WT/DS296/R 
 Page D-1 
 
 
 
 
ANNEX D 
 
 
ORAL STATEMENTS OF PARTIES AT THE 
SECOND SUBSTANTIVE MEETING 
 
 
Contents Page 
Annex D-1 Executive Summary of the Opening Statement of Korea D-2 
Annex D-2 Closing Statement of Korea D-4 
Annex D-3 Comments of Korea on the US Opening Statement D-8 
Annex D-4 Executive Summary of the Openi ng Statement of the United States D-10 
Annex D-5 Executive Summary of the Closing Statement of the United States D-14 WT/DS296/R 
Page D-2  
 
 
 
ANNEX D-1 
 
 
EXECUTIVE SUMMARY OF TH E SECOND ORAL STATEMENT 
BY THE GOVERNMENT OF KOREA 
 
30 July 2004 
 
 I.   INJURY ISSUES  
A. Volume Effects   The limited market share, the small cha nge in market share, and the unique 
circumstances of a US based factory shutting down a ll demonstrate that the volume of subject imports 
was not “significant”.  B. Price Effects    The United States continues to cite  figures concerning frequency of 
underselling in a vacuum.  Even if non-subject im port were underselling only 61 per cent of the time 
rather than 70 per cent, non-subject imports were 5 to 6 times larger in terms of market share.  The 
ITC focused on relatively small changes in th e frequency of underselling, while ignoring the 
dramatically different volumes of non-subject imports , about 80 per cent of which the United States 
now concedes was fully interchangeable.  
 
C. Causal Link   Hynix subject imports increased about 2 percentage points of market share 
(because of the shutdown in Oregon), but Hynix brand sales actually decreased
 about 4 percentage 
points. In the meantime, non-subject imports increased  almost 7 percentage points of market share.  
Hynix subject import underselling increased slightly  from 2000 to 2001.  If the Hynix brand is losing 
market share, and if non-subject imports are able to gain market share at more than three times  the 
rate of subject imports, it simply defies logic to find a causal nexus to subject imports.   
 
D.  Non-Attribution  
 Non-subject imports    The US producers and importers reported that non-subject and 
domestic DRAMs products were ge nerally used interchangeably and 22 out of 24 reported no 
important difference in product characteristics or sal es conditions between them. In addition, the ITC 
never reconciled the frequency of underselling analysis with the vastly different volumes
 of subject 
and non-subject imports.  In 2001 the portion of s ubject imports underselling was about 5 per cent of 
the market, but the portion of non-subject imports un derselling was about 27 per cent of the market.  
The ITC determination provides no satisfactory explan ation of how it separated and distinguished the 
effect of this 27 per cent, and did not improperly attr ibute this effect to the 5 per cent represented by 
subject imports.   Collapse in demand   To the extent the ITC felt supplier competition was somehow a factor, 
the ITC does not explain why it attributed the eff ect to the small change in subject import market 
share rather than the much larger market share a nd change in market share by non-subject imports.  
The modest difference in the frequency of underselli ng is dwarfed by the huge difference in market 
share, and the fact that non-subject imports were ga ining market share at more than three times the 
rate of subject imports.   Increased capacity   There is no discussion in the ITC determination that links detailed 
information about which
 suppliers were increasing their capacity, and the more general discussion of  WT/DS296/R 
 Page D-3 
 
 
general capacity as part of the business cycle.  To  look at capacity in the aggregate simply does not 
allow the necessary analysis.    
II.   SUBSIDY ISSUES 
 
A. Financial Contribution 
 
 The Legal Standard   To have any meaning, the text of Article 1.1(a)(1)(iv) must impose 
some threshold that must be met.  To focus on who
 is being entrusted to do what  is a textually sound 
way to ensure this legal threshold is being met.  This interpretation may make it more difficult for 
authorities to make sweeping, broad- brush conclusions about debt rest ructuring programmes.  But that 
is the unavoidable consequence of giving this prov ision some substantive legal content.  Also, a 
careful review of the treaty text in context confir ms this interpretative appr oach as encapsulated in 
US - Export Restraints . 
 
 The Evidence   Once the evidence of entrustment or direction cited by the United States is 
held up against the proper legal standard, the defi ciencies become quite apparent.  The deficiencies 
are most egregious for the October 2001 and May 2001 restructurings.  As for the May restructuring, the United States describes the r estructuring without even acknowledging the $1.25 billion in new 
equity capital that was raised.  As for the October restructuring, the United States largely ignores the 
critical feature of the October restructuring: many banks, including some 100 per cent owned by the 
GOK, declined to provide any new money.  The Un ited States also misstates both the function of the 
CRPA and the actual facts of the October restructuri ng.  Contrary to the US allegations, each creditor 
under the CRPA had a chance to see whether the rest ructuring options were more attractive than 
appraisal rights.  With respect to the Kookmin pr ospectus, the US now argues that the GOK could and 
did influence {Kookmin’s} lending decisions.  Ye t the actual behavior of Kookmin clearly 
demonstrates that Kookmin was exercising its own judgment with respect to the different phases of 
the Hynix restructuring.  In the end, this evidence simply does not support the sweeping DOC 
conclusion that every single Korean bank was entrusted or directed to engage in every single transaction with respect to the Hynix restructuring.   
B. Benefit 
  The DOC approach to “benefit” is utterly at odds  with the textual requirement of Article 14(b) 
in that the DOC crafted onto Article 14 the requirement of finding the perfect benchmark, and rejecting anything less.  The DOC si mply did not have the legal or f actual basis to reject all possible 
benchmarks.  This rush to reject  all benchmarks is particularly egregious for Citibank.  The DOC 
simply has not explained satisfactorily why Citiba nk was not “comparable” within the meaning of 
Article 14(b) for loans, and why Citibank was not indicative of the “usual investment practice under 
Article 14(a) for debt equity swaps.  In addition, the US argument that becau se Citibank’s initial loan 
to Hynix was small relative to total Hynix debt is ju st absurd in that nothing in Article 14(b) requires a 
loan to be both “comparable” and
 large relative to total debt. 
 C. Specificity   
 The United States has defined the subsidy in an  overbroad way so as to render the specificity 
requirement irrelevant.  Of course there is only one Hynix “bailout”.  But hundreds of Korean companies obtained loans, and hundreds of indebted  Korean companies went through restructuring.  
By failing to analyze the constituent elements of th e Hynix restructuring, the United States failed to 
comply with the requirements of Article 2. WT/DS296/R 
Page D-4  
 
ANNEX D-2 
 
 
CLOSING STATEMENT OF TH E GOVERNMENT OF KOREA 
AT THE SECOND SUBSTANTIVE MEETING 
 
21 July 2004 
   We would like to thank the Panel and the secretariat for another productive two days of 
meetings and tough questioning.  We believe this process has furthe r focused the enquiries in this 
case.  We use these closing comments respond to the Chairman’s request to offer our thoughts for 
how the Panel should go about its task in this case.  
Injury Issues 
 
 We start with the injury issues.  Both parties have stressed different aspects of the standard of 
review.  In our view, both parties are correc t:  the Panel must undertake an objective assessment 
without reweighing the evidence.  In a sense, the standard of review is not really the issue. 
  But make an “objective assessment” of what?  There are a number of key issues.  Under 
Article 15.2, the Panel must make an objective assessment of whether the subject import volume is 
“significant”.  In our view, the ITC cited a number of  facts and trends, but never really explained why
 
the volume of imports was “significant”.  The United States has argued extensively about the overall context of the import volume.  But the United States never adequately addressed the two most 
important aspects of this overall context:  the role  of the shutdown of the Hynix Oregon facility in 
explaining the modest increase in Hynix subject impo rt market share; and the significance of modest 
levels of subject imports in light of the mu ch, much larger volume of non-subject imports.  
  It is against this context that the Panel must evaluate the sufficiency of the US argument that 
subject imports were highly substitutable.  So  were Hynix DRAMs made in Oregon, and the 
substitution between 2000 and 2001 was largely Hynix customers switching from Hynix DRAMs 
made in Oregon to Hynix DRAMs ma de in Korea.  Since Hynix brand lost market share over this 
period, Hynix subject imports were not even replaci ng the market share lost when Oregon shutdown.  
But in addition, the non-subject DRAMs were also  completely substitutable.  The United States 
acknowledges that 80 per cent of these DRAMs are fully interchangeable, and this fact alone 
substantially undermines the credibility of the ITC cl aim that the modest additional volume of subject 
DRAMs could have “significant” volume effects as required by Article 15.2. 
  With regard to price effects, it is hard to say  anymore.  The US refusal to provide key data – 
even data for which it is difficult to see the rationa le for continued confidential treatment – makes the 
Panel’s task more difficult.  Unlike the volume arguments, where Hynix data alone provides a 
reasonable proxy, the pricing arguments are by necessity more abstract.  But in our view, there are at 
least two core issues that the Unite d States has not addressed adequately. 
  First, does it make any sense to focus on Hynix subject imports only relative to each
 other 
supply source, or should the ITC have also addressed  – as Hynix argued – the combined effect of the 
other sources?  Put differently, can the findings on pr ice effects be considered  sufficient without at 
least addressing this issue, and explaining why in spit e of the combined effects of all the other lowest 
price supply source, there are still significant price effects.   WT/DS296/R 
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 During our meeting yesterday, the United States stressed the facts of changing frequency of underselling.  We acknowledge those facts.  But does it make any sense to rely on those facts in 
isolation, when the other
 facts show that the other non-subject import sources were much bigger, were 
growing in market share much faster, and were un derselling with almost the same frequency?  We 
believe this conclusion does not make sense, and the ITC finding of “significant” price effects is 
inconsistent with Article 15.2. 
  Which brings us to causation.  We do not be lieve the ITC has shown the requisite causal link, 
but really have nothing to add to our prior arguments on this issue.  On the issue of non-attribution, however, we would like to offer a few additional thoughts. 
 
 First, the Appellate Body guidance in this ar ea has not been very concrete.  But the two 
general principles are clear: the authorities must “separate and distinguish” and they must provide a 
“satisfactory explanation” based on positive evidence.  This need to determine whether the authority 
has provided a “satisfactory explanation” requires th e Panel to consider the facts, consider the 
explanation offered, consider th e alternative explanations of the facts, and decide whether the 
authority’s explanation is detailed enough, comple te enough, and logical enough to be considered 
“satisfactory.”  From this perspective, the ITC findings are simply insufficient. 
  On non-subject imports, the ITC is trapped by its own logic.  If the substitutability of a 
commodity product enhances the volume effects, then  the much, much larger volume of non-subject 
imports must have been having an overwhelming eff ect on the market.  Non-s ubject imports were five 
times larger, gaining market share three times as fast , and underselling domestic prices with almost 
the same frequency.  None of the ITC explanations satisfactorily separate and distinguish the role of 
this other factor in the market.  The ITC ackno wledges the magnitude and trends of non-subject 
imports, but never explains its conclusion that s ubject imports themselves were still the cause of 
material injury. 
  Note that we are not
 saying that the existence of other factors means that subject imports 
cannot also be the cause of material injury.  That is a false characterization of Korea’s position.  Our 
argument is that in this case, the ITC explanation is so  deficient that we really do not know whether or 
how the ITC separated and distinguished this other factor.  We know the ITC conclusion, but we do 
not have a satisfactory explanation of how it reached that conclusion.  Put differently, we have no idea 
how the ITC controlled for the effect of non-subject  imports, and did not mistakenly attribute these 
effects to subject imports.  Both explanations o ffered – the limited volume of specialized products, 
and the different frequency of underse lling – fail under more careful scrutiny. 
 
 The same problems infect the ITC discussion of other alternative causes. We need not repeat 
those arguments now.   The United States yesterday made a plea that domestic industries are entitled to protection from subsidized imports.  This may be true, but under WTO standards the domestic industry is 
entitled to such protection only when very specific standards have been met.  In this case, they have 
not been met.  This Panel is charged with applyi ng these standards, and ensuring that protection is 
given only when these international standards have been met.  
Subsidy Issues 
 
 With respect to subsidy issues, we offer just  a few thoughts on the issue of entrustment or 
direction.    First, we continue to believe it is critical to  decide on the legal standard.  The United States 
has tried to side-step this issue.  We disagree.  We think this treaty language has a very specific 
meaning, and the Panel’s probing has he lped us focus our own interpretation. WT/DS296/R 
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  The United States has argued in its opening statem ent that Korea is reading “entrusts” out of 
the agreement, but that argument is wrong.  That word remains in the agreement; but our argument is 
that the “entrusts” portion of the standard is not prope rly part of this case.  “Entrusts” must have some 
meaning different than “directs,” otherwise the word would be unnecessary.  When read in light of the 
phrase “normally vested in”, we believe this word c onveys the idea of something concrete that can be 
entrusted.  Since the word “vested ” conveys the core meaning of giving someone a legally fixed right, 
it seems quite natural to read “entrusts” as focusing on those situations when the government has 
transferred responsibility for some programme to a pr ivate body.  A party can have some legally fixed 
right pursuant to a formal programme.  A party cannot  have any legally fixed rights with regard to a 
general “bailout”.  After all, the word “directs” re mains to cover other situations not involving such 
formal programmes.  The US interpretation simply does not give any separate meaning to “entrusts” 
and blurs the distinction between these two important terms.   Second, with respect to this legal standa rd, the key requirement remains:  has the 
United States provided sufficient evidence to meet th e legal standard.  During this dispute, we have 
often used the phrasing "who” was directed to do “what”, or called for a bank-by- bank or transaction-
by-transaction analysis.  But underlying both of th ese analytic frameworks is the simple idea that 
there must be evidence to support all
 aspects of any finding of entrustment or direction.  Having 
entrusted or directed part of an alleged bail out does not automatically establish entrustment or 
direction of the entire alleged bailout.  Certain ev idence might support some, but not all, of such a 
finding. 
  Third, although we believe the US evidence fa ils with respect to all aspects of the Hynix 
restructuring, these failures are most apparent with respect to the October 2001 restructuring and with 
respect to the private Korean banks.  The United States had only limited evidence with respect to 
October.   We agree with the United States that general pronouncements are not enough.   So the US 
argument for the October restructuring is based en tirely on the role of the Creditors’ Council.   
  We have discussed at length the US flawed interpretation of the statutory framework of the 
CRPA.  But more fundamentally, the US theory ca nnot explain what else the United States expected 
the creditors to do in the October restructuring.  Unless the United States is arguing for a per se rule 
that companies must declare bankruptcy and not restru cture, what else were the creditors to do?  The 
option 3 banks simply took the liquidation value, a nd walked away from any further involvement.  
The statute sets forth a series of procedural rights, including the right to mediation.  The Hynix financial statement clearly shows these banks invoke d their right to mediation, and Hynix recorded 
their claims as a current liability.  The option 2 ba nks took a chance on a debt for equity swap to 
recover a larger portion of the outstanding debt, but  refused new loans.  The option 1 banks – those 
with the largest amounts of debt at stake – made so me new loans so as to be allowed to swap more 
debt for equity, and thus limit the size of the write-offs  they had to take at the time.  None of this is 
sinister or suspicious.  These are the typical choices in a debt restructuring, and individual banks made 
those choices that made the most sense for them .  This is hardly entrustment or direction. 
 
 Similarly, the evidence with respect to private banks is simply insufficient.  We urge this 
Panel to consider not just the evid ence cited by the United States, but the other evidence left out of the 
DOC determination.  The outside e xperts were quite consistent in st ating that the private banks were 
different, and acted independently.  The informat ion before the DOC about substantial foreign 
ownership of these private banks is also fundamental ly at odds with the DOC finding of entrustment 
or direction.  The evidence of private bank independ ence, such as the refusal of KFB to participate in 
many parts of the Hynix restructuring provides fu rther evidence.  In the final analysis, the US 
evidence with regard to private banks is simp ly insufficient to meet the legal standard. 
  We believe the Panel can usefully focus its an alysis on the private banks.  If the Panel finds 
that the private banks were not entrusted or directed, either for all or for parts of the Hynix  WT/DS296/R 
 Page D-7 
 
 
restructuring, then the remainder of the DOC anal ysis fails.  The DOC cannot countervail those loans 
or investments by those private banks not entrusted or  directed.  Moreover, those banks then can serve 
as benchmarks for any other banks.   Indeed, this interplay between “entrusts or di rects” and “benefit” explains why the DOC made 
the overbroad finding of entrustment or direction in the first instance.  The DOC  realized that it had to 
disqualify all of the Korean banks so that none of them would be available to  serve as benchmarks.  
These other benchmarks would reinforce the conc lusions that DOC could and should have drawn 
based on Citibank as a benchmark.  
 We thank the Panel for its time, and look forw ard to the next round of written questions that 
will allow us to address any additional specific areas of concern. WT/DS296/R 
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ANNEX D-3 
  
COMMENTS OF KOREA ON TH E US OPENING STATEMENT 
AT THE SECOND SUBSTANTIVE MEETING IN THE 
US DRAMS CASE (DS 296) 
 
21 July 2004 
  
 I would like to make a few points about the US argument on new information.  First, as a 
legal matter, the Panel has discretion to consider whatever information it finds useful.  That is 
significance of the SCM Agreement not having a provision like Article 17.5 of the Anti-Dumping Agreement.  
 Second, as a practical matter, we agree that the Panel should not be undertaking de novo  
review.  But that argument goes to the way in which the evidence is being used, not the mere 
existence of evidence.  If there is some information that helps clarify what the authority did during the 
investigation, there is no reason that the Panel cannot use that information to understand better what 
the authorities did and what information the authorities considered.  
 Third, in this case the United States has se rious exaggerated the extent and use of new 
information.  Let me review the main items.   With respect to the default rates, this inform ation serves a very narrow purpose.  We argue at 
paragraph 148 of our second submission that the in formation about cumulative default rates could 
easily have been provided if DOC had asked.  We ha ve not and are not asking the Panel to use this 
information for any recalculation or  any other purpose.  We are si mply illustrating how easily Korea 
could have responded if we had been asked.   With respect to the MOU, the US argument is  quite disingenuous.  As paragraph 183 of the 
US First Submission shows, the DOC reviewed such  documents during the verification, and offered 
its own characterization of the MOU.  All Korea ha s done is provide the Panel with the MOU itself, 
so that the Panel can itself test whether the DOC has fairly characterized the document reviewed at 
verification.  The US argument is basically that it can review the MOU, but the Panel cannot.  This argument is absurd.  
 With respect to the sequence of meetings leading to the Hynix enrollment in the KDB 
programme, we cited specifically to the DOC verifica tion report.  We refer the Panel to Exhibit GOK 
61, which provides the DOC document.  Even if  Hynix made a minor misstatement in its 
questionnaire response, when the DOC investig ation collected additional and more detailed 
information, the DOC cannot ignore that information. 
 
 With respect to the FSS document in Exhibit GOK 50 and para 83 of the GOK Second Submission, this information is simply responding  to a US argument at para 52 of the US First 
Submission.  If the United States can draw an infe rence from a newspaper article, and refer to Hynix 
as being “conspicuously absent”, all without any cita tion to the DOC determination below, then Korea 
should be allowed to respond to that in nuendo.  Exhibit GOK 50 does nothing more. 
 
 With respect to the alleged pressure on credit rating agencies, we are simply responding to a 
new argument raised in the US First Submission.  At the outset, we note that this whole line of 
argument is secondary, and does not really address a lleged entrustment or direction of the Hynix  WT/DS296/R 
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creditors.  The Panel thus can and should ignore this  US argument entirely.  The US First Submission 
does not identify where DOC had made any finding about this issue, and we could not find any discussion in the DOC decision memorandum provided at Exhibit GOK 5.  So Korea’s goal was simply to let the Panel know that these various accusations reported in the press, and included along 
with hundreds of other articles submitted by Micron in the case below, had been denied by the FSS at 
the time. 
  Finally, the United States goes on at some length about the CRPA.  At the outset, we note that this Korean law has been on the DOC  record, and much of the Korean argument is simply clarifying, 
based on citations to the relevant provisions, how th is Korean law works.  That fact that DOC may 
have misunderstood the CRPA does not make th ese misunderstandings “evidence” to support the 
DOC conclusions.  Moreover the Korean argument is  based substantially on the evidence before the 
DOC.  In particular, we cite to Exhibit US 125, whic h is the relevant Hynix financial statement.  The 
United States professes surprise about the fact of me diation, but the text of the CRPA specifically 
provides for mediation in Articles 29 and 32, a nd the notes to the Hynix financial statement 
specifically note this fact.  If the DOC did not read the documents very carefully, that is not our fault. 
  We concede that the actual payment with interest  is a fact not before the DOC.  But what was 
before the DOC are the facts that the zero coupon de benture was proposed, but then rejected.  That is 
precisely why the option 3 banks went to mediation,  as the financial statement discloses.  Moreover, 
the DOC knew that Hynix had made a particular re serve, in anticipation of losing this point in 
mediation.  Thus, the only new fact is the final outcome of the mediation in 2002.  But this final 
outcome is not really the issue.  The United States adopted as “fact” a scenario that was not at all a 
fact based on the financial statement before the DOC.   In summary, the United States has dramatically ex aggerated the extent of new information, in 
part because the United States must realize now that its theory of GOK control is at odds with the 
actual text and operation of the CRPA.  We believ e all the Korean arguments can be fully supported 
with information before the DOC. They do not in any way ask the Panel to conduct a de novo review.  
Rather, they will help the Panel in discharging its  responsibilities under Article 11 of the DSU.  If the 
Panel has any questions about any sp ecific points, we are happy to address those either today, or in 
the form of answer to written questions. 
 WT/DS296/R 
Page D-10  
 
  
 
ANNEX D-4 
  
EXECUTIVE SUMMARY OF THE OPENING STATEMENT 
OF THE UNITED STATES AT THE SECOND 
SUBSTANTIVE MEETING OF THE PANEL 
 
2 August 2004 
 
 
The Commerce Department’s Subsidy Determination 
  
1.  Korea’s Submission of New Information :  Korea’s second written submission and answers 
to the Panel’s questions are replete with informa tion which was never provided to the DOC at any 
time during its investigation, notwithstanding the DOC ’s extensive requests for information.  All of 
this new information – some of which is contra dicted by evidence that was submitted during the 
investigation – should be disregarded by the Panel.   Prior panels have recognized that in disputes 
involving the review of a determination by an i nvestigating authority, the consideration of new 
evidence by a panel is incompatible with the principle that "a pane l is not to perform a de novo  review 
of the issues considered and decided by the investigating authorities".   
 2.  Korea’s submission of new evidence illustra tes its continuing efforts to have the Panel 
reweigh the facts.  It is remarkable that Korea so blithely has ignored its own admonition that the 
focus must be on the "evidence befo re the agency" at the time of its determination.  We are quite 
certain that if, for example, the United States had provided the Panel with information showing that 
prior to its privatization in December 2003, th e GOK formally acknowledged to the WTO its legal 
and practical control over Kookmin Bank, Korea would object strenuously on the grounds that the 
information was not on the record.   3.  It is equally distressing that Korea’s second submission and responses to the Panel’s questions 
are laced with many assertions of fact without citation to any support in the underlying record.  An 
objective assessment of Commerce’s explanation of how the record evidence supported its 
determination will lead the Panel to find that Co mmerce’s determination was entirely consistent with 
the SCM Agreement.   
4.  Financial Contribution, Benefit, and Specificity :  Korea, based on a novel and 
fundamentally flawed interpretive analysis, and some verbal sleight of hand, concludes that the facts 
of this case dictate the appropriate interpretation of  the Agreement.  Specifi cally, Korea argues that 
"in the context of the Hynix restructuring" only the term "directs" is relevant.  Thus, Korea argues for purpose of this case the Panel should read the term "entrusts" out of the SCM Agreement.  There is 
absolutely nothing in the text of subparagraph (iv) th at even remotely suggests that the task delegated 
to a private body must involve the administration of a formal "government programme".    5.  Korea argues that the term "directs" can onl y mean "orders" because the French and Spanish 
verbs – "ordonner" and  "ordenar" – translate  into English as "to order".  The drafters could easily 
have used the term "orders" in the English text for Article 1.1(a)(1)(iv), but they did not.  The drafters 
used the term "directs".  While "order" is cert ainly one meaning of "directs", it is not the only 
meaning.   WT/DS296/R 
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 6.  The United States has consistently taken the position that whether there is government 
entrustment or direction within the meaning of su bparagraph (iv), requires consideration of whether a 
government "gave responsibility to", "ordered", or "r egulated the activities of" private bodies to "carry 
out" financial contribution functions.  
7.  The United States has explained in great de tail – relying entirely on record evidence – the 
factual and legal bases for the Commerce Department ’s determination that the GOK pursued a policy 
to support Hynix and prevent its failure and that the GOK entrusted and directed Hynix’s creditors to 
effectuate that policy.  Korea does not deny the ex istence of GOK support for Hynix.  Nor could it do 
so with any credibility given the explicit statements  of government officials from the Blue House and 
the Financial Supervisory Commission (FSC), as well as from Economic Ministers, regarding 
government support of Hynix.  Rather, Korea suggest s that after the Economic Ministers meetings in 
late 2000, the evidence of the GOK’ s Hynix policy dries up.  However, the extensive evidence of 
GOK actions over the course of the entire 10-month period of the Hynix bailout – as documented in 
our previous submissions – belies Ko rea’s claim.  It also bears mentioning that in the midst of the 
planning for Hynix’s October 2001 restructuring and recapitalization, a high-level Hynix official 
acknowledged that "We won’t be going bankrupt.  The Korean government won’t let us fail".   
 8.  Korea’s allegations of "gaps" in the evidence rests on its view that a bank- and 
transaction-specific analysis is required.  We strongly disagree.  The concept of government 
entrustment or direction of a task does not require that the government micro-manage those given 
responsibility for carrying out that task.  Moreover, governments typically have a wide range of tools 
at their disposal to deliver a financial contribution indirectly.  These tools may vary greatly in terms of 
their transparency.  If subparagraph (iv) is to have any meaning, it is essential to recognize the 
importance of examining, on a case-by-case basi s, all of the evidence surrounding possible 
government entrustment or directi on, and to recognize reasonable infe rences that may be drawn from 
that evidence.  It is Ko rea’s suggestion that such an analysis is impermissible that the Panel should 
find alarming.  Given the nature of indirect subsidi es, the type of rigid evidentiary standard advocated 
by Korea would render subparagra ph (iv) virtually meaningless. 
 9.  Finally, the United States will touch very brie fly on the topics of "benefit" and "specificity".  
As a general matter, Korea offered nothing new on these issues in its second submission.  In response 
to the Panel questions, however, Korea states that , although it does not challenge the conclusion that 
the KDB Fast Track Programme constituted a financia l contribution, it does challenge the existence of 
any benefit from, and the specificity of, the progra mme.  Given Korea’s concession that the KDB Fast 
Track programme constitutes a financial contribution,  it is difficult to fathom how Korea can argue 
that financial contributions provided by banks under the Fast Track programme could themselves 
serve as benchmarks for determini ng the benefits from those very same financial contributions.  Korea 
offers no explanation for this dichotomy.   10.  With respect to specificity, as discussed earlier, Korea’s argument concerning the timing of 
Hynix’s nomination for the KDB Fast Track progra mme is contradicted by  the record evidence 
submitted by Hynix.  Moreover, Korea entirely ignores th e fact that in the one-year existence of the 
Fast Track programme, only six companies in total  participated in the progr amme, four of which were 
Hynix and its Hyundai affiliates.  
The ITC’s Injury Determination 
 
11.  Subject Import Volume was Increasing
:  Korea’s arguments that volume did not increase are 
based entirely on the assumption that "volume" does not mean the volume of subsidized subject 
imports , but instead means the volume of all Hynix-brand products being sold in the US market.  A 
brand-name analysis was not appropriate under th e circumstances and would contradict the SCM WT/DS296/R 
Page D-12  
 
 Agreement, because a brand-name analysis would not have corresponded to the relevant enquiry, 
which is to ascertain the effect of subsidized subject imports on the domestic industry.   12.  Korea Cannot Explain Away the Increased Volume of Subject Imports :  Even if, as Korea 
asserts, subsidized subject imports gained market share in the US market only by replacing products 
produced by Hynix’s Eugene facility, any such gain  was at the expense of the domestic industry 
because the Eugene facility was part of the domestic  industry.  Moreover, Hynix was not principally 
using Eugene products to service the US market.    13.  Korea’s Other Volume Arguments Also Fail :  Context Matters .  Consistent with the 
approach endorsed in Thailand – H-Beams , the ITC put the import figures and trends into the factual 
context of the DRAMs industry and the circumstan ces of the DRAMs investigation.  As the ITC 
determined, the commodity-like nature of domestic  and subject imported DRAM products magnified 
the ability of a given volume of imports to impact th e domestic market and industry.  Korea concedes 
that Article 15.2 of the SCM Agreement does not impose any numerical threshold on what is a 
"significant" volume or a "significant" increase in volume. 
 14.  Data Arguments .  The Panel should disregard Korea’s continuing efforts to assign values to 
the confidential volume data considered by the IT C.  There is no basis to use data from Hynix’s 
importer questionnaire response – however compiled – as a proxy.  Moreover, there are a number of 
problems with GOK Exhibit 62, problems that do not ex ist with respect to Confidential US Figure 1.  
Whereas Confidential US Figure 1 rightly includes co mpany transfers in the calculation of Hynix’s 
US shipments of subsidized subject imports, GOK Exhibit 62 does not include such transfers.  GOK 
Exhibit 62, therefore, presents a distorted pictur e of Hynix’s US shipments of subsidized subject 
imports.   
15.  Korea Has Not Shown any Shortcomings in the ITC’s Price Effects Analysis :  Underselling 
by subject imports increased between 2000 and 2001 at a time when the volume of subsidized subject 
imports was increasing, domestic market share was declining, and underselli ng of standard products 
by non-subject imports was relatively stable.  The underselling by subsidized subject imports 
ballooned to 69.8 per cent of all observations in 200 2, and underselling by subsidized subject imports 
was at a much higher frequency than underselling by non-subject imports at that time.  While not 
required to do so, the ITC did conduct a disaggregated analysis, which showed that Hynix’s 
subsidized subject imports were the lowest pri ced product more often than products from any other 
source.  16.  Contrary to Korea’s assertion, subject imports can have significant adverse price effects if 
they force domestic producers to lower their prices in or der to retain market share.  With respect to the 
ITC ’s conclusion that subsidized subject imports significantly depressed prices in the US market, to 
the extent that Korea is implying that evidence of price leadership is required under the SCM Agreement, it is wrong.  Second, the ITC found that  factors other than subsidized subject imports 
could not explain the unprecedented price depression e xperienced during the period of investigation.  
Third, Korea’s assertion that non-subject imports are completely fungible with the domestic like 
product is simply not supported by the evidence in this investigation. 
  17.  The ITC’s Impact Analysis Was Consistent with the SCM Agreement :  Korea tries to rebut 
the ITC’s impact analysis with snippets of inform ation about individual producers.  These snippets of 
information pertain only to individual producers, and are taken out of context and/or based on the 
company’ s global operations and/or oper ations on a broader array of products. 
 18.  The ITC’s Determination Was Also Consiste nt with Article 15.5 of the SCM Agreement :  
The ITC’s determination more than satisfies the standard articulated by Korea of "some causal 
connection" between subject imports and the material injury to the domestic industry, whether or not  WT/DS296/R 
 Page D-13 
 
 
 the Panel examines the data under a correlation lens, a conditions of competition lens, or some other 
lens.  A brief summary of the data is provided in Figure US-5, attached to this statement. 
 19.  The ITC examined known factors other than th e subsidized subject imports which at the same 
time were injuring the domestic industry to ensure th at it did not attribute injury caused by such other 
factors to the subsidized subject imports.  The IT C provided a thorough evaluation of known causes of 
injury other than the subsidized subject imports in its determination.  The ITC explicitly agreed with 
Hynix that there were capacity increases both globally and in the United States during the period of investigation, but its analysis did not stop there.   The ITC recognized that capacity increases lead to 
increased supply and that imbalances in supply lead  to the characteristic boom and bust phases of the 
DRAM industry’s business cycle.  At the same time, the ITC found that the business cycle, as well as 
other factors affecting prices, simply did not expl ain the dramatic price declines experienced during 
the period of investigation.  The other factors a ffecting prices that the ITC examined included the 
operation of the product life cycle and the slowing in the growth of demand at the end of the period of investigation.  Korea continues to mischaracter ize the evidence as showing a dramatic decline in 
demand.  The evidence showed that demand c ontinued to increase throughout the period of 
investigation, but the growth in demand was not as great at the end of the period of investigation.  
Korea simply fails to meet its burden of demonstrating how the United States failed to comply with 
the requirements of SCM Agreement Article 15.5.  
Article 19.4 of the SCM Agreement and Article VI:3 of GATT 1994 
 20.  Korea has failed to demonstrate that the United States has levied duties at all, let alone levied 
duties inconsistently with Article 19.4 and Article VI:3.  Korea recognizes that the word "levy" is 
defined in footnote 51 of the SCM Agreement as "the  definitive or final legal assessment or collection 
of a duty or tax", but Korea ignores the fact th at what has to be "definitive" for purposes of 
Article 19.4 is not the "duty", but rather the "asse ssment or collection" of the duty.  Korea concedes 
that the United States has not yet "collected" any co untervailing duties, and offers no explanation as to 
how the United States has " assessed" countervailing duties. 
 21.  Why Korea chose to invoke Article 19.4 and Article VI:3 is Korea’s business.  However, 
those provisions cannot be rewritten under the gui se of interpretation in order to accommodate 
Korea’s litigation choices.  
 
Korea’s Consultation Request Failed to Comply with Article 4.4 of the DSU 
 
22.  The Panel should reject Korea’s claims regarding Commerce ’s c ountervailing duty order 
because Korea’s consultation request fa iled to comply with Article 4.4 of the DSU.  Korea refused to 
indicate any provision of a WTO agreement with wh ich it considered the c ountervailing duty order to 
be inconsistent, even after the United States pointed out  this failure to Korea.  Korea claims that its 
second consultation request "speci fically cited to Article VI:3 of GATT 1994," but the second 
consultation request does not mention Article VI:3.  
23.  Article 4.4, at a minimum, requires an indication of at least one provision with which a 
measure is considered to be inc onsistent.  While the requirements of Article 4.4 are minimal, they 
cannot be blithely ignored.  Moreover, the United Stat es promptly informed Kor ea of the defect in its 
second consultation request, and subsequently  explained the defect to the DSB. 
 
24.  The United States does not believe that a failure  to comply with Article 4.4 can be excused by 
an alleged absence of prejudice, and Korea cites not hing to support such a proposition.  However, to 
the extent that the Panel considers a showing of pr ejudice necessary, the United States believes that it 
was prejudiced by Korea’s repeated  refusal to honour the US right to receive an indication of the legal 
basis behind Korea’s consultation request insofar as the countervailing duty order was concerned.WT/DS296/R 
Page D-14  
 
  
 
ANNEX D-5 
  
EXECUTIVE SUMMARY OF THE CLOSING STATEMENT 
OF THE UNITED STATES AT THE SECOND 
SUBSTANTIVE MEETING OF THE PANEL 
 
2 August 2004 
  Standard of Review  
1. We just heard our Korean colleague say th at the Panel must decide whether import volume 
was significant.  Of course, that is not the issue be fore the Panel.  Instead, the issue is whether the 
ITC’s conclusions regarding import volume were reasonable.  Based on the discussion over the past 
few days, we believe the Pa nel fully understands this. 
 
The Commerce Department’s Subsidy Determination 
 
2. At the last meeting the Panel asked, what must the government do for there to be an indirect 
subsidy?  We have t hought a great deal about this question and we  have explored it w ith the Panel.  In 
the end, we have concluded that the only answer is the one found in the SCM Agreement itself – the 
government must "entrust" a private entity or "direct" a private entity to make a financial contribution.  That is, the government must set the task, the task must involve making a financial contribution, and 
the government must give responsibility for carrying out that task to a private entity.  Thus, we know 
what the government must do.  We also know based on the ordinary meanings of "entrust" and "direct" what the government need not do.  That is, the government does not have to have a formal 
programme or dictate precisely how that task is carried out.  Moreover, nothing in the ordinary 
meaning of entrustment nor direction suggests that th e party tasked must believe that what it is being 
tasked to do is totally irrational – that it is  something no one would do absent government 
intervention.  The issue is simply whether that part y acts at the behest of the government to provide a 
financial contribution.  3. So, once again, let us step back from that im pressionist painting and look at the whole picture 
rather than focusing on the dots.  In this case, ther e is ample evidence that the government set the task; 
i.e., to give Hynix the financial assistance needed to resolve the company’s financial crisis.  There is 
also ample evidence that the banks had not been  relieved of that task prior to the October 
restructuring.  Explicit statements by Ministers and by Hynix itself demonstrate that; just prior to the October restructuring the government had publicly stated that Hynix was going to get whatever it 
needed.  
 
4. We also know that, for the most part, the government did not directly give Hynix the funds it needed.  So, how did the government implement its  decision?  Of course, the government did not 
make the decision and then simply do nothing to implement it.  The government turned to Hynix’s 
creditors and gave them responsibility for completin g the task.  Korea argues that the banks acted 
solely for commercial reasons.  But, the record s upports a different conclusion.  Record evidence for 
all elements of the Hynix bailout, such as the lo an approval documents and the Kookmin prospectus, 
indicate that even the banks that were not controlled by the government were acting at the government’s behest; i.e., that the government had asked them to assist Hynix and they were doing so  WT/DS296/R 
 Page D-15 
 
 
 in accordance with that request.  There is also the evidence of Hynix’s dismal financial condition, 
evidence that the banks were clas sifying the chances of recovery on Hynix’s debts as doubtful at the 
same time they were providing additional assistance, and evidence of government coercion of recalcitrant banks.  Based on the totality of that ev idence, it was certainly reasonable for Commerce to 
conclude that the banks were, in fact, acting at the behest of the government, and not purely for 
commercial reasons.  
 5. In addition, there is the fact that delega ting the task of saving Hynix to the banks was a 
readily available option for the GOK because most of Hynix’s debt was held by government banks, 
which the government knew it could trust to carry out its decision.  There was also a system – the 
Creditors’ Council – through which those government  banks could dictate terms to other Hynix 
creditors as well, particularly if it was demonstrat ed to the banks that the government was willing to 
step in as the enforcer, doing a little arm-twisti ng where necessary.  While the GOK denies these 
allegations by the banks, it cannot explain them unde r its theory of purely commercial behaviour. 
 
6. In sum, the government did not micro-manage the Hynix bailout; but there is ample evidence 
that the banks were acting at the government’s be hest in bailing out Hynix.  Thus, as the EC noted, 
this is not a close case.  The government’s hand – as policy maker, facilitator and enforcer – is all 
over the Hynix bailout.  Without question, based on the evidence as a whole, one can objectively and 
reasonably conclude that the Hynix bailout was a fina ncial contribution.  Frankly, if the evidentiary 
bar is set so high that the evidence in this case is  not sufficient to establish a financial contribution, 
then the indirect subsidy provision in Article 1 is utterly useless. 
 
The ITC’s Injury Determination 
 
7. Throughout these proceedings, Korea has insist ed that the United States, through the ITC, 
"violated" US obligations under the SCM Agreemen t, "ignored" record evidence, and considered 
other evidence in a "vacuum".  Notwithstanding its repeated arguments, Korea has fallen far short of 
satisfying its burden of proving that the United Stat es acted in a WTO-inconsistent manner.  Indeed, 
several of Korea’s factual and legal arguments contain no reference to the factual record, the ITC’s determination, the SCM Agreement, or reports  reviewing other investigating authorities’ 
determinations. 
 
8. Korea has repeatedly asserted that the volum e of subject imports declined.  The facts, 
however, showed that subject import volume and ma rket share increased, as even Hynix’s counsel 
admitted at the ITC’s hearing.  In fact, what Korea is really alluding to in its argument is the Hynix 
brand (composed of subsidized Hynix products made in Korea and products produced at Hynix’ s US 
facility in Eugene, Oregon), not Hynix’s subject import s.  But, Korea cannot point to any provision in 
the SCM Agreement for the investig ating authority to consider volume on a brand-name basis in 
circumstances such as in the DRAMs investigation, where brand names do not reflect country source 
and thus do not correspond to the relevant legal i nquiry:  namely the effect of subsidized subject 
imports on the domestic industry.  
9. Korea never explained why the ITC’s rejection of Hynix’s proffered reason for the increase in 
subject import volume was inconsistent with the SC M Agreement.  Hynix’s Eugene facility was part 
of the domestic industry, so even if Hynix subs tituted subsidized imports for DRAM products made 
by its US affiliate in Eugene, Oregon, those imports  injured the domestic industry.  The ITC provided 
a satisfactory explanation for its rejection of Hyni x’s factual argument, but Korea simply disagrees 
with the reason.  As for Korea’s argument that Hyni x has no obligation to supply the US market first 
from its Oregon facility, and then supplement it with  imports, Hynix can supply the US market with 
imports, as Samsung did, but only if those imports ar e fairly traded.  Hynix’s imports benefited from 
unfair subsidies, as my colleagues have explained at length.  WT/DS296/R 
Page D-16  
 
 10. The ITC found significant price undercutting by subsidized subject imports at high margins 
and increasing frequencies, no matter how the data we re examined.  Korea calls the ITC’s pricing 
analysis "crude".  In fact, the weighted averag e pricing comparisons that the ITC conducted were 
tailored to the conditions in the DRAMs industry a nd were painstaking and representative.  The ITC 
calculated a weighted average for subject imports an d offset instances of overselling with instances of 
underselling.  It compared the weighted average pr ice for subject imports with the weighted average 
price for domestic producers’ US shipments.  Thus, the ITC’s analysis was consistent with the relevant legal inquiry under the SCM Agreement, wh ich is the price effects of subsidized subject 
imports on the domestic industry.  
11. Although Korea has yet to demonstrate that a brand-name analysis was required, let alone 
permitted, under the SCM Agreement given the facts of the DRAMs investigation, the ITC also examined the pricing data on a disaggregated basi s by brand name by source, and this analysis 
confirmed the results of its weighted-average prici ng analysis.  The disaggregated analysis revealed 
that Hynix was the lowest-price source more often than any other source. 
 
12. Korea repeatedly accuses the ITC of conducti ng its examination of the volume and price 
effects of subsidized subject imports in a vacuum.  But, it is Korea that wants the Panel to look at 
certain facts and findings in a vacuum.  Korea wa nts the Panel to look at the absolute volume of 
subject imports and the increases in subject import volume both absolutely and relative to domestic consumption and production in the abstract.  Bu t, the SCM Agreement does not require such an 
approach, because it does not define any volume or  increase as "by definition" significant or 
insignificant.   13. As evidenced by its lengthy discussion of th e relevant conditions of competition and business 
cycle in a separate section of its determination, and by the integration of this discussion into its 
analysis of the volume, price effects, and impa ct of subsidized subject imports on the domestic 
industry, the ITC clearly examined the evidence and the relevant factors in context.  Subsidized 
subject imports were highly substitutable for domesti c DRAM products.  In this commodity market, 
price was important, and purchasers reacted quickly to price undercutting through the rapid dissemination of pricing information to certain purchasers, including through such mechanisms as 
most-favoured customer, best price clauses, and othe r informal arrangements.  Demand was inelastic, 
so lower prices were unlikely to generate additiona l demand for the product, and demand continued to 
rise each year.  Because DRAM producers must i nvest constantly in new capital equipment and 
research and development, they had to maximize capacity utilization.   14. Under these circumstances, a given volume can  be more harmful than in other cases involving 
a highly differentiated product because it is more likely to have a direct impact on the market, 
particularly in terms of purchasers’ willingness to switch to, or increase their purchasing of, subsidized subject imports, and/or use the low pri ces of subsidized subject imports as leverage to 
extract lower prices.  Indeed, under these circum stances, it was not even necessary for subsidized 
subject imports to gain market shar e, if they forced the domestic indus try to lower its prices in order 
to retain its share of the market. 
 
15. The SCM Agreement, which employs disjunctiv e language, does not even require a finding of 
a significant increase in subsidized subject import volume, let alone a significant increase in market 
share.  Here, however, not only were there significan t adverse price effects in the form of significant 
underselling and significant price depression, but there was also a significant volume of subsidized 
subject imports and significant increases in subject  import volume, no matter how measured.  As the 
ITC explained, the commodity-like nature of the hi ghly substitutable domestic and subsidized subject 
DRAM products magnified the ability of a given volu me of imports to impact the domestic market 
and industry.  In such a commodity market, which adjusts quickly to price changes, the ITC found 
that significant monthly price disparities between suppliers would not usually be expected.    WT/DS296/R 
 Page D-17 
 
 
  
16. Thus, it found a pattern of frequent, sustaine d underselling by subject imports, often at high 
margins, was especially significant in the context of the DRAM market, and could be expected to 
have particularly deleterious eff ects on domestic prices.  Although certain other factors played a role 
in the price declines, the ITC found that the unpreced ented severity of the price declines that occurred 
from 2000 to 2001 and persisted through 2002 indicated  that supplier competition was an important 
factor.  The increasing frequency of underselling by subsidized subject imports from 2000 to 2002 corresponded with the substantial d ecline in US prices over those sa me years.  In the absence of 
significant quantities of subject Korean product compe ting at relatively low prices, domestic prices 
would have been substantially hi gher.  Korea never seriously challenged the ITC’s analysis of the 
impact of subsidized subject imports on the domestic industry. 
 17. In the DRAMs investigation, there was a very  high causal nexus between the material injury 
suffered by the domestic industry and the subsidized  subject imports, no matter what standard the 
Panel applies, and no matter what  lens the Panel uses to examine the evidence.  Korea’s contrary 
arguments are predicated on the assumption that the volume of subsidized subject imports was 
declining, an assumption that has no support in the record evidence. 
 18. Finally, Korea has failed to demonstrate wh y the ITC’s evaluation of factors other than 
subsidized subject imports is inconsistent with US  obligations under the SCM Agreement.  As Korea 
stated, there is no requirement in the SCM Agreement for an investigating authority to quantify injury, 
nor has the Appellate Body ever said there was an y requirement to do sophisticated modelling or an 
econometric analysis of the data.  The Appellate Body  has explained that to "separate and distinguish" 
means that an investigating authority is to provide a satisfactory explanation of the nature and extent 
of the injurious effects of other factors, as di stinguished from the injurious effects of the unfair 
imports.  The ITC’ s determination shows that th e ITC not only examined all such factors, but 
provided a satisfactory explanation of the nature a nd extent of the injurious effects of the other 
factors, as distinguished from the injurious effect s of the unfair imports.  Korea has been unable to 
show why the ITC’s explanation is inadequate.  19. Korea would have the Panel believe that th e Government of Korea’s intervention in the 
market to artificially sustain the existence of the number three producer of DRAMs in the world had 
no adverse consequences on Hynix’s competitors.  We  respectfully disagree.  While the consequences 
of Korea’s subsidization of Hynix may have varied  from market to market, the evidence before the 
ITC – and the ITC’s analysis of that evidence – l eave no doubt that subsidized subject imports from 
Hynix caused material injury to the US DRAMs industry.