WT/DS273/R 
 Page H-1 
 
 
  
ANNEX H 
 
REQUEST FOR THE ESTABLISHMENT 
OF A PANEL 
 
 
Contents Page 
Annex H Request for the Establishment of  a Panel – Document WT/DS273/2 H-2 
 WT/DS273/R 
Page H-2  
 
ANNEX H 
 
 
REQUEST FOR THE ESTABLISHMENT  
OF A PANEL 
 
 
 WORLD TRADE  
ORGANIZATION  WT/DS273/2 
13 June 2003 
 (03-3145) 
 Original:   English 
 
   
KOREA – MEASURES AFFECTING TRADE IN COMMERCIAL VESSELS 
 
Request for the Establishment of a Panel by the European Communities
 
   The following communication, dated 11 June 2003, from the Permanent Delegation of the European Commission to the Chairman of the Dis pute Settlement Body, is circulated pursuant to 
Article 6.2 of the DSU. 
 
_______________ 
 
  On 21 October 2002, the European Comm unities requested consultations with the 
Government of the Republic of Korea (Korea) pursuant to Article 4 of the Understanding on Rules 
and Procedures Governing the Settlement of Disputes  (DSU), Article XXIII:1 of the General 
Agreement on Tariffs and Trade 1994  (GATT 1994) and Articles 4, 7 and 30 of the Agreement on 
Subsidies and Countervailing Measures  (SCM Agreement ) with regard to measures affecting trade in 
commercial vessels.  This request was circul ated to the WTO Members on 24 October 2002 as 
document WT/DS273/1, " Korea – Measures Affecting Trade in Commercial Vessels ".  
  Consultations were held on 22 Nove mber, 13 December 2002 and 7 May 2003. 
Unfortunately, these consultations failed to settle the dispute. 
  The European Communities therefore request s that a panel be established pursuant to 
Article 6 of the DSU, Article XXIII:2 of GATT 1994, Articles 4, 7 and 30 of the SCM Agreement  (to 
the extent that Article 30 incorporates by reference Article XXIII of GATT 1994).   The measures that are the subject of this requ est are prohibited and actionable subsidies.  In 
particular, the European Communities considers th at the following measures are inconsistent with 
Korea's obligations under the SCM Agreement : 
 
• The Act Establishing the Export-Import Bank of Korea ("KEXIM"),
 any 
implementing decrees and other regulations, that specifically allow and enable  WT/DS273/R 
 Page H-3 
 
 
KEXIM to provide Korean exporters of cap ital goods with financing at preferential 
rates. 
 
• The pre-shipment loan and advance paym ent refund guarantee schemes established 
by KEXIM. Under the pre-shipment loans programme , KEXIM provides pre-delivery 
loans at preferential rates to finance production costs of export contracts, such as raw 
material cost, labour and overheads un til delivery of the goods. Under the advance 
payment refund guarantees programme, KEXIM provides guarantees at preferential 
premium rates that a foreign buyer will be refunded any advance payments given to a 
Korean exporter, including any accrued inte rest on the advance payments, if the 
Korean exporter fails to perform his obliga tions under the relevant export contract. 
  The individual granting of pre-ship ment loans and advance payment refund 
guarantees by KEXIM to Korean shipyard s, including Samho Heavy Industries, 
Daedong Shipbuilding Co., Daewoo Shipbuild ing and Marine Engineering, Hyundai 
Heavy Industries, Hyundai Mipo, Samsung Heavy Industries and Hanjin Heavy Industries & Construction Co. 
 
• The provision by the Korean Government, through government-owned and 
government-controlled banks, of corporate rest ructuring subsidies in the form of debt 
forgiveness, debt and interest relief and de bt-to-equity swaps. These subsidies were 
granted to at least three shipyards (Daew oo Shipbuilding and Marine Engineering, 
Samho Heavy Industries, Daedong Shipbuilding Co) . 
 
• The Special Tax Treatment Control Law, more specifically, the special taxation on in-
kind contribution (Article 38) and the special taxation on spin-off (Article 45-2) scheme, establishes two tax programmes limited to companies under corporate 
restructuring and provides tax concessions to  Daewoo, the combined benefit of which 
is estimated at won 78 billion.  
 
 The European Communities cons iders that the Korean measures are in breach of Korea's 
obligations under the provisions of the SCM Agreement , in particular, but not necessarily exclusively 
of:  – Articles 3.1(a) and 3.2 of the SCM Agreement , because, inter alia , the KEXIM Act, 
the advance payment refund guarantees and the pre-shipment loans provided by 
KEXIM and the corporate restructuring packages and tax concessions are specific 
subsidies within the meaning of Articles 1 and 2 of the SCM Agreement  and are 
de jure  or de facto  export contingent. 
  – Article 5(a) of the SCM Agreement , because, inter alia , the above-mentioned KEXIM 
subsidies, the corporate restructuring packages and tax concessions are specific 
subsidies within the meaning of Articles 1 and 2 of the SCM Agreement  and are 
causing injury to the Community industry. 
  – Article 5(c) of the SCM Agreement , because, inter alia , the above-mentioned KEXIM 
subsidies, the corporate restructuring packages and tax concessions are specific 
subsidies within the meaning of Articles 1 and 2 of the SCM Agreement  and cause 
serious prejudice to the interests of the European Communities, in particular through significant price undercutting, price suppression, price depression or lost sales within the meaning of Articles 6.3 and 6.5 of the SCM Agreement
.  
  The European Communities requests that a Pane l be immediately established with standard 
terms of reference, in accordance with Articles 4.4 and 7.4 of the SCM Agreement  and Article 7 of the 
DSU. WT/DS273/R 
Page H-4  
 
  The European Communities asks that this requ est for the establishment of a Panel be placed 
on the agenda for the next meeting of the Dispute Settlement Body, which is scheduled to take place 
on 24 June 2003.  
 The European Communities further requests th at the DSB at that meeting initiate the 
procedures provided for in Annex V of the SCM Agreement  pursuant to paragraph 2 of that Annex.  In 
particular, the European Communities requests that  the DSB designate a representative to serve the 
function of facilitating the information-gathering process of Annex V.  The European Communities is prepared to propose names to the DSB and is cons ulting with Korea on this matter.  The European 
Communities also intends to put forward suggestio ns as to the information that should be sought 
under this procedure once the panel is established.   
__________