WORLD TRADE  
ORGANIZATION  G/SCM/Q2/KOR/29 
12 April 2007 
 (07-1465) 
Committee on Subsidies 
and Countervailing Measures Original:   English 
 
 
 
SUBSIDIES 
 
Replies To Questions from the UNITED STATES1 
Regarding the New and Full Notification of the REPUBLIC OF KOREA2 
 
  The following communication, dated 10 April 2007,  is being circulated at the request of the 
Delegation of Korea.  
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I. FISHERIES SUPPORT FOR OLD FI SHING VESSEL AND EQUIPMENT 
REPLACEMENT 
Question 1 on Support for Old Fishing Vessel Replacement 
  Is there any limit on the capacity of the new replacement vessels? 
 
Reply
 
 
There was no capacity limit on the replacement v essels.  The replacement program for coastal 
and off-shore fishing vessels expired as of January 2007. 
Question 2 on Support for Old Fishing Vessel Replacement 
 
 What happens to the old fishing vessel and equipment?  Is there a requirement that they 
be scrapped?  
Reply
 
 
For deep-sea fishing vessels, it is required that the license be withdrawn and the vessel be 
scrapped or sold overseas. 
SUPPORT FOR VESSEL DECOMMISSIONING  
Question 3 on Vessel Decommissioning 
 
When will the subsidization period for deep sea fisheries end?  
                                                      
1 G/SCM/Q2/KOR/28.   
2 G/SCM/N/123/KOR.   G/SCM/Q2/KOR/29 
Page 2  
 
  Reply
 
 
There is no fixed duration for the program. 
Question 4 on Vessel Decommissioning 
 
Please explain what happens to the decomm issioned fishing vessels?  Is there a 
requirement that the decommi ssioned vessels be scrapped? 
Reply  
 
For coastal and off-shore fishing vessels, the license is withdrawn and the vessel must be 
scrapped or reused strictly for public purposes. 
For deep-sea fishing vessel, the license is withdr awn and the vessel must be scrapped or sold 
overseas. 
LOCAL TAX REDUCTION FOR BUILDING AND ACQUISITION OF INTERNATIONAL LINE VESSELS AND 
DEEP SEA FISHING  
Question 5 on Local Tax Reduction 
 
Can the same fisherman receive a benefit under this programme and the two 
programmes noted above? 
Reply  
 
Under the directions for implementing the program s, it is prohibited to grant a vessel both a 
vessel decommissioning subsidy and an old vessel re placement subsidy, as the natures of the two 
programs are contradictory.  However, the local tax exemption program serves a different purpose and 
therefore, vessels eligible for vessel replacement s ubsidy may be eligible for the local tax exemption 
program.  The vessel decommissioning program is not related to the local tax exemption program. 
Question 6 on Local Tax Reduction 
 
We note that the duration of this program me is until 31 December 2006.  Will this 
programme be replaced by another progr amme providing similar benefits?  
Reply  
 
The program was extended until 31 December 2009. 
OTHER FISHERIES PROGRAM MES 
Question 7 on the Ten-Year Plan to Support Korea’s Fishing Sector 
 
In 2003, the Korean government announced that  a ten-year plan to support Korea's 
fishing sector had been developed by the Minist ry of Maritime Affairs and Fisheries.  Could 
Korea please provide further details of this pl an and describe how it  relates to the support 
programmes notified and any other support programmes not notified?  G/SCM/Q2/KOR/29 
 Page 3 
 
 
  Reply  
 
The 10 year master plan for the fisheries industry and communities was developed in 
January 2004.  The plan was established in prep aration for the conclusion of WTO DDA negotiations 
and various bilateral FTA negotiatio ns.  The plan aims at improving fisheries policy to achieve 
sustainable fisheries through resource stocking and marine environment conservation. 
Among 7 programs notified, replacement of ol d vessels and equipment for coastal and off-
shore fishery program has been reduced to re placement of equipment for safety on board. 
The local tax exemption program for interna tional line vessels and deep-sea fishing vessels 
does not have any relevance to the plan, as the purpose of the local tax exemption program is 
promotion of shipping industry and proper management of the national fleet. 
The rest of the notified programs will continue, while the contents of the programs may be 
modified to serve environment-friendly policy objectives. 
Certain programs were not notified as they are not  specific within the meaning of Article 2.  
These programs, including resource enhancement a nd social welfare programs, do not have any 
resource effect or trade effect.  And the benefits of these programs are not confined to fishing sector 
but, instead, affect the general public. 
Question 7 on Article 24 of the Framework Act on Marine Fishery Development 
 
Article 24 of the Framework Act on Marine Fishery Development states in part that the 
government will devise and implement policies requi red for the expansion of harbour facilities 
and fishing port facilities such as the constructi on of harbour and fishing ports.  Please explain 
why this program was not notified.  During the reporting period of 2003 and 2004, what was the amount of funds spent on developing fishing port facilities?  
Reply
 
 
The Act provides for general national infrastru cture development and therefore, is not a 
subsidy within the meaning of the ASCM Article 1.1. 
Question 8 on Article 29 of the Framework Act on Marine Fishery Development 
 
Article 29 of the Framework on Marine Fishery Development states that the Minister of 
Maritime Affairs and Fisheries may render support required for the development or 
industrialization of new technologies related to marine development.  Please explain why this 
programme was not notified and provide the amount of government funds spent on new 
technologies for the fisheries industry during th e reporting period of 2003 and 2004.   
Reply  
 
The program was not notified as it is not specific within the meaning of the ASCM Article 2.  
The beneficiaries of the program are not confined to  certain companies or industry.  Some examples 
of R&D implemented under the program during th e period of 2003~2004 include;  equipment for 
assessing marine toxicity using radiant microbes, development of a valve position indicator for vessels using hydrometry, etc.   
There was no fisheries related R&D under the program in 2004.  The amount invested under 
the program in 2003 was about 115 million Korean won.   G/SCM/Q2/KOR/29 
Page 4  
 
  II. GENERAL 
Certain publicly available information indi cates that Korea may maintain subsidy 
programmes that meet the requirements for notifi cation under Article 25.  Please explain why 
all the programmes listed below have not been noti fied.  If they do qualify as programmes that 
should be notified, and to the extent they have not yet been notified, please provide the 
information required under Article 25.3 of th e SCM Agreement and other programme-specific 
information as requested below. 
F
UNDS TO PROMOTE INFORMATION TECHNOLOGY VENTURE AND PROJECTS  
Question 9 on Funds to Promote Information Technology Ventures and Projects 
 
The Ministry of Information and Communications administers a programme titled 
"Funds to Promote Information Technology Vent ures and Projects".  During the years 1993 to 
2003, over 7 trillion won from this Fund was spen t in the development of Code Division 
Multiple Access CDMA and semiconductor technology. 
The Ministry of Information and Communica tions also administers a programme titled 
"IT839 Strategy".  Please provide a description of the IT839 Strategy and its relationship, if 
any, to the Funds to Promote Information T echnology Ventures and Projects programme.  In 
addition, please provide details on the funds pr ovided to support the IT839 Strategy during the 
2003-2004 notification period.   
Reply  
 
Information Promotion Fund supports wide variety of technological sectors which will 
contribute to building and strengthening the genera l social and economic infrastructure.  This fund 
covers technologies in various industries horizontally, and is neither designed nor operated in order to 
promote R&D for certain industries or sectors. 
Therefore, in its entirety or in part, this fund is not specific within the meaning of the ASCM 
Article 2. 
NEXT-GENERATION GROWTH ENGINES  
Question 9 on the "Next Generation Growth Engines" 
 
It is our understanding that Korea has provided R&D funding to promote the 
development of Korea's Next-Generation Grow th Engines.  In G/SCM/Q2/KOR/25 dated 
19 October 2004, in response to a question from the United States on Korean government R&D 
funds to the "Next-Generation Growth Engin es" earmarked for the development of next-
generation semiconductors, the Korean Government  responded that it is "still unclear whether 
the programs could be put into action and how mu ch would be allocated for them".  Since the 
date of that response, the FY 2005 budget was passed by the National Assembly and 
2,358 billion won has been allocated for the Ne xt-Generation Growth Engines.  The Korean 
Government has also identified Next-Generatio n semiconductor chips is one of the ten "growth 
engines".    G/SCM/Q2/KOR/29 
 Page 5 
 
 
  Reply  
 
As the "Next-Generation Growth Engines" pr ogram provides support, mostly for research 
institutions, under objective criteria and conditions governing the eligibility and the amount, there is 
no specificity within the meaning of the ASCM Article 2. 
 
SUPPORT FOR SUBSIDIES FOR RELOCATING FACTORIES  
Question 10 on the Support for Relocating Factories 
 
According to a local government website 
(www.provin.jeonbuk.kr/english/co ntents.html?fid=26&sid=60) , subsidies are provided to 
companies that relocate factories.  Under this programme, it appears that funds equal to three 
percent of construction costs will be provided to companies that relocate factories.   
According to a local government website,  the Ministry of Construction and 
Transportation has established a Company Relo cation Support Centre in order to provide 
relocating companies with details on loans and t ax assistance available to companies relocating 
to local regions or investment zones outside of the national capital region  
(www.provin.jeonbuk.kr/english/ contents.html?fid=26&sid=59 ).  Please provide details on the 
lending programmes available to companies that a re relocating to local regions from the Korea 
Development Bank Fund, Industrial Foundation  Fund, Korea Credit Guarantee Fund/Korea 
Technology Credit Guarantee Fund;  SME Management Stabilization Fund; and the Local 
SME Nurturing Fund.  Furthermore, please provide a complete description of the types of tax 
benefits available to companies relocating to loca l regions or outside of the national capital 
region.   
Reply  
 
Financial supports for relocating factories ar e provided only from Korea Development Bank 
Fund and Industrial Foundation Fund.  Other funds mentioned in the US questionnaire are applicable 
to all companies in an equal manner with no preferen tial treatment to those relocating to local regions. 
Korea Development Bank Fund provides relocati ng companies that have engaged in business 
for not less than 3 years in the national capital regi on with loan for facilities needed for relocation.  
The loan period is within 8 years including grace peri od and the interest rate is benchmark interest 
plus spread.  The loan is provided up to 90 pe r cent of the fund needed for construction of the 
facilities. 
Unlike subsidies offered in order to induce new local investment, this program operates as an 
encouragement to move away from the capital regi on.  When making such relocations, companies 
incur additional costs that they would not otherwi se face.  As these costs are incurred in order to 
achieve the general social goal of decentralization rather than for the benefit of the individual 
companies, support is offered to help co mpensate them for these additional costs. 
The Industrial Foundation Fund is offered to support factories moving into an industrial 
complex according to the master plans for managing and controlling industrial complexes, companies 
in an industrial complex seeking to renovate old fac ilities or change types of business, and projects for 
building the foundation for promoting business integrati on in an industrial complex.  This fund is 
provided primarily to companies relocating to outside of the national capital region from the 
congestion restraint zone in the capital region.  Detailed conditions for the fund are as follows: G/SCM/Q2/KOR/29 
Page 6  
 
  Subjects
 
Relocation-related costs, expenses for renovation of old facilities and facility automation, and 
facility and operation funds relating to  promoting industry integration. 
 
Conditions  
Loan limit:  2 billion Korean won per company 
Interest rate:  5.0 per cent Loan period:  8 years 
 
Besides the financial support, tax supports ar e provided to the relocating companies.  
Companies relocating to local regions can have 100 per cent of tax cut for 5 years and 50 per cent of 
tax cut for 2 years concerning income tax and corpor ation tax.  The companies receiving  these tax cut 
benefits are small and medium sized companies that have engaged in business in the congestion 
restraint zone of the capital region for not less than  2 years and relocate factories to outside of the 
capital region (in effect since 1971), and corporations  that have engaged in business in the congestion 
restraint zone of the capital region for not less than 3 years and relocate their head office or factories 
to outside of the capital region (in effect since 2000). 
Another tax benefit available to the relocati ng companies is a tax deferment on capital gains 
with 3-year grace period and 3-year instalment taxation.  The compani es eligible for these benefits are 
corporations whose factories are relocated to local regions from the congestion restraint zone of the capital region and metropolitan areas (in effect since 1977), corporations whose head office is 
relocated to local regions from the congestion rest raint zone of the capital region (in effect since 
1985) and corporations that have engaged in business in the congestion restraint zone of the capital 
region for not less than 3 years and relocate their head office or factories to outside of the national capital region (in effect since 2000). 
A
SSISTANCE TO THE TEXTILE INDUSTRY  
Question 11 on the "Next Generation Textile" 
 
In a Ministry of Commerce, Industry and Energy 2001 White Paper, the government 
created a plan for the development of "next-g eneration" fibres.  The plan called for the 
investment of 9 trillion won of government f unds during the years 2001 through 2005.  Under 
this plan, a Technical Centre for Industrial Text iles was to be established at the Korea Institute 
of Industrial Technology in the city of Cheonan.  Please provide a description of the plan for the 
development of "next-generation" textiles.  Furthermore, please provide the amount of 
government funding provided under this plan or provided to the development of "next-
generation" fibres during the notification period of 2003 and 2004. 
Reply  
 
The "next generation" textile plan is sponsor ed and established by the government to promote 
industry and academic collaboration.  The Research  Center for Industrial Textiles of the Korea 
Institute of Industrial Technology, that was establishe d as a result of public competition, is a part of 
the project implemented by the Ministry of Commerce, Industry and Energy (MOCIE) to build infrastructure for industrial technology.  The Resear ch Center provides basic equipment for research 
and development in industrial textiles. 
For reference, the Korea Institute of Industria l Technology is a comprehensive research and 
development institute not only covering textiles,  but also other manufacturing industries like 
chemicals, steel and machinery.    G/SCM/Q2/KOR/29 
 Page 7 
 
 
  The amount of government funding provided for th e Research Center for Industrial Textile 
during 2003-2004 was 2.61 billion Korean won. 
Question 12 on the "New Face of Textile and Fashion Industry" 
 
In a 27 December 2002 press release titled "The New face of Textile and Fashion 
Industry", the Ministry of Commerce, Industry and Energy announced details on a number of 
programmes enacted to promote the development of the Korean textile industry.  Please provide 
the amount of government funds provided during the notification period of 2003 and 2004 for 
each of the programmes referenced in this press release.  In addition, please explain whether 
funds are provided to companies, trad e associations or research institutes. 
Reply  
 
The "New Face of Textile and Fashion Indus try" is one of the industry development 
initiatives that the MOCIE establishes in every 3~5 ye ars, which was established to study the potential 
for long term development of the textile industry.  
The goal of this program is not to provide government funding but to provide industries, 
academic and research institutes with direction a nd guidelines to achieve development initiatives. 
Question 13 on the "Vision and Development St rategy for Textile and Apparel Industry for 
2015" 
 
In November of 2005, the Ministry of Commerce, Industry and Energy announced a 
"Vision and Development Strategy for Textile an d Apparel Industry for 2015".  Please provide 
the details and objectives of the "Vision a nd Development Strategy for Textile and Apparel 
Industry for 2015", including the amount of gove rnment funds provided during the notification 
period of 2003 and 2004.  Please explain the relationship between the textile development program announced in December 2002 and this November 2005 announcement. 
Reply
 
 
The "Vision and Development Strategy for Textile  and Apparel Industry for 2015" is also one 
of the industry initiatives implemented by the MOCIE.   This is a new version of the "New Face of 
Textile Industry" and no government fundi ng has been provided for this program. 
The Korean government is not providing any funding solely for the textile industry but, 
instead, is making efforts to facilitate research a nd development overall for industries in general.  
Against this backdrop, the MOCIE establishes overall industry development initiatives in every 
3~5 years to encourage sound economic development. 
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