport construction."467
4.403  The United States argues that throughout Korea's GPA accession negotiation, and even after
the GPA came into force for it, Korea never once referred to these Regional Aviation Offices in the
context of Annex 1 coverage of airport procurement.  Further, the United States contends that Korea's
answer appears to contradict Korea's present argument that the Regional Aviation Offices have been
awarding airport procurement contracts during the period 1992-1998.
4.404  The United States also notes that in the question immediately preceding the question posed by
the United States mentioned above, the United States asked:
"Please identify all government entities that were responsible for airport construction
projects at [the time bilateral negotiations between the United States and Korea
relating to Korea's participation in the GPA were concluded (1993)] and the
relationship of those entities to KOACA, which was established subsequently."
4.405  The United States notes that Korea responded as follows:
"No other institutions besides the New Airport Development Group was involved in
the construction of the airport."468
                                                     
466 Ibid.
467 Korean response to US Question 7(a), dated September 1998, (GPA/W/76).
468 Questions 6(a) and 6(b) (GPA/W/76).WT/DS163/R
Page 107
4.406  The United States notes that, again, Korea neglected to mention the Seoul and Pusan Regional
Aviation Offices.  The United States state that, in fact, Korea even neglected to mention KAA, thus
admitting that, as of 1993, the New Airport Development Group of MOCT was still responsible for
IIA construction.
4.407  Korea argues in response  that the United States neglects to mention that the entire backdrop
to the series of 27 questions raised in the September 1998 questionnaire was a growing dispute with
Korea regarding the applicability of the GPA to, specifically, KOACA, as an entity responsible, again
specifically, for IIA procurement.  Korea refers to the minutes of the 18 February 1998 and
25 June 1998 meetings of the Committee on Government Procurement, which record the
disagreement and characterize it as one regarding the " Korea Airport Construction Authority " and the
"International Airport Construction Corporation ."469  Korea also refers to a letter from Ambassador
David Aaron of the US Department of Commerce,  dated 17 August 1998, specifically discussing
KOACA's  procurement procedures for the IIA project.470  Korea notes that the questionnaire was sent
to Korea by the United States shortly after this letter, on 11 September 1998.471
4.408  Korea argues that the context and content of the questionnaire, therefore, was entirely focused
on KOACA and its role in the IIA project.  Korea states that it is understandable that Korea's response
to the United States' questions would, therefore, focus on KOACA and the IIA project.
4.409  Korea argues that it is not incumbent upon Korea to mention something about which the
United States did not ask, such as the Regional Aviation Offices.  Korea states that for practical
reasons alone, guessing what would have been important to the United States or any other negotiating
partner would have been impossible.  If any particip ant in a negotiation were to accept such a burden,
the sheer impossibility of fulfilling it would subject it to almost certain liability.  Korea questionswhether any deleterious impact on the United States or any other signatory could be alleged with
regard to the "failure" by Korea to raise the role  of the Regional Airport Offices in procurement for
airports have had on the United States or any other signatory, and what the effect it would it have on
this dispute.  In any event, Korea notes that if the United States consulted with US industry carefully
and extensively with regard to airport procurement,  it surely would have been aware of both the
potential bidding opportunities available to and the contracts secured by US companies from the
Office of Supply and the Regional Aviation Offices during the period while the GPA negotiations
were pending.
4.410  Korea also notes that the United States was in fact aware of the Regional Aviation Offices
during negotiations regarding Korea's accession to the GPA.  Korea points to a February 1991
document, titled " Supplementary Explanation of the Note by the Republic of Korea, dated
29 June 1990, relating to the Agreement on Government Procurement ," that lists the Regional
Aviation Offices as included within Korea's offer by virtue of its inclusion of MOCT.  Korea provides
evidence demonstrating that the United States received this document in February 1991.
472
4.411  In response, the United States notes that Korea argues that when the United States asked
Korea to "identify all Ministries that will be responsible for the procurement of goods and services
related to new airport construction" in 1998, Korea neglected to mention the Regional AviationOffices because the United States was focused only on the New Airport Development Group.
However, the United States queries as to why it would ask about other entities if the United States was
                                                     
469 GPA/M/8, 24 May 1998, Minutes of the Meeting Held on 18 February 1998 , pp. 1, 5;  GPA/M/9, 1
September 1998, Minutes of the Meeting Held on 25 June 1998 , pp. 1, 6.
470 Letter from Ambassador David L. Aaron, Under S ecretary for International Trade, US Department
of Commerce (with cover letter from Karen L. Ware, Acting Minister Counsellor for Commercial Affairs, US
Embassy Seoul), to Mr. Kang, Dong-Suk, Chairman and President, KOACA, dated 17 August 1998.
471 GPA/W/76, 18 September 1998, Request for Information Pursuant to Paragraphs 1 and 2 of
Article XIX of the Agreement on Government Proc urement, Communication from the United States.
472 Korea’s Answer to Question 21 from the Panel, dated 29 November 1999.WT/DS163/R
Page 108
focused only on the New Airport Development Group.  The United States also notes that Korea
argues that when the United States asked about "all airport construction projects currently being
planned or implemented by government entities in Korea," Korea neglected to mention the projects by
the Regional Aviation Offices because the United States was focused only on the IIA project.  The
United States again queries as to why it would ask about other projects if the United States was
focused only on the IIA project.  The United States contends that if Korea's responses to these
questions are to be taken seriously, then Korea should be estopped from arguing that General Note 1
is not referring to the New Airport Development Group or the IIA project.
(c) Statements against Interest
4.412  The United States notes  that Korea was the Party that initially raised the issue of "statements
against interest".  The United States then lists "statements against interest" made by Korea.473  F o r
example, the United States notes that when MOCT's website states that KAA, KOACA and IIAC are
its "subsidiary linear organizations," this could be interpreted as a statement against interest and an
admission that these entities are in fact MOCT's subsidiary organizations.  The United States argues
that, furthermore, Korea's 1991 statements that  the New Airport Development Group under MOCT
and the Office of Supply are responsible for IIA construction could also be interpreted as statementsagainst interest and as government admissions of the coverage of airport construction under the GPA.
According to the United States, throughout this dispute, Korea makes many statements against its
interest.
4.413  Korea refers to the United States list of "statements against interest" and challenges the
"inconsistencies" alleged by the United States.  In each instance, Korea argues that "Korea" (not amonolith, but many individuals) was asked a question in a foreign language and answered, also in a
foreign language.  Korea states that, later the question was asked again, and a different set of words
was used to convey the same meaning or two different statements were issued by different people at
different times referring to the same subject, using di fferent verbal formulas.  Korea states that the list
of statements against interest to which the US refers then takes these "different" responses and
suggests that they constitute contradictions or statements against interest, and that the doctrine of
estoppel is relevant.  Korea states that, in any case, Korea made its best efforts to respond to questions
that came from the United States.  If the United States did not understand an answer, Korea tried a
different verbal formula to convey the same meaning.
(d) Doctrine of Estoppel
4.414  The United States refers  to the international law doctrine of estoppel and, more specifically,
quotes from a decision of the International Court of Justice:
"Estoppel may be inferred from the conduct, declarations and the like made by a State
which not only clearly and convincingly evinced acceptance by that State of a
particular regime, but also had caused another State, in reliance on such conduct,
detrimentally to change position or suffer some prejudice."474
4.415  The United States argues that Korea made repeated declarations concerning whether airport
procurement would be within the scope of its GPA offer.  The United States contends that it relied
upon these declarations in agreeing to Korea's terms of accession.  The United States argues that,
therefore, Korea is now estopped from changing its position on the very facts it held out to be true
during negotiations.
                                                     
473 US Exhibit 79.
474 Military and Paramilitary Activities in and against Nicaragua, Jurisdiction and Admissibility,
Judgment, ICJ Reports 1984 , p. 415, paragraph 51.WT/DS163/R
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3. Subsequent Practice
(a) Coverage of Entities or Projects
4.416  The United States argues  that subsequent practice in the application of the GPA confirms
that the GPA does not contemplate pure entity coverage.  The United States notes that, for instance, inconsidering "the greatest possible extension of [GPA] coverage," pursuant to Article XXIV:7(b) of the
Agreement, the Parties at informal consultations suggested:
"Identification of potential sectors for extended coverage.  Reference was made to the
inclusion of the telecommunications, transportation and steel sectors.  In response to
this suggestion, the appropriateness of focusing work on the expansion of coverage inthe telecommunications and transportation sectors has been questioned since many
countries had made significant progress towards privatization in these sectors.  It hasbeen suggested that the review relating to this element should focus on the
elimination of the derogations from coverage in some other sectors existing in
Appendix I of Parties."475
(b) Discussion in relation to GPA Requirements
4.417  The United States argues  that it first became aware that Korea was not conducting
procurement for the IIA project in a manner consis tent with its GPA obligations approximately two
years ago in 1997, when US companies began informing the United States Government that they were
being treated unfairly and in a manner that was inco nsistent with GPA requirements when bidding for
contracts relating to the Inchon International Airpor t construction project.  At that time, the United
States began looking into these practices, and when the United States contacted Korea to discuss the
situation, Korea informed the United States that it did not consider the IIA project to be covered by
the GPA.476
4.418  The United States contends that it continued to discuss this issue with Korean Government
officials in Seoul and on the margins of meetings of the WTO Committee on GovernmentProcurement.  The United States contends that when it became clear that this matter was not going to
be quickly resolved by informing Korean trade officials of KOACA's discriminatory procurement
practices and reminding Korea of its obligations under the GPA, the United States began raising this
issue formally in the WTO Committee on Government Procurement, sending letters to the Korean
Government, and raising this matter in bilateral negotiating fora.
477
4.419  The United States notes that prior to initia l complaints from US companies in mid-1997, the
United States continued to believe that it was undisputed that IIA procurement was covered under theMinistry of Transportation, and was part of Korea's GPA commitments.  The United States notes, for
example, that a 1992-1993 publication jointly produc ed by Commercial Service Seoul and the
Association of Foreign Trading Agents of Korea (AFTAK)
478, listing major projects in Korea,
indicates that the new international airport project as being conducted by the Ministry of
Transportation.479  The United States notes that, in addition, a United States Government reporting
                                                     
475 Committee on Government Procurement, "Checklist of Issues Raised in Informal Consultations
Regarding Modalities for the Review of the Agreement on Government procurement," (7th revision)
Job No. 369, 25 January 1999, p. 29.
476 US Answer to Question 29 from the Panel, dated 3 November 1999.
477 US Answers to Questions 27 and 29 from the Panel, dated 3 November 1999.
478 The United States notes that AFTAK is a private tr ade association of over 10,000 Korean agents and
distributors.
479 American Business in Korea, Guide & Directory 1992-93 , the Association of Foreign Trading
Agents of Korea in cooperation with the Foreign Commercial Service, American Embassy, Seoul.  The UnitedStates notes that while many projects contained in the chart of "Major Projects Status as of October 1992" listWT/DS163/R
Page 110
cable describing Korea's new GPA obligations, sent on 1 May 1997, specifically notes that
infrastructure projects such as the new Inchon Airport are subject to the new conditions of the GPA.480
4. Press Releases and Other Publications
(a) Procurements Announced as MOCT Procurements
4.420  The United States argues  that MOCT's control is so prevalent that, at times, procurements
for the IIA construction project are announced as "MOCT" procurements.  The United States further
argues that such thorough control of these entities has led the public to view MOCT as being
responsible for making the award determinations for IIA procurements.
4.421  In support, the United States refers to a 1996 article in the Korea-Herald, which notes that
"The tender contract for the project to build and operate refuelling facilities at the Inchon International
Airport in South Korea, has been awarded to a consortium led by Hanjin Group.  The decision byMOCT to select the Hanjin-led consortium ended the month-long squabble for the project between
Hanjin and Kumho Group ... ."
481  The United States asserts that even awardees of Inchon
International Airport contracts considered their awards to have been made by MOCT:  A press release
on the PR Newswire specifies that the "Korean Ministry of Construction and Transportation awarded
a Samsung and Lockheed Martin team a contract for the Korean Area Control Center (KACC) systemto be installed at the new airport and facility in Inchon, Korea."
482  The United States argues that there
is no indication that Korean officials ever disputed or sought to change these characterizations of the
role of MOCT.
4.422  In response, Korea notes  that the selection of a consortium to build and operate the
refuelling facility was not a "procurement."  Korea states that, to the contrary, it was the award of afranchise or concession to build and operate the refuelling facility.  Korea further states that such
arrangements are common at airports.  As to the KACC system, Korea notes that this was not a
procurement for the IIA, but for a replacement for the nationwide air traffic control system presently
located at Taegu.  Korea states that the new system will indeed be located at Inchon, rather than
Taegu, but it will direct air traffic on a national basis, not for the airport.  The air traffic controlsystems for the airport are being procured by KOACA and IIAC.  Korea further notes that the award
regarding refuelling predated the effective date of GPA obligations for Korea.
483
4.423  The United States also notes that in an article that appeared in the February 1998 edition of
the magazine, "Air Transport World" it was stated that:
"Since the national government controls both the airport construction authority and
the Korea Airports Authority – which operates South Korea's major airports and is
expected to manage IIA – it will set the fees."484
4.424  The United States also refers  to press clippings and publications in support of its assertion
that MOCT maintains managerial responsibil ity (including the approval of budgets and
implementation plans) over the IIA project as a whole.  Specifically, the United States refers to
publications, which it says, establish that:  (a) primary facilities of the IIA, such as the passenger
                                                                                                                                                                    
the entity responsible for the project as a government invested corporation ( i.e. Korea Gas Corp.), and not a
central government entity, the Ministry of Transportation is listed with regard to the new international airport.
480 US Answer to Question 29 from the Panel, date d 3 November 1999, citing US Department of State
Reporting Cable, (prepared 1 May 1997), paragraph 10.
481 "Hanjin-Led Consortium Wins Deal," Korea-Herald , 28 August 1996, p. 8.
482 "Korean Ministry of Construction and Transportation Awards Air Traffic Center Contract to
Samsung/Lockheed Martin," PR Newswire,  26 May 1998.
483 Korea's Answer to Question 1 from the Panel, dated 3 November 1999.
484 Adele C. Schwartz, "Return to Inchon," Air Transport World (February 1998), p. 89.WT/DS163/R
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terminals, the concourses, and the runways, must by law be paid for by the government, controlled by
the government, and owned by the government485;  (b) although "[p]rivate investment for the
construction of certain IIA facilities [called 'secondary facilities,' which include cargo terminals,
refuelling facilities, and catering facilities] is also actively solicited by IIAC, and is authorized by the
Private Capital Inducement Act for the Expansion of Social Overhead Capital ," these facilities must
nevertheless "be turned over to the government after a certain period of time"486;  (c) during the period
that KAA, KOACA and IIAC were responsible for IIA construction, MOCT was issuing its own bid
announcements related to IIA construction, while other bid announcements noted MOCT's "control"
over KOACA.487
4.425  With respect to the bid announcements to which th e United States refers to illustrate MOCT's
"control" over KOACA, Korea states that they both pre-date Korea's GPA obligations and they are
not Korean documents.  Korea states that, rather, they are reports from the US Embassy in Seoul.
4.426  Specifically, Korea notes that one of the examples referred to by the United States begins, in
its substantive part, with the statement, "The Korea Airport Construction Authority (KOACA), under
the control of the Ministry of Construction and Transportation … ."  Korea states that it appears that
this is a statement from KOACA or MOCT, but Korea states that this is not the case.  Korea notes that
the original bid announcement states simply, "The Korea Airport Construction Authority (KOACA)invites bids for the procurement of the Soil and Concrete Testing Equipments on the following
conditions."  Korea further notes that there is no mention of MOCT or control in this bid
announcement.
4.427  Korea further notes that another example to which the United States refers concerns a
co-generation power plant.  Korea states that this is not a procurement but the award of a franchise orconcession to build and operate a power plant.
4.428  Korea provides press materials which it says challenges the United States' argument that press
clippings and publications support the view that MOCT controls the IIA project.  Korea provides
press releases by US companies identifying KOACA as the contracting entity for IIA projects during
its tenure in that role
488, and news articles identifying KAA as the entity in charge of IIA procurement
while it held that responsibility.489
(b) MOCT Officials Take Credit
4.429  The United States also states  that MOCT officials themselves have also taken credit for
major decisions related to the construction of the Inchon International Airport.  The United States
refers, for instance, to a March 1996 article in the Korea-Economic Daily in which an MOCT
spokesman announcing the decision by MOCT to formally name the Inchon International Airport the"Seoul-Inchon International Airport."
490  In addition, the United States notes that the Korea-Herald
quotes an MOCT official declaring that MOCT had re-estimated the cost for the Inchon International
                                                     
485 "SOC Project in 1996," Business Korea, March 1996, Vol. 13, Issue 2, p. 3.  Also see section 22 of
the Private Capital Inducement Act for the Expansion of Social Overhead Capital.
486 Inchon International Airport brochure, p. 41.
487 "Korea:  Invitation to Bids for New Seoul Int'l Airport Soil and Concrete Testing Equipment"
(6 June 1995), paragraph 1.  For more evidence of MOCT's control over KOACA, also see "Korea:Yongjongdo Airport Co-Gen Power Plant Proj:  Opp'ties" (25 January 1996), which states in its paragraph 1 that"With the approval of the Ministry of Construction and Transportation (MOCT), the Korea Airport ConstructionAuthority (KOACA) recently held an orientation and qu estion/answer session regarding Request For Proposal
(RFP) for the Yongjongdo co-generation project on 12 January 1996."
488 Exhibits Kor-50 and Kor-51.
489 Exhibits Kor-102 and Kor-103.
490 "New Airport to be Called Seoul-Inchon International Airport," Korea-Economic Daily ,
25 March 1996.WT/DS163/R
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Airport from W 5.7 trillion to W 7.48 trillion (US$5.8 billion), that MOCT did not see any problem in
meeting the planned date for opening, and that MOCT would complete the first phase of the
construction by mid-2000.491  This official was identified as MOCT's "director general who is in
charge of the new airport construction."492
(c) Publications Concerning Airport Projects
4.430  The United States argues  that the airport procurements referred to in General Note 1(b) can
only mean those of the IIA construction project.  The United States contends that from the time Korea
tabled its GPA commitment offer on 29 June 1990, to the present, the United States knows of no new
major airport construction projects in Korea, other than the Inchon project.  According to the United
States, this is the understanding, not only of the United States, but also of other countries interested in
the Korean procurement market.
4.431  In support of its argument, the United States notes that, for example, in a 1998 publication by
the European Communities ("EC"), entitled "Business Opportunities and the Government
Procurement Agreement:  A Handbook for EU Companies," a list of "major construction and
transportation projects" in Korea is provided, in which the IIA is the only airport procurement project
enumerated.  Furthermore, the publication offers a list of "major purchasing entities in Korea."  TheUnited States contends that the publication also identifies "MOCT, Korea Airport Authority Corp." as
the "competent ministry" for the IIA project.
493  The United States asserts that if, in fact, another
entity was responsible for procurements for the Inchon project, or other airport procurements, surely it
would have been included on this list.  The United States contends that, moreover, if the "Korea
Airport Authority Corp." is an entity independent of MOCT, it would have been listed separately.The United States notes that, however, MOCT is the on ly entity listed as being responsible for airport
procurement, and "Korea Airport Authority Corp." is not listed separately.
5. MOCT's Website and Other Entities' Websites
4.432  The United States argues  that in interpreting Annex 1 of the GPA reliance must be placed
on the "ordinary meaning" of its text, in its context and in light of the object and purpose of the GPA,in accordance with Article 31 of the Vienna Convention .
494  The United States notes that it then looks
to MOCT's website to confirm this interpretation.  The United States asserts that this is a proper use of
the information on MOCT's website and, therefore, should be fully considered in this dispute.
4.433  The United States argues that throughout the Inchon International Airport construction
process, MOCT let it be known that it is the entity responsible for the construction of the new Inchon
International Airport.
4.434  In support of this argument, the United States refers to the Internet website of MOCT, which
proclaims, "In preparation for the 21st century, this ministry is . . . dedicated to the construction of the
Seoul-Pusan high-speed rail and the Inchon International Airport."  The United States contends that
the website also declares that "As of today, MOCT's organization consists of 3 offices, 5 bureaus and
47 divisions which overlook the affairs on nationa l development planning, housing, city planning,
                                                     
491 "Inchon Airport Cost Balloons 31 Percent to W 7.5 Trillion," The Korea Herald , 22 July 1998.
492 Ibid.
493 The United States asserts that although it appear s unclear as to whether "Korea Airport Authority
Corp." is referring to KAA or KOACA, either way, it is evident that "Korea Airport Authority Corp." is
considered by the European Communities to be a subordinate organization of MOCT.
494 Article 31 of the Vienna Convention .  In addition, Article 32 permits the use of supplementary
means to either confirm an Article 31 interpretation, or to interpret the treaty when an Article 31 interpretation
"leaves the meaning ambiguous or obscure, or leads to a result which is manifestly absurd or unreasonable."WT/DS163/R
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land policy, water resources policy, construction and administration of roads and airports and all other
matters concerning construction and transport safety affairs."495
4.435  The United States also asserts that national-level entities in Korea have subsidiary
organizations, and unless otherwise specified, a listing of a "central government entity" under
Annex 1 also embodies its subsidiary organizations.  In support of this argument, the United Statesrefers to the fact that Korea specifically uses the term, "subsidiary organization," on MOCT's website
to describe KAA, KOACA and IIAC.
4.436  The United States also argues that the New Airport Development Group which, Korea
represented in July of 1991 as the entity responsible for IIA construction and which exists to this day
as the "New Airport Construction Planning Team" is a branch office of MOCT.  The United States
notes that MOCT lists the New Airport Construc tion Planning Team on the organizational chart
located on its webpage.
4.437  In response, Korea argues  that it is irrelevant for the purposes of interpreting Korea's
Annex 1 and Note 1 that MOCT's website (which ha s been prepared by MOCT's public affairs office)
refers to KAA, IIAC and eight other entities as "subs idiary organizations."  Korea notes in this respect
that Note 1 to Annex 1 states that the term "subordinate linear organizations" is to be interpreted "as
prescribed in the Government Organization Act ," and not as referred to on MOCT's website.
4.438  Korea also notes that in other parts of the organizational chart included on the MOCT
website, KAA is described, along with 47 other enti ties, as a "Related Organization" to MOCT, rather
than a "subsidiary organization."  Korea further states that the relevant excerpt of the MOCT website,
while a useful informational guide, is, for purposes of interpreting legal terms of art, imprecise.
Korea states that it is for this reason, undoubtedly, that Note 1 does not state that the centralgovernment entities listed on Annex 1 include their subordinate linear organizations "as prescribed by
the website of the Ministry of Construction and Transportation of the Republic of Korea."
4.439  Further, in response to a question from the Unit ed States, Korea argues that the organizational
chart included on the MOCT website is an unofficial  "Organizations Chart" printed out from MOCT's
website, which post-dates the 15 April 1994 signing of the GPA, which explicitly references theGovernment Organization Act .  Korea notes that the website, which was first put online in 1997,
could not have contributed to the United States' expectations concerning coverage of KAA at the time
the GPA was signed.
496
4.440  In response, the United States contends that the excerpt of the MOCT webpage to which
Korea refers that categorizes KAA as a "related organization" instead of a "subsidiary organization" is
simply a more recent version of the website that categorized KAA and KOACA as "subsidiary
organizations."  The United States asserts that it was only after the consultations with the UnitedStates in March of 1999 that Korea replaced the term, "subsidiary organization," with "related
organization," on every page of MOCT's  website.  However, the United States asserts that there is still
one page that labels KAA and IIAC as "subsidiary organizations."
4.441  Korea  states  in response that it does not see how a website put up in 1997 could have
influenced a Member's attitude when it signed the GPA in 1994.  Korea also has noted that KAA andKOACA are not the only entities that appear on that website as somehow related or subordinate to
MOCT.  At least four of Korea's Annex 3 entities also are listed: Korea National Housing
                                                     
495 The United States contends that, in addition, Article 16(34) of the Presidential Order on the
Organization of the Ministry of Construction and Transportation  provides that the Civil Aviation Bureau within
MOCT is responsible for "[a]ffairs relevant to construction, maintenance, improvement and operation of airportfacilities."
496 Korea's Answer to Question 10 from the US, dated 3 November 1999.WT/DS163/R
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Corporation;  Korea Water Resources Corporation;  Korea Land Corporation; and Korea Highway
Corporation.  Korea submits that if "control" by an Annex 1 entity subjects another entity, not on
Annex 1, to GPA coverage under that Annex, then it does so to these four entities as well as to those
responsible for Inchon Airport procurement.  Korea asserts that the "control" is the same in all
instances.  Korea argues that, however, if "control" subjects these entities to Annex 1 coverage, it isunclear what the consequences are given their placement on Annex 3 and the higher thresholds that
apply.
4.442  The United States also states  that, in fact, on MOCT's webpage, subsidiary organizations are
separated into three distinct and separate categories:  "Government Investment Corporations,"
"Government Contribution Authorities," and "Gover nment Contribution Research Institutes."  The
United States contends that the subsidiary organizations cited under "Government Investment
Corporations" are all listed in Korea's Annex 3, while the "Government Contribution Authorities"
(which include KAA and KOACA) and the "Government Contribution Research Institutes" are not.
The United States argues that this is consistent  with the textual interpretation that all subsidiary
organizations are covered within the scope of "central government entity" under Annex 1, unless
otherwise specified (as in the case of "Government Investment Corporations").  The United States
argues that, moreover, only the "Government Inve stment Corporations" are subject to a special
legislative act, the Framework Act on the Management of Government-Invested Corporations ;  there
is no analogous legislation for "Government Contri bution Authorities" or "Government Contribution
Research Institutes."
4.443  In support of its arguments made in paragraph 4.243  regarding the categorization of IIA
entities on the one hand and the Seoul and Pusan Aviation Authorities on the other hand , Korea
refers  to a list of "Airport Profiles" from the Japanese Ministry of Transportation website.
497  Korea
notes that while the "founder" and "administrator" for many Japanese airports is the Japanese Ministry
of Transportation itself, the New Tokyo Internationa l Airport Authority is listed as the founder and
administrator of the New Tokyo International (Narita) Airport.
4.444  Korea refers to another extract, from the New Tokyo International Airport's website, which it
says explains that although "[i]n the past, the national government has directly administered the
establishment and management of international airports in Japan . . . it was decided that the New
Tokyo International Airport Authority would perform the construction, management, and operation of
[the New Tokyo International Airport] ... ."498  Korea notes that Japan offers several reasons for this
decision, including the need to attract "massive amounts" of private capital to fund such a large
project499, the need for greater flexibility than a traditional government bureaucracy could offer500, and
the need for greater efficiency, demanded by the complex operating demands of the project, thancould be generated through a traditional government bureaucracy.
501
4.445  Korea's asserts that its decision to separate the implementation of the IIA project from other
airport construction was motivated by similar reasons, and was entirely legitimate.
                                                     
497 Japanese Ministry of Transportation website, Airport Profiles ,
http://www.motnet.go.jp/info/kuko03.htm.
498 New Tokyo International (Narita) Airport website, Adoption of Airport Authority Format and the
First Step Toward Construction of New Airport , http://www.narita-airport.or.jp/airport-
e/prpf_e/keii_e/koudan1_e.html.
499 Ibid. ("[B]ecause the construction of a new airport requires massive amounts of capital, it would be
necessary to obtain some project funds from the private sector.").
500 Ibid. ("[F]lexibility would be needed in the areas of organization, personnel, and accounting.").
501 Ibid. ("[T]he complexity of airport operation would require an efficient, self-supporting system.").WT/DS163/R
Page 115
C. PRACTICES IN VIOLATION OF THE GPA
1. Bid Deadlines
4.446  The United States argues  that Korea routinely imposes inadequate bid deadlines that are
shorter than the durations required by the GPA.  The United States provides the following examples in
support of its claim:
• Korea announced the procurement of a radar and communication system on
13 June 1998, then required tenders to be received less than 26 days later on8 July 1998.
502
• Korea announced the procurement of a contract for the ventilation systems on
9 November 1998, then required tenders to be received less than 23 days later on1 December 1998.
503
• Korea announced the procurement of a 22.9 KV electrical cable on 23 November 1998,
then required tenders for Part I of the procur ement to be received less than 17 days later
on 9 December 1998, with tenders for Part II to be received less than 29 days later on
21 December 1998.504
• Korea announced the procurement of electrical wire facilities on 23 November 1998, then
required tenders to be received less than 25 days later on 17 December 1998.505
• Korea announced the procurement of outdoor lighting equipment on 24 November 1998,
then required tenders for Part I of the procur ement to be received less than 15 days later
on 11 December 1998, with tenders for Part II to be received less than 28 days later on
22 December 1998.506
4.447  The United States contends that the imposition by Korea of deadlines of less than 40 days for
receiving tenders from the date of publication of the procurement announcements was inconsistent
with the requirements of Article XI:1(a) and XI:2(a).
2. Qualification requirements
4.448  The United States argues  that Korea imposes qualification requirements that require
domestic investment while favouring domestic bidders.  The United States contends that, for example,
in the procurement of vertical transportation equipment – that is, elevators and escalators - Korea
limited participation of parties as prime contractors to those that "completed the registration for
manufacturing business of [elevators and escalators] under the laws of lift manufacturing and
management and [to those that possess] both the licence of lift installation business underConstruction Industry Basic Act and the licence of the first class electrical construction business under
Electricity Work Business Act ."
507  The United States argues that, in other words, this condition
required firms bidding as prime contractor to have four Korean-issued licences:  an elevator
manufacturing licence, an escalator manufacturing licence, an elevator installation licence, and an
electrical construction licence.  The United States contends that two of these licences could only be
                                                     
502 Announcement of Bid for Radars and ATC Communication System for Inchon International Airport
(IAA), KOACA Publication 98-39 (18 June 1998).
503 Passenger Terminal and Attached Building Machin e Installation and TAB Operation, New Airport
Construction Corporation Announcement No. 98-69 (9 November 1998).
504 22.9 KV Electrical Cable Manufacture/Purchase Project (I) and (II), New Airport Construction
Corporation Announcement No. 98-70 (23 November 1998).
505 22.9 KV Electrical Wire Facilities Constructio n, New Airport Construction Corporation
Announcement No. 98-71 (23 November 1998).
506 Inchon International Airport Outside Lighting Fixtures Manufacture Purchase Project (I) and (II),
New Airport Construction Corporation Announcement No. 98-72 (24 November 1998).
507 Announcement for the Procurement of the Manufacture and Installation of Vertical Transportation
Equipment (15 May 1998), Item 2.1 of Information for Proposal.WT/DS163/R
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obtained by firms that had committed substantial investment in Korea by either building or purchasing
local manufacturing facilities.  The United States argues that one can see the difficulties faced by
foreign suppliers in becoming prime contractors as compared to domestic suppliers who no doubt
already have manufacturing facilities in their home country.  The United States argues that the
discriminatory nature of this condition is further highlighted by the fact that the actual equipment usedto satisfy the requirements of this specific contract need not be produced in the local manufacturing
facilities in Korea.
508
(a) Article III:1(a) of the GPA
4.449  The United States argues  that Article III:1(a) requires non-discriminatory treatment between
foreign and domestic products, services, and suppliers in government procurement.  According to the
United States, the standard of this non-discrimination obligation in the GPA is expressed in terms of"treatment no less favourable."  The United States notes that similar, though not identical, language is
found in Article III:4 of the General Agreement on Tariffs and Trade (GATT 1994).
"The products of the territory of any cont racting party imported into the territory of
any other contracting party shall be accorded treatment no less favourable than that
accorded to like products of national origin in respect of all laws, regulations, andrequirements affecting their internal sale, offering for sale, purchase, transportation,
distribution or use ... ."
4.450  The United States contends that there are strong similarities between Article III:4 of the
GATT 1994 and Article III:1 of the GPA that should guide the interpretation of the GPA.  The United
States argues that, for example, both provisions prohibit discriminatory treatment based on productorigin.  Further, according to the United States, both utilize the "treatment no less favourable"
standard.  Under Article III:4 of the GATT 1994, this standard requires "equal treatment with respect
to competitive opportunities."
4.451  The United States notes that, as first articulated by the panel in Section 337 of the Tariff Act
of 1930:
"These words ["treatment no less favourable,"] are to be found throughout the
General Agreement and later agreements negotiated in the GATT framework as an
expression of the underlying principle of equality of treatment of imported products
as compared to the treatment given either to other foreign products, under the most
favoured nation standard, or to domestic products, under the national treatment
standard of Article III . . . The Panel therefore considered that, in order to establish
whether the "no less favourable" treatment standard of Article III:4 is met, it had toassess whether or not Section 337 in itself may lead to the application to imported
products of treatment less favourable than that accorded to products of United States
origin.  It noted that this approach is in accordance with previous practice of the
Contracting Parties in applying Article III, which has been to base their decisions on
the distinctions made by the laws, regulations or requirements themselves and ontheir potential impact, rather than on the actual consequences for specific imported
products."
509
                                                     
508 Ibid.
509 Panel report on United States - Section 337 , paragraphs 5.11 and 5.13.WT/DS163/R
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4.452  The United States contends that this inte rpretation of "no less favourable treatment" in
Article III of GATT 1994 as requiring equality in terms of competitive opportunities has been
followed consistently in subsequent panel and Appellate Body reports.510
4.453  The United States argues that Korea's qualification requirements are inconsistent with the
GPA's national treatment requirements in Article III:1(a) because they unfairly discriminate againstforeign suppliers in favour of domestic suppliers.
4.454  The United States further argues that by using "treatment no less favourable" in the GPA, the
Parties to the GPA obviously intended to create a standard that also refers to less favourable
competitive opportunities.  The United States argues that, thus, if Korea's procurement practices have
modified the competitive opportunities against foreign suppliers in favour of domestic suppliers,
Korea should be deemed to have provided "less favourable treatment" to foreign suppliers, in
violation of Article III:1(a) of the GPA.
4.455  The United States further argues that, in fact, the qualification requirements imposed by
Korea in the vertical transportation equipment procurement accorded less favourable competitive
opportunities for foreign firms than for domestic fi rms.  According to the United States, in that
procedure, a firm could not bid as a prime contractor unless it possessed by building or purchasing
certain manufacturing facilities in Korea.  The United States further states that foreign suppliers (whomore often than not do not maintain manufacturing facilities in Korea) could, therefore, only bid as
prime contractors if they invested considerable resources towards building or purchasing these local
manufacturing facilities.  The United States argues that this requirement provides less favourable
conditions to foreign suppliers, since competing Korean suppliers need not expend the same amounts
of additional resources in order to submit bids as prime contractors.  The United States argues that, assuch, this measure constitutes "less favourable tr eatment" within the meaning of GPA Article III:1(a).
(b) Article VIII first sentence of the GPA
4.456  The United States contends  that qualification procedures set forth by Parties to the GPA
must be consistent with the provisions of Article VIII.  The United States further states that Korea'squalification requirements are all requirements within qualification procedures for procurements
related to the IIA project.  However, the United St ates argues that since it has already established that
these requirements discriminate against foreign suppliers generally within the meaning of
Article III:1(a) of the GPA, a fortiori , they also discriminate against foreign suppliers in violation of
Article VIII, first sentence.
(c) Article VIII(b) of the GPA
4.457  The United States argues  that Article VIII(b) establishes that any qualification requirements
must be "essential" in order to ensure the "capability" of the firm to fulfill the contract.  The United
States argues that in applying Article 31 of the Vienna Convention on the Law of Treaties , one finds
that the ordinary meaning of the term "essential," is "absolutely indispensable or necessary."511  The
United States argues that under Article VIII(b), such conditions for participation may include"financial guarantees, technical qualifications and information necessary for establishing the financial
commercial and technical capacity of suppliers, as well as the verification of qualifications."  Bearing
                                                     
510 See, e.g., Japan - Measures Affecting Consumer Photographic Film and Paper , 31 March 1998,
WT/DS44/R, paragraph 10.379 (" Japan - Film ");  Canada - Import, Distribution and Sale of Certain Alcoholic
Drinks by Provincial Marketing Agencies  (adopted on 18 February 1992), BISD 39S/27, paragraphs 5.12-5.14
and 5.30-5.31;  US - Malt Beverages , BISD 39S/206, paragraph 5.30;  US - Gasoline , WT/DS2/R,
paragraph 6.10;  Canada - Periodicals  (adopted on 30 July 1997), WT/DS31/R, p. 75; Bananas III ,
WT/DS27/R, paragraphs 7.179-7.180.
511 The New Shorter Oxford English Dictionary (1993 ed.), p. 852.WT/DS163/R
Page 118
in mind that, under the first sentence of Article VIII, the qualification process must not be
discriminatory, the United States asserts that the question is whether a qualification requirement is
really necessary to guarantee that a winning bidder will in fact be able to perform the very contract it
has been awarded.  The United States contends that it can thus be determined that Korea's
qualification requirements are not "essential" in the sense of Article VIII(b).
4.458  The United States further argues that Korea's qualification requirements are inconsistent with
Article VIII(b) of the GPA because, as conditions for participating in the tender procedures, they are
not "essential" to a firm's "capability to fulfill the contract."  Rather, it appears that these conditions
were put in place to ensure that Korean suppliers would be able to benefit from and better participate
in these valuable procurements.
4.459  Additionally, the United States argues that Korea's requirement for a firm to maintain elevator
or escalator manufacturing facilities in Korea, just  so the firm can participate in a tender proceeding
for vertical transportation equipment, is clearly not "essential to ensure the firm's capability to fulfill
the contract."  The United States contends that the elements that make it possible for a firm to supply
and install an elevator or escalator – reliability, technical expertise, solvency – have no necessary
relation to whether the firm owns a manufacturing facility located in Korea (as opposed to some other
country), nor to whether the firm owns any factories at all.  In fact, the factory requirement at bestimposes a buy-national or local-content requirement.  The United States asserts that if such a
requirement is "essential to ensure the firm's capab ility to fulfill the contract," then any other GPA
Party could exclude from its tender proceedings any bidder that does not have a factory in that
country.  In the view of the United States, this would eliminate any possibility that a bidder located
wholly abroad could bid on a GPA-covered tender and supply the product from a foreign factory.  TheUnited States concludes that a key objective of the drafters of the GPA, to ensure that procurement
rules and practices are not applied "so as to afford protection to domestic products or services or
domestic suppliers,"
512 would be defeated.
3. Domestic Partnering Requirements
4.460  The United States argues  that Korea has conducted procurements under bidding rules
specifying that foreign suppliers can participate only if they partner with or act as a subcontractor to
domestic suppliers.  The United States notes that, for example, in a procurement for "site preparation
and weak foundation enforcement," Korea established the requirement that any "company that has its
base outside the Inchon Metropolitan Area must enter into a joint venture for at least 10 per cent of
the contract with an Inchon-based company that possesses a Civil Engineering and Construction
Licence (including Civil Engineering) issued in the Inchon Metropolitan Area."513  The United States
asserts that, in other words, foreign companies, since they are obviously based outside of the InchonMetropolitan Area, must enter into joint ventures wi th local companies in order to even participate in
the tendering process.  The United States assert s that Korea used similar language to limit the
participation of foreign firms in a procurement for electrical wire facilities.
514
4.461  The United States further argues that in a procurement for a movement area management
system, Korea specified that "[f]oreign firms should participate in a bid with local firms (leading orprime company) as consortium members or subcontractors."
515  The United States notes that Korea
used this same language to limit the participation of foreign suppliers as prime contractors in
                                                     
512 Second paragraph of the preamble to the GPA.
513 Facilities Infrastructure Construction, New Airport Construction Corporation Announcement
No. 98-68.
514 22.9 KV Electrical Wire Facilities Constructio n, New Airport Construction Corporation
Announcement No. 98-71 (3 November 1998).
515 Announcement of Bid for Movement Area Management System (MAMS) for Inchon International
Airport (IIA), KOACA Publication 98-37 (16 June 1998).WT/DS163/R
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procurements for radar and communication systems516, as well as for weather radar systems.517
Finally, the United States argues that Korea prohibited foreign firms from bidding in a procurement
unless they participated in a consorti um with no less than two Korean firms.518
(a) Article III:1(a) of the GPA
4.462  The United States argues  that Korea's domestic partnering requirements are inconsistent
with the GPA's national treatment requirements contained in Article III:1(a) because they unfairly
discriminate against foreign suppliers in favour of domestic suppliers.
4.463  The United States argues that Korea's domestic partnering requirements have provided less
favourable competitive opportunities for foreign firms, in comparison with domestic firms.  The
United States contends, for instance, that in the procedures for "site preparation" and "electrical wire
facilities," foreign suppliers were required to participate as joint bidders with local suppliers based inthe Inchon area.  The United States argues that this requirement accorded less favourable conditions
to foreign firms in the procurement, since it becam e necessary for foreign firms to expend additional
resources just to find and obtain partnering contracts with local suppliers.  The United States contends
that, moreover, for the foreign supplier, the potential profits from winning the tender were
substantially reduced, since the foreign supplier would be obligated to share these profits and/or otherbenefits of the award with the local supplier.  The United States further notes that, in contrast, local
firms could bid alone, without being subjected to additional costs.  The United States asserts that, as
such, these requirements provide foreign suppliers with "less favourable treatment" than local
suppliers within the meaning of GPA Article III:1(a).
4.464  The United States further argues that other domestic partnering requirements also provided
less favourable competitive opportunities as between foreign and domestic suppliers.  In the tendering
procedures for "movement area systems," "radar and communications systems" and "weather radar
systems," the United States asserts that Korea prohibited foreign suppliers from bidding as prime
contractors, and further specified that local firm s should be the "prime or leading company," with
foreign suppliers permitted only to act as subcontractors or consortium members.  The United Statesargues that this measure discriminated against foreign suppliers, because they could only participate if
they were able to enter into a "partnership" arrang ement with a domestic firm, not only to bid jointly,
but to bid in a subordinate position.  The United States argues that any potential profits for the foreign
supplier must be shared with the domestic supplier (who, in this case as the prime contractor, would
most likely exercise its control over the sharing of  the profits).  According to the United States,
domestic suppliers, in contrast, could bid alone if they so choose, again without being subjected to
additional costs or other disadvantages.
4.465  As a final example, the United States refers to another domestic partnering scheme in which
foreign suppliers were obligated to bid with two or more domestic suppliers.  The United States
contends that domestic suppliers, on the other hand, were not forced to bid with foreign suppliers, let
alone other domestic suppliers.  The United States argues that this requirement again singled out
foreign suppliers for less favourable competitive opportunities.
4.466  The United States argues that, for the foregoing reasons, it is clear that Korea's domestic
partnering practices and procedures provide less favourable treatment to foreign suppliers than that
accorded to domestic suppliers within the meaning of Article III:1(a) of the GPA.
                                                     
516 Announcement of Bid for radars and ATC Communication System for Inchon International Airport,
KOACA Publication 98-39 (18 June 1998).
517 Announcement of Bid for Terminal Doppler Weather Radar for Inchon International Airport,
KOACA Publication 98-66 (23 October 1998).
518 Manufacture and Installation of IIA Passenger Boarding Bridge System, Project No. PMD1
(12 March 1998).WT/DS163/R
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(b) Article VIII first sentence of the GPA
4.467  The United States argues  that qualification procedures set forth by Parties to the GPA must
be consistent with the provisions of Article VIII and that Korea's domestic partnering requirements
are all requirements within qualification procedures for procurements related to the IIA project.  TheUnited States contends that, however, since it has already been established that these requirements
discriminate against foreign suppliers generally within the meaning of Article III:1(a) of the GPA,
a fortiori , they also discriminate against foreign suppliers in violation of Article VIII, first sentence.
(c) Article VIII(b) of the GPA
4.468  The United States argues  that Korea's domestic partnering requirements are inconsistent
with Article VIII(b) of the GPA because, as conditions for participating in the tender procedures, theyare not "essential" to a firm's "capability to fulfill the contract."  The United States argues that, rather,
it appears that these conditions were put in place to ensure that Korean suppliers would be able to
benefit from and better participate in these valuable procurements.
4.469  The United States further argues that Korea's requirement that a foreign supplier bid as a joint
contractor with a domestic supplier also cannot be deemed as "essential to ensure the firm's capabilityto fulfill the contract."  The United States assert s that there is no legitimate rationale for concluding
that all foreign suppliers would be incapable of perf orming the contract on their own.  In the view of
the United States, this too is simple protectionism.  The United States asserts that if this were
permitted, all GPA-covered procurements might eventually be subjected to such domestic partnering
requirements, nullifying much of the benefit of the GPA.
4.470  The United States argues that, similarly, Korea in some procurements has permitted foreign
suppliers to bid not as prime contractors, but only as subcontractors or consortium members (with a
Korean supplier as the prime contractor).  The United States further argues that there is no necessary
basis for concluding that all foreign suppliers would be incapable of performing the contract as prime
contractors.  The United States contends that, therefore, it cannot legitimately be argued that theseconditions are "essential to ensure the firm's capability to fulfill the contract."
4.471  Finally, the United States argues that Korea's requirement that foreign suppliers bid with two
Korean suppliers is again simply protectionism.  The United States contends that it cannot
legitimately be argued that all foreign suppliers are incapable (acting individually or jointly) of
fulfilling a contract, and that one Korean partner is not enough (i.e., for a foreign firm to fulfil the
contract, the firm will need to partner with two Korean suppliers).  The United States argues that as
with the other requirements previously identified, this qualification requirement is imposed for themere purpose of ensuring maximum domestic participation in procurements for the IIA project.
4. Absence Of Access To Challenge Procedures
4.472  The United States notes  that in 1995, Korea passed the Act Relating to Contracts to Which
the State is a Party .
519  This Act established the "International Contract Dispute Mediation
Committee" as the impartial and independent body that reviews domestic challenges to theprocurement practices of GPA-covered entities.
520  The United States notes that Korea has indicated
officially that this Committee is the impartial and independent body that will review challenges to the
                                                     
519 Law No. 4868, 5 January 1995.
520 Ibid.  Articles 28 and 29.WT/DS163/R
Page 121
procurement practices of GPA-covered entities, which is meant to satisfy Korea's obligations under
Article XX of the GPA.521
4.473  However, the United States argues that when suppliers and service providers protested certain
procurement practices by KOACA, alleging inconsistencies with the GPA, the International Contract
Dispute Mediation Committee has refused to consider such challenges on the grounds that KOACA isnot "recognized as an entity covered by the government [sic] procurement agreement."
522
4.474  The United States contends that, to date, Korea has yet to grant suppliers and service
providers participating in procurements for the IIA construction project with access to
non-discriminatory, timely, transparent, and effective domestic challenge procedures.  Korea has
failed to provide aggrieved foreign suppliers with access to the appropriate challenge procedures
under Article XX.
4.475  Further, the United States argues that Korea has not otherwise provided suppliers and service
providers of these procurements access to non-discriminatory, timely, transparent and effective
domestic challenge procedures.  In fact, KOACA's internal rules do not even contain dispute
resolution procedures.  Accordingly, no relief is allotted to foreign suppliers and service providers
when an Inchon Airport procurement is conducted in a GPA-inconsistent manner.  Thus, Korea is in
violation of Article XX of the GPA.
5. Korea's Response to the Violation Claim
4.476  The Panel asked Korea whether it agreed with the United States' assertion that if the entities
engaging in procurement for the IIA are "covered entities," such entities' IIA procurement practices
would not be consistent with the Agreement on Government Procurement.523  In response, Korea
states  that it has not taken a position on the assertions of the United States with regard to the
consistency of Korea's procurement practices with the GPA, other than to note that the entities
responsible for IIA procurement are not covered entities.524
D. NON-VIOLATION CLAIM :  NULLIFICATION OR IMPAIRMENT OF BENEFITS
1. Details of the Non-Violation Claim
4.477  The United States  argues that regardless of whether or not the measures referred to above
violate the various articles of the GPA, they nevertheless nullify and impair any benefits accruing to
the United States under the Agreement.
4.478  The United States argues that a successful determination of a non-violation nullification and
impairment in the GPA requires the finding of three elements:  (1) a concession was negotiated and
exists;  (2) a measure is applied that upsets the established competitive relationship;  and (3) the
measure could not have been reasonably anticipated at the time the concession was negotiated.525
                                                     
521 GPA/12/Rev.1, Notification of National Implementing Legislation of the Republic of Korea,
9 June 1997.
522 Report to Karen Ware, US Deputy Senior Foreig n Commercial Service Officer to the Republic of
Korea, containing remarks by Dr. Kim Jung-Min, Deputy Director, Government Procurement & AccountingPolicy Division of MOFE on 18 November 1998.
523 Panel's Question 20 following the First Substantive Meeting.
524 Korea's Answer to Question 20 from the Panel, dated 3 November 1999.
525 Report of the Working Party on The Australian Subsidy on Ammonium Sulphate  (adopted on
3 April 1950), BISD II/188-196, paragraph 12;  Panel Report on Treatment by Germany of Imports of Sardines
(adopted on 31 October 1952), G/26, BISD 1S/53-59, paragraph 16;  Panel Report on  European Economic
Community - Production Aids Granted on Canned Peaches, Canned Pears, Canned Fruit Cocktail and DriedWT/DS163/R
Page 122
4.479  The United States argues that given the inconsistency with the GPA of the procurement
practices engaged in by the IIA authorities, elements (2) and (3) of the non-violation claim have
already been met.  The United States asserts that the only outstanding issue is the first element – that
is, whether or not there is a concession.
4.480  The United States contends that, as a matter of judicial economy, it does not request a ruling
on the non-violation claim if it is established that Korea has violated its obligations under the GPA.
The United States also notes that a finding of non- violation nullification or impairment leads in the
first instance to compensation and not necessarily to compliance.  The United States contends that its
interest in the dispute is first and foremost to  assure Korea's compliance with its GPA obligations
through the elimination of its GPA-inconsistent procurement practices.
4.481  In response, Korea argues  that the burden placed upon the United States to support its
non-violation claim under Article XXII:2 of the GPA is substantial.  Korea notes that underArticle 26:1(a) of the Understanding on Rules and Procedures Governing the Settlement of Disputes,
"the complaining party shall present a detailed justif ication in support of any complaint relating to a
measure which does not conflict with the relevant covered agreement."
526
4.482  Korea refers  to the Panel in Japan – Film527 which noted three elements of a non-violation
complaint incumbent upon the complainant to prove.  Korea states that these elements are evident in
the terms of Article XXII:2 of the GPA;  namely, "(1) application of a measure by a WTO Member;
(2) a benefit accruing under the relevant agreement;  and (3) nullification of the benefit as the result of
the application of the measure."528
4.483  Korea argues that the United States must demonstrate, by virtue of the requirement in
Article XXII:2 that it identify a "benefit accruing" to it under the GPA, that it "reasonably expected"
to obtain the benefit of GPA coverage for IIA procurement.529  Korea further argues that "for
expectations of a benefit to be legitimate, the challenged measures must not have been reasonably
anticipated at the time the tariff concession was negotiated."530  Korea asserts that this requirement is
self-evident and quotes for support:  "If the measures were anticipated, a Member could not have had
a legitimate expectation of improved market access to the extent of the impairment caused by thesemeasures."
531
4.484  Korea also notes that the United States is correct that the first requirement referred to above in
paragraph 4.478 - a concession - is very much at issue.   Korea asserts that just what "concession" the
United States made in exchange for the alleged in clusion of KAA among Korea's commitments is not
clear.  Korea states that it is aware of no evidence from the United States on this point.  Korea also
notes, as item (2) on the US list implies, that an  "agreement" is necessary.  Korea states that it
                                                                                                                                                                    
Grapes , 20 February 1985 (unadopted), L/5778, paragraph 51;  and Panel Report on  European Economic
Community - Payments and Subsidies Paid to Processors and Producers of Oilseeds and Related Animal-FeedProteins  (adopted on 25 January 1990), L/6627, BISD 37S/86, paragraphs 142-152.
526 Understanding on Rules and Procedures Go verning the Settlement of Disputes , Article 26:1(a).
527 Although the Panel in Japan – Film  addressed a non-violation claim under Article XXIII:1(b) of the
GATT 1994, there is no material difference between the language used in Article XXIII:1(b) of the GATT 1994
and Article XXII:2 of the GPA to enumerate the requirements for a non-violation complaint.  The Panel’s legalreasoning is, therefore, applicable in its entirety.
528 Japan - Film , paragraph 10.41.
529 Ibid.  paragraph 10.72.  As further support for this principle, see EEC - Oilseeds , BISD 37S/86,
128-129 (paragraphs 147-148);  Operation of the Provisions of Article XVI , BISD 10S/201, 209 (paragraph 28)
(adopted on 21 November 1961);  Other Barriers to Trade , BISD 3S/222, 224 (paragraph 13) (adopted on
3 March 1955);  Germany - Sardines , BISD 1S/53, 58-59 (paragraph 16) (adopted on 31 October 1952);
Australian Subsidy on Ammonium Sulphate , GATT/CP.4/39, BISD II/188, 193-194 (adopted on 3 April 1950).
530 Japan - Film , paragraph 10.76.
531 Ibid.WT/DS163/R
Page 123
understands that the essence of a non-violation is that some action of a party, after an agreement is
concluded, which could not have been reasonably anticipated at the time of the agreement, nullifies or
impairs a concession made by another party.  According to Korea, the United States has not specified
what agreement was made by the parties that was nullified or impaired by action taken by Korea after
that agreement was entered into.  Korea argues that it could not have been an agreement to includeKAA (and KOACA and IIAC) in Korea's GPA coverage, for Korea never agreed to include KAA in
any of its offers.  Korea also states that in additi on to the first point, the third is also very much in
contention.  Korea questions how the United States could reasonably anticipate that Korea would
apply the GPA to procurements for the new airport without an agreement and a concession.  In
Korea's view, the whole premise of the United States' non-violation case rests on the elements it needs
to prove for its violation claim:  an agreement between the parties, which included a concession by the
United States.
2. Concession
(a) 1991 Negotiations
4.485  The United States argues  that during 1991 negotiations with Korea, the United States
specifically accrued the benefit of all new airport construction projects under the coverage of theGPA.  Further, the United States contends that even if the transfer of procurement authority as
between the various IIA entities was reasonably anticipated by the United States, this fact is irrelevant
to a determination of whether a concession was made.
4.486  For support of its argument that a concession was made, the United States notes that in July of
1991, Korea stated that the "New Airport Development Group under" MOCT and the "Office ofSupply" are responsible for new airport construction projects.  The United States further notes that in
relation to the IIA project, Korea stated that the "basic plan" will be completed "by 1992 and the
working plan by 1993," that Bechtel "is taking part in the basic plan project," and that the
"procurement plan" is not yet "fixed because now th e whole airport construction project is only in a
basic planning stage."  The United States notes that Korea is now arguing that when it said the"procurement plan has not been fixed," it actually meant "nothing concrete was fixed,"
532 or "nothing
with regard to procurement was fixed."533  The United States argues that, however, an entity is not a
plan;  the Office of Supply is not a procurement plan, it is a procuring entity.
4.487  Further, the United States argues that Korea has always made a distinction between an entity
and a plan.  The United States notes that Korea made such a distinction in attempting to explain what
"procurement plan" meant.  The United States quote s: "This included both the entities that might
ultimately be responsible for procurement as well as the procurement plan itself."534  The United
States argues that if Korea had meant the "procurement plan" and the "entities that might ultimately
be responsible for procurement," it would have said so in its July 1991 response.  The United States
notes that, instead, Korea only stated that the "procurement plan has not been fixed."  The United
States argues that Korea's plain language speaks for itself and questions how Korea's mention of
"procurement plan" can refer to both the "procureme nt plan" and the "entities that might ultimately be
responsible for procurement."
4.488  The United States also argues that Korea's claim that it had made no decision regarding
"which entity would be responsible for IIA construction"535 in July 1991 is inconsistent with Korea's
actions in 1991.  In support of this argument, the Un ited States notes that it expressly held out MOCT
and the Office of Supply as the responsible airport procurement entities, it included MOCT and the
                                                     
532 Korea's Answer to Question 16 from the Panel, dated 3 November 1999.
533 Korea's Answer to Question 15 from the US, dated 3 November.
534 Korea's Answer to Question 16 from the Panel, dated 3 November 1999.
535 Korea's Answer to Question 3 from the Panel, dated 3 November 1999.WT/DS163/R
Page 124
Office of Supply in its GPA schedule offer, and it conducted the procurement of IIA's basic plan
through MOCT.536
4.489  Regarding the United States' interpretation of its July 1991 response, Korea notes  that, in
fact, the July 1991 response does not state that  either MOCT or NADG were to be involved in
procurement.537 Moreover, Korea states that its July 1991 response was not a concessions offer, but
merely a response to an inquiry.  Even if it were such an offer, Korea argues, action by the Korean
National Assembly in December 1991, designating KAA as the responsible entity for the IIA project,
notified the United States of its position.  The United States, moreover, admits that it had actual
notice, and was even "surprised" by it.
4.490  In response, the United States asserts that this new argument by Korea is totally without
basis.  Korea's July 1991 response states that, "the new airport construction is being conducted by the
New Airport Development Group under the Ministry of Transportation."  The United States submitsthat any reasonable interpretation of "conducting the new airport construction" suggests
"involvement" in the procurement process by MOCT.  The United States further submits that, in fact,
Korea itself admitted that MOCT solicited and awarded the first IIA procurement for the 1990-1991
basic plan.
4.491  With regard to the Office of Supply, Korea states  that it does not consider that the
interpretation suggested by the United States is reasonable and, therefore, does not consider that
Korea's July 1991 response is reasonably susceptible to the interpretation suggested by the United
States.  Korea states that the qualification ("Bu t at present . . .") offered immediately after
identification of the Office of Supply as the entity that would in principle, under the Government
Procurement Fund Act , have undertaken IIA procurement had there even been any at the time, over
16 months before site preparation for the airport was to begin, made it unreasonable for any negotiator
to conclude that the Office of Supply would, forever after, be the entity responsible for IIA
procurement.
538
4.492  In response, the United States reiterates  that the phrase "But at present, the concrete
procurement plan has not been fixed . . ." refers only to the procurement plan and not the procuremententity.
539  The United States argues that, in addition, because MOCT was responsible for the first IIA
procurement, i.e., the 1990-1991 basic plan "by virtue of the Government Procurement Fund Act ," the
Office of Supply should also have been responsible for that procurement.540
4.493  The United States argues that, furthermore, it is wrong to imply that, based on its July 1991
representation, the United States concluded that "the Office of Supply would, forever after, be the
entity responsible for IIA procurement."  The United States contends that, rather, the United States
reasonably expected that if Korea were to alter its position regarding an explicit representation madeon paper during formal GPA negotiations, it would have explicitly informed the US trade negotiators
of such change.  The United States contends that, moreover, a decision was taken by the Committee
on Government Procurement that each signatory w ould notify changes to its annexes taking place
between the signing of the GPA at Marrakesh and its entering into force.
541  The United States further
states that if Korea were to change its position after the GPA came into force for it, Korea would be
                                                     
536 Korea's Answer to Question 16 from the Panel, dated 3 November 1999, and Korea's Answer to
Question 5 from the US, dated 3 November 1999.
537 Korea's Answer to Question 2 from the Panel, dated 29 November 1999.
538 Korea's Answer to Question 2 from the Panel, dated 29 November 1999.
539 Second Written Submission of the United States, paragraph 61.
540 US Response to Korea's Answer to Question 2 from the Panel, dated 29 November 1999.
541 See GPA/IC/M/2 at Annex 2, "Administration of Modifications to the Appendices to the Agreement
on Government Procurement (1994) Prior to its Entry into Force, Other Than Rectifications of a Purely FormalNature or Those Resulting from Negotiations Aimed at Expanding Coverage."WT/DS163/R
Page 125
obligated to utilize Article XXIV:6 of the Agreement, the sole GPA provision that permits
rectifications or modifications to a Party's annexes.542
4.494  Korea states  that it has demonstrated that KAA, KOACA and IIAC, rather than the Office of
Supply, have conducted the procurements for IIA.543  Korea argues that since the Office of Supply has
not in fact procured for the IIA, Korea's July 1991 response can speak only to the United States'expectations regarding the entities responsible fo r IIA procurement, purportedly held prior to the
conclusion of negotiations for Korea's accession to the GPA.
544  Korea argues that to serve as the basis
for a non-violation complaint, those expectations "must not have been reasonably anticipated at the
time the tariff concession was negotiated."545  Given the qualified nature of Korea's July 1991
response, followed by:  the December 1991 amendments to the Seoul Airport Act  appointing KAA as
the entity responsible for the IIA project;  correspondence between the United States and Korea
regarding KAA's role in the IIA project546;  and between Korea and major US airport authorities
regarding KAA's role in the IIA project547;  the successful participation of numerous US companies,
closely consulted by the United States regarding Korea's offer548 in KAA procurements for the IIA549;
KAA's role as a separate "juristic" person550;  the inclusion of airport authorities on Annex 3 rather
than Annex 1 by the United States itself, Hong  Kong, Israel, Japan, Aruba, Norway, Singapore,
Switzerland and every member State of the European Communities;  and the absence of KAA fromany of the Annexes included in Korea's Appendix I, Korea argues that the United States' purported
interpretation, even if reasonable in July 1991, was no longer reasonable after these developments,
well in advance of the conclusion of negotiations regarding Korea's concession, in December 1993.
551
(b) Ambiguity associated with July 1991 Response
4.495  In response to a question from the Panel, Korea argues  that if Korea's July 1991 response
is open to the interpretation the US now claims, Korea submits that the US interpretation is not the
only possible interpretation, nor even the best possible interpretation.  Korea further argues that the
fact that the US interpretation is not the only possible interpretation is fatal to the US case.552
4.496  The United States argues in response  that Korea newly attributes a "claim" to the United
States that Korea's July 1991 response is open to more than one interpretation.  The United States
contends that Korea does not provide any citation as to where the United States allegedly made such a
claim.  The United States notes that, in fact, the United States has made statements directly to the
contrary, which is consistent with the US view that Korea's July 1991 response to US questions
concerning new airport construction projects was unequivocal and unambiguous.553
                                                     
542 US Response to Korea's Answer to Question 2 from the Panel, dated 29 November 1999.
543 Exhibits Kor-19A through Kor-19D, Kor-48A through Kor-48N, Kor-57A through Kor-57E.
544 Korea's Answer to Question 2 from the Panel, dated 29 November 1999.
545 Japan - Film , paragraph 10.76.
546 Letter from US Senator Slade Gorton to Mr. Wan-Sik Yook, Chairman, KAA, 6 October 1992;
Letter from Council member of Seattle City Council to Mr. Wan-Sik Yook, Chairman, KAA,22 September 1992;  Letter from the Vice Chairman of KAA to Sung Yong Kim and J.A. Corbett, staffsecretaries in the Economic Section of the US Embassy Seoul, 8 August 1992.
547 Exhibit Kor-34 (Port Authority of New York and New Jersey); Exhibit Kor-35 (Los Angeles
Department of Airports);  Exhibit Kor-36 (Denver (Stapleton) International Airport); Exhibit Kor-37(Dallas/Fort Worth International Airport).
548 US First Written Submission, paragraph 92.
549 Exhibit Kor-23.
550 Notification of Act No. 3219, Official Gazette , 28 December 1979, p. 5892.  Korea reiterates that
KAA was established by the National Assembly pursuant to this Act.  Article 3 states that KAA is a "juristic
person."
551 Korea's Answer to Question 2 from the Panel, dated 29 November 1999.
552 Ibid.
553 US Response to Korea's Answer to Question 2 from the Panel, dated 29 November 1999.WT/DS163/R
Page 126
4.497  Korea notes that while the US was asking questions in its native language, Korea was
responding in a foreign language.  Korea notes further that ambiguity generally is in the eye of the
reader or listener, not the writer or speaker.  Korea states that those who communicate do not
normally aim at ambiguity, and Korea certainly did not do so in this instance.  Korea states that this
July 1991 communication, which the US now finds is subject to more than one interpretation,concerned a subject that was apparently of crucial importance to the United States: the extent of
Korea's GPA offer in relation to the new airport.
554
4.498  In response, the United States argues that in making its argument, Korea appears to suggest
that Korea is exempt from the normal rules of treaty interpretation, and of state responsibility, with
respect to its GPA schedules and other official documents merely because those documents were
translated from Korean to English.  The United States asserts that this argument is specious and states
that Korea has already agreed that its schedule to the GPA be "[a]uthentic in the English languageonly."
555  Indeed, all negotiating documents provided by Korea, including the Government
Organization Act of the Republic of Korea , were provided in English.  The United States contends
that, moreover, when it has suited Korea, Korea has in many other instances argued for precise textual
interpretations of translated Korean documents.556
4.499  In response to a question from the Panel, Korea submits  that if the subject of Korea's GPA
coverage was as important as the US suggests, and if the July 1991 communication was as imprecise
as the US argues (in that it would support the US interpretation as well as Korea's) then Korea states
that it is puzzling that the US did nothing to clear up the matter.  Korea argues that a reasonable US
reader of an allegedly imprecise communication concerning a crucial matter would have sought
clarification, particularly when it knew that the language of the response was not the first language ofthe person who prepared it. Korea reiterates that no clarification was sought, and the US has
submitted no evidence to the contrary.
557
(c) Burden of Proof
4.500  Korea refers  to the views of the Appellate Body in the EC - LAN  case.  Korea states that in
that case, the panel concluded that it was the importing party – in the context of this case, Korea – that
bore the responsibility for the clarity of its tariff  schedule.  Korea states that the Appellate Body
disagreed.  The Appellate Body said: "It is only normal that importing Members define their offers
(and their ensuing obligations) in terms which suit their needs."  "On the other hand," it continued,
"exporting Members have to ensure that their corresponding rights are described in such a manner in
the Schedules of importing Members that their export interests, as agreed in the negotiations, are
guaranteed."558  In other words, exporting Members have an obligation to ensure that their interests
are guaranteed.559
4.501  Korea argues that the reasoning of the Appellate Body is equally applicable to this case.
Korea states that it was entitled to define its GPA offer, and its ensuing obligations, in terms that
suited its own needs.  Korea further states that it was up to the United States to ensure that its interests
were protected in this process;  it was not up to Korea to do so.
                                                     
554 Korea's Answer to Question 2 from the Panel, dated 29 November 1999.
555 US Exhibit 45.
556 US Response to Korea's Answer to Question 2 from the Panel, dated 29 November 1999, referring
to Korea's Answer to Questions from the Panel, dated 29 November 1999, at p. 21 in which Korea argues that"Article 6 of the 1997  Seoul Airport Act , however, [was] not coincidentally titled 'Operator of New Airport
Construction Project'."
557 Korea's Answer to Question 2 from the Panel, dated 29 November 1999.
558 EC – LAN,  WT/DS62/AB/R, WT/DS67/AB/R, WT/DS68/AB/R, AB-1998-2 (adopted on
22 June 1998) paragraph 109.
559 Korea's Answer to Question 2 of the Panel, dated 29 November 1999.WT/DS163/R
Page 127
4.502  Korea further argues that just what "concession" the United States made in exchange for the
alleged inclusion of KAA among Korea's commitments is not clear.  Korea asserts that there is no
evidence on this point.
4.503  In response, the United States argues that Korea appears to suggest that it has no
responsibility for the clarity of its GPA schedule.  However, the United States argues that what theAppellate Body in EC - LAN  made clear was that "[t]ariff negotiations are a process of reciprocal
demands and concessions, of 'give and take'."
560
4.504  The United States argues that, in addition, the EC - LAN  dispute involved a situation in which
"the detailed product composition of tariff commitments was never  discussed in detail during the tariff
negotiations" and the negotiators "relied on a continuation of the status quo."561  The United States
contends that, indeed, the factual record in EC - LAN  confirms that the "detailed product composition
of the tariff category" in question in that dispute was not discussed at all.  The United States arguesthat, in contrast in this case, the United States  specifically asked Korea during negotiations to
"identify all Ministries that will be responsible for the procurement of goods and services related to
new airport construction."  The United States notes that believing that the United States' question was
emphasizing the IIA project, Korea responded that "[t]he new airport construction is being conducted
by the New Airport Development Group under the Ministry of Transportation . . . The responsible
organization for procurement of goods and services relating to the new airport construction is the
Office of Supply."  The United States argues that, thus, it was through this question and response that
the United States made sure "that [its] corresponding rights [were] described in such a manner in the
Schedules of [Korea] that [its] interests, as agreed in the negotiations, [were] guaranteed."
562
3. Measure
(a) Application of a Measure
4.505  Korea argues  that the United States must demonstrate that the assignment to KAA of the
responsibility for IIA procurement is a "measure" within the meaning of Article XXII:2 of the GPA.
Korea argues that Article XXII:2 is written in the present tense.  Korea notes that the Panel in Japan –
Film  stated that Article XXII:2, therefore, "contemplates nullification or impairment in the present
tense," and "limits the non-violation remedy to measures that are currently being applied."563
4.506  Korea argues that since the measure granting KAA authority to undertake IIA procurement is
no longer in effect, the United States' non-viola tion claim under Article XXII:2 must be rejected.
Korea notes in this respect that the Seoul Airport Act  was amended in August 1994 to shift
responsibility for implementation of the IIA project from KAA to KOACA.  Korea further notes that,
similarly, Article 7(5-2) of the Korea Airport Corporation Act , which previously vested KAA with
the authority to implement the IIA project, was deleted in August 1994.
4.507  Korea also argues that the transferral of responsibility from MOCT or Office of Supply in
December 1991 to KAA which the United States claims undermined its legitimate expectations,
occurred two years before the conclusion of the GPA negotiations, in December 1993, when Korea
and other signatories submitted their final offers.  Korea asserts that, as such, it must be presumed thatthe United States anticipated and in fact had knowledge of the event.  It is the United States that bears
the very significant burden of rebutting that presumption.                                                     
560 US Response to Korea's Answer to Question 1 from the Panel, dated 29 November 1999, referring
to Appellate Body report on EC - LAN , WT/DS62/AB/R, WT/DS67/AB/R, WT/DS68/AB/R (adopted on
22 June 1998), paragraph 109.
561 EC - LAN , paragraph 91.
562 US Response to Korea's Answer to Question 1 from the Panel, dated 29 November 1999, referring
to EC - LAN ,  paragraph 109.
563 Japan - Film , paragraph 10.57.WT/DS163/R
Page 128
4.508  In response, the United States argues  that the measures at issue in this dispute are the
procurement practices and not, the United States argues as asserted by Korea, the transfer of
procurement authority.
4.509  Further, in response to a question from the Panel, Korea states  that KAA's authority over
the IIA project was transferred to KOACA because it was determined that KAA's responsibilities forexisting airports did not permit it to conduct the construction of the IIA efficiently.  Korea notes in
this respect that KAA is primarily focused upon the management of existing airport operations.
Korea states that this may involve incidental repair and maintenance.  Korea further notes that the
only significant construction authority possessed by KAA was its responsibility, from December 1991
to August 1994, for the IIA.  Korea states that it beli eved that an entity devoted solely to the project
was necessary given that KAA's existing portfolio made it difficult to balance its construction
responsibilities for the IIA.  As a result, responsibility for implementation of the basic plan for the IIAproject and IIA procurement was transferred by the National Assembly to KOACA in August 1994.
Korea notes that KAA continues to supervise the operation of existing airports, including construction
and maintenance at those airports.
564
(b) Measure Upsets Competitive Relationship
4.510  The United States notes  that the situation in this dispute is analogous to a 1952 dispute,
Treatment by Germany of Imports of Sardines, in which tariff reductions negotiated by Norway with
Germany were later not honoured by Germany.  The United States refers to the relevant panel report,
which explains:
"a nullification or an impairment of a benefit accruing to Norway directly or
indirectly under the [GATT] . . . would exis t if the action of the German Government,
which resulted in upsetting the competitive relationship between [products from
Norway and other directly competitive products] could not reasonably have been
anticipated by the Norwegian Government at the time it negotiated for tariff
reductions on [its products].  The Panel concluded that the Government of Norwayhad reason to assume, during these negotiations that [the products from Norway]
would not be less favourably treated than [other directly competitive products] and
that this situation would not be modified by unilateral action of the German
Government . . .
As the measures taken by the German Government have nullified the validity of the
assumptions which governed the attitude of the Norwegian delegation [during
negotiations] and substantially reduced the value of the concessions obtained byNorway, the Panel found that the Norwegian Government is justified in claiming that
it had suffered an impairment of a benefit accruing to it under the General
Agreement."
565
4.511  The United States contends that, similarly, during Korea's GPA accession negotiations, the
United States bargained for and received from Korea the coverage of all government entitiesresponsible for the procurement of products and services related to new airport construction projects
under Annex 1.  According to the United States, Korea subsequently engaged in, and continues to
engage in, measures in procurement that could not have reasonably been anticipated by the United
States at the time the coverage of new airport construction was negotiated.  More specifically, the
United States argues that by applying GPA-inconsistent practices in the procurement of new airportconstruction projects, Korea upsets the established competitive relationship between US products,
                                                     
564 Korea's Answer to Question 18 from the Panel, dated 3 November 1999.
565 Panel report on Treatment by Germany of Imports of Sardines (adopted on 31 October 1952,) G/26,
paragraphs 16-17.WT/DS163/R
Page 129
services and suppliers and Korean products, services and suppliers.  The United States argues that
these measures result in the upsetting of the established competitive relationship between US
products, services and suppliers and Korean products, services and suppliers in the IIA construction
project, a competitive relationship worth potentially US$6 billion.  On this basis, the United States
argues that Korea is nullifying or impairing benefits accruing to the United States under the GPA.
4.512  Korea argues  that the requirement that the measure at issue upset the competitive
relationship created by the Agreement implies, that an "agreement" is necessary.  Korea further argues
that the essence of a non-violation claim is that some action of a party, after an agreement is
concluded, which could not have been reasonably anticipated at the time of the agreement, nullifies or
impairs a concession made by another party.  Korea asserts that the United States has not specified
what agreement was made by the parties that was nullified or impaired by action taken by Korea after
that agreement was entered into.  Korea further asserts that it could not have been an agreement toinclude KAA, KOACA and IIAC in Korea's GPA coverage given that Korea never agreed to include
KAA in any of its offers.
4. Reasonable Expectation of a Benefit
(a) Relevance of "Reasonable Expectation of Benefit"
4.513  Korea emphasizes  that whether or not the United States' expectations regarding Korea's GPA
commitments are "reasonable" is entirely irrelevant  to a "violation" complaint under the GPA.  Korea
notes that reference to a complainant's reasonable expectations in the context of a violation complaint
"melds the legally-distinct bases for violation and non-violation complaints . . . into one uniform
cause of action, and is not in accordance with established GATT practice."566  Korea asserts that the
question whether expectations are reasonable or not is, therefore, relevant only in the context of a
"non-violation" complaint, raised by the United States pursuant to Article XXII:2 of the GPA.
(b) Has there been a Reasonable Expectation of Benefit in this Case?
4.514  Korea argues  that during the negotiation of the GPA, and specifically, during the period
leading up to the submission by Korea of its final offer list for accession to the GPA, the United States
was very much aware that KAA, rather than MOCT, Office of Supply or any other covered entity,
was in fact responsible for IIA procurement.  Korea further argues that the United States was aware of
KAA's role as the entity responsible for IIA procurement years before Korea submitted its final offer
for accession to the GPA, in December 1993.  Korea notes in this respect that responsibility for IIA
procurement was assigned to KAA two years before Korea's submission of its final offer for accession
to the GPA on 15 December 1993, nearly two and one-half years before the conclusion of theMarrakesh Agreement on 15 April 1994, and six years before the effective date of the GPA, which for
Korea was 1 January 1997.
4.515  Korea further argues that during negotiations regarding Korea's accession to the GPA, the
United States was aware of the existence and activities of Annex 1 entities undertaking "procurement
for airports," whether related to new airport construction or work on existing airports.  Specifically,Korea argues that the United States was aware that entities other than KAA – namely, the Regional
Aviation Offices – existed, procured for Korean airports other than IIA and were included in Korea's
offer.
567
                                                     
566 EC - LAN , WT/DS62/AB/R, WT/DS67/AB/R, WT/DS68/AB/R (adopted on 22 June 1998),
paragraph 80.
567 Korea's Response to the US Answer to Question 17 from the Panel, dated 29 November 1999.WT/DS163/R
Page 130
4.516  Korea states in this respect that the Korean cable report568, the questions put to Korea by the
United States in May 1991569 and the May 1991 US Department of Commerce cable report570 all note
the United States' receipt of a February 1991 document titled " Supplementary Explanation of the Note
by the Republic of Korea dated 29 June 1990 relating to the Agreement on Government
Procurement ."  Korea further notes that page 11 of this Supplementary Explanation , explaining
Korea's initial offer, lists the Regional Aviation Offices or Bureaus as included within Korea's
commitment of the Ministry of Transportati on.  Korea notes that it does not list KAA.571
4.517  Furthermore, Korea states that it has furnished proof of procurements undertaken by the
Regional Aviation Offices both during the negotiations and up to the present.572  Korea argues that it
is not credible for the United States to claim, on the one hand, that it consulted carefully and
extensively with US industry regarding Korean airport procurement and yet, on the other hand, that it
had no idea about the entities undertaking that procurement.573
4.518  Korea also states that Korea's General Note 1(b) meant (and means), and what the United
States reasonably expected it to mean at the conclusion of GPA negotiations with Korea, was that
Annex 1 entities conducting procurements for airports existed (and exist) and that they are MOCT's
Regional Aviation Offices.  Korea states that during negotiations with Korea, the United States was
aware of their existence, their identity, their proc urement activity and their inclusion in Korea's offer.
It was also aware that Korea did not include KAA in the February 1991 Supplementary Explanation
as a procuring entity considered covered under Korea's offer by virtue of a relationship with the
Ministry of Transportation.574
4.519  In response, the United States  argues that Korea's GPA-inconsistent practices in the
procurement of new airport construction projects could not have been reasonably anticipated by theUnited States at the time of the 1991 negotiations.
4.520  Further, the United States argues that it is completely irrelevant whether the United States
knew that KAA was responsible for airport procurement or not.  The United States argues that, rather,
what is relevant is the fact that KAA is a subsidiary organization of MOCT.  Given that it is a
subsidiary organization of MOCT, and thus cove red under Annex 1 of the GPA, the United States
could, therefore, not have reasonably anticipated the lack of GPA coverage for any of KAA's
procurements.
4.521  Additionally, in response to a question from the Panel, the United States notes that its
reasonable expectation relates not to KAA's status as a project operator, nor to the fact that KAA was
operating under its own procurement regulations, but instead it relates to whether the United States
reasonably expected new airport construction to be covered under Annex 1 of the GPA.  The United
States contends that this reasonable expectation did not change despite the shift of procurementauthority to KAA, because KAA was (and is) a subordinate unit of MOCT, and a shift of procurement
authority within MOCT was of no consequence, for Korea had already assured the United States that
all of MOCT would be covered under Annex 1.  The United States asserts that a transfer from one
subordinate unit of MOCT to another subordinate unit  of MOCT is no transfer  at all.  According to
the United States, the procurement authority remained within MOCT.
575
                                                     
568 Exhibit Kor-118.
569 US Exhibit 4, Questions 9, 10, 11, 14, 15.
570 US Exhibit 2, p. 2.
571 Korea's Response to the US Answer to Question 17 from the Panel, dated 29 November 1999.
572 Exhibits Kor-61A through Kor-61J.
573 Korea's Response to the US Answer to Question 17 from the Panel, dated 29 November 1999.
574 Ibid.
575 US Answer to Question 25(b) from the Panel, dated 3 November 1999.WT/DS163/R
Page 131
4.522  The United States contends that, moreover, the US reasonable expectation did not change
because KAA was using different procurement regulations at the time.  The United States further
states that central government entities (including their subordinate units) are only required to come in
line with GPA requirements after the GPA enters into  force.  According to the United States, it was
reasonable to expect that Korea would bring KAA's practices into line with the GPA by the time theGPA entered into force for Korea, in January 1997.
576
(c) Relevant Evidence Before Korea's Accession
(i) Negotiations and Communications
Korea's July 1991 Communication
4.523  Korea argues  that assignment of responsibility for IIA procurement to what would become a
non-covered entity should have been, and in fact was, reasonably anticipated by the United States
during negotiations with Korea regarding its GPA commitments.  In support of its argument, Korea
states that in a 1 July 1991 response to a question from the United States regarding the IIA project,
Korea stated that Office of Supply was to be the "responsible organization for procurement" for the
IIA project.  Immediately following that sentence, however, Korea expressly stated:  "But at present,the concrete procurement plan has not been fixed because now the whole airport construction project
is only in a basic planning stage."  Korea asserts that it could not have made this qualification with
greater clarity.
4.524  According to Korea, Korea argues that, furthe rmore, there would in July 1991 have existed
some uncertainty concerning the entity responsible for IIA procurement was entirely reasonable.Korea notes in this respect that its response to the United States' inquiry was offered six months
before the basic plan for IIA was completed, 16 months before site preparation for the IIA project was
to begin, two and one-half years before Korea's submission of its final offer list, and nearly five years
before ground-breaking for the IIA passenger terminal took place, on 23 May 1996.  Korea states that
given the express reservation in Korea's July 1991 response, and given that the IIA project was in theinfancy of its planning stage when that response was given as stated in the July 1991 response, the
United States was on notice that plans regarding the entities responsible for IIA procurement were not
yet set.  Procurement plans for the IIA project were simply not ready in July 1991, and Korea fully
disclosed this fact to the United States.
4.525  The United States contends in response  that Korea's argument is not persuasive because it
fails to explain how the phrase, "procurement plan,"  can specifically be referring to "plans regarding
the entities responsible for IIA procurement."  The United States argues that "procurement plan," byits ordinary meaning, could only be referring to "the basic plan for the construction of IIA," which,
consistent with Korea's own representation, was not yet fixed at the time of Korea's 1991 response.
The United States contends that this basic plan provided for the "general direction of IIA construction,
an outline of the construction plan, an estimated duration for the construction, and a financing plan for
the project."  The United States asserts that it did not provide for any change in entity coverage and itwas not announced until 16 June 1992, whereas KAA became responsible for the procurement of
airport construction in December 1991.  The United States further asserts that if Korea had really
wanted to provide "greater clarity," it would have said, "But at present, the procurement entity has not
been fixed."
4.526  Further, the United States argues that, as for Korea's argument that the United States was
placed on notice that "the entities responsible for IIA procurement were not yet set," the United States
contends that Korea's representation that "the concrete procurement plan has not been fixed because
now the whole airport construction project is only in a basic planning stage," referred only to the
                                                     
576 Ibid.WT/DS163/R
Page 132
procurement "plan" and not to the procuring "entity."  The United States notes that, furthermore, this
condition directly followed plain statements refere ncing a "basic plan" and a "working plan" to be
completed by 1992 and 1993, respectively, as well as a definitive representation regarding the role of
MOCT and the Office of Supply as entities responsible for IIA construction.  The United States
concludes that, therefore, Korea's conditional statement could only be referring to the basic plan or theworking plan, and not to the entities conducting the procurement.
4.527  The United States also states that it relied on Korea's representations in 1991, when Korea
explicitly stated that the New Airport Development Group of MOCT and the Office of Supply are the
only two entities responsible for procurements of new airport construction. The United States also
states that it relied on Korea in subsequent years when Korea never again raised the issue of airport
procurement.
4.528  Korea responds  by arguing that even if Korea's July 1991 response did not alone effectively
alert the United States to the possibility that IIA procurement responsibility might eventually fall to an
entity other than the Office of Supply, there are numerous examples of constructive and actual notice
that demonstrate that the United States was very much aware of KAA's role years before the
conclusion of the GPA negotiations.
4.529  Korea states that those examples of constructive and actual notice include the following:  In
December 1991, Korea published in its Official Gazette  notification of KAA's appointment to
implement the IIA project, and the United States is charged with knowledge of this notice;  during
1992, Korea and the United States exchanged correspondence regarding KAA's role as the entity
responsible for the IIA project;  during the period 1992-1994, numerous US companies bid for and
secured procurements conducted by KAA for the IIA project;  during 1992, KAA broadcast itsprocurement role in the IIA project to airport a nd airport construction experts worldwide, including
the Port Authority of New York and New Jersey, the Los Angles Department of Airports, the Denver
(Stapleton) International Airport, and the Dallas/Fort Worth International Airport;  press reports
demonstrate that KAA was the entity in charge of IIA procurement;  the United States was aware, by
virtue of the publication in the Official Gazette  of the Korea Airport Corporation Act , that KAA, like
Korea's Annex 3 entities, is a separate "juristic" person;  the United States was aware that its own
airport authorities, as well as the airport authorities of nearly every GPA signatory, were included on
Annex 3 rather than on Annex 1;  in July 1998, the United States acknowledged that KOACA, is not
covered, and the European Communities stated, in March 1993, that Korea's GPA proposal contained
"no offer regarding airports."
4.530  According to Korea, therefore, during the period leading up to its submission of its final GPA
offer, the United States was aware that KAA, rather than MOCT or the Office of Supply, was theentity responsible for IIA procurement.  At the same time, Korea asserts that the United States was
also aware that KAA was not listed on Korea's Annex 1.
577
Korea's February 1991 Supplementary Explanation
4.531  Korea argues  that the United States was aware that KAA did not feature on the list of
subordinate bodies covered by virtue of Korea's offe r of the Ministry of Transportation and also was
well aware of the inclusion of other MOCT airpor t-procurement entities – that is, the Regional
Aviation Offices - within Korea's offer of the Ministry of Transportation as an Annex 1 entity.578
4.532  Korea argues that procurements for construction at "other regional airports" are covered under
Korea's Annex 1 not because they are covered projects, but because they are undertaken by covered
entities – MOCT's Regional Aviation Offices or the Office of Supply on their behalf.  Korea notes in
                                                     
577 Korea's Second Written Submission, paragraphs 169-172.
578 Korea's Answer to Question 21 from the Panel, dated 29 November 1999.WT/DS163/R
Page 133
this respect that responsibility for procurements fo r significant construction for these airports falls to
the Regional Aviation Office s or the Office of Supply.579
4.533  Korea notes that the United States has claimed in these proceedings that it was not aware that
entities other than KAA, KOACA and IIAC – namely, the Regional Aviation Offices and the Office
of Supply – conduct procurements for "other regiona l airports" in Korea.  Korea notes that the United
States blames this lack of awareness on Korea, arguing that Korea should have disclosed the existence
of the Regional Aviation Offices to the United States in its 1 July 1991 response and its response to
other questions put to it by the United States in September 1998.580
4.534  Korea argues in response that the United States was in fact aware of the existence of the
Regional Aviation Offices during negotiations with Korea regarding its accession to the GPA.  Korea
refers to a document, dated February 1991, and titled " Supplementary Explanation of the Note by the
Republic of Korea dated 29 June 1990 relating to the Agreement on Government Procurement ,"
which lists on pages 6-14 all 47 Korean central government entities, along with their subordinate
linear organizations, special local administrative organs and attached organs.  Korea states that page 5
of the Supplementary Explanation  notes that 35 of those 47 central governments were covered under
Korea's June 1990 offer.  Korea further notes that page 26 of the document describes the point of what
eventually became Note 1 to Korea's Annex 1 – "to clarify the coverage of central government organswhich come under 35 of [4]7 purchasing entities."
581
4.535  Korea notes as an example, page 11 of the Supplementary Explanation , lists five bodies as
covered by the inclusion of the Korean Ministry of Transportation, including the Regional Aviation
Offices or Bureaus.  Korea argues that this do cument confirms that Korea did intend to commit to
coverage of procurements by the Regional Aviation Offices.  Korea states that it is also noteworthythat KAA is not on this list included at pages 6-14 of the Supplementary Explanation , either as a body
under the Ministry of Transportation, or as a central government entity in its own right.
582
4.536  Korea argues that the United States received th is document.  Korea notes that this is evident
from a Korean 25 February 1991 cable report indicating that the Supplementary Explanation  was in
fact delivered to and acknowledged as received by the United States.583  Korea notes that, moreover,
the United States' May 1991 questions to Korea include five citations to Korea's February 1991
Supplementary Explanation .584  Korea also notes that the May 1991 US Department of Commerce
cable report includes at least two references to the "ROKG's 2/91 Supplementary Explanation " or "the
February Supplementary Explanation ."585  Korea states that it is evident that the document was
provided to the United States, scrutinized by the United States, and used as a starting point for
questions put to Korea by the United States.586
4.537  Korea states that despite KAA's conspicuous absence from the list of MOCT
airport-procurement entities included on page 11 of Korea's February 1991 Supplementary
Explanation , despite the United States' purported interest in GPA negotiations with Korea, in the
transportation sector generally and the "Airport Development Group" more specifically and despite
the United States' awareness of KAA's role as the entity responsible for the IIA project, the United
                                                     
579 Ibid.
580 Ibid.
581 Korea's Answer to Question 21 from the Panel, dated 29 November 1999.  Korea notes that
although p. 5 clearly states that 35 of the 47 total central government entities were covered by Korea's offer,p. 26 puts the number at "35 of 37"entities.  The statement on p. 26 appears to be a typographical error, since thelist on pp. 6-14 actually includes 47 entities.
582 Ibid.
583 Ibid.
584 Questions 9, 10, 11, 14, 15.
585 p. 2.
586 Korea's Answer to Question 21 from the Panel, dated 29 November 1999.WT/DS163/R
Page 134
States never once, in the more than two and one-half years remaining in the GPA negotiations with
Korea, asked where KAA fit into Korea's offer.  Korea cannot be accorded responsibility for the
United States' failure.587
4.538  In support of its argument, Korea refers to an internal EC Commission note, dated
3 December 1993.588  Korea states that this document refers to Korea's offer of coverage for "a
number of major cities (Seoul, Pusang) [sic]" that "control their airports in co-operation with the
Ministry of Transportation."  MOCT's two Regional Aviation Offices are, again, the Seoul and the
Pusan Regional Aviation Offices.  Those are the airport procurement entities included in Korea's offer
for Annex 1 GPA coverage of MOCT.589
4.539  In response, the United States argues  that even though the February 1991 document lists all
of the "subordinate linear organizations," "special local administrative organs," and "attached organs"
of the Ministry of Transportation and the Ministry of Construction, when this document is comparedwith the 1994 and 1999 MOCT organizational charts
590, there are numerous discrepancies.591
4.540  The United States notes, for instance, that the General Affairs Division, the Planning and
Management Office, the Construction Affairs Office , the Transportation Policy Office, the National
Territory Planning Bureau, the Land Bureau, the Housing and Urban Affairs Bureau, the Surface
Transportation Bureau, the Transportation Safety Bureau, the Civil Aviation Bureau, the WaterwayBureau, the Air Traffic Control Center and the Central Land Tribunal from the 1994 MOCT
organizational chart are not listed in the February 1991 document.  The United States contends that,
yet it is uncontested that these entities are covered under Annex 1 of the GPA.  In addition, the
Construction Economy Bureau, the Technology and Safety Bureau, the Road Bureau and the Water
Resources Bureau (entities from the 1999 MOCT organizational chart not found in the 1994 chart) arealso not listed in the February 1991 document.
592
4.541  The United States argues that, moreover, according to this February 1991 document, there are
24 District Construction Offices, five VOR-TAC Stations, and a Fl ight Inspection Office under the
Ministries of Construction and Transportation, yet these entities cannot be found in either the 1994 or
1999 MOCT organizational charts.  Similarly, the February 1991 document lists three Flood ControlOffices, a National Construction Research Institute, a Central Equipment Management Office, and
five Marine Accident Inquiry Offices.  However, the organizational charts list five Flood Control
Offices, and the 1999 chart excludes the National Construction Research Institute, a Central
Equipment Management Office, and five Marine Ac cident Inquiry Offices (four of which have the
exact same name on the 1994 chart).  Finally, the United States notes that, in addition to KAA, the
New Airport Development Group is not listed in the February 1991 document.  Thus, it is not
surprising that KAA is not listed in this document.
593
4.542  The United States argues that what is clear is that the February 1991 document does not
represent Korea's GPA commitments;  it is not even Korea's final offer.  The United States contends
that as Korea itself has noted, it is merely "a starting point for questions put to Korea by the United
States."  The United States contends that this makes sense, because subsequent to receiving this
document, the United States in May 1991 asked Korea to "[p]lease identify all Ministries that will beresponsible for the procurement of goods and services related to new airport construction." The
United States notes that Korea responded in July 1991, "The new airport construction is being
                                                     
587 Ibid.
588 Attached as Annex V to the EC's Answer to Questions from the Panel, dated 3 November 1999.
589 Korea's Response to the EC's Answer to Question 1 from the Panel, dated 3 November 1999.
590 Exhibit Kor-111.
591 US Response to Korea's Answer to Question 21 from the Panel, dated 29 November 1999.
592 Ibid.
593 Ibid.WT/DS163/R
Page 135
conducted by the New Airport Development Group under the Ministry of Transportation . . .  The
responsible organization for procurement of goods and services relating to the new airport
construction is the Office of Supply."594
4.543  The United States argues that it is also clear that whether a non-listed entity should be
considered "attached/connected/affiliated" to a listed entity should not be determined by the listedentity's organizational chart, which is subject to unilateral alterations at any time, and was not
considered as part of the GPA negotiations.  The United States argues that following a textual analysis
of the GPA, "control" is the only feasible, objective method in which one can determine whether a
non-listed entity is "attached/connected/affiliated" to  a listed entity, and therefore is covered under the
GPA.  The United States further argues that, in fact, at one point in its response, even Korea appears
to embrace the "control" concept by claiming that it did not include KAA in the February 1991
document because it "did not consider KAA to be 'controlled' enough by MOCT to include it on thelist of MOCT airport-procurement entities."
595
Legislation
Act on the Promotion of a New Airport for Seoul Metropolitan Area Construction
4.544  In response to a question from the Panel  as to why Korea did not refer to the 1991
enactments and amendments to IIA legislation in its July 1991 response, Korea states  that pursuant to
Japan - Film596, the United States is charged with knowledge of the enactment of the Seoul Airport
Act, and the significance thereof, from the date of its publication in the Official Gazette, which came
not weeks or months before the conclusion of ne gotiations regarding Korea's GPA commitments, but
instead more than two and one-half years before the conclusion of those negotiations.597  Korea argues
that by virtue of either the publication of the Act or otherwise, the United States was aware of the Act
and its significance.  Korea argues that, therefore, it was not incumbent upon Korea to provide an
answer to a question that was not even asked of it, in circumstances where the United States had
constructive and actual knowledge of the Act.598
4.545  Korea also notes that with the enactment of amendments to the Seoul Airport Act  in
December 1991, the National Assembly stated that MOCT would not be responsible for the IIAproject and that that job would go to KAA.  Korea states that the GPA significance of this fact is not
found in the Act itself, but instead stems from the fact that KAA is not now and never was listed on
any of the Annexes included in Korea's Appendix I.
599
4.546  In response, the United States argues  that this assertion is contradicted by the fact that no
version of the Seoul Airport Act  has ever stated that MOCT would not be responsible for the IIA
project.  The United States contends that, on the contrary, the Seoul Airport Act is filled with
references to MOCT authority over the project ope rator and MOCT's role in the IIA project.  The
United States notes that, significantly, the December 1991 Seoul Airport Act  amendments did not state
that the job of responsibility over the IIA project would go to KAA.  The United States notes that the
December 1991 amendments merely added KAA to the list of potential project operators of the IIA
project.  The United States further contends that the December 1991 amendments did not alter
                                                     
594 Ibid.
595 Ibid.
596 Korea's Answer to Question 9 from the Panel, dated 29 November 1999.
597 Korea's Answer to Question 1 from the Panel, dated 29 November 1999, referring to Japan - Film ,
WT/DS44/R (adopted on 22 April 1998), paragraph 10.80.
598 Korea's Answer to Question 1 from the Panel, dated 29 November 1999.
599 Korea's Answer to Question 5 from the Panel, dated 29 November 1999.WT/DS163/R
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Article 6(2) in any way, the provision which bestows upon MOCT authority to designate any project
operator for the IIA project.600
4.547  The United States contends that, moreover, Korea's statement gives the impression that the
National Assembly was responsible for designating KAA as the IIA project operator.  The United
States notes that, however, according to Korea, MOCT made the sole "internal decision" to designateKAA as project operator for the 1991-1994 portion of the IIA project.  The United States notes further
that MOCT then drafted and published the "draft legislation containing proposed amendments to the
Seoul Airport Act ."  The United States further states that Korea submitted this draft legislation to the
National Assembly, not because the National Assembly "assigned" KAA to this task, but because only
the National Assembly can pass laws in Korea.  The United States concludes that, thus, the National
Assembly merely codified a decision made by MOCT, pursuant to the authority granted to MOCT in
the Seoul Airport Act .
601
4.548  Korea states  that the appointment of KAA, in December 1991, as the entity responsible for
IIA procurement occurred "prior to the conclusion of the tariff negotiations at issue."  Korea further
argues that there is "a presumption that the United States should be held to have anticipated those
measures and it is for the United States to rebut that presumption."602
4.549  Korea reiterates that it is the United States that  bears the considerable burden of rebutting this
presumption.  Korea need not demonstrate that the United States did not anticipate to secure coverage
of the entities responsible for IIA procurement.  To effectively rebut the presumption, it is for the
United States to demonstrate, affirmatively, that it  "reasonably expected" to obtain the benefit of GPA
coverage for IIA procurement by virtue of Korea's inclusion of MOCT and the Office of Supply on its
Annex 1 list.603
4.550  In response, the United States argues  that Korea's argument is irrelevant to this case.  The
United States argues that it does not matter whether the United States had constructive or actual notice
of the enactment of the Seoul Airport Act , for the significance of the Act is simply that it confirms
MOCT's statutory authority and control over the IIA project.604
4.551  The United States reiterates that the Seoul Airport Act is replete with references to MOCT
authority over the IIA project.  The United States notes that, for example, Article 6 of the Seoul
Airport Act , while listing a range of possible "operators" (which incidentally includes "state" and
"local" governments), grants MOCT ultimate authority to select any entity to be the project operator
for the IIA project.  This is entirely consistent w ith the rights granted to MOCT under Article 94(2) of
the Aviation Act .605
4.552  The United States contends that it is important  to keep in mind that a "project operator" is
distinct and separate from the entity that has ultimate authority over the project.  The United Statesalso states that it is important to remember that Korea itself reconfirmed that the Office of Supply and
                                                     
600 US Response to Korea's Answer to Question 5 from the Panel, dated 29 November 1999.
601 Ibid.
602 Japan - Film , WT/DS44/R (adopted on 22 April 1998), paragraph 10.80.
603 Ibid. paragraph 10.72.  As further support for this principle, see EEC - Oilseeds , BISD 37S/86,
128-129 (paragraphs 147-148);  Operation of the Provisions of Article XVI , BISD 10S/201, 209 (paragraph 28)
(adopted on 21 November 1961);   Other Barriers to Trade , BISD 3S/222, 224 (paragraph 13) (adopted on
3 March 1955);  Germany - Sardines , BISD 1S/53, 58-59 (paragraph 16) (adopted on 31 October 1952);
Australian Subsidy on Ammonium Sulphate , GATT/CP.4/39, BISD II/188, 193-194 (adopted on 3 April 1950).
604 US Response to Korea's Answer to Question 1 from the Panel, dated 29 November 1999.
605 Ibid.WT/DS163/R
Page 137
the Ministry of Transportation were responsible for the IIA airport development project when it
responded to US questions in July 1991, two months after the enactment of the Seoul Airport Act .606
Aviation Act
4.553  The United States notes that the version of the Aviation Act  granting statutory authority over
airport development projects to MOCT, came into effect as a wholly amended Act on14 December 1991.  Accordingly, the United States argues that it was on notice from December 1991
onwards that MOCT retained statutory authority a nd control over all airport development projects in
Korea, including the IIA project.  In light of this, ar gues the United States, it felt confident that, from
1991 to the time when Korea submitted its final offer in December 1993 and signed the revised GPA
at Marrakesh in 1994, MOCT was the proper entity to be covered under the GPA in order for the US
to obtain non-discriminatory access to Korea's airport procurement market.  The United States notes
that to this day, the Aviation Act  remains unaltered in providing MOCT the statutory authority over
the IIA airport development project.  The United States argues that this was one of the reasons why it
was essential for the United States to negotiate MOCT's coverage under the GPA, and why the United
States was not concerned about explicitly covering IIA project operators, which MOCT could change
at will at any time (as evidenced by the shift of  IIA responsibility from KAA to KOACA and IIAC
over a span of eight years), but which would neve rtheless remain covered under the GPA because of
MOCT's ultimate control over the IIA project.
607
4.554  Korea argues in response  that the Seoul Airport Act  replaces the Aviation Act  for the
purposes of the construction of the IIA.608  Korea states that the United States, well beyond
constructive knowledge of the Seoul Airport Act , had actual knowledge of that Act throughout and
subsequent to negotiations with Korea regarding accession to the GPA.  Korea asserts that the UnitedStates' awareness of the passage of the Seoul Airport Act  and its understanding that the Seoul Airport
Act rather than the Aviation Act  regulates IIA construction is illustrated in the United States' First
Written Submission, in which it cites 17 Articles from the Seoul Airport Act  in support of its claims,
and no Articles from the Aviation Act .
609
4.555  Korea also argues that the United States' apparent assertion that its expectations regarding
which entity would be responsible for IIA construction were formed by the Aviation Act  presumes
ignorance of the Seoul Airport Act .  Korea argues that it is virtually impossible for one with
knowledge of both Acts to have concluded that the question of responsibility for construction of the
IIA was and is governed by the Aviation Act , rather than the Seoul Airport Act .610 Korea states the
purpose of the Seoul Airport Act  alone – to "specify…the matters necessary for the speedy
construction of a new airport in the Seoul Metropolitan area" – should have been enough to signal to
any remotely observant reader that the Seoul Airport Act  would regulate the IIA project.611
4.556  Korea also argues that the Seoul Airport Act , the Korea Airport Corporation Act , the Korea
Airport Construction Authority Act  and the Law on Inchon International Airport Corporation are the
"other Acts" and "other laws" referred to in the proviso  in Article 94(1) of the Aviation Act  which
allows an entity other than MOCT to implem ent IIA construction.  Korea argues that the proviso  in
Article 94(1) was triggered on a number of occasions.  Specifically, Korea notes that December 1991amendments to the Seoul Airport Act  and the Korea Airport Corporation Act  appointed KAA as the
                                                     
606 Ibid.
607 US Answer to Question 18 from the Panel, dated 29 November 1999.
608 Korea's Answer to Question 9 from the Panel, dated 29 November 1999.
609 Ibid.
610 Ibid.
611 Ibid.WT/DS163/R
Page 138
entity responsible for the IIA project612, August 1994 amendments to the Seoul Airport Act  and the
September 1994 enactment of the Korea Airport Construction Authority Act  appointed KOACA to
that role613 and February 1999 amendments to the Seoul Airport Act , together with passage of the Law
on Inchon International Airport Corporation , similarly appointed IIAC to perform this task.614  Korea
argues that the United States is charged with c onstructive knowledge – and indeed has demonstrated
actual knowledge – of the legislative events triggering the proviso  of Article 94(1).615
4.557  In response, the United States refers  to its arguments in paragraphs 4.111 and 4.114.
4.558  Korea also submits  that it is not the Seoul Airport Act  about which the United States was
unaware at the time of Korea's 1991 response.  Rather, Korea asserts that until its Second Written
Submission in these proceedings, it was the Aviation Act  about which the United States was unaware.
Korea argues that any claim by the United States that the Aviation Act  rather than the Seoul Airport
Act formed the basis for its expectations regard ing coverage of the entities responsible for IIA
procurement is nothing more than a convenient post hoc rationalization.  Korea states that this is
totally apart from the fact that the Aviation Act  was pre-empted by the Seoul Airport Act .616
Amendment of the GPA
4.559  Korea argues that the US and all of the Parties to the GPA negotiations knew that the
Uruguay Round negotiators had dropped the control test and agreed to that.  According to Korea,whatever their expectations might have been prior to rejection of the control test, reality changed in
two crucial ways.  First, as a matter of law, entities controlled by named entities, but not themselves
named, no longer could be covered.  Second, from that  point forward it was no longer reasonable to
believe that controlled entities, not themselves named, would in any way be covered.  Korea argues
that, thus, a non-violation claim based on control must fail.
617
4.560  In response to the United States' control arguments, Korea also asserts that the "control" test
was, according to the United States, "excluded" from the Uruguay Round GPA, and to the extent it
was reinserted elsewhere, can be found in Annex 3.  Korea states that whether the "control" test was
excluded altogether, or reborn in Annex 3, the United States' purported expectation of coverage for
KAA could not reasonably have been expected on the basis of any alleged "control" over it byMOCT.  Korea argues that if the "control" test was excluded, any expectation of coverage based on
"control" cannot be reasonable.  Further, Korea argues that if the "control" test was reborn in Annex 3,
then the United States could not have reasonabl y expected coverage for KAA without inclusion of
KAA on Korea's Annex 3.
618
Communications with the US Government
                                                     
612 1991 Seoul Airport Act , Article 6(1).  See also  Korea Airport Corporation Act , Article 7(5-2)
(assigning to KAA the task of "[n]ew airport construction projects as referred to subparagraph 2 of Article 2 ofthe Act on the Promotion of New Airport Construction in Seoul Metropolitan Area.").
613 1997 Seoul Airport Act , Article 6(1).  See also  Korea Airport Construction Authority Act , Article 2
(defining project with which KOACA was charged as encompassing activities "stipulated in the subparagraph 2,
Article 2, ' Seoul Airport Act '.").
614 Korea's Answer to Question 9 from the Panel, dated 29 November 1999, referring to Seoul Airport
Act, Article 6(1).  See also Law on Inchon International Airport Corporation , Article 10(1)(1) (charging IIAC
with responsibility for "[c]onstruction business of th e Metropolitan New Airport (hereinafter referred to as
Inchon International Airport) in accordance with the Article 2 of the promotional law on Metropolitan New
Airport Construction.").
615 Korea's Answer to Question 9 from the Panel, dated 29 November 1999.
616 Korea's Answer to Question 1 from the Panel, dated 29 November 1999.
617 Korea's Answer to Question 20 from the Panel, dated 29 November 1999.
618 Korea's Response to US Answer to Question 16 from the Panel, dated 29 November 1999.WT/DS163/R
Page 139
4.561  In support of its argument  that the United States was aware that KAA, rather than MOCT,
Office of Supply or any other covered entity, was in fact responsible for IIA procurement, Korea
refers  to a letter, dated 6 October 1992, from a US Senator to the Chairman of KAA, requesting
consideration of a constituent company's bid for work on the IIA project.619  Korea also refers to a
letter, dated 22 September 1992, from the Seattle City Council to the Chairman of KAA regardingthat same bid.
620  Korea then refers to a letter, dated 8 August 1992, from the Vice Chairman of KAA
to (among others) Sung Yong Kim and J.A. Corbett, staff secretaries in the Economic Section of the
US Embassy, Seoul, inviting them to attend KAA's International Symposium on Building
Metropolitan Airport on 25 August 1992.621  Korea notes that this letter states that KAA "is
designated to construct a metropolitan airport, which shall become hub center of air transportation in
east Asia."  Finally, Korea states that it had also confirmed that the then-US Ambassador to Korea, the
Honorable Donald Gregg, visited KAA during this period, and with other US officials accompanyinghim on the visit was fully briefed by KAA on the IIA project.
4.562  In response, the United argues  that nothing in the correspondence cited suggests in any way
that KAA would not be a covered entity under the GPA, or that the IIA project would not be covered
under the GPA.  The United States argues that, furthermore, none of the letters in question were to or
by US trade negotiators.  The United States asserts that, for example, it is obvious that a US Senatorwriting on behalf of a company in his State interested in participating in an IIA procurement and a
Seattle City Council member writing on behalf of the same company do not represent the United
States Government in GPA negotiating matters.  The United States contends that by contrast,
"responses to the United States' questions" during GPA negotiations by an "employee of the Ministry
of Commerce," which were "review[ed] by his superiors in advance of the [July 1991] submission"unquestionably represented Korea's official position in such negotiations and the United States' action
in relying on these responses, and assuming that they were made in good faith, was entirely
reasonable.
622
4.563  Korea also argues that, as was the case with KAA, the United States was and is aware of
KOACA's role in IIA procurement.  For support of this argument, Korea refers to a letter from the USAmbassador to Korea, addressed to the Chairman and President of KOACA, requesting consideration
of a US company's bid for work on the IIA project.
623
Communications with US Companies
4.564  In further support of its argument that the United States was aware that KAA was the IIA
procuring entity, Korea also states  that during KAA's tenure as operator of the IIA project, numerous
US companies participated in and, in fact, successfully secured procurements conducted by KAA.
Korea refers to a list of successful bids submitted by US companies to KAA during the period1992-1994 to support this statement.
624  Korea argues that even if the United States had not had direct
knowledge of KAA's responsibility for the IIA project, were it intent on achieving coverage for IIA
procurement it would have asked the numerous US firms actively and successfully bidding for the IIA
project for some basic information regarding the enti ties that would need to be "covered" by Korea's
GPA commitments to secure GPA coverage for the IIA project.
                                                     
619 Letter from US Senator Slade Gorton to Mr. Wan-Sik Yook, Chairman, KAA, 6 October 1992.
620 Letter from Council Member of Seattle City Council to Mr. Wan-Sik Yook, Chairman, KAA,
22 September 1992.
621 Letter from the Vice Chairman of KAA to Sung Yong Kim and J.A. Corbett, staff secretaries in the
Economic Section of the US Embassy Seoul, 8 August 1992.
622 US Response to Korea's Answer to Question 2 from the Panel, dated 29 November 1999.
623 Letter from US Ambassador Stephen Bosworth to Mr. Kang, Dong-Suk, Chairman & President,
KOACA, dated 3 July 1998.
624 The list includes successful bids made by US companies during the period 1992-1998.  As will be
addressed further below, another entity took over IIA procurement from KAA in August 1994.  Korea has alsoattached correspondence between KAA and US firms Greine r International Ltd. and Bechtel Aviation Services.WT/DS163/R
Page 140
4.565  Korea also argues that, like the US Government, US firms625 were aware that KOACA was
the entity responsible for IIA procurement as was th e case with KAA.  For support of this argument,
Korea refers to a list of successful bids submitted by US companies to KOACA during the period
1994-1998.626
Communications with Major Airports
4.566  Korea also states  that, coincident with the negotiation of the GPA, KAA's responsibility for
the IIA project was communicated to virtually every major airport construction expert and airport or
aviation organization in the world.  Korea refers to examples of correspondence, from the period
1991-1993, between KAA officials and the International Air Transport Association, the International
Civil Aviation Organization, the International Union of Architects, the American Institute of
Architects, the Airports Association Council Intern ational, the Civil Aviation Authority of Singapore,
the Schiphol Airport Authority, the Frankfurt Airpor t Authority, the Port Authority of New York and
New Jersey, the Los Angeles Department of Airpor ts, the Denver (Stapleton) International Airport
Office and the Dallas/Fort Worth International Airport.  Correspondence between KAA and noted
architects and architectural firms is also attached, including correspondence with I.M. Pei, Cesar Pelli
& Associates, Richard Meier & Partners, Ricardo Bofill, Sir Norman Foster and Alco Rossi.  Korea
states that with all of these noted experts aware of KAA's role, it is difficult to imagine that the UnitedStates was not also itself aware of KAA's status as the entity responsible for IIA construction.
627
EC's March 1993 Report and Other EC Communications
4.567  Korea notes  that in March 1993, the European Communities stated that Korea's GPA
proposal contained "no offer regarding airports."628
4.568  In response to a question from the Panel regarding a letter from the European Communities to
the Korean Director of Multilateral Trade Affairs, dated 24 November 1993, which, according to
Korea, allegedly indicates that Korea had offered to cover airports, Korea notes that although the
letter presumes that a response was made by Korea, Korea has been unable to locate any reply to the
European Communities' letter of 24 November 1993.  Korea also notes that until Korea's
15 December 1993 final offer, which "for the first time" included General Note 1(b), the EuropeanCommunities may have considered procurements by the Regional Aviation Offices to be part of
Korea's offer.  Korea notes these Offices are mentioned in Korea's February 1991 Supplementary
Explanation .
629
4.569  Korea notes that the November 1993 letter could of course mean that, in March 1993, the
statement by a subdivision of the European Commission that Korea had made "no offer regarding
                                                     
625 Korea refers to press releases by US firms, AT&T, dated 11 March 1997, and ARINC, dated
10 September 1998, announcing the conclusion of contracts with KOACA.
626 The list includes successful bids made by US companies during the period 1992-1998.  Korea notes
that KAA was responsible for procurement during the period December 1991 to September 1994.
627 Korea refers to KAA correspondence with the International Air Transport Association, the
International Civil Aviation Organization, the International Union of Architects, the American Institute ofArchitects, the Airports Association Council International, the Civil Aviation Authority of Singapore, theSchiphol Airport Authority, the Frankfurt Airport Authority, the Port Authority of New York and New Jersey,the Los Angeles Department of Airports, the Denver (Stapleton) International Airport Office, the Dallas/FortWorth International Airport, I.M. Pei, Cesar Pelli & Associates, Richard Meier & Partners, Ricardo Bofill,
Sir Norman Foster and Alco Rossi.
628 Report from the Commission Concerning Negotiations Regarding Access to Third Countries'
Markets in the Fields Covered by Directive 90/ 531/EEC (the Utilities Direct ive), COM (93) 80 final,
3 March 1993, p. 7.
629 Korea's Answer to Question 6 from the Panel, dated 29 November 1999.WT/DS163/R
Page 141
airports" was inaccurate.630  However, Korea argues that whatever its accuracy, this statement spoke
to the European Communities' expectations at that time; it expected that Korea's offer would not
include procurements by any entities responsible for airport procurement, including IIA procurement.
Korea states that if those expectations changed with the European Communities' 24 November 1993
letter, available evidence, in the form of Korea's February 1991 Supplementary Explanation , suggest
that the reference was to procurements by the  Regional Aviation Offices.  Korea states that no
evidence provided by the European Communities suggests that the entities responsible for IIA
procurement were to be included in Korea's Annex 1 offer.631
Reciprocal Derogations
4.570  In response to a question from the Panel, the United States argues  that it interpreted the
reciprocal airport derogations between the European Communities and Korea as an indication that
Korea and the EC could not agree that each was offering "comparable and effective access [to their]relevant markets."
632  The United States further states that, moreover, it interpreted these derogations
as a confirmation that Korea's GPA offer indeed included coverage of "new airport construction"
under its Annex 1, consistent with Korea's July 1991 statement regarding the coverage of MOCT and
the Office of Supply – as entities responsible for the IIA project under Annex 1.  The United States
contends that it was able to draw this conclusion because Korea's country-specific derogation, whichlisted the EC and others, did not include the United States when carving out "procurement for airports
by the entities listed in Annex 1."
633
4.571  Korea responds  that the reciprocal airport derogations between the European Communities
and Korea, recorded for Korea's part in General Note 1(b) to its Appendix I, did not as the United
States argues serve as "confirmation that Korea's GP A offer indeed included coverage of 'new airport
construction' under its Annex 1."634  Korea quotes the actual language of its General Note 1(b), which
suggests simply that "procurement for airports by the entities listed in Annex 1" would be subject to
GPA-consistent terms for US suppliers and service suppliers.  According to Korea, there is no
specification in General Note 1(b) of Annex 1 procurement by entities engaging in " new airport
construction."
4.572  Korea then states that the United States was aware of Annex 1 entities – specifically, MOCT's
Regional Aviation Offices – undertaking "procurement for airports," whether related to new airport
construction or work on existing airports.  Korea argues that the United States, therefore, knew that
what Korea's General Note 1(b) meant (and means) was that Annex 1 entities conducting
procurements for airports exist, and that they are MOCT's Regional Aviation Offices.
(ii) Conduct And Events
Availability of Government Organization Act
4.573  Korea argues  that the United States knew, or should have known, that KAA was not
included on Korea's Annex 1 by virtue of Note 1 ther eto - that is, it knew, or should have known, that
KAA was not a "subordinate linear organization," as prescribed by the Korean Government
Organization Act .  Korea states that that Act, including the list of "subordinate linear organizations"
                                                     
630 Report from the Commission Concerning Negotiations Regarding Access to Third Countries'
Markets in the Fields Covered by Directive 90/531/ EEC (The Utilities Directiv e), COM (93) 80 final,
3 March 1993, p. 7.
631 Korea's Answer to Question 6 from the Panel, dated 29 November 1999.
632 See EC General Note 1 and Korea General Note 1 to Appendix I of the GPA.
633 US Answer to Question 17 from the Panel, dated 29 November 1999.
634 Korea's Comments on the United States' Answer to Question 17 from the Panel, dated
29 November 1999,  quoting  the United States’ Answer to Question 17.WT/DS163/R
Page 142
identified at Article 2(3) therein635, was at the United States' disposal during negotiations with Korea
regarding its commitments to the GPA.636  KAA is not included in the list provided in Article 2(3) to
the Act.
Failure to Enquire
4.574  The United States argues  that the designation of KAA as IIA procurement operator came as
a surprise to the United States, which had not been informed by Korea of this action.  The United
States asserts that, however, even assuming the United States was aware that KAA had been
designated the procurement operator at that time, there would have been no need for the United States
to take any specific action in response.  The United States argues that as a subsidiary organization of
MOCT, KAA remains covered under Annex 1 of the GPA because under a reading of the plain text of
Annex 1, (1) all subsidiary organizations of "central government entities" are automatically covered
under Annex 1 unless otherwise specified and (2) KAA's procurements are, in fact, procurements byMOCT, pursuant to Article I of the GPA.
4.575  The United States argues that. moreover, the United States would not have taken any specific
action in response to Korea's designation of KAA as project operator, because MOCT retains statutory
authority under Korean law to carry out airport construction projects.  The United States notes that the
Aviation Act  states that even though the Minister of Construction and Transportation can grant
permission to another government entity to assume the role of project operator for a given project,
"airport development projects shall be carried out by the Minister of Construction and
Transportation.
637  The United States also notes that the Aviation Act  defines "airport development
projects" as "projects related to new construction, enlargement or improvement of airport facilities,
executed under this Act."638  The United States argues that, thus, because MOCT remained the entity
responsible for carrying out airport development projects, there would be no reason for the United
States to take any specific action following the designation of KAA as project operator.
4.576  Finally, the United States notes that documents provided by Korea indicate that even after
KAA was designated by MOCT to be the project operator for the IIA project, KAA procurements
were conducted by the Office of Supply – the entity responsible for procurement for Annex 1 entitiesand, as Korea's July 1991 responses indicate, the entity "responsible . . . for procurement of goods and
services relating to new airport construction.  The United States also refers to its arguments in
paragraph 4.520.
4.577  In response, Korea argues  that in the two-year period between December 1991 when KAA's
role in the IIA project was publicly announced and December 1993 when Korea submitted its final
GPA offer, the United States did not once inquire whether or not KAA was included in Korea's offer.
Korea further notes that the United States expressed surprise at the designation of KAA as theresponsible IIA entity.  Korea states that what is particularly unusual, in view of this surprise, is that at
no time during the nearly two and one-half years be tween this designation and the signing of the
GPA, did the United States ever note its surprise and ask where KAA appeared in Korea's Appendix I.
4.578  Korea further argues that even had the United States not been aware of the May 1991
enactment of the Seoul Airport Act , it has admitted that in December 1991, a full two years before the
completion of negotiations for Korea's accession to the GPA, it was "surprised" at amendments to the
Seoul Airport Act  appointing KAA as the entity responsible for the IIA project.
639  Korea states that to
                                                     
635 Government Organization Act , Article 2(3).
636 Reference to the Government Organization Act  was included in Note 1, Annex 1 to Korea's initial
GPA offer.  Korea's Initial Offer to Accede to th e Tokyo Round Agreement on Government Procurement,
25 June 1990.
637 Aviation Act , Article 1.
638 Ibid.  Article 2:8.
639 US Answer to Question 23 from the Panel, dated 3 November 1999.WT/DS163/R
Page 143
be "surprised," it most certainly must actually have been aware of the Act, quite apart from the
constructive knowledge with which it is charged.  Ko rea argues that whether or not Korea expressly
told the United States about the Seoul Airport Act  in July 1991, therefore, the United States most
certainly became aware of the Act and its implications in December 1991 - a full two years before the
completion of negotiations for Korea's accession to the GPA.640
4.579  In response, the United States argues  that it is clear from the US comment regarding being
surprised that the United States never indicated that it was surprised by Korea's action in 1991.  The
United States contends that this is pure conjecture by Korea;  a plain reading of the second sentence
confirms this.  Indeed, to be surprised by Korea's action, the United States must have been aware of it.
Yet the second sentence above begins, "even assuming the United States were aware . . .," which
indicates that the United States was not aware at the time, and therefore could not have been surprised
at that time.641
4.580  Korea also states  that given the massive effort to publicize KAA's role, no reasonable person
would have supposed that a specific overture to the United States was necessary.  Further, Korea
asserts that given the apparent importance to the United States of attaining coverage for airport
procurement entities, and given the absence of KAA from the terms of Korea's offer, the failure of the
United States to seek clarification, at any time in the more than two-year period remaining in the GPA
negotiations, is fatal to its claim.
4.581  Korea argues that, in these circumstances, the United States' failure to seek clarification can
only mean one of two things:  either it lost track of its objective, or it understood that it had not
secured coverage of the entities responsible for IIA procurement.642
4.582  In either case, Korea states that it cannot be accorded responsibility for the United States'
failure.  Korea states that this does not indicate that Korea acted in bad faith and does not suggest that
Korea employed a strategy of negotiation by stealth.  Korea states that it is merely recognition that the
United States' claim that it anticipated coverage of the entities responsible for IIA procurement was
not reasonable.
4.583  Korea further argues that the United States cannot escape from this failure by arguing that it
bargained in good faith for the coverage of the IIA project, without regard to which particular entity
undertook procurements for the project. Korea observes in this respect that its Annex 1 commits
"entities" rather than "projects."  Korea argues that neither the United States nor any other party
negotiated for coverage of projects under Korea's Annex 1.  Korea notes that Annex 1, as opposed to
other Korean Annexes, lists entities rather than projects.
4.584  In response, the United States argues  that this assertion by Korea is contradicted by the
very evidence provided in this dispute.  The United States argues that during Korea's GPA accessionnegotiations, the United States specifically asked for "coverage of projects under Annex 1" by
requesting Korea to identify "all Ministries that will be responsible for the procurement of goods and
services related to new airport construction."  The Un ited States contends that Korea conceded that it
understood "that the United States' question was about the IIA project," and responded by giving "as
much information as was available about what was at the time a fledgling project."  The United Statesconcludes that, thus, it is reasonable for the United States to expect that the new airport construction,
                                                     
640 Korea's Answer to Question 1 from the Panel, dated 29 November 1999.
641 US Response to Korea's Answer to Question 1 from the Panel, dated 29 November 1999.
642 Letter to Mr. Park, Sang-Kyun, Director, North American Trade Team, Korean Ministry of Foreign
Affairs & Trade, from Karen Ware, Deputy Senior Commercial Officer, US Embassy Seoul, 6 July 1998, p. 2("During the period before KOACA formally is brought under the GPA, we propose that it agree to measuresthat would bring its procurement policies and practices de facto into conformity with the internationally-acceptable provisions of the GPA . . .").WT/DS163/R
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i.e., the Inchon airport development project, is covered under Korea's Annex 1 of the GPA.  Indeed,
the EC also considered it reasonable to expect coverage for the IIA project under the GPA.643
4.585  The United States contends that it would not have taken any specific action in response to
Korea's designation of KAA as project operator, because MOCT retains statutory authority under
Korean law to carry out airport construction projects.  The United States notes that the Aviation Act  of
the Republic of Korea states that even though the Minister of Construction and Transportation can
grant permission to another government entity to assume the role of project operator for a given
project, "airport development projects shall be carried out by the Minister of Construction and
Transportation."644  The United States further notes that the Aviation Act  defines "airport development
projects" as "projects related to new construction, enlargement or improvement of airport facilities,
executed under this Act."645  The United States contends that, thus, because MOCT remained the
entity responsible for carrying out airport development projects, there would be no reason for theUnited States to take any specific action following the designation of KAA as project operator.
646  The
United States also notes that this version of the Aviation Act  includes amendments through
December 1997, and, therefore, also applied when KOACA was designated as the operator of the IIA
construction project.647
4.586  Further, the United States notes that documents provided by Korea indicate that even after
KAA was designated by MOCT to be the project operator for the Inchon Airport project, KAA
procurements were conducted by the Office of Supply - the entity responsible for procurement for
Annex 1 entities, and, as Korea's July 1991 responses indicate, the entity "responsible . . . for
procurement of goods and services relating to the new airport construction."  The United States also
asserts that Korea's exhibits show that the Office of Supply at times administered procurements forKAA and the Seoul and Pusan Regional Aviation Offices which Korea admits are covered under
Korea's Annex 1 through MOCT's status as a central government entity, jointly on a single
procurement notice.  The United States asserts that this further reflects the fact that KAA
procurement, like that of the Seoul and Pusan Regional Aviation Offices, is actually procurement by
MOCT.
648  The United States also submits that if KAA had independent procurement authority, then
presumably the Office of Supply would not have been issuing KAA procurement notices, let alone
issuing them together with entities Korea agrees are covered under Annex 1 because of their
relationship to MOCT.649
4.587  Further, in response to a question from the Panel, the United States notes that even assuming
that US negotiators had been informed by private US companies or state and local aviation officials
that KAA was now the operator of the project, it is unlikely that the United States would have
requested clarification of the status of IIA procurements.  In support of this argument, the UnitedStates notes it was not relevant that KAA was operating under its own procurement regulations.  The
United States argues that within a given "central government entity," subordinate entities often issue
their own internal regulations that apply only to that  entity.  The United States notes that, for example,
there are separate regulations that relate solely to the New Airport Development Group.  The United
States further notes that, moreover, the regulations of KAA (like all other subordinate units of coveredcentral government agencies) would be required to come into conformity with the GPA only after the
Agreement entered into force for Korea.
650  More specifically, the United States notes that these
                                                     
643 US Response to Korea's Answer to Question 4 from the Panel, dated 29 November 1999, referring
to the European Communities' Answer to Ques tion 5 from the Panel, dated 3 November 1999.
644 Aviation Act , Act. No. 4435, 14 December 1991, Articles 94-95.
645 Ibid. Article 2:8.
646 US Answer to Question 23 from the Panel, dated 3 November 1999.
647 US Answer to Question 26 from the Panel, dated 3 November 1999.
648 US Answer to Question 23 from the Panel, dated 3 November 1999.
649 US Answer to Question 26 from the Panel, dated 3 November 1999.
650 US Answer to Question 25(a) from the Panel, dated 3 November 1999.  The United States further
notes that, in fact, the four primary enforcement decrees and regulations relating to the Act Relating to ContractsWT/DS163/R
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central government regulations did not come into existence until 1997 when Korea implemented the
GPA, so the fact that KAA did not utilize the central government regulations for IIA procurement
would not be of concern to the United States in 1991-1993.651
4.588  In response, Korea notes  that it is not true that KAA's use of its own Contract
Administration Regulations for IIA procurements during the period 1991-1994 was merely a result ofthe fact that "central government [procurement] regulations did not come into existence until 1997."
Korea states that the government procurement regulations in effect during this period were included in
the Korean Budget and Accounting Act .  Korea notes that rather than being required to follow those
rules, KAA drafted and adopted its own regulations.
4.589  Korea also notes that although it is true that the Office of Supply has procured for KAA, this
does not mean that those procurements are covered by the GPA since Office of Supply procurements
are only covered when made for entities listed on Annex 1.  KAA is not, Korea asserts, included onAnnex 1.
652  Korea also states that the Office of Supply has not in fact procured for the IIA653, and that
the procurements cited by the United States654, were not for the IIA, which is exclusively the subject
of the Panel's terms of reference.655
Failure to Inform
4.590  The United States contends  that despite Korea's claim that "virtually every major airport
construction expert and airport or aviation organization in the world" was aware that MOCT shifted
IIA procurement from the New Airport Development Group to KAA, Korea did not once inform its
GPA negotiating partners of this supposed change in its negotiating position.  The United States
argues that Korea cannot expect to alter its concessions offer during international trade negotiations
without directly and officially notifying the relevant government representatives involved.
4.591  The United States also states that it remains very concerned about Korea's assertions that if a
country makes an express material representation to its negotiating partner, but then later it changes
its mind, it is under no obligation to inform its negotiating partner, yet it can still expect its express
representation to be no longer valid.  The United States argues that by making express commitments
which Korea should have expected its negotiating partners would rely on, and then refraining frominforming them when it acted to change the status  quo to which it had committed, Korea created a
legitimate expectation among its GPA negotiating partners that its airport procurement was covered
through its listing of MOCT and the Office of Supply.
4.592  Korea argues in response  that the United States implicitly asserts that Korea altered its offer
during negotiations without directly and officially notifying the United States and other concerned
governments.  Korea states that there are a number of reasons why this assertion is not applicable.
First, it assumes that Korea's "concessions offer" was altered during negotiations.  Korea notes thatthe only "evidence" put forward by the United States to support this argument is Korea's July 1991
response to the US inquiry.  Korea argues that this is hardly a "concessions offer."  According to
Korea, this was a response to an inquiry.
4.593  Korea states that, second, even if the July 1991 response is deemed to be a "concessions
offer," and even if it is interpreted as the United  States would interpret it, Korea, through the formal
                                                                                                                                                                    
to Which a State is a Party—Korea's primary procur ement law implementing its GPA commitments, entered
into effect on 31 December 1996, one day before Korea's GPA commitments took effect.
651 US Answer to Question 26 from the Panel, dated 3 November 1999.
652 Korea's Statement for the Second Meeting of the Panel, paragraph 47.
653 Korea's Answer to Question 2 from the Panel, dated 29 November 1999.
654 Exhibits Kor-61D and Kor-61E.
655 Korea's Comments on the United States' Answer to Question 22 from the Panel, dated
29 November 1999.WT/DS163/R
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designation of KAA as the responsible entity, by action of the National Assembly in December 1991,
did notify the United States of its position.  This was more than constructive notice.  Korea asserts
that the United States had actual notice and that the United States was even "surprised" by it.
(d) Evidence Following Korea's Accession
(i) The US July 1998 Communications
4.594  Korea argues  that the United States was also aware of KOACA's role in IIA procurement.
Korea argues that in a July 1998 letter from the US Embassy in Seoul to the Korean Ministry of
Foreign Affairs & Trade, the United States acknowledged that KAA's successor for the IIA project,
KOACA, was not covered.656
4.595  Korea notes that in the July 1998 letter, the United States proposed that "[d]uring the period
before KOACA formally is brought under the GPA," Korea "agrees to measures that would bring its
procurement policies and practices de facto into conformity with the internationally-acceptable
provisions of the GPA . . ."657  Korea argues that if KOACA is  not yet "formally brought under the
GPA," it is not a covered entity, thus necessitating the US request that KOACA bring its practices "de
facto into conformity with the . . . GPA."  Korea further argues that had the United States consideredthat KOACA was a covered entity, it would surely not have requested de facto compliance with the
GPA;  it would have demanded de jure  compliance.
(ii) MOCT's Website
4.596  Korea notes  that the events to which the United States points to support its claimed
expectations all date after the signing of the GPA.  Korea states that this is particularly true of
MOCT's website, which was not created until 1997.  Korea argues that regardless of what claims
MOCT makes on that website, those claims could in no way have influenced the United States three
years earlier in April 1994, when the GPA was signed.
V. ARGUMENTS OF THIRD PARTIES (EUROPEAN COMMUNITIES)
658
A. ENTITIES COVERED UNDER KOREA 'S APPENDIX I OF THE GPA
1. Interpretation of Appendix I and Notes
5.1 The European Communities argues  that, in accordance with Article 18 of the Vienna
Convention on the Law of Treaties , regard must be had to the common intentions of the Parties in
determining the content and scope of their respective obligations under the GPA.
5.2 In support, the European Communities referred to the Appellate Body decision in the LAN
case where it was stated that659:
                                                     
656 Letter to Mr. Park, Sang-Kyun, Director, North American Trade Team, Korean Ministry of Foreign
Affairs & Trade, from Karen Ware, Deputy Senior Commercial Officer, US Embassy Seoul, 6 July 1998, p. 2("During the period before KOACA formally is brought under the GPA, we propose that it agree to measuresthat would bring its procurement policies and practices de facto into conformity with the internationally-acceptable provisions of the GPA . . .").
657 Letter to Mr. Park, Sang-Kyun, Director, North American Trade Team, Korean Ministry of Foreign
Affairs & Trade, from Karen Ware, Deputy Senior Commercial Officer, US Embassy Seoul, 6 July 1998, p. 2.
658 While Japan also reserved its rights as a Third Party to this dispute, it did not make any submissions
for this case.
659 AB-1998-2, WT/DS62/AB/R-WT/DS67/AB/R-WT/DS68/AB/R of 5 June 1998, paragraph 84.WT/DS163/R
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"The purpose of treaty interpretation under Article 31 of the Vienna Convention is to
ascertain the common intentions of the parties.  These common intentions cannot be
ascertained on the basis of the subjective and unilaterally determined "expectations"
of one of the parties to a treaty.  Tariff concessions provided for in a Member's
Schedule -- the interpretation of which is at issue here -- are reciprocal and resultfrom a mutually-advantageous negotiation between importing and exporting
Members."
5.3 The European Communities argues that the same reasoning, mutatis mutandis , should apply
to this case.
5.4 The European Communities further argues that th e issue of what was the intention of Korea
during the negotiations is legally irrelevant.  Ac cording to the European Communities, the only matter
that counts is how the common intention of the GPA Contracting Parties were expressed in the actualtext of the agreement, having regard to the ordi nary meaning of its terms in their context and the
object and purpose of the Agreement.
660
2. Annex 1, Appendix I: The Scope of "Central Government Entities"
(a) The Ordinary Meaning of "Central Government Entities"
5.5 The European Communities believes  that the definition in Korea's GPA concession which
includes the Ministry of Transport and Construction implies the inclusion of all entities hierarchically
under that Ministry.  The European Communities argues that the entities responsible for IIA's
construction remained hierarchically subject to MOCT after 1991, and, further, were so on
15 April 1994.661
(b) The "Control" Test
5.6 The European Communities argues  that the "control" test proposed by the United States to
determine whether certain entities are covered by Annex 1 of the GPA is an incorrect yardstick in
order to measure the extent of Korea's obligations under the GPA.
5.7 The European Communities discusses , by way of illustrative argument, the hypothetical
case of procurement in the United States in similar circumstances to that which exist for the IIA
project.  Specifically, the European Communities considers, for example, the case of construction of a
new North Dakota International Airport where the US Government transfers responsibility for the
project to one of the authorities of a state which is not covered by the GPA.  The European
Communities states that, in such a case, the issue would not be, as the US suggests, whether that
procurement is 'guided', 'supervised', 'inspected' or 'directed' by any covered entity.  The EuropeanCommunities further argues that, in fact, the relations between the federal government's covered
entities and North Dakota's authorities woul d probably not correspond to those definitions.
5.8 The European Communities states that, in its view, the US would not be able to escape its
obligations under the GPA which it undertook in 1994 by merely transferring responsibility to a
non-covered entity in such a case.  Rather, the United States would be obliged to duly notify the otherGPA Contracting Parties of the transfer under Article XXIV:6 and to follow entirely the procedures
laid down in that provision.
                                                     
660 EC's Answers to Panel's Questions, dated 29 November 1999, Preliminary Observations citing
Article 31 of the Vienna Convention .
661 EC's Answer to Question 5 from the Panel, dated 29 November 1999.WT/DS163/R
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3. Annex 1, Appendix I:  Note 1
(a) Ordinary Meaning of Note 1 to Annex 1
5.9 The European Communities refers  to what it calls a "novel" interpretation by Korea of its
Note 1 to Annex 1.  The European Communities quotes the Korean argument as follows:
"(...) Note 1 to Korea's Annex 1 provides the exclusive means by which to identify as
Annex 1 covered entities those entities that, while not literally listed on Annex 1, are
nonetheless considered Annex 1 covered entities by virtue of their relationships with
entities listed on Annex 1.  Under the ordinary meaning of Note 1 to Korea's
Annex 1, the Panel is directed, exclusively, to the Government Organization Act of
the Republic of Korea to determine whether particular entities not specifically
included in Annex 1 are nonetheless considered covered entities by virtue of theirstatus as subordinate linear organizations, special local administrative organs or
attached organs."
5.10 The European Communities argues that the interpretation of Note 1 suggested by Korea does
not correspond to its ordinary meaning.  The European Communities asserts that according to the
ordinary meaning and the syntax of the English language, the part of the sentence in Note 1 "asprescribed in the Government Organization Act  of the Republic of Korea" can in fact only be a
reference to the preceding words "attached organs" and not also to the earlier part – that is,
"subordinate linear organizations" and to "local administrative organs."  The European Communities
further argues that, in fact, in order for this latter interpretation to apply, the text should have included
a comma after the word "organ."  However, the European Communities notes that the comma doesnot appear in the text.
5.11 The European Communities argues that the only correct reading of Note 1 is as follows: "The
above central government entities include their subordinate linear organizations [like KAA, KOACA
or IIAC];  special local administrative organs;  and attached organs as prescribed in the Government
Organization Act  of the Republic of Korea."
5.12 The European Communities argues that this interpretation is confirmed by the text of
Article 2(3) of the Korean Government Organization Act and by comments made by Korea:
"(...) Article 2(3) [of the Government Organization Act of the Republic of Korea]–
both in its current form and as it existed during the negotiations leading up to the
submission by Korea of its final offer list for accession to the GPA – identifies not
entities, but officials within a ministry's hierarchy."
5.13 The European Communities states that, thus, the words "as prescribed in the Government
Organization Act of the Republic of Korea" logically cannot refer to "their subordinate linear
organizations" since the Act identifies, according to Korea's own interpretation, officials, not
organizations.
5.14 In response, Korea states that the European Communities arguments regarding
interpretation of Article 2(3) of the Government Organizations Act  are erroneous.  Korea states that
the modification of Note 1 offered by the European Communities, itself proves the point.  Korea
states that had it meant the reference to the Government Organization Act  to modify only the term
"attached organs," it would have used the semi-colons inserted by the European Communities after
the terms "subordinate linear organizations" and "special local administrative organs."  Korea notes
that it did not do so.WT/DS163/R
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5.15 Korea notes that, moreover, the fact that the rather unusual and unique English terms
"subordinate linear organizations" and "special local administrative organs" are used and are
specifically defined in the first three articles of the Government Organization Act  i s  m o r e  t h a n
coincidence.  Korea states that it confirms that the reference to the Government Organization Act  in
Note 1 is to modify those terms of art as well as th e term "attached organs," defined in Article 4 of the
Government Organization Act .  Korea further states that all three of the terms in Note 1 to Korea's
Annex 1 are defined "as prescribed in the Government Organization Act  of the Republic of Korea."
Korea concludes that no other reading of that language is sensible.
(b) Are the IIA Procuring Entities Subordinate Linear Organizations?
5.16 The European Communities argues  that there is clear evidence indicating that KAA,
KOACA and IIAC are "subsidiary organizations" within the meaning of the Government
Organization Act .
5.17 The European Communities notes that at the time  of the entry into force of the GPA, MOCT
was in charge of aviation construction works.
5.18 The European Communities states that by Korea's own admission:
KAA itself was established (under the name "Korea International Airports
Authority") on 30 May 1980 as an independent public corporation pursuant to the
International Airport Management Corporation Act, as enacted on
28 December 1979…662
The chairman, deputy chairmen and auditor [of KAA] are [were] appointed byMOCT…
663  KAA is [was] subject to the 'direction and supervision' of the MOCT,
which as stated in Article 28(1) of the Korea Airport Corporation Act permits MOCT
to require KAA to submit to certain reporting and inspection requirements concerning
activities of the Corporation.  Specifically, pursuant to Article 28(2) of the Korea
Airport Corporation Act, MOCT is to ensure that KAA officials do not commit
'unlawful or unreasonable acts.664
5.19 The European Communities argues that it follows that, at the time of the signature of the
GPA, Korea itself admits that KAA was a "subordina te linear organization" within the meaning of the
Government Organization Act  (i.e., a subsidiary or subordinate body) of MOCT which had a very
large degree of control over KAA.  In the view of the European Communities, Korea's own statements
confirms this.  The European Communities also claim that the clear understanding of the entire
business community and of all the other GPA Contracting Parties on 15 April 1994 was that MOCT
was in fact running the entire Inchon Airport business and that KAA was nothing more than anarticulation of such Ministries.
5.20 The European Communities concludes that KAA should be considered as
"'attached/connected/affiliated' etc." to MOCT because  of the control or decisive influence that the
MOCT has over the KAA and, thus, over its procurement procedures.  According to the European
Communities, the KAA is, therefore, covered by the definition of "subordinate linear organizations"in Appendix I, Note 1 to Annex 1, of the Korean concession.
665
                                                     
662 Korea's First Written Submission, paragraph 23.
663 Ibid.  paragraph 24.
664 Ibid.  paragraph 25.
665 EC's Answer to Question 7 from the Panel, dated 29 November 1999.WT/DS163/R
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4. Appendix I:  Note 1(b)
5.21 The European Communities asserts that procurem ent for airports is covered by the original
GPA Korean obligations.  The European Communities argues that this is confirmed by the text of
General Note 1(b) in Appendix I, which expressly subjects "procurement for airports by the entities
listed in Annex 1" to a reciprocity clause vis-à-vis  the European Communities and some other
European Contracting Parties.
5.22 In response, Korea notes  that in March 1993 the European Communities stated that Korea
had made "no offer regarding airports."  Korea states that the EC now asserts that this March 1993
statement was in reference to Korea's exclusion of the EC from airport procurement via General
Note 1(b).666  Korea further states that, however, this assertion follows acknowledgement by the
European Communities that General Note 1(b) was added "for the first time" in Korea's third offer,
dated 14 December 1993.667  Korea argues that by its own chronology, the European Communities
could not have known of Korea's General Note 1(b) until December 1993.  In Korea's view, its
statement concerning "no offer regarding airports" nine months earlier, in March, could not have
referred to General Note 1(b).  Korea states that, more importantly, the EC's statement in March 1993
that Korea made "no offer regarding airports" means all airports, which, according to Korea, includes
the IIA.  Korea argues that, whatever the accuracy of the EC statement in March 1993, it demonstratesthat the EC did not expect coverage for all airports, including the IIA.
5.23 In response to a question from the Panel, the European Communities argues  that during
bilateral meetings between Korea and the European Communities in November and December 1993,
Korea "declared" that airports were covered.  In support of this argument, the European Communities
produced a letter from the Commission of the European  Communities to the Korean Ministry of Trade
and Industry, dated 24 November 1993, which stated:
"With regard to the inclusion of airports in your offer, you and your colleagues
pointed out that generally they depend on the Ministry of Transportation, which is
offered.  I would be most grateful if y ou could provide me with some more detail
about which airports are included in your offer by virtue of the inclusion of theMinistry of Transportation, or are otherwise included.  Furthermore, if airports under
the Ministry of Transportation are covered, does that imply that OSROK carries out
their procurement on their behalf? Does that also apply to ports which are under the
authority of the Korea Maritime and Port Administration?"
668
5.24 In responding to the Panel's question, the European Communities also refers to an internal
Commission document, dated 3 December 1993, which stated:
"Airports
The Korean side has explained that a number of major cities (Seoul, Pusang), which
are offered, control their airports in co-operation with the Ministry of Transportation.
We have requested confirmation in writing."669
5.25 Korea responds  that its February 1991 Supplementary Explanation  indicates that the
24 November 1993 EC letter was referring to procurements by MOCT's Seoul and Pusan Regional
Aviation Offices.  Moreover, according to Korea, the 3 December 1993 internal EC note supports this
conclusion.  The 3 December 1993 note refers to Korea's offer of coverage for "a number of major
                                                     
666 EC Answer to Question 4 from the Panel, dated 3 November 1999.
667 EC Answer to Question 3 (point 5) from the Panel, dated 3 November 1999.
668 Annex IV to EC Answers to Question 3 from the Panel, dated 3 November 1999.
669 Annex V to EC Answers to Question 3 from the Panel, dated 3 November 1999.WT/DS163/R
Page 151
cities (Seoul, Pusang) [sic]" that "control their airports in co-operation with the Ministry of
Transportation."  Korea notes that MOCT's two Regional Aviation Offices are in fact the Seoul and
the Pusan Regional Aviation Offices, and that these two Offices are in fact covered under Korea's
Annex 1 commitment to coverage of MOCT.670
5. Amendments to the Appendix under Article XXIV:6
(a) The Obligations Under Article XXIV:6
5.26 The European Communities argues  that Korea attempted to modify its obligations under
the GPA and in so doing, failed to comply with Article XXIV:6 of the GPA.
5.27 The European Communities argues that Article XXIV:6(a) of the GPA is expressly based on
the principle of the maintenance of the balance of concessions.  According to the European
Communities, it corresponds, mutatis mutandis , to the fundamental provision of Article XXVIII
GATT 1994671 and is the expression in the GPA of the general principle of public international law
codified in Article 26 of the Vienna Convention on the Law of Treaties .
5.28 The European Communities states that, according to Article XXIV:6 of the GPA, no GPA
Contracting Party is allowed to alter in any way, either in form or in substance, its concessions as
specified in the Appendices to the GPA, unless an d until the procedures thereunder have been duly
and entirely followed.
5.29 For support of its argument, the European Communities relies upon the following statement
by the Appellate Body672:
"The chapeau of Article 5.5 clearly states that the schedule in the body of that
provision is mandatory. The word used in the chapeau is 'shall', not 'may'. There is no
qualifying language, and there is no language that permits any method other than thatset out in the schedule in Article 5.5 as a basis for the calculation of additional
duties."
5.30 The European Communities states that in cases  under both Article XXIV:6(a) and (b), a
procedure is foreseen with ultimately the necessity of 'compensatory adjustments.'  According to the
European Communities, if the word 'shall' in either paragraph could be interpreted as anything lessthan a binding obligation, both paragraphs would become redundant.  The European Communities
states, in the words of the Appellate Body:
"[o]ne of the corollaries of the 'general rule of interpretation' in the Vienna
Convention is that interpretation must give meaning and effect to all the terms of the
treaty. An interpreter is not free to adopt  a reading that would result in reducing
whole clauses or paragraphs of a treaty to redundancy or inutility."
673
(b) Application of Article XXIV:6 to the Present Case
5.31 The European Communities argues  that, notwithstanding these clear and indisputable
obligations, Korea did not follow the procedures under Article XXIV:6.
                                                     
670 Korea's Response to the European Communities' Answer to Question 1 from the Panel, dated
29 November 1999.
671 The European Communities refers in particular to Article XXVIII.2.
672 European Communities - Measures Affecting The Importation Of Certain Poultry Products ,
AB-1998-3, WT/DS69/AB/R of 13 July 1998 at § 165.
673 United States - Reformulated Gas , WT/DS2/9, Appellate Body report, p. 23.  See also Appellate
Body report in Japan - Alcohol , WT/DS8/AB/R at section D.WT/DS163/R
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5.32 The European Communities argues that Korea fa iled to notify the creation of KOACA, the
alleged transfer of the authority for airport construction procurement to that entity, the alleged
separation of that entity from the Ministry of Transport, and the transformation of KOACA into IIAC
under Article XXIV:6.
5.33 The European Communities argues that Korea cannot claim now that KOACA and/or IIAC
are not covered alleging ex post  that they are separate from those covered in the original concession
because it will automatically admit that it did not of fer to the other GPA Contracting Parties, as it was
unconditionally compelled, compensatory adjustments, with a view to maintaining a balance of rights
and obligations and a comparable level of mutually agreed coverage.
5.34 In the view of the European Communities, the onl y relevant date that determines the point of
reference for the implementation of Article XXIV:6 procedures is 15 April 1994 being the date of the
official conclusion of the Uruguay Round and of signature of the GPA by all Contracting Parties,including Korea.
5.35 In support of its argument, the European Communities refers to Article 18 of the Vienna
Convention on the Law of Treaties  which states as follows:
"[a] State is obliged to refrain from acts which would defeat the object and purpose of
a treaty when:
(a) it has signed the treaty or has exchanged instruments constituting the treaty
subject to ratification, acceptance or approval, until it shall have made its
intention clear not to become a party to the treaty; or
(b) it has expressed its consent to be bound by the treaty, pending the entry into
force of the treaty and provided that such entry into force is not undulydelayed."
5.36 The European Communities refers to the Appellate Body decision in the LAN
674 case where it
stated that:
"A Schedule is made an integral part of the GATT 1994 by Article II:7 of the
GATT 1994.  Therefore, the concessions provided for in that Schedule are part of theterms of the treaty."
5.37 The European Communities argues that the same conclusion must be drawn from
Article XXIV:12 of the GPA.
5.38 The European Communities further argues that th e relevant date for Korean legislation and
practice to be in conformity with the 1994 GPA was the date of entry into force of the 1994 GPA (for
Korea: 1 January 1997), and thereafter.  The European Communities states that Korea was, in its
view, entitled to change its legislation before its entry into force, as long as it ensured that it compliedfrom 1 January 1997 onwards with its obligations as they were undertaken on 15 April 1994.
675
5.39 The European Communities argues that, as from 1 January 1997676, pursuant to
Article XXIV:6(a) and (b), Korea is unconditionally obliged to notify any change of its concessions as
specified in the Appendices to the GPA - in particul ar Appendix I - that may have taken place since
15 April 1994.  The European Communities notes further that if the modifications go beyond a mere
                                                     
674 AB-1998-2, WT/DS62/AB/R-WT/DS67/AB/R-WT/DS68/AB/R of 5 June 1998, paragraph 84.
675 EC's Answer to Question 5 from the Panel, dated 29 November 1999.
676 Date of application of the Agreement to Korea.WT/DS163/R
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formal correction of the text, it is unconditionally obliged to offer compensatory adjustment for those
changes, with a view to maintaining a balance of rights and obligations and a comparable level of
mutually agreed coverage provided in the GPA pr ior to the notification.  The European Communities
asserts that Korea clearly failed to do so.
5.40 Korea responds  that its decision not to notify the "transfers of authority" for IIA procurement
to and between KAA, KOACA and IIAC on the basis that those entities are not covered under the
GPA does not constitute admission that "compe nsatory adjustments" were due to other GPA
signatories.  According to Korea, since neither KAA, KOACA nor IIAC are covered, "transfers"
between them did not trigger the notification requirement of Article XXIV:6(a).  Moreover, the
"transfer" of IIA procurement authority to KAA took place in December 1991, at which time Korea
was not bound by any GPA obligations, including those contained in Article XXIV:6(a).
(c) Shifting of an Entity from Annex 1 to Annex 3
5.41 In response to a question from the Panel, the European Communities notes  that there is
an explicit provision allowing for Korean National Railway Administration (NRA) to be moved from
Annex 1 to Annex 3 (once that it adopts the form of a public corporation) without any consultation
and/or compensation.
5.42 The European Communities argu es that this implies, a contrario , that, in the absence of a
similar provision, a Party to the GPA can not even move an entity from one GPA Appendix I annex to
another without following the appropriate consultation procedure.  The European Communities
asserts that this also implies, a fortiori , that a Party of the GPA cannot unilaterally remove an entity
from all the annexes of the GPA without following the appropriate procedures (and offering adequatecompensation) under Article XXIV:6 of the GPA.
677
5.43 The European Communities states that, as a matter of fact, NRA was in a situation similar to
that of KOACA, i.e., it simply changed its le gal form but remained under government control.
However, the European Communities goes on to st ate that (a) contrary to NRA, the GPA does not
provide for an explicit exception applying to KOACA and (b) in any event, the solution adopted forNRA was not at all the exclusion of this entity from GPA coverage, but its transferral to another
annex.
678
VI. INTERIM REVIEW679
6.1 In letters dated 13 March 2000, the United States and Korea requested an interim review by
the Panel of certain aspects of the Interim Report issued to the parties on 3 March 2000.    The United
States made several further comments regarding the Descriptive Part of the Report.  Both parties
requested review and amendments with respect to certain portions of the Findings.  Neither party
requested an Interim Review Meeting.  On 24 March 2000, the United States requested that the Panel
permit it to submit further comments regarding Korea's Interim Review comments.  The Panel granted
the request and, in the interests of fairness, also  permitted Korea to make further comments, which
Korea did on 29 March 2000.
6.2 Korea made several specific comments on a number of paragraphs which we will address
below.  However, Korea also submitted a covering letter noting that the Panel has appeared critical of
Korea's actions with respect to events that occurred in mid to late-1991 regarding one of the questions
                                                     
677 EC's Answer to Question 1 from the Panel to Third Parties, dated 3 November 1999, p. 2.
678 Ibid.
679 Pursuant to Article 15.3 of the DSU, the findings of a panel report shall include a discussion of the
arguments made at the interim review stage.  Consequently, the following section entitled Interim Review is partof the Findings of this Panel Report.WT/DS163/R
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submitted by the United States and Korea's response thereto.  The facts are clear and we stand by our
assessment of them.680  We also find Korea's arguments in their covering letter misplaced.  Korea
appears to have mis-read the Findings.
6.3 First, we must note what we did not do in the Findings.  We specifically did not make a
finding that Korea acted in bad faith, or attempted to mislead or deceive the United States as Korea
claims in its letter of 13 March 2000.  We did not delve into the motivations of the Korean
Government.  We did not make a finding that the Korean Government was trying to conceal
information from the United States.  It is entirely possible that simple errors took place.  We will add
a footnote to paragraph 7.80 reiterating that we are not making a determination that Korea acted in
bad faith.  We will also make some minor modifications to the language in paragraphs 7.80 and 7.119
without altering the sense of our conclusions.
6.4 Second, we are concerned by the substantive comments made by Korea in this regard.  The
thrust of Korea's argument in their covering letter to their comments is that the answer provided to the
United States in July 1991 was drafted by the Ministry of Commerce.  Korea argues that the Korean
Government is not a monolith and that the Ministry of Commerce should not be charged with
knowledge about actions taken by the Ministry of Transportation when answering such questions.
The impression given by Korea in its Interim Review comments is that the only piece of written anddocumented evidence before us of the negotiations between Korea and the United States
681 was the
responsibility of a single individual in a single Mi nistry without actual or imputed knowledge of the
subject-matter of the questions put to the Korean Government by the US Government.  We do not
find this at all compelling.
6.5 We note that this argument was previously made by Korea during the course of the
proceedings and was fully taken into account by us in coming to our Findings.  Furthermore, in our
view, Korea is simply wrong in making such an argument.  The Parties to the GPA did not expect
incomplete or even possibly inaccurate answers fr om one portion of the Korean Government speaking
only for itself.  The answers must  be on behalf of the whole of the Korean Government.  Negotiations
would be impossible otherwise.  The Korean Government chose who was tasked with answering thequestions and the Korean Government cannot avoid responsibility for the result.  It cannot be a
justifiable excuse for incomplete answers that  an applicant for accession to the GPA gave
responsibility to Ministry A to answer questions, but the projects and procurement responsibilities
were really the concern of Ministry B and Ministry A was ignorant of the true situation when it
provided answers.  In our view, and as we stated in the Findings, there is an affirmative duty on the
part of a Party or prospective Party to the GPA to answer such questions fully, comprehensively and
on behalf of the whole government.
682  This conclusion is supported by the long established
                                                     
680 See, among others, paragraphs 7.76-7.81, 7.104-7.110 and 7.121-7.122 and cross-references
contained therein.
681 In its covering letter for its Interim Review comments, Korea stated that it took a series of public
actions that would have contradicted any implication that the United States was misled.  Korea cites, among
other things, "the preparation of communications to th e European Communities clear enough to convince the EC
that the entity responsible for IIA procurement was not covered by Korea's offer."  Aside from repeating that we
made no findings regarding Korea's motivations or intent, we recall our statement in paragraph 7.116 of the
Findings that the United States is not charged with knowledge of bilateral communications between Korea andthe European Communities.  Furthermore, while we note that Korea is drawing a conclusion from the EC'sresponse to Korea's communication of November or December 1993 that such communication was clear and
convincing, we will refrain from agreeing with that  characterization ourselves because Korea was unable to
produce the document when requested.
682 The Panel never dealt with a question of attributing information from one official to another.  This is
a construct of Korea's later taken up by the United Stat es in its second Interim Review comments.  The Panel's
point is much more straightforward.  In the context of negotiations, a communication from a Membergovernment is considered to be on behalf of the government as a whole and cannot later be disavowed as theactions of a mere individual or Ministry.WT/DS163/R
Page 155
international law principles of State responsibility .  The actions and even omissions of State organs
acting in that capacity are attributable to the State as such and engage its responsibility under
international law.683
6.6 One further anomaly of Korea's position is that it implies that other GPA Parties are charged
with a higher degree of knowledge of Korean legisl ation than the Korean Government itself.  Korea
argues that the United States was charged with knowledge of its laws, including the Seoul Airport Act
which came into effect on 31 May 1991, at least one month prior to Korea's response to the US
questions.684  On the other hand, Korea now strenuously argues that another Ministry of the Korean
Government should not also be charged with such k nowledge.  This is a double standard we clearly
do not accept.
6.7 Finally, we must also note our doubts about the position taken by Korea on this issue for
purposes of this dispute.  Korea asserts that the official at the Ministry of Commerce who answeredthe questions simply did not know about the acti ons underway at the Ministry of Transportation
regarding the IIA project.  However, aside from the fact that this supposedly ill-informed official
replied to the US questions with 29 pages of extensive answers, as stated by Korea in its Interim
Review comments of 13 March 2000, we note that th e answer on the particular question at issue did
provide some specific details.  For example, it was stated that the New Airport Development Groupwas conducting airport construction.  Even more specifically, the answer identified by name a US
company taking part in the basic plan projects.  It is not clear how such details could be known to the
Ministry of Commerce officials who Korea now says were ignorant of the actions of the Ministry of
Transportation.  Had an inquiry into the motivations or lack thereof on the part of the Korean
Government regarding the answer provided to the United States been relevant or probative, we wouldhave followed up this issue in detail.  We did not and we decline to do so now.
6.8 In making the above statements, we recall our determination that our inquiry in this matter
could not stop with the events of 1991 and our Find ings rest upon a weighing of all the facts of the
dispute.  Other than the addition noted in paragraph 6.3 above, we decline to make any of the changes
requested by Korea in its covering letter to the Panel.
6.9 As noted, Korea made some specific technical comments on the Interim Report.  We have
made technical changes and corrections as requested in paragraphs 7.28, 7.33, 7.45, 7.66
(footnote 726), 7.110, 7.115, 7.120 and 7.125 (footnote 768).
6.10 With respect to paragraph 7.55, Korea states that it is its position that the "control" test
contained in the Tokyo Round GPA was eliminated during the Uruguay Round and that it was the
United States that argued that the new annexes to the GPA made the test redundant.  However, Korea
did make the following statement in its Second Submission to the Panel:
"If the United States "control" test were to prevail, Annex 3 would in such instances
become redundant; entities listed on Annex 3 are subject to a degree of control by
Annex 1 entities that would subject them, under the United States' test, to coverage
under Annex 1."
685
                                                     
683 See the draft articles on State Responsibility drafted by the International Law Commission,
Articles 5 and 6 and Commentary, Yearbook of the International Law Commission  (1973), Vol. II, p. 173 et seq.
See also Corfu Channel Case , 1949 ICJ Reports, p. 23;  US Diplomatic and Consular Staff in Tehran , ICJ
Reports 1980, pp. 30-31 and 33.  These principles of attributability of actions of organs of the State must also
function where it concerns communications of a State organ, particularly in the context of negotiations of a
plurilateral agreement such as the GPA.  Otherwise Parties to the GPA could not rely upon each other'scommunications, which ultimately could result in the breakdown of the treaty system itself.
684 Paragraph 4.544.
685 Second Written Submission of Korea at paragraph 159.WT/DS163/R
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This statement implies the argument that the Panel attributed to Korea.  However, we do note that it
was made in the context of a broader argument made to rebut the US position.  Therefore, we will
clarify the language in paragraph 7.55.
6.11 With respect to paragraph 7.125, Korea requests that we add an additional reference to the
parenthetical reference to evidence that the US Government and industry was aware of KAA's role in
IIA procurement.  Korea argues that we made such a reference in paragraph 7.115.  We note that there
is already a cross-reference in the previous sentence (by way of footnote 767) to paragraphs 7.104-
7.116.  Also, the use of the term "such as" indicates that the parenthetical phrase is illustrative and not
comprehensive.  Therefore, we see no need to expand the parenthetical phrase further.
6.12 With respect to the Factual Aspects section of the Report, the United States requests that
paragraph 2.64 be further clarified to remove any possible implication that any version of the Seoul
Airport Act  designated KAA or its successors as the operators of the IIA project.  It is the case that
other laws made the specific designations, so we will change paragraph 2.64 accordingly.
6.13 With respect to paragraph 2.87, the United States requests that it would be appropriate to refer
to the language of the original version of the Korea Airport Corporation Act  when discussing the
constitution of KAA.686  We have made a change to clarify that the quoted provision is from the 1994
version of the Act.
6.14 With respect to paragraphs 2.95 and 2.113, the United States objects to including in this
section a statement to the effect that KAA and KOACA employees and directors are not government
employees.  The United States considers this an unsubstantiated assertion made by Korea.  Aside from
the point that we do not have any reason to doubt this representation, we also note that, for example,Article 30 of the Korean Airport Corporation Act  provides that KAA employees shall be considered
government employees for specific limited purposes relating to certain criminal acts.  The clear
implication of this is that they are not considered government employees for all other purposes.
Further, we note that the footnotes to paragraphs 2.95 and 2.113 clearly indicate that Korea's
submissions are the source for these paragraphs. Thus, we think it is appropriate to leave theseparagraphs as part of the Factual Aspects of the Panel's Report and in relevant portions of the
Findings.
6.15 With respect to the Arguments of the Parties section, the United States asserts that this section
represents an incomplete summary of arguments presented by the parties.  We cannot agree with this
assertion.  All the arguments and rebuttals are fully reflected in the Report in essentially their original
form.
687  We also arranged the parties' arguments under headings and in a sequence such that the
arguments raised by the parties were addressed in the most logical and coherent way.  In so doing, thePanel did its utmost to ensure that the context in which the arguments and rebuttals were raised by the
parties was preserved.  Additionally, the Panel soug ht to avoid unnecessary duplication of arguments.
Since the parties often repeated arguments in their submissions, sometimes verbatim, we considered
that it was sufficient to state those arguments in the most relevant section or sections and to include
cross-references to those arguments in other sections where necessary.  For example, this approachwas adopted in relation to the additions proposed by the United States to paragraphs 4.232 and 4.239.
In summary, in our view, the Descriptive Part of the Report contains a fair and accurate presentation
                                                     
686 We note that the United States referred us to US Exhibit 20 for the 1979 version of the Act, but such
version does not appear to be contained in that or any other exhibit.
687 In this dispute, the United States recommended that the Panel dispense with the conventional
Descriptive Part and append the parties' submissions to the Report.  We indicated our willingness to adopt thisapproach as long as Korea agreed.  In the event, Korea was unable to agree to such an approach and, therefore,
we have undertaken the task to provide an extensive summary of the parties' arguments.  It follows that we havenot inserted the arguments verbatim in precisely the form originally submitted.WT/DS163/R
Page 157
of the parties' arguments and we cannot agree with the assertion by the United States that the
Descriptive Part of the Report is skewed.
6.16 A further comment made by the United States is that this section of the Report separates
textual arguments from supporting evidence which, according to the United States, results in the
removal of such evidence from its context and its logical order.  Again, we cannot agree with thiscomment.  The United States argued, and the Panel agrees, that Articles 31 and 32 of the Vienna
Convention on the Law of Treaties  applies to this case.  According to those Articles, regard must be
had first to textual arguments in determining the meaning of Korea's Schedule.  Supporting evidence
in the form of preparatory work and the circumstances of the conclusion of the GPA should only be
referred to in cases where a textual interpretation leads to a meaning that is ambiguous or obscure or
would lead to a manifestly absurd result.  Recourse  also may be had to such materials to confirm the
ordinary meaning of the text.  Accordingly, the Pane l believes that the separation of textual arguments
from supporting non-textual evidence is appropriate.  As an example, we note that this approach was
adopted in relation to the addition proposed by the United States to paragraph 4.58.  Finally, we note
that we have made the amendments requested by the United States in relation to paragraph 4.45 but
not in relation to paragraph 4.434 since the proposed amendment is already included in the next
paragraph.
6.17 With respect to paragraph 7.17, the United States requests an amendment noting that control
was but one aspect of the test it proposed.  We recognize that the United States asserted more than just
"control" and, indeed, we have throughout the Findings taken a very broad approach in our analysis as
we explicitly stated in paragraph 7.57 and then fo llowed-up fully in the subsections following that
paragraph.  What we are focusing on in paragraph 7.17 is the question of control which was theelement most strongly emphasized by the United States.  Then we proceeded to the broader
examination.  Thus, we think paragraph 7.17 is appropriate in context and decline to amend it.
6.18 With respect to paragraph 7.18, the United States requests that we eliminate the portion of the
first sentence concerning transfer of authority to KAA because the United States does not agree that
any such transfer took place.  We agree that the sentence should be amended to remove anyimplication that the United States agre ed with such an interpretation of the Seoul Airport Act .  The
United States also requested several additions to its arguments.  We will expand the reference to the
US position, but recall that the full explanation of the US position is found in its submissions which
are reflected in the Descriptive Part of this Repo rt.  The Findings are not the place to re-introduce
such arguments in extensive detail.
6.19 With respect to paragraph 7.29, the United States requests that we amend the paragraph to
reflect that MOCT has been directly responsible.  If the United States means that MOCT was directlyresponsible throughout the period in question, obviously we disagree and decline to make the
requested change.  However, we will amend the paragraph to reflect that KAA, KOACA and IIAC
have been responsible for the IIA project subsequent to enactment of the Seoul Airport Act .
6.20 With respect to paragraph 7.47, the United States requests that we include a number of other
bureaus that were not included in the list provided in the portion of the Supplementary Explanation
quoted in paragraph 7.46.  However, our observation in paragraph 7.47 is limited to the subject of
aviation bureaus and offices.  This was significant in  light of the fact that KAA was responsible for 10
regional airports.  Such a significant element of Korea's offer surely would have been referenced in
the Supplementary Explanation .  Furthermore, we note that there was no evidence presented
indicating that any party to the negotiations considered the 10 KAA-administered regional airports aspart of Korea's offer.  The evidence was to the contrary.  We will amend paragraph 7.47 to clarify this
point.  We also will add a footnote to paragraph 7.61 in this regard.WT/DS163/R
Page 158
6.21 With respect to paragraph 7.50, the United States requests we amend the paragraph to reflect
that its arguments were not limited to "control".  As noted above, we deal with the broader issues
elsewhere and therefore decline to make the change requested by the United States.
6.22 With respect to paragraph 7.53, the United States requests that we drop any reference to the
employment status of employees of KAA, KOACA and IIAC.  The statements in this paragraph
reflect our conclusions in this regard and we, therefore, decline to make the requested change.
6.23 With respect to paragraphs 7.60 and 7.61, the United States argues that the Panel has ignored
evidence presented by the United States.  This statement by the United States, of course, is incorrect.
We fully considered all evidence presented by the parties.  When we state our conclusions in the
Findings, we summarize the evidence we found most persuasive without each time repeating all of the
counter-arguments made by the party that disagr ees with the conclusion.  To do otherwise would
render the Findings opaque and unreadable.  Specifically, with regard to paragraph 7.60, the UnitedStates argues that KAA's by-laws are implem ented upon approval of MOCT and that senior
management appointments also are subject to such approval.  We considered these matters and found
them part of the oversight functions of MOCT.
6.24 The United States also reiterates its arguments about whether KAA's employees are properly
considered government employees or not.  We have explained our position elsewhere in this regard.Further, the United States argues implicitly that the non-governmental funding is minimal.  In some
years, it has been.  However, KAA and its successors have provided other funds.  The reference in
footnote 720 in this regard was inaccurate and we have corrected it accordingly.
6.25 With respect to paragraph 7.61, the United States highlights again elements of what it
considers "control" of KAA by MOCT.  On these issu es, as with others, we took into consideration
the various aspects of control or authority between MOCT and KAA and its successors.  We do not
wish to imply that this was an easy factual assessment by any means.  We weighed these and the other
facts and, on balance, made our assessments as stated in the Findings.  We have made a minor
clarification of the language in paragraph 7.61, but otherwise, we decline to make the changes
requested by the United States in this regard.
6.26 With respect to paragraph 7.63, the United States argues that: "it is inaccurate to portray the
United States as relying 'heavily' on the Korean Aviation Act  alone."  We did not say that the United
States relied on the Aviation Act  "alone."  If we had, we would not have used the term "heavily;"  we
would have used "exclusively" or a synonym for it.  Our statement in paragraph 7.63 is accurate and
we decline to change it.
6.27 We will change footnote 724 in paragraph 7.62 as requested by the United States to reflect the
fact that Korea raised the question of the applicability of Article I:3 of the GPA.
6.28 With respect to paragraph 7.66, the United States argues that the Panel does not discuss the
other cross-references between the Aviation Act  and the Seoul Airport Act .  We spent considerable
time reviewing this question of cross-references and discussed in most detail the one that we felt of
particular importance in light of the US arguments.  We will amend the paragraph to note that we
have taken into account the various cross-references before reaching our conclusions.
6.29 With respect to paragraph 7.67, the United States requests an amendment to reflect that the
Seoul Airport Act  does not relate to the relationship between KAA and MOCT but between MOCT
and various other state, local or designated entities.  KAA and its successors were designated later as
entities to operate the project and, therefore, the Act does cover their relationship, even if it may cover
others as well.  We decline to make the change requested by the United States.WT/DS163/R
Page 159
6.30 With respect to paragraphs 7.67 and 7.68, the United States requests that the Panel re-state
further evidence that the United States argues that the relationship between MOCT and KAA beyond
just oversight.  As noted above, we have fully taken into account the references cited by the United
States and have not found them, on balance, to be persuasive.  We decline to make the changes
requested by the United States in these paragraphs.
6.31 The United States requests several changes to paragraph 7.69.  We agree that the reference to
bid requests in the second sentence was more than a mere mention.  We will amend the sentence
accordingly.  The United States requests we change the reference in the third sentence to the ratio of
employees of KAA to MOCT rather than between IIAC and MOCT.  We believe the reference to the
current state of affairs is relevant and decline to change it.  We requested information regarding the
number of employees of IIAC but did not specifically request information on the number of
employees of KAA in 1991.  This is because KAA was an entity founded over 12 years earlier withresponsibility for 10 regional airports.  As such, it would have been impossible to separate the
employees dedicated to the IIA project from those responsible for other activities of KAA.  We also
find it unlikely that KAA would have been an empty shell either given its other responsibilities.  The
US objects to our use of the term "empty shell" as a mis-characterization of its arguments concerning
alleged Korean "shell games."  The reference to an empty shell was ours and not related to the USpoint which was on another issue.  We will make only the requested change to the first sentence of
paragraph 7.69.
6.32 The United States objects to our reference to other bid documents in footnote 732 in
paragraph 7.69 to the effect that they showed no relationship with MOCT.  The United States argues
that bid documents are not intended to show such re lationships.  However, that is precisely what the
United States wished to establish with bid documents that indicated a role for MOCT or the Office of
Supply.  We were merely noting that of all the bid documents presented in evidence, the vast majority
show no role for MOCT or the Office of Supply.  We decline to make the change requested.
6.33 With respect to paragraph 7.70, the United States reminds the Panel of the references in the
MOCT website to the role of NADG in the IIA project and argues that more than just oversight byMOCT was involved.  We have acknowledged this evidence elsewhere and took it fully into
consideration.  We reiterate that it is not only not required, but would be counter-productive to recite
every piece of evidence at every stage of the Findings.
6.34 With respect to paragraph 7.106, the United States argues that the date of the Korean response
has not been established as 1 July 1991, only that Korea has asserted it.  The relevance of the US
point has not been established.  In light of our extensive discussion about Korea's response and our
views about its inadequacy, we do not think it would change our conclusions if the actual date was aweek or two later.  Therefore, we see no need to change our reference.
6.35 With respect to paragraph 7.115, the United States notes its strong objection to Korea's claim
that the United States Government knew that KAA was in charge of the IIA project. However, the
statement that the United States objects to is one of a list of factors considered by us as evidence of
the wide knowledge of the fact that KAA was operating the IIA project and this reference was alreadyqualified by noting that it was evidence submitted by Korea.  We have amended paragraphs 7.115 and
7.119 to clarify the point.
6.36 The United States also claims that the only legally relevant officials with respect to
knowledge of relevant factors are those within a pa rticular government entity in a position to decide
whether to go forward with the negotiated result.  The United States has provided no legal support forthis sweeping assertion.
688  While the US comment was directed at the issue of actual notice, it is
                                                     
688 Indeed, the contrary would appear to be the case.  See our discussion in paragraph 6.5 above, and
the footnotes thereto.WT/DS163/R
Page 160
difficult to see how it could have any legal relevance in a setting where constructive notice is
sufficient.
6.37 With respect to paragraph 7.125, the United States requests that we qualify the statement by
noting that at least one month of the four-month period was for verification.  We agree that this is
more accurate and will make the requested change.
6.38 We have corrected grammatical and typographical errors in paragraphs 7.4, 7.34, 7.46, 7.48,
7.61, 7.93 (footnote 751) and 7.100 and made a minor clarification in paragraph 7.48.
VII. FINDINGS
A. CLAIMS OF THE PARTIES
7.1 The United States requested the Panel to make the following findings689:
"That Ministry of Construction and Transportation ("MOCT") (including the New
Airport Development Group ("NADG") under MOCT), the Korean Airport Authority("KAA"), the Korean Airport Construction Authority ("KOACA"), and the Inchon
International Airport Authority ("IIAC"), all of which are or have been in the past
Korean Government entities involved in procurement for the Inchon International
Airport ("IIA") project, are covered under Korea's Appendix I of the WTO
Agreement on Government Procurement ("GPA") and:
(a) That by imposing bid deadlines for the receipt of tenders that are shorter than
the GPA-required 40 days, Korea is in violation of Article XI:1(a) and
XI:2(a) of the GPA.
(b) That by imposing qualification requirements specifying that an interested
foreign supplier must have a licence that in turn requires that supplier to buildor purchase manufacturing facilities in Korea, just so the supplier may be
eligible to bid as a prime contractor, Korea is in violation of Articles III:1(a),
VIII first sentence, and VIII(b) of the GPA.
(c) That by imposing domestic partnering requirements that force foreign firms
to partner with, or act as subcontractors to, local Korean firms, just so theforeign firms may participate in tendering procedures, Korea is in violation of
Articles III:1(a), VIII first sentence, and VIII(b) of the GPA.
(d) That by not establishing effective domestic procedures enabling foreign
suppliers to challenge alleged breaches of the GPA for procurements related
to the IIA project, Korea is in violation of Article XX of the GPA."
7.2 The United States also requested the Panel to make the following finding
690:
"That should the Panel determine that the above measures do not violate the GPA, the
measures nevertheless nullify or impair benefits accruing to the United States under
the GPA, pursuant to Article XXII:2 of the GPA."
7.3 Korea requested the Panel to reject the complain ts to the United States on the basis of the
following finding691:
                                                     
689 Paragraph 3.1.
690 Paragraph 3.2.WT/DS163/R
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"That the entities conducting procurement for the IIA are not covered entities under
Korea's Appendix I of the GPA."
B. GPA COVERAGE OF THE INCHON INTERNATIONAL AIRPORT PROJECT
1. General
7.4 As discussed above, the United States has claimed that the procurement practices with respect
to the IIA are not consistent with the provisions of the GPA.  Specifically, the United States argues
that the bid deadlines have been too short, there are improper qualification and local partnering
requirements and there are not adequate challenge procedures.  Korea has taken no position with
respect to these allegations;  rather, Korea argues that the entities responsible for IIA procurement are
not covered by Korea's GPA commitments contained in Appendix I to the GPA and that, therefore,
Korea is under no obligation to conduct IIA procurement in a manner consistent with the provisions
of the GPA.
7.5 The question that we must address at the outset, therefore, is whether procurement for the IIA
is covered by Korea's GPA commitments.  Since Korea's final offer of concessions on
14 December 1993 and the Members' agreement to the WTO GPA and Korea's accession to it on
15 April 1994692, three entities have been responsible for IIA procurement:  KAA, KOACA and IIAC.
It is undisputed between the parties that these three entities occupy similar situations, the transfer of
authority between them being largely irrelevant to our analysis.  Both parties agree that Korea has
never utilized the procedures contained in GPA Article XXIV:6 for modification of its Schedules with
respect to airport construction.  The issue, therefore, is whether KAA was a covered entity693 at the
time that Korea concluded its accession negotiations.  We will, however, also look at the activities of
KOACA and IIAC, to the extent necessary, as well as the relationship of MOCT and the Office ofSupply to the three entities, to see what impact, if any, that will have on our analysis.
7.6 Article I of the GPA provides as follows:
"This Agreement applies to any law, regulation, procedure or practice regarding any
procurement by an entity covered by this Agreement, as specified in Appendix I."
A footnote to Article I further provides that for each Party to the GPA, its Schedule is divided into
five annexes covering different types of procuring entities.  For our purposes, the most relevant
annexes are:  Annex 1 containing central government entities;  Annex 2 containing sub-central
government entities;  and, Annex 3 containing other entities that procure in accordance with the
provisions of the GPA.  Generally, there are different procurement thresholds for each Annex.
7.7 The question arises as to how to interpret these Schedules in the event of a disagreement.  In a
recent dispute, the issue of the approach to take in interpreting Schedules under Article II ofGATT 1994 was taken up by the Appellate Body.  In particular, the Appellate Body addressed the
question of whether and how to apply the normal rules of treaty interpretation contained in the Vienna
Convention  to the interpretation of the language contai ned in a Member's tariff schedule.  In this
dispute, European Communities – Customs Classifi cation of Certain Computer Equipment ,
WT/DS62, WT/DS67, WT/DS68, (" European Communities – Computer Equipment "), the question
involved the appropriate tariff treatment for cert ain electrical products such as local area network
("LAN") equipment.  The United States claimed that the products should have been treated by the
                                                                                                                                                                    
691 Paragraph 3.3.
692 The effective date of Korea's accession was 1 January 1997.
693 We note that the GPA does not use the term "covered entity" as such, rather it refers to entities
covered by this Agreement.  Both parties used the term "covered entity" as shorthand for this and we willcontinue in this manner as well.WT/DS163/R
Page 162
European Communities in its schedule as automatic data-processing machines.  Some EC member
States treated LAN equipment as telecommunicati ons equipment.  The panel found for the United
States, among other things, on the basis that the United States had a legitimate expectation as to how
the products would be treated.
7.8 The panel finding was reversed by the Appellat e Body.  In the Appellate Body's view, the
panel had incorrectly based its findings on the unilateral and subjective expectations of the exporting
party.  Instead, the Appellate B ody provided the following views:
"Tariff concessions provided for in a Member's Schedule – the interpretation of which
is at issue here – are reciprocal and result from a mutually-advantageous negotiation
between importing and exporting Members.  A Schedule is made an integral part of
the GATT 1994 by Article II:7 of the GATT 1994.  Therefore, the concessions
provided for in that Schedule are part of the terms of the treaty.  As such, the onlyrules which may be applied in interpreting the meaning of a concession are the
general rules of treaty interpretation set out in the Vienna Convention ."
694
7.9 Like GATT Article II:7 which refers to the tariff Schedules as "integral" parts of the
Agreement, Article XXIV:12 of the GPA states that:  "The Notes, Appendices and Annexes to this
Agreement constitute an integral part thereof."  Thus, it follows that we should consider the Schedulesappended to the GPA as treaty language.  Accordingly, we will refer to the customary rules of
interpretation of public international law as summarized in the Vienna Convention  in order to interpret
Korea's GPA Schedule.
7.10 Article 31 of the Vienna Convention  reads as follows:
"1. A treaty shall be interpreted in good faith in accordance with the ordinary
meaning to be given to the terms of th e treaty in their context and in light of
its object and purpose.
2. The context for the purpose of a treaty interpretation shall comprise, in
addition to the text, including its preamble and annexes:
(a) any agreement relating to the treaty which was made between all the 
parties in connexion with the conclusion of the treaty;
(b) any instrument which was made by one or more parties in connexion 
with the conclusion of the treaty and accepted by the other parties as 
an instrument related to the treaty.
3. There shall be taken into account, together with the context:
(a) any subsequent agreement between the parties regarding the 
interpretation of the treaty or application of its provisions;
(b) any subsequent practice in application of the treaty which establishes 
the agreement of the parties regarding its interpretation;
(c) any relevant rules of international law applicable in the relations 
between the parties.
                                                     
694 Appellate Body Report on European Communities – Customs Classification of Certain Computer
Equipment , WT/DS62, WT/DS67, WT/DS68, adopted on 22 June 1998, at paragraph 84.  See also Appellate
Body Report on Canada – Measures Affecting the Importation of Milk and the Exportation of Dairy Products ,
WT/DS103 and WT/DS113, adopted on 27 October 1999, at paragraph 131.WT/DS163/R
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4. A special meaning shall be given to a term if it is established that the parties
so intended."
7.11 Article 32 of the Vienna Convention  provides guidance on supplementary means of
interpretation.  It reads as follows:
"Recourse may be had to supplementary means of interpretation, including the
preparatory work of the treaty and the circumstances of its conclusion, in order to
confirm the meaning resulting from the application of Article 31, or to determine the
meaning when the interpretation according to Article 31:
(a) leaves the meaning ambiguous or obscure;  or
(b) leads to a result which is manifestly absurd or unreasonable."
7.12 The first step of the analysis, therefore, will be to examine Korea's Schedule and determine
whether, within the ordinary meaning of the terms therein, the entity responsible for IIA procurement
is covered.  This will include a review of all relevant Annexes and Notes.
7.13 If the meaning is ambiguous or obscure, or woul d lead to a result which is manifestly absurd,
then, in accordance with Article 32, recourse may be had to the preparatory work and the
circumstances of the conclusion of the treaty.  Such recourse could include reference to matters such
as the questions asked of Korea by GPA members during the accession process and Korea's responsesthereto.  Reference to the negotiating history is also appropriate to confirm the Panel's understanding
of the ordinary meaning of the terms in the treaty.
2. Covered Entities under Korea's Annex 1
(a) Arguments of the Parties
7.14 Listed in Annex 1 of Korea's Appendix I Schedule are, inter alia , the MOCT695 and the Office
of Supply.  The Office of Supply is covered with respect to procurements made for entities listed in
Annex 1.  An important element in construing the co verage of Annex 1 is Note 1 to that Annex.  It
reads as follows:
"The above central government entities include their subordinate linear organizations,
special local administrative organs, and attached organs as prescribed in the
Government Organization Act of the Republic of Korea."
7.15 The United States has argued that the interpreta tion of "central government entity" in Annex 1
includes branch offices and subsidiary organizations.  According to the United States, proper treaty
interpretation of this term must result in the inclusion of the subdivisions of listed entities and such
subdivisions could include branch offices and subsidiary organizations or other such entities.  The
United States argues that this interpretation is wholly consistent with Note 1 because that Note statesthat Annex 1 entities "include" certain other organizations.  "Include" is a broadening term, not a
limiting one.  Thus, the organizations described in Note 1 are in addition to the central government
entities themselves.  These other organizations include branch and subsidiary organizations.
7.16 The United States argues that NADG is a part of MOCT, or at least a branch or subsidiary
organization of MOCT.
696  The United States further argu es that, even t hough NADG has not been
                                                     
695 MOCT was formed in December 1994 thro ugh the merger of the Ministries of Construction and
Transportation.  Generally we will refer to the covered entity as MOCT for simplicity, recognizing that this maybe anachronistic at points.
696 See paragraphs 4.13, 4.15 and 4.436.WT/DS163/R
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expressly listed in Korea's Schedule, it is nevertheless covered under the GPA by virtue of MOCT's
listing.  The United States argues that NADG is the organization responsible for IIA construction and
that, therefore, the IIA is a project of a covered entity.  Alternatively, the United States argues that
KAA and its successors are branch offices or subs idiary organizations of MOCT and the IIA project
would, therefore, also be covered under that line of analysis.
7.17 The United States urges the Panel to look closely at the element of "control" over the
organizations in question, particularly in regard to the specific project in question and argues that
given the degree of control exercised by MOCT over KAA and its successors, procurements by those
entities are actually procurements by MOCT.  The United States argues that, therefore, the GPA
requirements apply to those procurements.
7.18 The United States points to the Act on the Promotion of a New Airport for Seoul Metropolitan
Area Construction  ("Seoul Airport Act ") as evidence.  Article 4(1) of that Act provides, among other
things, that MOCT will establish a "master plan" for th e IIA project.  This plan is to include general
direction of construction, outline of the construction plan, the construction period, a financing plan
and other matters deemed necessary.  The United States also refers to Article 7(1) which requires
MOCT's approval of the project operator's "execution plan" and Article 12 which requires the project
operator to submit reports to MOCT.  Article 13 permits MOCT to cancel permission to operate orsuspend or alter the work.  Article 14 requires that the project operator permit MOCT inspection of its
office and workplace and other places relevant to the new airport development project.
7.19 The United States also argues that the Korean Aviation Act  is the controlling statutory
authority for airport construction.  Under Article 95 of the Aviation Act , KAA would have been a
"project operator".  The United States then refers to the numerous provisions in the Aviation Act
which require the project operator to work under the supervision of MOCT.  The United States also
refers to the obligation of the project operator to report to the MOCT under the Seoul Airport Act .
7.20 The United States further notes that General Note 1of Korea's Appendix reads as follows:
"Korea will not extend the benefits of this Agreement
(a) as regards the award of contracts by the National Railroad Administration,(b) as regards procurement for airports by the entities listed in Annex 1,
(c) as regards procurement for urban transportation (including subways) by the
entities listed in Annexes 1 and 2
to suppliers and service providers of member States of the European Communities,
Austria, Norway, Sweden, Finland and Switzerland, until such time as Korea has
accepted that those countries give comparable and effective access for Korean
undertakings to their relevant markets."
7.21 The United States argues that the reference to "procurement for airports" in paragraph (b) of
the General Note confirms that there are, in fact, entities listed in Annex 1 of Korea's Schedule that
are responsible for procurement for airports.  The United States further argues that since MOCT, the
NADG, KAA, KOACA and IIAC are the only entities Korea has held out as being responsible for
procurements for airports, these are the entities that must be covered under Annex 1 for all countriesnot referred to in the General Note.
7.22 The United States points to MOCT's website which listed the NADG as responsible for IIA
construction, along with other press and business gr oup reports that also referred to MOCT or NADG
responsibility for the IIA project.  According to the United States, all of these factors showed thatWT/DS163/R
Page 165
MOCT was in control of KAA and its successors, or, at the very least, was in control of the IIA
project.
7.23 Korea responds that there is no textual basis for the US arguments about branch offices and
subsidiary organizations.  According to Korea, Note 1 to Annex 1 defines the scope of the coverage of
central government entities under Annex 1.  Korea argues that this is the most reasonableinterpretation of the phrase "as prescribed in the Government Organization Act " that is contained in
Note 1.  In any event, Korea disagrees that KAA or its successors could be properly described as
branch or subsidiary organizations of MOCT.  While Korea disagrees that there was a "control" test
contained in the WTO GPA, Korea also argues that KAA was independent both overall and with
respect to the IIA project.  This is because, among other things, KAA was established by law as an
independent juristic entity;  it authored and adopte d its own by-laws;  it had its own management and
employees who were not government employees;  it authored and adopted its own procurement rulesdistinct from the general government rules;  it published bid announcements and requests for
proposals of its own accord;  it concluded contracts with successful bidders on its own behalf;  and it
funded portions of the IIA with its own monies.
7.24 Korea points out that Article 94(1) of the Aviation Act  states that it is the controlling provision
of law unless "otherwise provided by law."  According to Korea, in this case, the Seoul Airport Act
"otherwise provided by law."  Therefore, the Seoul Airport Act  was the controlling law and it
explicitly authorized an entity other than MOCT to have the responsibility for the IIA project.  Korea
acknowledges that there were elements of supervision by MOCT of the IIA project as it is an
important national project.  However, Korea argues, this sort of general oversight is very typical for
projects that are closely linked to public welfare, safety and finance and ensures accountability.Korea argues that this sort of oversight does not involve the surrender of the supervised entity's status
as a separate legal entity.
7.25 Korea further argues that the indicia of independence, as listed above, clearly indicated that
KAA was an independent entity for purposes of coverage by the GPA.  Korea notes that other entities
such as KAA were typically Annex 3 entities both in Korea and in other GPA signatories, if thenegotiators agreed to their coverage at all.
7.26 In regard to General Note 1(b), Korea responds that, in fact, procurement for some airports is
conducted by covered Annex 1 entities.  Specifically, the Seoul and Pusan Regional Airport
Authorities are local administrative organs as provided in the Government Organization Act  and are
therefore covered by reason of Note 1 to Annex 1.  Thus, there is nothing inconsistent about
General Note 1(b) and Korea's position that KAA and its successors, and therefore the IIA project, are
not covered.
7.27 With respect to MOCT's website, Korea argues that this was a product of MOCT's public
relations department and was not a binding classificati on of responsibilities.  Korea also argues that in
July 1998, around the time the website evidence is cited, the US Commercial Officer in Seoul sent a
letter to the Korean Government which implicitly acknowledged that KOACA was not a covered
entity.  The letter requested, among other things, that KOACA be considered de facto covered untilactual GPA coverage took place.
7.28 The United States responds to this last point by providing a series of other US Government
letters from this time-period, including some from more senior US officials, which the United States
maintains made very clear the full and accurate position of the United States which was different from
that of the above-mentioned Commercial Officer.  In  the US view, the July 1998 letter does not lead
to the conclusion proposed by Korea, in any event, because in stating that there should be de facto
coverage it did not imply that there was no de jure  coverage.WT/DS163/R
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(b) Evaluation of the Parties' Arguments
7.29 As noted in paragraph 7.5 above, three entiti es (KAA, KOACA and IIAC) have been directly
responsible for IIA procurement following the designation of a project operator in December 1991.697
In evaluating the parties arguments in regard to the claim of a violation of Korea's commitments under
the GPA, there are two aspects which must be addressed.  The first issue is the interpretation of
Korea's Schedule of commitments.  Is the entity conducting the procurement for the IIA project listed
in the Annexes or the Notes thereto?  This requires an interpretation of Annex 1 to Korea's Schedule
and the Notes thereto, as well as other relevant portions of the Schedule.698  The second issue is
whether there is some other test that we should apply to determine if the entity in question is covered
by Korea's GPA commitments even if not listed.  The United States has generally argued in this
regard that the proper test should be whether the procuring entity is "controlled" by a listed entity.Korea has contested the validity of that proposed test.  The question becomes whether there are some
criteria exogenous to the lists and Notes in the Schedules that, when applied to an entity, would lead
to the conclusion that its procurement should be covered by a GPA signatory's commitments.
699
(i) Interpretation of Annex 1 of Korea's Schedule
7.30 A critical question we must first address is dete rmining what is explicitly contained in Korea's
Schedule.  A preliminary issue is the status of Note 1 to Annex 1, in particular the extent to which
Parties can qualify the coverage of listed entities through such Notes.  In our view, Members
determine, pursuant to negotiation, the scope of the coverage of their commitments as expressed in the
Schedules.  In this regard, we take note of the panel finding in United States - Restrictions on Imports
of Sugar  ("United States - Sugar ") wherein the panel observed that Headnotes could be used to qualify
the tariff concessions themselves. 700
7.31 The implication of the Findings in United States - Sugar  for the present case would be that a
GPA signatory could use Notes to its Schedules to qualify the entity coverage itself.  However, as will
be discussed in subsequent sections, questions have been raised as to whether an entity not mentionedin a Schedule, either through an affirmative listing or an explicit exclusion, may still be covered due
to the nature of its relationship with another entity which is covered.
7.32 Our first step, therefore, is to examine what entities are actually listed in Korea's Schedule.
We note that MOCT is included in the list of central government entities.  KAA and its successors are
not listed either there or elsewhere.
7.33 Note 1 to Annex 1 states that the "central government entities include their subordinate linear
organizations, special local administrative organs, and attached organs as prescribed in theGovernment Organization Act  of the Republic of Korea."  To begin with, we agree with Korea that
the phrase "as prescribed in" means that the Government Organization Act  defines the terms listed in
the Note.  The relevant definition of the verb prescribe is to:  "limit, restrict, confine within
bounds."
701  In our view, this concept of limiting or confining within bounds means that "prescribed"
does provide definition to the preceding terms in Note 1.  Indeed, one of the definitions of the verb"define" is to: "determine, prescribe , fix precisely, specify."
702  We think that the definitions of
"prescribe" and "define" are so close as to make the words virtually synonymous.  Thus, we will look
to the cited Act for the definitions of the terms listed in Note 1.
                                                     
697 Seoul Airport Act  as amended by Act No. 4436 (14 December 1991) Exhibit Kor-12;  Korea Airport
Corporation Act  as amended by Act Nos. 4435 and 4436 (14 December 1991) Exhibit Kor-14.
698 See subsections (i) and (ii), below.
699 See subsection (iii), below.
700 Report of the Panel on United States - Restrictions on Imports of Sugar , adopted on 22 June 1989,
(BISD 36S/331) at paragraphs 5.2-5.3 and 5.7.
701 New Shorter Oxford English Dictionary , (Clarendon Press, 1993) Vol. 2 at p. 2339.
702 Ibid. , Vol. 1 at p. 618. (emphasis added)WT/DS163/R
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7.34 Article 2(3) of the Government Organization Act  states:  "The subordinate linear
organizations of the central administrative organs shall be Cha-Gwan (Vice-Minister), Cha-Jang
(Deputy Administrator), Sil-Jang (Office Director) . . ."703  Thus, the subordinate linear organizations
are defined as individual offices rather than organi zations as such.  In response to a question from the
Panel, Korea states that this means that coverage would be with respect to areas of responsibility of
those officials.  We accept the explanation by Korea and, therefore, cannot agree with the US
assertion that Article 2(3) of the Government Organization Act  does not really provide a definition of
"subordinate linear organizations."  In our view , there is no doubt that Article 2(3) defines
"subordinate linear organizations" by reference to the entities (ministries, divisions, units, etc.) which
fall under the responsibility of one of these offices.  It has not been argued that KAA falls within any
of these offices.  Therefore, we shall proceed on the basis that KAA is not a subordinate linear
organization.
7.35 Article 3(1) provides that: "Each central administrative organ may have local administrative
organs as prescribed by the Presidential Decree except those especially prescribed by laws, in case
they are necessary for the implementation of the duties under its jurisdiction."704  Examples of such
organizations are the Seoul and Pusan Regional Airport Authorities.  KAA and its successors are not
considered local administrative organs.705
7.36 In addition, Article 4 of the Act provides as follows:
"(Establishment of Attached Organs) In an administrative organ, there may be
established by the Presidential Decree organizations for experiment, research,
education and training, culture, medicine, manufacturing or advice, respectively, if
necessary for the fulfilment [of] duties under its jurisdiction."706
There is no dispute that KAA is not an "attached organ" within the meaning of this definition.
7.37 As demonstrated above, KAA does not fall within  the terms of Articles 2(3), 3(1) or 4 of the
Government Organization Act .  We, therefore, conclude that prima facie KAA does not fall within the
terms of Note 1 to Annex 1 of Korea's Schedule.  We note, however, that there are diverging views on
whether this should be the end of the analysis of Korea's Schedule.  Korea is of the view that it should
be, while the United States urges us to interpret Note 1 (and, in particular, the word "include") in such
a way as to permit us to look beyond Annex 1 itself.
(ii) Further Evaluation of the Extent of Korea's Commitment
7.38 In effect, Korea argues for a narrow reading of  the list in Annex 1 by using Note 1 as a
definition.  The implication of this is that because KAA and its successors are not prescribed in theGovernment Organization Act , they cannot be covered under Annex 1.  On the other hand, the United
States focuses on the term "include" and argues that Note 1 broadens the coverage beyond the central
government entities listed in Annex 1 itself to also encompass additional entities described in the
Government Organization Act .
7.39 A reference to Note 1 of Annex 2 (sub-central government entities) would tend to support the
narrower interpretation.  Note 1 to Anne x 2 reads in relevant part as follows:
                                                     
703 Exhibit Kor-58.  All translations of legislative materials have been provided by Korea.
704 Ibid.
705 Korea states that this is the case.  The United states merely notes in response that the Government
Organization Act  does not identify the Seoul and Pusan Regional Aviation Offices as "special local
administrative organs."
706 Ibid.WT/DS163/R
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"1. The above sub-central administrative government entities include their
subordinate organizations  under direct control  and offices as prescribed in
the Local Autonomy Law of the Republic of Korea."
7.40 There are two important observations to make in regard to this Note to Annex 2.  First, there
is a term "subordinate organizations" as opposed to  "subordinate linear organizations."  This would
support an interpretation with respect to Note 1 to Annex 1 that subordinate linear organizations is a
term of art and does not have a broader meaning inclusive of subordinate organizations (or, for that
matter, "branch offices" or "subsidiary organizations").  Furthermore, it implies the negative that
subordinate organizations in general are not meant to be included unless specifically stated as in
Note 1 to Annex 2.  We do note, however, that the translation from the original Korean may have
added some ambiguity with respect to this issue.
7.41 The second observation is that when Korea wished to make reference to entities under direct
control of the listed entities, it made the reference e xplicit.  The absence of such a reference in Note 1
to Annex 1 implies that "direct control" is not a criter ia there.  This issue of control will be discussed
further in subsection (iii), below.
7.42 However, we must note that the reading of Note 1 to Annex 1 as a definitional provision is
that it implies a peculiar structure of the Annex 1 Schedule where one set of organizations  is defined
in terms of offices rather than entities.  Another unusual aspect of Note 1 is that the
comprehensiveness of the list of offices defining subordinate linear organizations could lead to a
conclusion that the individual entities listed in Annex 1 are virtually without substance except as
provided  in the Government Organization Act .  The problem raised by this observation is that the
Note states that the central government entities in Annex 1 include  subordinate linear organizations,
local administrative organs and attached organs.  We agree with the United States that the term
"include" is normally not a limiting or defining term.  The relevant definition of "include" is:  "contain
as part of a whole or as a subordinate element."707
7.43 In our view, this use of the term "include" along with the unusual use of a list of individuals to
define subordinate linear organizations results in ambiguity regarding the interpretation of Note 1 andtherefore the meaning of the whole of Annex 1 incl uding the Notes.  While we will examine further
the other aspects of Korea's Schedule and the relevant Notes, we find it helpful in accordance with
paragraph (a) of Article 32 of the Vienna Convention  to examine at this point the negotiating history
of Korea's GPA accession to provide some clarity to Note 1.  In this particular case, there is some very
specific evidence in this regard which will assist in interpretation.
708
7.44 Korea's original offer in 1990 provided for GPA coverage of 35 central government entities.
In February 1991, Korea provided to the Tokyo Round Agreement signatories a Supplementary
Explanation of the Note by the Republic of Korea dated 29 June 1990 relating to the Agreement on
Government Procurement .709  Section 3 of the Supplementary Explanation  provided a "Clarification
of Notes in Korea's Offer."  Note 1 at that time was essentially the same as it appeared in Korea's
Schedule.  The clarification of Note 1 reads in relevant part:
"o Note 1 is established to clarify the coverage of central government organs
which come under 35 of 37710 purchasing entities.
                                                     
707 New Shorter Oxford English Dictionary , supra ., Vol. 1 at p. 1337.
708 We will return to the overall negotiating history of Korea's Schedule below.
709 Exhibit Kor-117.
710 Elsewhere in the Supplementary Explanation  the figure of 35 out of 47 is given.  Ibid.  at p. 5.  This
may be a typographical error, but is not of relevance to our discussion.WT/DS163/R
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o The meaning and categories of subordinate linear organizations, special local
administrative organs and attached organs are prescribed in the Government
Organization Act of the Republic of Korea as follows:
- Subordinate linear organizations: office of the minister, 
vice-minister, assistant minister, director general, director, etc."711
7.45 This provides insight on two aspects of the interpretation of Note 1.  First, the Supplementary
Explanation  by its terms was intended to clarify  the coverage of central government organs.  That is,
it is a clarification of the scope of the list in Annex 1.  Note 1 was not in itself intended as an
extension of coverage to entities other than those li sted in Annex 1.  Secondly, the coverage based on
offices is made explicit.  This goes to the observation in paragraph 7.42 above, that Annex 1 is
virtually without substance except as provided in the Government Organization Act .  The answer is
that this is precisely the case because, in fact, Note 1 defines the scope of the coverage by listingcomponents of the central government entities themselves;  it was not meant to denote something
exterior to the central government entities as might be implied by the term "include."
7.46 The Supplementary Explanation  also provided a list of central government entities which it
described as the "total central government entities."  With respect to the Ministry of Transportation, it
provided as follows:
"o Ministry of Transportation
- Regional Aviation Bureaus (2)
- CHEJU Regional Aviation Office
- Flight Inspection Office of the Director-General – VOR-TAC 
Stations (5)
- Marine Accident Inquiry Offices"
712
7.47 As noted above, Korea has maintained that the entities for which coverage is provided under
Annex 1 of its Schedule are the Seoul and Pusan Regional Aviation offices.  The reference to two
Regional Aviation Bureaus in the Supplementary Explanation  supports this assertion.  This
corresponds with the evidence arising later from th e EC's inquiries of Korea in late 1993 which leads
to the conclusion that the Regional Aviation Bureaus listed under the Ministry of Transport were the
Seoul and Pusan Regional Airport Authorities which are included by Note 1 as local administrative
organs.  KAA is not included in the list contained in the Supplementary Explanation .  We note that
KAA was responsible for 10 regional airports (although apparently it was not itself localized in one
region in its responsibilities and therefore was not "regional") and, as such, it would have been a
major element of Korea's offer.  In light of this, we find its omission from the list significant.
                                                     
711 Ibid.  at p. 26.
712 Ibid.  at p. 11.  We also note that this piece of negotiating history also adds clarity to the meaning of
General Note 1(b) and permits a consistent and coherent reading of Annex 1 in light of this General Note.  Werecall that the United States argued that General Note 1(b) did not make any sense if the IIA project was notcovered because it would then refer to nothing at all and the treaty should not be read in a manner which renders
any of it meaningless.  However, the Supplementary Explanation  confirms the meaning otherwise derived from
a reading of the Government Organization Act  as referred to in Note 1 to Annex 1.  That is, Korea withheld
coverage of airport procurement for the European Communities and certain other signatories, but this does notnecessarily imply coverage of the IIA project under Note 1 of Annex 1.  Rather, it implicitly refers to theregional airport authorities.  We will discuss this further below in the context of the broader negotiating historyof Korea's accession to the GPA.WT/DS163/R
Page 170
7.48 Thus, Note 1 provides a clarification of the scope of the coverage of the central government
entities contained in the list in Annex 1.  Obviously, even in light of this conclusion regarding the
relationship between the list of entities in Annex 1 and the clarification in Note 1, the term "include"
does nonetheless remain a part of Note 1.  Also, while it is the case that the definitions of "subordinate
linear organizations, local administrative organs, and attached organs" are virtually coterminous withthe "central government entities" in Annex 1, there may be a gap.  Based on the evidence before us,
the office of the Minister is not included in the offices specified in the Government Organization Act ,
but it would evidently fall under the remit of the Ministry.  This means, for example, that tasks or
projects specifically designated by law or decree as the responsibility of the Minister are covered by
the list in Annex 1, even though not "included" by virtue of the definition provided by the
Government Organization Act .  We note, in this regard, that NADG as an ad hoc task force is not
contained in the definitions found in the Government Organization Act , but is assigned its tasks by
regulations issued by the Minister of Constr uction and Transportation (paragraph 4.14).  Thus, NADG
would seem to be covered by the list in Annex 1 (as acknowledged by Korea), but not included by
reason of Note 1.  In contrast, KAA is not assigned its tasks by the Minister;  is not listed in Annex 1;
nor does Note 1 explicitly include KAA in coverage.
7.49 Therefore, we next will examine whether the relationship between MOCT and KAA was such
that KAA's procurement is covered (at least with respect to the IIA, if not more broadly) even though
KAA is not explicitly included.  As noted in paragraph 7.29 above, there is a remaining question as to
whether there exists the possibility of the inclusion of certain procurements of an entity which is not
listed, due to its relationship with a listed entity.  These arguably are general issues which arise with
respect to any Member's Schedule regardless of the structure and content of the Schedule and anyqualifying Notes.
(iii) Evaluation of the Parties Arguments:  The Issue of "Control"
7.50 The United States argues that KAA may be considered a part of MOCT because it is
controlled, at least for the purposes of the IIA project, by MOCT.  As noted in paragraph 7.29 above,a question is raised whether, regardless of what is specifically in a Schedule, an entity which is
deemed "controlled" by a listed entity is also covered by the Member's GPA commitments?
713  If so,
as a follow-on to this second question, does KAA fall within this category?
7.51 Korea has discussed this issue in a slightly di fferent manner.  Korea has argued that if we
were to adopt the US proposed control test, it would cause a number of entities included within
Korea's (and other Members') Annex 3 commitments to be put by operation of law under Annex 1
because such entities would arguably be under the "control" of Annex 1 entities.  This is importantbecause it would change the threshold levels negotiated with respect to the Annex 3 entities.
"Control" Generally
7.52 First, we must recall our observation made earlier in regard to Note 1 to Annex 2 of Korea's
Schedule.  Among other things, we observed that the term "direct control" arose in that Note as a
means of describing the scope of the concessions in Annex 2.  Arguably, because Korea used the termexplicitly with respect to Annex 2, its absence in Note 1 to Annex 1 implies that it has no applicability
to Annex 1.  While this negative implication cannot be overlooked, we also recall that we are
reviewing in this section the question of whether GPA coverage can result from the control
relationship between two entities regardless of the Schedules and the way in which Parties seek to
define them.  Obviously, however, the more explic it the Schedule, the narrower the scope for any
such coverage to exist.
                                                     
713 In our view, the US arguments regarding branch offices and subsidiary organizations, to the extent
not already dealt with in the previous subsections, are subsumed within this general discussion regarding"control."WT/DS163/R
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7.53 The United States has referred us to the Appellate Body decision in Canada – Measures
Affecting the Importation of Milk and the Exportation of Dairy Products  ("Canada – Dairy ") for
guidance on the question of what constitutes "control" of an entity.  However, the focus of that dispute
was whether or not the Canadian milk marketing boards were "government agencies."714  In our view,
that is a different question than we are facing in the present dispute.  While the employees of KAA,KOACA and IIAC are not government employees (except for a "legal fiction" created by statute with
respect to certain criminal actions), neither party has argued that these are not "government" agencies.
We agree that they are.  The question here is narrower.  Are these "government" agencies actually a
part of or an agent for covered government entities?
7.54 Indeed, the United States has acknowledged that there are different tests involved in
answering these questions.  There was considerable discussion regarding the implication we should
draw, if any, from the exclusion in the current GPA of the relevant language contained in Article I ofthe Tokyo Round Agreement.  That read:
"Article I
Scope and Coverage
1. This Agreement applies to:
[. . .]
(c) procurement by the entities under the direct or substantial control of
Parties and other designated entities, with respect to their procurement
procedures and practices.  Until the review and further negotiations referredto in the Final Provisions, the coverage of this Agreement is specified by the
lists of entities, and to the extent that rectifications, modifications or
amendments may have been made, their successor entities, in Annex I."
7.55 Korea argued that the coverage of the current GPA now is defined exclusively by the
Schedules and did not even arguably include another normative rule relating to direct control.
715  In
response to a question from the Panel regarding the im plications of the existence of this language for
understanding the negotiations between the parties in 1991-1993, the United States answered that this
language was irrelevant to the Panel's analysis of  the US response to Korean legislation implemented
in 1991.  The United States went on to make the following statement:
"With regard to the expansion of coverage  to procurements by "entities under the
direct or substantial control of Parties", the 1979 USITC report states that "[t]he
broader language 'direct or substantial control' apparently is intended to encompassnot only governmental units but quasi-governmental purchasing agents as well".  In
other words, this control reference is not related to the control of "central government
entities" over their subdivisions.  Instead it is referring to the control of Code parties
(i.e., the governments themselves) over their "quasi-governmental purchasing
agents"."
716
                                                     
714 Appellate Body Report on Canada – Measures Affecting the Importation of Milk and the
Exportation of Dairy Products, (WT/DS103 and WT/DS113), adopted on 27 October 1999, at
paragraphs 96-102.
715 Korea referred to a United States International Trade Commission report with respect to the nature
of the language in Article I:3 of the Tokyo Round Code.  See Exhibit Kor-73.
716 US Responses to Second Set of Panel Questions at p. 10.WT/DS163/R
Page 172
7.56 We agree with this statement both as to the nature of the language in Article I:1(c) of the
Tokyo Round Agreement and the distinction between the two types of "control" questions.
Article I:1(c) was referring to the broader question of whether an entity was "governmental" or not
rather than to the relationship between two "governmental" entities for purposes of the GPA.
However, the panel and Appellate Body in Canada – Dairy  also were referring to that broader
question.  Indeed, it seems to us that the GPA is virtually sui generis  in this regard.  It is an important
question under the GATT/WTO Agreements as to whether an action is being taken by a
"governmental" entity or a private person for the covered agreements are considered to apply to
"governmental" action only.  However, once it is determined that there are "governmental" measures
at issue, it is not generally of legal relevance which "governmental" entity is applying the measures.
But within the GPA this is a critical question.  There are obligations on the part of certain government
entities but not others.
7.57 There is no use of the term "direct control" or  even "control" in the sense that the United
States wishes to use it.717  It has not been defined in this manner either in the context used in the
Tokyo Round Agreement or elsewhere.  We cannot agree with the overall US position that a "control"
test should be read into the GPA.  However, we also do not think that it is an entirely irrelevant
question.  We think the issue of "control" of one entity over another can be a relevant criterion amongothers for determining coverage of the GPA, as discussed below.
(iv) Evaluation of the Relationship of the Entities Concerned
7.58 As discussed above, we do believe that entities that are not listed in an Annex 1 to the GPA
whether in the Annex list or through a Note to the Annex, can, nevertheless, be covered under theGPA.  We believe that this flows from the fact that an overly narrow interpretation of "central
government entity" may result in less coverage under Annex 1 than was intended by the signatories.
On the other hand, an overly broad interpretation of the term may result in coverage of entities that
were never intended to be covered by signatories.
7.59 In the present case, our view is that the relevant questions are:  (1) Whether an entity (KAA,
in this case) is essentially a part of a listed central government entity (MOCT) – in other words, are
the entities, legally unified?  and (2) Whether KAA and its successors have been acting on behalf of
MOCT.  The first test is appropriate because if entities that are essentially a part of, or legally unified
with, listed central government entities are not considered covered, it could lead to great uncertainty
as to what was actually covered because coverage would be dependent on the internal structure of an
entity which may be unknown to the other negotiating parties.  The second test is appropriate because
procurements that are genuinely undertaken on behalf of a listed entity (as, for example, in the casewhere a principal/agent relationship
718 exists between the listed entity and another entity) should
properly be covered under Annex 1 because they would be considered legally as procurements by
MOCT.  In our view, it would defeat the objectives of the GPA if an entity listed in a signatory's
Schedule could escape the Agreement's disciplines by commissioning another agency of government,
not itself listed in that signatory's Schedule, to procure on its behalf.
Are the Entities Legally Unified?
7.60 With respect to the first question, in our view, KAA is not legally unified with or a part of
MOCT.  There are a number of factors leading to this conclusion.  Among them are:  KAA was
established by law as an independent juristic entity;  it authored and adopted its own by-laws;  it had
                                                     
717 The term "control" does appear in Article XXIV:6(b), but it is referring there to privatization.  That
is, it is used in the same manner as per the analysis in Canada – Dairy  for determining whether an entity is
"governmental" or not rather than for examining the relationship between entities.
718 The parties at various times referred to a concept of "agency."  The term "agency" does not appear
in the GPA, but could be used in a very general sense of one entity legally acting on behalf of another.WT/DS163/R
Page 173
its own management and employees who were not government employees719;  it published bid
announcements and requests for proposals of its own accord;  it concluded contracts with successful
bidders on its own behalf;  and it funded portions720 of the IIA project with its own monies.721
7.61 There are, nonetheless, some indicia of a relationship between MOCT and KAA and its
successors.  The senior members of KAA's board of directors are appointed by MOCT and the rest ofthe directors are appointed by these senior members.  There are indicia of control, at least with respect
to the IIA project, that indicate some level of oversight or monitoring of KAA by MOCT.  We will
discuss this in more detail below with respect to the second question, but, in our view, these levels of
"control" relate to oversight or monitoring and not to the common identity of the entities.  These sorts
of relationships exist throughout the public sector.  Without them, it would be difficult for
governmental functions to be coordinated effectively.  But not all such relationships lead to a finding
that one entity is, in effect, a part of another enti ty.  Certainly for purposes of the GPA, such a result
would lead to a great deal of uncertainty in the coverage of the Schedules.  The GPA has always been
based on what is affirmatively included in Schedules
722 and extending the coverage further without
clear indicia of effective unity between entities is not warranted by the structure and purpose of the
GPA.  On balance, we are persuaded by the indicia of independence of KAA and its successors and
find that these entities are not a part of MOCT.723
Legal responsibility for the IIA project
7.62 The second question is whether or not KAA and its successors were acting on behalf of
MOCT, at least with respect to the IIA project.  That is, was the IIA project really the legal
responsibility of MOCT.  In answering these questions, we must review the laws governing
construction of the IIA.724
                                                     
719 This, as noted above, is a different question from whether such employee status means KAA is not a
"governmental" entity.
720 See paragraphs 2.61, 2.101 and 2.130.
721 Korea also argued that the fact that KAA authored and adopted its own procurement rules distinct
from the general government rules indicated KAA's indepe ndence.  We recognize that it is arguable that it is an
indicia of independence that there was pre-existing authority for procurement regulations separate from theentity that KAA was asserted to be a part of.  However, we also note that the question of separate andnon-conforming procurement regulations is the core of the complaint in this regard and the inconsistency at
issue should not generally be considered a justification fo r itself.  Thus, this aspect of alleged independence is of
sufficiently questionable probative value that we have not relied upon it.
722 See USITC Report, Exhibit Kor-73.
723 If KAA were to be considered a part of MOCT, then the 10 regional airports administered by KAA
would also have been included in Annex 1 coverage.  As noted in paragraph 7.47 above, even though the Panelrequested that the parties (particularly the United Stat es) address this issue, no evidence was presented that
KAA's 10 regional airports were considered part of Korea's offer.
724 We note that Korea raised the question of the applicability of GPA Article I:3 to the present
situation.  This provision reads as follows:
"Where entities, in the context of procurement covered under this Agreement, require
enterprises not included in Appendix I to award contracts in accordance with particular
requirements, Article III shall apply mutatis mutandis to such requirements."
This provision applies "in the context of procurement covered by this Agreement."  This implies that it is
already agreed that there is a covered entity with procurement under its responsibility.  Here the question iswhether the entity in question, KAA, is covered.  The provision also refers to a covered entity requiring aparticular enterprise  to award contracts for a project.  It is unclear what guidance this provides when reviewing
the relationship of two entities.  Thus, we do not think this provision provides guidance in the present situation.WT/DS163/R
Page 174
7.63 The United States relies heavily on the Korean Aviation Act  for support for its position that
MOCT has the legal responsibility for the IIA project.  Paragraphs (1) and (2) of Article 94 read as
follows:
"(1) The airport development projects shall be carried out by the Minister of
Construction and Transportation: Provided , that this shall not apply in case
(of) provided otherwise [sic] by this Act or other Acts and subordinate
statutes. ( emphasis in original )
(2) Any person other than the Minister of Construction and Transportation, who
desires to operate the airport development projects, shall obtain the
permission of the Minister of Construction and Transportation, under the
conditions as prescribed by the Presidential Decree."725
7.64 Paragraph (3) of Article 94 provides that the land and airport facilities will revert to the State
upon completion of the project.  Article 95 then continues on with a statement of the requirements that
the "project operator" as prescribed in Article 94 must fulfill regarding drawing up project plans and
getting approval from the Minister before beginning work as provided in the Presidential Decree.
7.65 Korea has responded that the proviso in Article 94(1) means that the Seoul Airport Act  is the
ultimate controlling statute rather than the Aviation Act .
7.66 We agree with Korea's reading of these statutes.  It seems clear to us that the Aviation Act
provides for at least two methods of airport constr uction.  One is by MOCT, in which case the whole
of the Aviation Act  applies.  A second is by other entities as provided otherwise by law.  The Seoul
Airport Act  is such a law.726  The United States argues727 that the cross-reference to Article 95(1) of
the Aviation Act  in Article 8(1)16 of the Seoul Airport Act  proves that the Aviation Act  is still the
controlling statutory authority.  We do not think this aids the US case.  Indeed, if anything, it would
tend to support the opposite conclusion.  Article 8(1)16 cross-references only the requirement in
Article 95 of the Aviation Act  regarding the submission of an operational plan by a project operator.
Article 95(1) of the Aviation Act  requires approval of an operational plan by MOCT;  Article 7 of the
Seoul Airport Act  requires the project operator to draw up an "execution plan" for approval.
Article 8(1)16 operates to create the presumption (l egal fiction) that the Article 7(1) approval is
equated with the approval given by Article 95(1) of the Aviation Act .  One of the aspects that implies
the contrary of the US assertion is the very limited cross-reference to Article 95(1) in the context of a
series of cross-references in Article 96.  These cross-references in Article 96 are made redundant by
Article 8 of the Seoul Airport Act .  As Korea has pointed out728, the redundancies in these two Acts
would not be necessary if, in fact, the Aviation Act  were still the controlling statutory authority for the
IIA project.  Furthermore, we also note that Article 95(3) of the Aviation Act  appears to make a
distinction between operational plans made directly by MOCT and such plans merely approved by
MOCT.729
                                                     
725 Exhibit Kor-115.  The version of the law in effect in 1991 is included in Exhibit Kor-114 where
Article 94(1) is phrased somewhat differently from the later version.  The difference is not material to ourpurposes and it is unclear whether the difference is merely one of translation.
726 Seoul Airport Act , Act No. 4383 (31 May 1991) as amended by Act No. 4436 (14 December 1991)
Exhibit Kor-12; Korea Airport Corporation Act  as amended by Act Nos. 4435 and 4436 (14 December 1991)
Exhibit Kor-14.
727 Paragraphs 4.90-4.94, 4.101-4.104 and 4.114-4.116.
728 Paragraphs 4.95-4.100.  See also paragr aphs 4.86-4.89, 4.105-4.108 and 4.112-4.113.
729 While we consider the cross-reference discussed in the text the most salient for purposes of our
Findings, we do note that the United States cited other cross-references.  For example, the United States cited
cross-references in Articles 2:1 and 2:2(a) of the Seoul Airport Act  to definitions contained in the Aviation Act .WT/DS163/R
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7.67 The Seoul Airport Act  has many provisions relating to the relationship between KAA and
MOCT.  These provisions, as noted in the previous paragraph, would be at the very least unnecessary
if the Aviation Act  were the controlling statutory authority.  Moreover, Article 4 of the Seoul Airport
Act provides for MOCT to draw up a master plan of the project including the general direction  of
construction, an outline of the construction plan, the construction period and a financing plan, as well
as other matters deemed necessary by MOCT.730  These issues of a general nature are not uncommon
elements of a Ministry's oversight of a project but do not render the other entity its agent.
7.68 Article 6 of the  Seoul Airport Act  provides that the master plan shall be implemented by the
state and local governments and by what was later designated as KAA.  Article 7 then required KAA
to develop an execution plan and have it approved  by MOCT along with any alterations other than
minor ones.731  There obviously is a relationship of some degree between MOCT and KAA.  MOCT
has specific responsibilities of continued oversight.  However, we are not persuaded that thisoversight was such that KAA was acting as a mere agent of MOCT on a project that was still within
the procurement responsibility of MOCT.
7.69 Importantly for purposes of analysis under the GPA, procurement appears to be the
responsibility of KAA.  The United States has provided examples of bid requests that identify MOCT
or the Office of Supply, but we do not find these isolated instances that have been shown to us as
sufficient evidence that MOCT is responsible for procurement for the IIA.
732  We note that the
currently responsible entity, IIAC, has 557 employees and the NADG is staffed by 30 MOCT
officials.733  While we recognize that a smaller entity can utilize a larger agent, it does not appear that
IIAC is a mere empty shell.  We also take note of Korea's statement that MOCT has no role in IIA
procurements.734  We see no evidence that would cast doubt on this statement.
7.70 The United States has pointed out that the MOCT website states that NADG has
responsibility for the IIA project.  As discussed previously, we also take note of Korea's caution that a
Ministry's website is not a legal document and that in this case it was prepared by the public relations
department of MOCT which might have other motivations in describing the Ministry's business other
than technical accuracy.  There certainly is a role under Korean law for MOCT in the IIA project.  Itappears to be a role of oversight.  We do not think oversight by one governmental entity of a project
which has been delegated by law to another entity (which we have already found to be independent
and not covered by GPA commitments) results in a conclusion that there is an agency relationship
between them.
Conclusion
7.71 In our view, after reviewing the issues raised in this subsection, we return to our previous
conclusion that the answer must be that Members generally may, pursuant to negotiations, decidewhich entities (and procurement covered by those entities) are included in their Schedules and in
which Annex they will be included.  The question of "control" or other indicia of affiliation is not an
explicit provision of the GPA.  Rather, it is a matter of interpretation for the content of the Schedules
themselves.  Therefore, the issue of whether a Party can use a Note to exclude an entity which would
otherwise appear to be covered within the concession contained in a particular Annex is precisely the
                                                                                                                                                                    
We find such citations unpersuasive in support of the US point.  It only makes sense that two statutes referring
to aviation matters should operate from common definitions.
730 Exhibit Kor-12(a).
731 Ibid.
732 US Exhibits 25, 75 and 76.  We also note that several examples of such documents submitted by the
United States to support the allegations of procurements inconsistent with the requirements of the GPA show norelationship with MOCT.  See US Exhibits 34-43.  See also Exhibit Kor-48 (A-N).
733 Paragraph 2.82.
734 Paragraphs 4.50, 4.69, 4.77 and 4.78.  Exhibit Kor-116.WT/DS163/R
Page 176
sort of issue appropriate for qualifications through Notes as found by the panel in United States –
Sugar , as discussed in paragraphs 7.30-7.31, above.
7.72 We must also note, however, that this ability to define the scope of commitments is not
absolute.  The United States pointed out that procurement by NADG was unarguably covered by the
GPA even though it was neither listed explicitly nor directly within the definition of a subordinatelinear organization or otherwise in Note 1 to Annex 1.  Korea responded that NADG was merely an
ad hoc task force within MOCT.  But this response of Korea somewhat avoids the challenge of this
example. There can be something else beyond the strict confines of the language of the Schedule
which must be examined.  If a Party explicitly excludes an entity in a Note, that is conclusive.  A
Member may also affirmatively put entities in another Annex from an affiliated entity.  But if the
Schedule is completely silent on an entity, it may be necessary to look somewhat further to see if there
is an affiliation of two entities such that they could be considered legally the same entity (which
appears to be the case between MOCT and NADG) or one could be acting on behalf of another.
7.73 In this dispute, we cannot so far conclude from the language of Korea's Appendix I and the
Notes contained therein that KAA and its successors as entities are covered by Korea's Schedule
commitments or that the IIA project is somehow othe rwise included.  We must still note, however, the
ambiguities in the wording of Note 1 to Annex 1 which were not fully resolved by a textual analysisand led us to refer already to one piece of the negotiating history of Korea's accession to the GPA.
We, therefore, will complete our examination of the scope of Korea's Annex 1 through a more
thorough discussion of the relevant aspects of  negotiating history of Korea's accession to the GPA.
3. Negotiations for Korea's GPA Accession
7.74 As we noted above, Korea's Note 1 to Annex 1 leaves room for ambiguity.  As an aid in
interpreting Note 1 and Annex 1 we reviewed one particularly relevant piece of negotiating history.
At that point we did not undertake a broader review of the negotiating history because it was a limited
point we were examining and one piece of evidence was particularly relevant to its interpretation.
Clearly, there are difficulties in interpreting the Schedule language, some aspects of which are
ambiguous, and we wish to ensure that there are not other aspects of the negotiating history whichmight change the conclusions we reached with respect to Note 1.  Also, the United States has
specifically argued that the understanding of the parties at the time of the negotiations was that there
was a concession with respect to the IIA project, regardless of which entity was responsible.
Therefore, we consider it appropriate to engage in a further review of the overall negotiating history.
7.75 At the outset of our analysis of this issue, we must address some relevant issues relating to
use of negotiating history which arose in the European Communities – Computer Equipment  dispute.
In that dispute, the Appellate Body specifically found that the standard of reasonable expectation orlegitimate expectation existing with respect to non-violation cases had no role in reviewing
negotiating history in order to aid in resolving the issues pertaining to a violation case.  One of the
reasons is that in a non-violation case the relevant question is what was the reasonable expectation of
the complaining party.  However, if it is necessary to go beyond the text in a violation case, the
relevant question is to assess the objective evidence of the mutual understanding of the negotiatingparties.
735  This involves not just the complaining and responding parties, but also involves possibly
other parties to the negotiations.  It is also important to note that there is a difference in perspectives
of the reasonable expectations of one party as opposed to the mutual understanding of all the parties.
The information available at the time of the negotiations may be available to some parties but not all.
In other words, the evidence before the panel may be different in the two analyses and the weightingand probative value may also differ.
                                                     
735 European Communities – Computer Equipment  at paragraphs 81-84, 93.WT/DS163/R
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7.76 We start by noting again that Korea provided in February 1991 a Supplementary Explanation
to its initial 1990 offer.736 The United States then began bilateral negotiations with Korea regarding its
accession bid on 22 April 1991.  During the course of these negotiations, the United States put a series
of questions to Korea regarding its offer.737  Question 6 asked:
"How does the Airport Development Group relate to the Ministry of
Communications?  Does Korea's offer of coverage of the Ministry of
Communications include purchases for the Airport Development Group?  Please
identify all Ministries that will be responsible for the procurement of goods and
services related to new airport construction."
7.77 In response, Korea answered:
"The new airport construction is being conducted by the New Airport Development
Group under the Ministry of Transportation.  The new airport construction project isscheduled to be completed by 1997 after the completion of the basic plan by 1992 and
the working plan by 1993.  The US company, Bechtel, is taking part in the basic plan
projects.
The responsible organization for procurement of goods and services relating to the
new airport construction is the Office of Supply.  But at present, the concreteprocurement plan has not been fixed because now the whole airport construction
project is only in a basic planning stage."
738
7.78 On 14 December 1993, Korea made its final offer.  The final offer also introduced General
Notes that applied to all the Annexes.  General Note 1 provides:
"Korea will not extend the benefit of this Agreement(a) as regards the award of contracts by National Railroad Administration,
(b) as regards procurement for airports by the entities listed in Annex 1,
(c) as regards procurement for urban transportation (including subways) by the
entities listed in Annexes 1 and 2
to the suppliers and service providers of member states of the European Community,
Austria, Norway, Sweden, Finland and Switzerland, until such time as Korea has
accepted that those countries give comparable and effective access for Korean
undertakings to their relevant markets."
7.79 The European Communities had made an inquiry of Korea in late November 1993 as to the
coverage of airports.
739  There apparently was no written response.  However, an internal EC note
does indicate that Korea responded that there was airport coverage, but in parenthesis noted "Seoul,
Pusan" as examples of the airports that would be covered.  This implies that they are therefore theairports covered by reason of Note 1 to Annex 1.  That is, this evidence is consistent with our
conclusion reached in paragraph 7.47.  There was no mention of KAA or the IIA project in the EC
internal note.
740  Then the European Communities and several other countries introduced reservations
                                                     
736 See paragraph 7.44.
737 Paragraphs 2.51 and 4.328.
738 Paragraphs 2.52 and 4.330.
739 EC Response to First set of Panel Questions, Annex IV.
740 Ibid. , Annex V.WT/DS163/R
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excluding coverage of airports for Korea.  Appa rently, this is what prompted Korea's derogation
quoted above in General Note 1(b) to Appendix I.
7.80 As will be discussed more fully in the following two sections, the Korean answer to the US
question clearly was not as full and thorough a response as would normally be appropriate for GPA
negotiations.741  At the time Korea provided its answer it had already enacted legislation designating
another entity (other than MOCT) as responsible for the IIA project.  Further legislation to designate
KAA as that entity was already in the planning stages.  Korea has stated that it knew that the IIA
project was the subject of the US inquiry.742  The Korean answer can, at best, be described as
inadequate.
7.81 Nonetheless, we do note that Korea's July 1991 answer to the US question was qualified by
the reference to the fact that the procurement plans were not finalized.  And this qualification was
preceded by the linking word "but" which clearly means the previous statement should not have beentaken as an absolute.  We recognize that the "but" qualification refers to the procurement plan while
the question and the previous portion of the answer  refer to the responsible procuring entities.
However, the Korean answer was sufficiently qualified so that it should have raised questions.  And,
importantly, the United States (we have no evidence that any Parties other than the United States were
aware of this particular Korean response) had over two and a half years before reaching a finalagreement during which time this ambiguity could have been cleared up.  The European Communities
and other negotiating parties did act in 1993 to clarify the coverage of airports and received answers
that contribute to the overall picture that there was no mutual understanding of the parties that a
covered entity was procuring for the IIA project.  In fact, it seems that negotiating parties other than
the United States were clear that the IIA project was not covered.
743  In light of the lapse of time and
the actions of other Members, the United States should not have rested upon the conclusions they now
tell this Panel they reached based on this qualified response from Korea in 1991.
7.82 In summary, with respect to the interpretation of the negotiating history of Korea's accession
to the GPA, we recall our conclusion that this information clarifies that Note 1 to Annex 1 was meant
to be definitional in nature and that the text of Korea's Schedule does not include coverage of KAAand its successors.  In our view, the full negotiating history reflecting what the several parties to the
negotiations understood with respect to Korea's offer, confirms our conclusion that there was no
mutual understanding on the coverage of KAA.
7.83 Therefore, we conclude that the IIA construction project was not covered as the entities
engaged in procurement for the project are not covere d entities within the meaning of Article I of the
GPA.  Furthermore, the kind of affiliation that we have concluded is necessary to render an unlisted
entity subject to the GPA is not present in this case .  Therefore, we do not need to proceed further and
make specific findings with respect to the alleged inconsistencies of Korea's procurement practices in
this regard.
744
                                                     
741 The Panel notes that it has not made any finding at any point in this Report that Korea acted in bad
faith during any portion of the negotiations for its accession to the GPA.
742 Paragraph 4.343.
743 The fact that the United States alone received an answer from Korea that may have resulted in a
reasonable expectation on the US part of some differen t situation will be discussed below with respect to the
non-violation claim.
744 We note that had such Findings been required, Korea took no position in response to the US
allegations and offered no evidence to refute that provided by the United States.WT/DS163/R
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C. ALLEGATION OF NON -VIOLATION NULLIFICATION OR IMPAIRMENT
1. General
(a) Asserted Basis of the Claim
7.84 We note at the outset that the basis for the non-violation claim that the United States has made
in the context of this case is different from the basis that usually exists in relation to such claims.745  In
order to explain this difference clearly, it is necessary first to note the bases of a traditional
non-violation claim.
7.85 The panel in Japan – Measures Affecting Consumer Photographic Film and Paper
(WT/DS44) (" Japan – Film ") summarized the traditional test for non-violation cases in the following
manner:
"The text of Article XXIII:1(b) establishes three elements that a complaining party must
demonstrate in order to make out a cognizable claim under Article XXIII:1(b):
(1) application of a measure by a WTO Member;  (2) a benefit accruing under the
relevant agreement;  and (3) nullification or impairment of the benefit as the result of
the application of the measure."746
To this we would add the notion that has been developed in all these cases that the nullification or
impairment of the benefit as a result of the measure must be contrary to the reasonable expectations of
the complaining party at the time of the agreement.
7.86 So, normal non-violation cases involve an examination as to whether there is:  (1) an
application of a measure by a WTO Member;  (2) a benefit accruing under the relevant agreement;and (3) nullification or impairment of the benefit due to the application of the measure that could not
have been reasonably expected by the exporting Member.
7.87 In this case, the United States has asserted that measures it claimed violated the GPA (that is,
the imposition of inadequate bid-deadlines;  the imposition of certain qualification requirements;  the
imposition of certain domestic partnering requirements;  and the failure to establish effective domesticchallenge procedures engaged in by KAA and its successors in relation to the IIA project) nullify or
impair benefits accruing to the United States under  the GPA, pursuant to Article XXII:2 of the GPA.
A key difference between a traditional non-violation case and the present one would seem to be that,
normally, the question of "reasonable expectation" is whether or not it was reasonably to be expected
that the benefit under an existing concession would be impaired by the measures.  However here, if
there is to be a non-violation case, the question is whether or not there was a reasonable expectation of
an entitlement to a benefit that had accrued pursuant to the negotiation  rather than pursuant to a
concession .
(b) Arguments of the Parties
7.88 The United States slightly re-arranges the test enunciated by the Japan – Film  panel and
proposes that a successful determination of a non-violation nullification and impairment in the GPArequires the finding of the following three elements:  (1) a concession was negotiated and exists;  (2) a
measure is applied that upsets the established competitive relationship;  and (3) the measure could not
                                                     
745 The allegations made by the United States are pursuant to a portion of GPA Article XXII:2 which is
equivalent to Article XXIII:1(b) of GATT 1994.
746  Japan - Film , at paragraph 10.41, citing, EEC - Oilseeds , BISD 37S/86, paragraphs 142-152;
Australian Subsidy on Ammonium Sulphate , BISD II/188, 192-193 .WT/DS163/R
Page 180
have been reasonably anticipated at the time the concession was negotiated.747  The United States
argues that of the three elements of a non-violation claim, the only outstanding issue in this case is the
first element – that is, whether or not there is a concession.
7.89 The United States contends that, similarly, during Korea's GPA accession negotiations, the
United States bargained for and received from Korea the coverage of all government entitiesresponsible for the procurement of products and services related to new airport construction projects
under Annex 1.  According to the United States, Korea subsequently engaged in, and continues to
engage in, measures in procurement that could not have reasonably been anticipated by the United
States at the time the coverage of new airport construction was negotiated.  The United States argues
that these measures result in the upsetting of the established competitive relationship between US
products, services, and suppliers and Korean products, services, and suppliers in the IIA construction
project, a competitive relationship worth potentially US$6 billion.  On this basis, the United Statesargues that Korea is nullifying or impairing benefits accruing to the United States under the GPA.
7.90 In response, Korea argues that the burden placed upon the United States to support its
non-violation claim under Article XXII:2 of the GPA is substantial.  Korea notes that under DSU
Article 26:1(a), "the complaining party shall present a detailed justification in support of any
complaint relating to a measure which does not co nflict with the relevant covered agreement."
7.91 Korea argues that the United States must demonstrate, by virtue of the requirement in
Article XXII:2 that it identify a "benefit accruing" to it under the GPA, that it "reasonably expected"
to obtain the benefit of GPA coverage for IIA procurement.
748  Korea further argues that "for
expectations of a benefit to be legitimate, the challenged measures must not have been reasonably
anticipated at the time the tariff concession was negotiated."749  Korea asserts that this requirement is
self-evident and quotes for support:  "If the measures were anticipated, a Member could not have had
a legitimate expectation of improved market access to the extent of the impairment caused by these
measures."750
7.92 Korea argues that the requirement that the measure at issue has upset the competitive
relationship created by the Agreement implies that an "agreement" is necessary.  Korea further arguesthat the essence of a non-violation claim is that some action of a party, after an agreement is
concluded, which could not have been reasonably anticipated at the time of the agreement, nullifies or
impairs a concession made by another party.  Korea asserts that the United States has not specified
what agreement was made by the parties that was nullified or impaired by action taken by Korea after
that agreement was entered into.  Korea further asserts that it could not have been an agreement to
include KAA and KOACA and IIAC in Korea's GPA coverage given that Korea never agreed to
include these entities in any of its offers.
                                                     
747 The United States cites: Report of the Working Party on The Australian Subsidy on Ammonium
Sulphate  (adopted on 3 April 1950), BISD II/188-196, paragraph 12;  Panel Report on Treatment by Germany of
Imports of Sardines  (adopted on 31 October 1952), G/26, BISD  1S/53-59, paragraph 16;  Panel Report on
European Economic Community -Production Aids Granted on Canned Peaches, Canned Pears, Canned Fruit
Cocktail and Dried Grapes , 20 February 1985 (unadopted), L/5778, paragraph 51;  and Panel Report on
European Economic Community - Payments and Subsidies Paid to Processors and Producers of Oilseeds andRelated Animal-Feed Proteins  (adopted on 25 January 1990), L/6627, BISD 37S/86, paragraphs 142-152.
748Japan - Film at paragraph 10.72.  As further support for this principle, Korea cites EEC - Oilseeds ,
BISD 37S/86, 128-129 (paragraphs 147-148);  Operation of the Provisions of Article XVI , BISD 10S/201, 209
(paragraph 28) (adopted on 21 November 1961);  Other Barriers to Trade , BISD 3S/222, 224 (paragraph 13)
(adopted on 3 March 1955);  Germany - Sardines , BISD 1S/53, 58-59 (paragraph 16) (adopted on
31 October 1952);  Australian Subsidy on Ammonium Sulphate , GATT/CP.4/39, BISD II/188, 193-194 (adopted
on 3 April 1950).
749Japan - Film  at paragraph 10.76.
750 Ibid.WT/DS163/R
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2. Non-violation Claims in the Context of Principles of Customary International Law
7.93 In our view, the non-violation remedy as it has developed in GATT/WTO jurisprudence
should not be viewed in isolation from general principles of customary international law.  As noted
above, the basic premise is that Members should not take actions, even those consistent with the letter
of the treaty, which might serve to undermine the reasonable expectations of negotiating partners.This has traditionally arisen in the context of actions which might undermine the value of negotiated
tariff concessions.  In our view, this is a further development of the principle of pacta sunt servanda
in the context of Article XXIII:1(b) of the GATT 1947 and disputes that arose thereunder, and
subsequently in the WTO Agreements, particularly in Article 26 of the DSU.  The principle of pacta
sunt servanda  is expressed in Article 26 of the Vienna Convention
751 in the following manner:
"Every treaty in force is binding upon the parties to it and must be performed by them
in good faith."
7.94 It seems clear that good faith performance has been agreed by the WTO Members to include
subsequent actions which might nullify or impair the benefits reasonably expected to accrue to other
parties to the negotiations in question.  The consistency of such an interpretation with the general
principles of customary international law is confirmed by reference to the negotiating history of the
Vienna Convention .  According to the Report of the International Law Commission to the General
Assembly, this issue was considered by the members negotiating the Convention in the following
manner:
"Some members felt that there would be advantage in also stating that a party must
abstain from acts calculated to frustrate the object and purpose of the treaty.  The
Commission, however, considered that this was clearly implicit in the obligation to
perform the treaty in good faith and preferred to state the pacta sunt servanda  rule in
as simple a form as possible."752
7.95 The non-violation doctrine goes further than just respect for the object and purpose of the
treaty as expressed in its terminology.  One must respect actual provisions (i.e., concessions) as far as
their material effect on competitive opportunities is concerned.  It is an extension of the good faithrequirement in this sense.
7.96 We take note that Article 3.2 of the DSU requires that we seek within the context of a
particular dispute to clarify the existing prov isions of the WTO agreements in accordance with
customary rules of interpretation of public international law.
753   However, the relationship of the
WTO Agreements to customary international law is broader than this.  Customary international law
applies generally to the economic relations between the WTO Members.  Such international law
applies to the extent that the WTO treaty agreements do not "contract out" from it.  To put it anotherway, to the extent there is no conflict or inconsistency, or an expression in a covered WTO agreement
that implies differently, we are of the view that the customary rules of international law apply to the
WTO treaties and to the process of treaty formation under the WTO.
7.97 As Korea has argued, non-violation is an exceptional concept within the WTO dispute
settlement system.  Article 26:1(a) of the DSU requires that:
                                                     
751 A reference to the rule of pacta sunt servanda  also appears in the preamble to the Vienna
Convention.
752 Yearbook of the International Law Commission  (1966), Vol. II at p. 211.
753 We should also note that we can see no basis here for an a contrario  implication that rules of
international law other than rules of interpretation do not apply.  The language of 3.2 in this regard applies to aspecific problem that had arisen under the GATT to the effect that, among other things, reliance on negotiatinghistory was being utilized in a manner arguably inconsistent with the requirements of the rules of treatyinterpretation of customary international law.WT/DS163/R
Page 182
"[T]he complaining party shall present a detailed justification in support of any
complaint relating to a measure which does not conflict with the relevant covered
agreement."
7.98 As stated by the panel in Japan – Film:
"Although the non-violation remedy is an important and accepted tool of
WTO/GATT dispute settlement and has been "on the books" for almost 50 years, we
note that there have been only eight cases in which panels or working parties have
substantially considered Article XXIII:1(b) claims.  This suggests that both the
GATT contracting parties and WTO Members have approached the remedy with
caution and, indeed, have treated it as an exceptional instrument of dispute settlement.
We note in this regard that both the European Communities and the United States in
the EEC - Oilseeds  case, and the two parties in this case, have confirmed that the non-
violation nullification or impairment remedy should be approached with caution and
treated as an exceptional concept.  The reason for this caution is straightforward.
Members negotiate the rules that they agree to follow and only exceptionally would
expect to be challenged for actions not in contravention of those rules."754
Despite this caution, however, the panel in Japan – Film  was of the view that the non-violation
remedy had an important role - that of protecting the reasonable expectations of competitive
opportunities through negotiated concessions.
7.99 In our view, these observations by previous panels are entirely in line with the concept of
pacta sunt servanda .  The vast majority of actions taken by Members which are consistent with the
letter of their treaty obligations will also be consistent with the spirit.  However, upon occasion, it
may be the case that some actions, while permissible under one set of rules (e.g., the Agreement on
Subsidies and Countervailing Measures is a commonly referenced example of rules in this regard), are
not consistent with the spirit of other commitments su ch as those in negotiated Schedules.  That is,
such actions deny the competitive opportunities which are the reasonably expected effect of suchcommitments.  However, we must also note that, while the overall burden of proof is on the
complainant, we do not mean to introduce here a new requirement that a complainant affirmatively
prove actual bad faith on the part of another Member.    It is fairly clear from the history of disputes
prior to the conclusion of the Uruguay Round that such a requirement was never established and there
is no evidence in the current treaty text that such a requirement was newly imposed.  Rather, the
affirmative proof should be that measures have been taken that frustrate the object and purpose of the
treaty and the reasonably expected benefits that flow therefrom.
7.100  One of the issues that arises in this dispute is whether the concept of non-violation can arise in
contexts other than the traditional approach represented by pacta sunt servanda.   Can, for instance the
question of error in treaty negotiation be addressed under Article 26 of the DSU and Article XXII:2 of
the GPA?  We see no reason why it cannot.  Parties have an obligation to negotiate in good faith just
as they must implement the treaty in good faith.  It is clear to us (as discussed in paragraphs 7.110 and7.121 below) that it is necessary that negotiations in the Agreement before us (the GPA) be conducted
on a particularly open and forthcoming basis.
7.101  Thus, on the basis of the ample evidence provided by both parties to the dispute, we will
review the claim of nullification or impairment raised by the United States within the framework of
principles of international law which are generally applicable not only to performance of treaties but
also to treaty negotiation.
755  To do otherwise potentially would leave a gap in the applicability of the
                                                     
754 Japan - Film  at paragraph 10.36.
755 We note that DSU Article 7.1 requires that the relevant covered agreement be cited in the request
for a panel and reflected in the terms of reference of a panel.  That is not a bar to a broader analysis of the typeWT/DS163/R
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law generally to WTO disputes and we see no evidence in the language of the WTO Agreements that
such a gap was intended.  If the non-violation remedy were deemed not to provide a relief for such
problems as have arisen in the present case regarding good faith and error in the negotiation of GPA
commitments (and one might add, in tariff and services commitments under other WTO Agreements),
then nothing could be done about them within the framework of the WTO dispute settlementmechanism if general rules of customary international law on good faith and error in treaty
negotiations were ruled not to be applicable.  As was argued above, that would not be in conformity
with the normal relationship between international law and treaty law or with the WTO Agreements.
7.102  If non-violation represents an extension of the good faith requirements in the implementation
of a treaty and can also be applied to good faith and error in negotiations under the GPA, and we think
it can, then the special remedies for non-violation contained in DSU Article 26 should also be applied
rather than the traditional remedies of treaty law which are not apposite to the situation of the GPA(see the discussion in footnote 769, below).
(a) The Traditional Approach: Extended pacta sunt servanda
7.103  Because the United States raised the non-violation issue in this dispute at least nominally
under the traditional approach, we will examine the fact s of the dispute in that context first.  In our
view, there is a slightly different cast to traditional non-violation claims with respect to the GPA than
under previous GATT non-violation cases.  Here the analysis would run as follows:  (1) there was an
agreed concession on entities;  (2) resulting from that there was a reasonable expectation of enjoying
competitive bidding opportunities;  (3) an action which does not violate GPA rules is taken by the
Member that made the concession, including the concessions on entities;  and (4) resulting from that,the expected competitive bidding opportunities are not available and the benefits of the concession
have been nullified and impaired.
7.104  In light of these elements, we will now turn to the facts of this case.  In 1990, Korea made its
initial offer of coverage when it requested accession to the Tokyo Round Agreement.  In
February 1991, Korea provided a Supplementary Explanation .  As we discussed above, that
February 1991 explanation noted airport coverage under the Ministry of Transportation.
756  It showed
two unnamed regional airport authorities and one named airport entity.  The IIA project was not
mentioned nor was KAA.  As we have also discussed above, the meaning of the proposed Note 1 to
Annex 1 was clarified in a manner which clearly indicated it was intended as a guide to the scope of
the coverage under Annex 1.
7.105  On 1 May 1991, the United States sent a series of questions to Korea including a question
regarding coverage of airport construction.  On 31 May 1991, the Korea National Assembly enactedthe Seoul Airport Act  which Korea has told the panel was the legal basis for the shift of authority
away from MOCT.  Otherwise the Aviation Act  would have required that the Minister of
Transportation build the facility.  On 26 June 1991, the Ministry of Transportation began the
preparatory legislative work that would result in KAA being designated in December 1991 as the
responsible entity for the IIA project.
                                                                                                                                                                    
we are following here, for the GPA would be the referenced covered agreement and, in our view, we are merely
fully examining the issue of non-violation raised by the United States.  We are merely doing it within thebroader context of customary international law rather than limiting it to the traditional analysis that accords with
the extended concept of pacta sunt servanda .  The purpose of the terms of reference is to properly identify the
claims of the party and therefore the scope of a panel's review.  We do not see any basis for arguing that theterms of reference are meant to exclude  reference to the broader rules of customary international law in
interpreting a claim properly before the Panel.
756 See paragraph 7.44.WT/DS163/R
Page 184
7.106  On 1 July 1991, Korea provided its response to the US questions.  We will quote again at this
point both the US question and Korea's answer becaus e we think it is very important to review them
in light of the facts described in the preceeding two paragraphs.  The United States asked:
"How does the Airport Development Group relate to the Ministry of
Communications?  Does Korea's offer of coverage of the Ministry ofCommunications include purchases for the Airport Development Group?  Please
identify all Ministries that will be responsible for the procurement of goods and
services related to new airport construction."
In response, Korea answered:
"The new airport construction is being conducted by the New Airport Development
Group under the Ministry of Transportation.  The new airport construction project isscheduled to be completed by 1997 after the completion of the basic plan by 1992 and
the working plan by 1993.  The US company, Bechtel, is taking part in the basic plan
projects.
The responsible organization for procurement of goods and services relating to the
new airport construction is the Office of Supply.  But at present, the concreteprocurement plan has not been fixed because now the whole airport construction
project is only in a basic planning stage."
7.107  Following this answer, on 10 July 1991, the MOT published a public notice of draft
legislation containing proposed amendments to the Seoul Airport Act.   Then extensive internal
governmental consultations took place and, on 21 October 1991, the draft legislation was transferredto the National Assembly.  It was adopted by  the National Assembly on 20 November 1991 and
signed by the President and published in the Official Gazette  on 14 December 1991.
7.108  We find it very difficult to understand how Korea could have made the response that it did on
1 July 1991, state nothing else at that time or in the succeeding months and bring none of this to the
attention of the United States.  The enabling legislation was already passed on 31 May 1991 removingMOCT's direct authority for the project and this was at least one month before Korea provided its
response to the question posed by the United States.  Furthermore, at that time, plans were under way
already to name a specific entity  (KAA) as the en tity responsible for the IIA.  Yet Korea's response in
July 1991 was that MOCT (through NADG) was currently responsible for the IIA project.  Korea's
answer was qualified by stating that procurement plans were not fixed, but much more than this was
known by Korea at the time and should have been reported to the United States in the answer.  Korea
has offered no valid reason for why it did not do so.
7.109  We do not agree with Korea's argument that there is nothing to the GPA but the question of
whether entities are covered.  It is true that the Schedules are structured in terms of entities, but that is
not the basis for the negotiations.  Members do not negotiate to get coverage of entities as such.  They
do not bargain for names on a list.  Rather, they negotiate to achieve coverage of the procurements
which are the responsibility of the covered entities.   As previous panels have noted, the object ofnegotiations on Schedule commitments is to achieve competitive opportunities and, in the context of
the GPA, that comes with access to projects, not just a list of names of government entities.
7.110  In our view, an agreement such as the GPA requires full, timely and complete responses to
questions.  Negotiations for coverage of government procurement markets are difficult.  Each market
has its own characteristics which are fully understood only by the responding party.  We recall howdifficult it is to understand fully the structure of the Korean Government coverage pursuant to the
Government Organization Act  as an illustration of the difficulties in this regard.  Korea has stated that
in its view it had no obligation to try to guess what the United States was interested in and supplyWT/DS163/R
Page 185
further information.  However, Korea also stated th at it did not mention in its answer the regional
airport authorities that it had offered to include because it knew the United States was really interested
in the IIA.   Clearly the latter answer was correct.  It was objectively clear what the US question was
about.  And Korea, knowing that, then had an obl igation to make a full and frank response.  The
integrity of the negotiating system requires no less.  In our view, Korea's actions fell short of theconduct expected of parties negotiating accession to the GPA.
7.111  However, having stated that Korea's answer was not satisfactory in various ways, that is not
the end of our review of the facts.  The next issue which we must address is the fact that Korea's
answer to the US question was provided about two a nd a half years before submission of Korea's final
offer and that responsibility for the IIA project was assigned to KAA two years before that 14
December 1993 offer.  Indeed, the Agreement was not actually finalized until 15 April 1994.  We note
that in a previous dispute involving a tariff Schedule where there was an agreed concession, it wasfound possible to base a non-violation claim on measures taken prior to the close of negotiations that
later impaired the benefits reasonably expected to accrue from the concessions.  The panel in Japan –
Film stated:
"In the case of measures shown by Japan to have been introduced prior to the
conclusion of the tariff negotiations at issue, it is our view that Japan has raised apresumption that the United States should be held to have anticipated those measures
and it is for the United States to rebut that presumption.  In this connection, it is our
view that the United States is charged with knowledge of Japanese Government
measures as of the date of their publication.  We realize that knowledge of a
measure's existence is not equivalent to understanding the impact of the measure on aspecific product market.  For example, a vague measure could be given substance
through enforcement policies that are initially unexpected or later changed
significantly.  However, where the United States claims that it did not know of a
measure's relevance to market access conditions in respect of film or paper, we would
expect the United States to clearly demonstrate why initially it could not havereasonably anticipated the effect of an existing measure on the film or paper market
and when it did realize the effect . . . A simple statement that a Member's measures
were so opaque and informal that their impact could not be assessed is not
sufficient."
757
7.112  In one situation that arose in that dispute, the United States showed that the relevant measure
(a Cabinet Decision) was only published nine days before the conclusion of the Kennedy Round of
negotiations.  The panel made the following finding:
"Because of the short time period between th is particular measure's publication and the
formal conclusion of the Kennedy Round, we consider it difficult to conclude that the
United States should be charged with ha ving anticipated the 1967 Cabinet Decision
since it would be unrealistic to expect that the United States would have had an
opportunity to reopen tariff negotiations on individual products in the last few days of amultilateral negotiating round."
758
7.113  On the other hand, when the measure pre-dated the conclusion of the Round by a month and a
half, the panel reached a different conclusion:
"As we noted earlier, the United States is charged with knowledge of Japanese
regulations on publication.   Although we can conceive of circumstances where theexporting WTO Member may not reasonably be aware of the significance of a
                                                     
757 Japan - Film , supra ., at paragraph 10.80.
758 Ibid.  at paragraph 10.103.WT/DS163/R
Page 186
measure for or its potential disparate impact on imported products until some time
after its publication, the United States has not demonstrated the existence of any such
circumstance here."759
7.114  We recall that even though Korea's answer in July 1991 was almost two and a half years prior
to Korea's final offer, it appears from evidence a nd statements from the parties that the Korean and
US Governments had no further discussions on the subject.  The United States has told us that they
did not inquire further about that subject because they were reasonably convinced that they knew
MOCT was covered and they believed that MOCT retained statutory authority under Korean law to
carry out airport construction projects.
7.115  However, as pointed out by the panel in Japan – Film and quoted above, the United States is
charged with knowledge of Korean legislation.  The United States, therefore is presumed to have
known of the Seoul Airport Act  and the pieces of legislation enacted in December 1991 which actually
put KAA in charge of the project.  It is up to the United States to provide a persuasive explanation for
why it did not know either about the legislation or the significance of it.  Further, Korea has submitted
evidence to show that US industry and Government had actual knowledge that KAA was in charge of
the project.760  Furthermore, while Korea's answer in July 1991 was not full and complete, it did
contain a qualification.  Over the course of about two and a half years, with knowledge that an entityother than MOCT was in charge of the project and in  light of the qualification contained in the Korean
answer upon which it was relying, at the very least, further inquiries should have been made by the
United States.
7.116  Furthermore, the European Communities and several other Members did pursue the question
of Korea's airport coverage.  The United States is not charged with knowledge of the bilateralcommunications between these negotiating parties and Korea;  however, more than that occurred here.
The European Communities along with several other Members at some point in December 1993
added a derogation with respect to Korea's airport coverage in their GPA Schedules.  Korea responded
in kind with its derogation in its General Note 1(b).  The United States certainly should have known
from these circumstances that further clarifications from Korea were in order with respect to the US
understanding of the Korean offer.  We further note that the WTO GPA was not finalized until four
months after Korea's final offer.  At least one month of this period was to be used for verification with
consultations to resolve the matter to follow if necessary.
761  We have seen no evidence that the
United States made any effort to use this verification period to clarify the situation.
7.117  At this point, we will review the elements of a traditional non-violation case, applied in the
context of the GPA, that we listed in paragraph 7.103 above, but we will do it in reverse order to
illustrate a particular problem with this case.  With  respect to step four, the United States believes it
has lost competitive opportunities on bidding for the IIA project.  With respect to step three, the
United States alleges that this is a result of actions taken by Korea. (However, these actions are
identical to the actions alleged under the US viol ation complaint.)  With respect to step two, the
United States claims that it had reasonable expectations with respect to bidding opportunities on the
IIA project (as discussed in paragraphs 7.104-7.107, above).  But, with respect to step one, this wasbased on reasonable expectations derived from the negotiations, not from the concessions because we
have found in section VII:B, above, that there were in fact no concessions given by Korea.
7.118  As discussed above, the United States bases its argument on the claim that it had a reasonable
expectation that it had received a commitment with re spect to a particular project, but the concessions
themselves are based on covered entities.  Thus, unlike traditional non-violation claims there is no
                                                     
759 Ibid.  at paragraph 10.111.
760 See paragraphs 4.561, 4.563-4.566.
761 Minutes of the Meeting of the Committee on Government Procurement Held on 15 December 1993,
Annex 1, GPR/M/50, 21 January 1994.  US Exhibit 65.WT/DS163/R
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actual Schedule commitment in this case.762  If there were a commitment, the case would properly be
a violation case because the measures cited by the United States as the basis for the non-violation
nullification case (e.g., inadequate bid deadlines and insufficient challenge procedures) would, if they
were substantiated, result in a violation.  A traditional non-violation case could, therefore, not be
sustained in this situation.
7.119  In sum, Korea's answer to the US question in July 1991 was insufficient.  Members have a
right to expect full and forthright answers to their questions submitted during negotiations,
particularly with respect to Schedules of affirm ative commitments such as those appended to the
GPA.  However, Members must protect their own interests as well and in this case the United States
did not do so.  It had a significant amount of time to realize, particularly in light of the wide
knowledge of KAA's role, that its understanding of the Korean answer was not accurate.  Therefore,
we find that, even if the principles of a traditional non-violation case were applicable in this situationthe United States has failed to carry its burden of proof to establish that it had reasonable expectations
that a benefit had accrued.
(b) Error in Treaty Formation
7.120  It is clear from the discussion above that the traditional claim of non-violation does not fit
well with the situation existing in this dispute.  Non-violation claims, as the doctrine has developed
over the course of GATT and WTO disputes, have been based on nullification or impairment of
benefits reasonably expected to flow from negotiated concessions.  In this case, it was the negotiations
which allegedly gave rise to the reasonable expectations rather than any concessions.
7.121  Therefore, we will continue with our analysis  and first recall our finding that there is a
particular duty of transparency and openness on the "offering" party in negotiations on concessions
under the GPA.  The negotiations between the Pa rties under the GPA do not benefit from a generally
accepted framework such as the Harmonized System with respect to goods or even the Central
Product Classification in services.  The Annexes to the GPA which contain the entities whose
procurement is covered by the Agreement are basically self-styled Schedules whose interpretationmay require extensive knowledge of another country's procurement systems and governmental
organization.  Therefore, we believe that transparency and forthright provision of all relevant
information are of the essence in negotiations on GPA Schedules.
763
7.122  In our view, as discussed fully in the previous section, Korea's response to the US question
was not as forthright as it should have been.  Indeed, the response could be characterized as at best
incomplete in light of existing Korean legislation and ongoing plans for further legislation.  However,
when addressing this problem, rather than asking whether there was a nullification or impairment ofexpectations arising from a concession, it might be better to inquire as to whether the United States
was induced into error about a fact or situati on which it assumed existed in the relation to the
agreement being negotiated regarding Korea's accession to the GPA.  In this case, it clearly appears
that the United States was in error when it assumed that the IIA project was covered by the GPA as a
result of the entity coverage offered by Korea.
7.123  Error in respect of a treaty is a concept that  has developed in customary international law
through the case law of the Permanent International Court of Justice
764 and of the International Court
                                                     
762 At best, the United States could argue that the relevant commitment was the coverage of MOCT.
However, this does not really change the analysis, for we have already found that KAA was the responsibleentity for IIA procurement and KAA was independent.  It comes back again to the fact that the United States is
arguing that it thought it had a commitment which it did not.
763 We do not imply by this paragraph or other similar portions of our Findings that parties to
negotiations in other areas do not owe each other an obligation of transparency and openness.
764 Legal Status of Eastern Greenland  (1933) PCIJ, series A/B, No. 53, p. 22, at p. 71 and dissenting
opinion of Judge Anzilotti, at pp. 91-92.WT/DS163/R
Page 188
of Justice.765  Although these cases are concerned primarily with the question in which circumstances
of error cannot be advanced as a reason for invalidating a treaty, it is implicitly accepted that error can
be a ground for invalidating (part) of a treaty.  The elements developed by the case law mentioned
above have been codified by the International Law Commission in what became the Vienna
Convention on the Law of Treaties of 1969 .  The relevant parts of Article 48 of the Convention read as
follows:
"Article 48
Error
1. A State may invoke an error in a treaty as invalidating its consent to be bound
by the treaty if the error related to a fact or situation which was assumed by
that State to exist at the time when the treaty was concluded and formed anessential basis of its consent to be bound by the treaty.
2. Paragraph 1 shall not apply if the State in question contributed by its own
conduct to the error or if the circumstances were such as to put that State on
notice of a possible error."
Since this article has been derived largely from case law of the relevant jurisdiction, the PCIJ and the
ICJ, there can be little doubt that it presently represents customary international law and we will apply
it to the facts of this case.
7.124  As the Appellate Body has pointed out in European Communities – Computer Equipment  and
in Canada - Dairy , schedules are an integral part of a treaty.  Hence negotiations about schedules, in
this case GPA Annexes, are fundamentally treaty negotiations.  In these treaty negotiations, we have
noted that the United States believed that the IIA project was covered.  As we have found in
section VII:B of these Findings, that was not correct.  The IIA project procurement was the
responsibility of a non-covered entity.  Hence the US error related to a fact or situation which was
assumed by the US to exist at the time when the treaty was concluded.  In our view, it also appearsfrom the behaviour of the United States that this purported concession arguably formed an essential
basis of its consent to be bound by the treaty as finally agreed.  Hence the initial conditions for error
under Article 48(1) of the Vienna Convention  seem to us to be satisfied.
7.125  This raises the question of whether the exclusionary clause of the second paragraph of
Article 48 can be overcome.  Although we have indicated above that the duty to demonstrate good
faith and transparency in GPA negotiations is particularly strong for the "offering" party, this does not
relieve the other negotiating partners from their duty of diligence to verify these offers as best as theycan.
766  Here again the facts already recounted in the previous sub-section767 demonstrate that the
United States has not properly discharged this burden.  We do not think the evidence at all supports a
finding that the United States has contributed by its own conduct to the error, but given the elements
mentioned earlier (such as the two and a half year interval between Korea's answer to the US question
and its final offer, the actions by the Euro pean Community in respect of Korea's offer768, the
subsequent four-month period, of which at least one month was explicitly designated for verification,
etc.), we conclude that the circumstances were such as to put the United States on notice of a possible
                                                     
765 Case concerning the Temple of Preah Vihear , ICJ Reports 1962, p. 6, at pp. 26-27.
766 See Appellate Body report in European Communities - Computer Equipment  at paragraphs 109-110.
767 See Paragraphs 7.104-7.116, above.
768 Note that the importance of the actions of a th ird State in avoiding error was already considered
important in the case on the Legal Status of Eastern Greenland , loc. cit. PCIJ, p. 71 (the reaction of the US to
the Danish request not to make any difficulties in the settlement of the Greenland question compared to theNorwegian reaction).WT/DS163/R
Page 189
error.  Hence the error should not have subsisted at the end of the two and a half year gap, at the
moment the accession of Korea was "concluded."  Therefore, the error was no longer "excusable" and
only an excusable error can qualify as an error which may vitiate the consent to be bound by the
agreement.
7.126  For these reasons, on balance, we are of the view that the US has not demonstrated error
successfully as a basis for a claim of non-violation nullification or impairment of benefits.769
VIII.  CONCLUSIONS
8.1 In light of our findings in Section VII, above, we conclude that the entities which have been
conducting procurement for the IIA project are not covered entities under Korea's Appendix I of the
GPA and are not otherwise covered by Korea's obligations under the GPA.
8.2 In light of our findings in Section VII, abov e, we conclude that the United States has not
demonstrated that benefits reasonably expected to accrue under the GPA, or in the negotiationsresulting in Korea's accession to the GPA, were nullified or impaired by measures taken by Korea
(whether or not in conflict with the provisions of the GPA) within the meaning of Article XXII:2 of
the GPA.
                                                     
769 A finding of justifiable error in treaty formation might normally be expected to lead to the
application of Article 65 of the Vienna Convention .  However, Article 65 on the specific procedure for invoking
invalidity of a treaty does not seem to belong to the provisions of the Vienna Convention  which have become
customary international law.  See also the European Court of Justice in Case C-162/69 (Racke v. HauptzollamptMainz), 1998 ECR, I-3655, at point 59.  The Article on separability (Article 44) raises the possibility that
provisions may be separated, such as e.g. separate reciprocal concessions in schedules, if they do not form an
essential basis for the consent of the other party of the treaty as a whole (though the fact or the circumstance towhich the error related was an essential factor in the consent to be bound by the treaty (Art. 48(1)).  We do notthink that any of these provisions would be required with respect to non-violation under the WTO Agreementsbecause Article 26 of the DSU clearly provides for the appropriate remedy.WT/DS163/R
Page 190
ANNEX 1
WORLD TRADE
ORGANIZATIONWT/DS163/4
11 May 1999
(99-2009)
Original:  
KOREA – MEASURES AFFECTING GOVERNMENT PROCUREMENT
Request for the Establishment of a Panel by the United States
The following communication, dated 11 May 1999, from the Permanent Mission of the
United States to the Permanent Mission of the Republic of Korea and to the Chairman of the DisputeSettlement Body, is circulated in accordance with Article 6.2 of the DSU.
_______________
The Government of Korea is engaging in government procurement practices, in the
construction of the new Inchon International Airport, that are inconsistent with Korea's obligations
under the WTO Agreement on Government Procurement (GPA).  These practices include:
- Qualification requirements:  In order to be eligible to bid as a prime contractor, an
interested supplier must have a license that in turn requires the supplier to have manufacturing
facilities in Korea.
- Domestic partnering requirements:  Foreign firms must partner with or act as
subcontractors to local Korean firms in order to participate in tendering procedures.
- Absence of access to challenge procedures:  The GPA requires that member countries
provide effective procedures enabling suppliers to challenge alleged breaches of the GPA arising in
the context of procurements.  However, such procedures do not exist for Inchon International Airport
and other airport construction procurements.
- Inadequate bid deadlines:  There are impositions of deadlines for the receipt of
tenders that are shorter than the GPA-required 40 days, such as when tendering procedures are
cancelled without explanation and immediate re-bidding takes place with a shortened deadline for
tendering.
On 16 February 1999, the United States Government requested consultations with the
Government of Korea pursuant to Article 4 of the Understanding on Rules and Procedures Governing
the Settlement of Disputes (DSU) and Article XXII of the GPA with respect to the above measures.
The United States and Korea held consultations in Geneva on 17 March 1999, but failed to settle the
dispute.
During consultations, Korea asserted that the entities responsible for Inchon International
Airport procurements are not within Korea's obligations under the GPA, and therefore not subject tothe provisions of the GPA.  The United States notes, however, that these entities are in fact within theWT/DS163/R
Page 191
scope of Korea's list of central government entities, as specified in Annex 1 of Korea's coverage of
obligations in Appendix I of the GPA.  The United States bargained in good faith for the coverage of
all airport construction in Korea during negotiations for Korea's accession to the GPA; the United
States' GPA commitments with respect to Korea and its acceptance of Korea as a party to the
Agreement were based on a balance of rights and obligations that included this coverage.  Korea'ssubsequent assertion that the entities responsible for the procurement of the Inchon International
Airport are not covered by the GPA seriously disrupts this mutually-agreed balance.
Pursuant to Article I.1 of the GPA, Korea's obligations under the GPA apply in full with
respect to government procurements for the Inchon International Airport.  Consequently, the above
measures are inconsistent with Articles III, VIII, XI, XVI and XX of the GPA.  In addition, pursuant
to Article XXII:2 of the GPA, whether or not these measures conflict with the provisions of the GPA,they nullify or impair benefits accruing to the United States under the GPA.
The United States continues to be interested in settling this dispute.  However, in the absence
of a settlement at this time, the United States, in order to preserve its rights, respectfully requests the
establishment of a panel pursuant to Article XXII of the GPA, with standard terms of reference as setout in Article XXII.4 of the GPA.  The United States further asks that this request for a panel be
placed on the agenda for the next meeting of the Dispute Settlement Body, to be held on
26 May 1999.
__________