WORLD TRADE  
ORGANIZATION  WT/DS299/9 
20 April 2006 
 (06-1813) 
 Original:   English/ 
 French/  Spanish 
  
   
EUROPEAN COMMUNITIES – COUNTERVAILING MEASURES ON 
DYNAMIC RANDOM ACCESS MEMORY CHIPS FROM KOREA 
 
Communication from the European Communities
 
   The following communication, dated 12 April 2006, from the delegation of the European 
Communities to the Chairman of the Dispute Settleme nt Body is circulated at the request of the 
European Communities.  
_______________ 
 
 
 On 10 April 2006, the European Communities in formed the Dispute Settlement Body (DSB) 
that the Council of the European Union adopted on 10 April 2006 a regulation implementing the DSB 
ruling and recommendations in European Communities – Counterva iling Measures on Dynamic 
Random Access Memory Chips from Korea . 
 
 This Council Regulation has now been published in the Official Journal of the European 
Union  of 12 April 2006 and will enter into force on 13 April 2006. 
  With the publication and entry into force of this Council Regulation, the European Communities considers that it fully implements th e recommendations and rulings of the DSB in the 
aforementioned dispute. 
 
 WT/DS299/9 
Page 2  
 
  COUNCIL REGULATION (EC) No 584/2006 
of 10 April 2006 
amending Regulation (EC) No 1480/2003 im posing a definitive countervailing duty 
and collecting definitely the provisional duty imposed on imports of certain 
electronic microcircuits known as DRAM s (dynamic random access memories) 
originating in the Republic of Korea  
 
 THE COUNCIL OF THE EUROPEAN UNION
, 
 
Having regard to the Treaty establishing the European Community,  
 
Having regard to Council Regula tion (EC) No 1515/2001 of 23 July 2001 on the measures that may 
be taken by the Community following a report adopted by the WTO Dispute Settlement Body concerning anti-dumping and anti-subsidy matters
1,  
 
Having regard to Council Regulation (EC) No 2026/97 of 6 October 1997 on protection against 
subsidised imports from countries not members of the European Community2 (the basic Regulation),  
 Having regard to the proposal submitted by the Commission after consulting the Advisory Committee,  
 
Whereas:  
A.  PROCEDURE 
  1. Existing measures 
 
(1) By Regulation (EC) No 1480/2003
3 (the definitive Regulation), the Council imposed a 
definitive countervailing duty of 34,8 % on im ports of certain electronic microcircuits known 
as dynamic random access memories (DRAMs) orig inating in the Republic of Korea and 
manufactured by all companies other than Samsung Electronics Co., Ltd (Samsung), for 
which a 0 % duty rate was established. The definitive Regulation was preceded by 
Commission Regulation (EC) No 708/2003 of 23 April 2003 imposing a provisional countervailing duty on imports of certain electronic microcircuits known as DRAMs 
(dynamic random access memories) originating in the Republic of Korea
4 (provisional 
Regulation). 
 
(2) Two exporting producers located in the Repub lic of Korea cooperated in the investigation 
which led to the imposition of the existing measu res (the original investigation): Samsung, 
which was not found receiving subsidies, a nd Hynix Semiconductor Inc. (Hynix). The 
European Community (EC) industry in the orig inal investigation consisted of two producers 
which accounted for the major proportion of the total Community production of DRAMs, 
Infineon Technologies AG, Munich, Germany (Infineon) and Micron Europe Ltd, 
Crowthorne, United Kingdom (Micron).  
 
                                                      
1 OJ L 201, 26.7.2001, p. 10. 
2 OJ L 288, 21.10.1997, p. 1. Regulation as last amended by Regulation (EC) No 461/2004 (OJ L 77, 
13.3.2004, p. 12). 
3 OJ L 212, 22.8.2003, p. 1. Regulation as amended by Regulation (EC) No 2116/2005 (OJ L 340, 
23.12.2005, p. 7). 
4 OJ L 102, 24.4.2003, p. 7.  WT/DS299/9 
 Page 3 
 
 
  (3) The investigation of subsidisation and inju ry covered the period from 1 January 2001 to 
31 December 2001 (IP). The examination of tr ends relevant for the assessment of injury 
covered the period from 1 January 1998 to the end of the IP (the period under consideration).  
 
 2. Report adopted by the Dispute Settlement Body of the WTO  
 
(4) On 3 August 2005, the Dispute Settlement Body (DSB) of the World Trade Organisation 
(WTOmm) adopted a Panel report in 'Europ ean Communities – Countervailing measures on 
dynamic random access memory chips from Korea'.5 
 
(5) According to the Panel report, the EC act ed in a manner inconsistent with its WTO 
obligations under:   (a) Article 1.1(a) of the Agreemen t on Subsidies and Countervailing Measures
6 (the 
SCM Agreement) in determining that the May 2001 restructuring programme 
constituted a financial contribution by the government;  
  (b) Article 1.1(b) of the SCM Agreement in its  determination of the existence of a benefit 
in the case of the syndicated loan;  
  (c) Articles 1.1(b) and 14 of the SCM Agreem ent in directly applying, for the purposes 
of the calculation of the amount of benef it, its grant methodology to all programmes 
found to constitute a subsidy;  
  (d) Article 15.4 of the SCM Agreement by not evaluating the factor 'wages' as a relevant 
factor affecting the state of the domestic industry; and  
 
 (e) Article 15.5 of the SCM Agreement by fa iling to make sure that the injury caused by 
certain other factors (in particular, declin e in demand, overcapacity, and other (non-
subsidised) imports) was not attribut ed to the subsidised imports.  
 (6) On the other hand, the EC was found to have  acted consistently with its WTO obligations 
under:  
  (a) Article 1.1(a) of the SCM Agreement in  determining that the syndicated loan, the 
KEIC guarantee, the KDB debenture progr amme and the October 2001 restructuring 
programme constituted a financial contributio n by the Government of Korea (GOK);  
 
 (b) Article 1.1(b) of the SCM Agreement in determining that a benefit was conferred on 
Hynix by the KEIC guarantee, the KDB debenture programme, the May 2001 restructuring programme and the October 2001 restructuring programme;  
  (c) Articles 1.2 and 2 of the SCM Agreement in  finding de facto specificity (two Korean 
claims);  
  (d) Article 15.2 of the SCM Agreement in  assessing the significance of the volume and 
price effects of the subsidised imports (2 Korean claims);  
 
 (e) Article 15.4 of the SCM Agreement in c onsidering all factors relevant to the overall 
condition of the domestic industry, except for the factor 'wages';  
                                                     
 
5 WT/DS299/R. 
6 OJ L 336, 23.12.1994, p. 156.    WT/DS299/9 
Page 4  
 
   
 (f) Article 15.5 of the SCM Agreement in  demonstrating the requisite causal link 
between the subsidised imports and injury; and  
  (g) Article 12.7 of the SCM Agreement in appl ying 'facts available' with respect to the 
subsidy investigation.  
 
 3. Reassessment to implement the DSB's recommendations 
 
(7) In the light of the recommendations set out in the Panel report, the Commission conducted a 
thorough and objective reassessment of the releva nt findings in the definitive Regulation on 
the basis of information on the record. The scope  of the reassessment is appropriately limited 
to an examination of the five specific aspects of the existing measure, as  described above, that 
were found to be inconsistent with the SCM Agreement. This examination is based on the 
re-evaluation of the existing evidence on the record of the original investigation in light of the 
relevant findings in the Panel report.  
 (8) The reassessment set out below shows that in jurious subsidisation still exists, although at a 
slightly lower level. 
 
B.  PRODUCT UNDER CONSIDERATION AND LIKE PRODUCT  
 
(9) The product under consideration and the like pr oduct are the same as that covered by the 
original investigation, i.e. certain electr onic microcircuits known as dynamic random access 
memories (DRAMs), of all types, densities and variations, whether assembled, in processed wafer or chips (dies), manufactured using va riations of metal oxi de-semiconductors (MOS) 
process technology, including complementary MO S types (CMOS), of all densities (including 
future densities), irrespective of access speed , configuration, package or frame etc., 
originating in the Republic of Korea. The product concerned also includes DRAMs presented 
in (non-customised) memory modules or (non-cust omised) memory boards, or in some other 
kind of aggregate form, provided the main purpose of which is to provide memory.
7  
 
(10) The product concerned is currently classifi able within CN codes 8542 21 11, 8542 21 13, 
8542 21 15, 8542 21 17, ex 8542 21 01, ex 8542 21 05, ex 8548 90 10, ex 8473 30 10 and ex 8473 50 10.  
 (11) The Panel report did not cover any claims affecting the findings set out in the definitive 
Regulation concerning the product under c onsideration and the like product.  
 
C.  REVISED FINDINGS BASED ON THE PANEL REPORT 
 
 1. Subsidies 
  1.1. Introduction 
 (12) This part sets out the reassessed findings b ased on the conclusions a nd recommendations of 
the Panel report concerning:  
 
 (a) whether the May 2001 restructuring pr ogramme constituted a financial contribution 
by the GOK within the meaning of Article 2(1) of the basic Regulation;  
                                                     
 
7 Regulation (EC) No 2116/2005 amended the definitive Regulation for the purpose of adopting special 
provisions in order to ensure that the countervailing duty is properly levied on the product concerned.  WT/DS299/9 
 Page 5 
 
 
   
 (b) whether there was a benefit in the case of  the syndicated loan within the meaning of 
Article 2(2) of the basic Regulation;  
  (c) the calculation of the amount of the be nefit with regard to all subsidy programmes 
within the meaning of Articles 2(2) and 6 of the basic Regulation.  
 (13) All other findings concerning subsidies remain  as established in the original investigation and 
set out in the provisional Regulation and the definitive Regulation.  
 
 1.2. May 2001 bond purchase by creditor banks in the amount of KRW 1 trillion and first 
roll-over of debt (restructuring programme) 
 
(14) The Panel found that the determination that th e creditor banks were directed to participate in 
the May 2001 restructuring programme and that their purchase of KRW 1 trillion of 
convertible bonds (CBs) as part of the pr ogramme therefore constituted a financial 
contribution by the GOK was not consistent with Article 1.1(a) of the SCM Agreement.
8 
More specifically, the Panel found that 'while  the May 2001 restructuring programme is a 
close case, we consider that th e evidence before the investigati ng authority was insufficient to 
reasonably conclude that the government entruste d or directed the private banks to purchase 
the Hynix CBs.'9 
 
(15) In accordance with the Pane l's assessment, the funds provided to Hynix in the context of the 
May 2001 restructuring programme shall not be countervailed.10  
  1.3. Syndicated loan of KRW 800 billion 
 
(16) With respect to the syndicated loan of KRW 800 billion, the Panel found that the EC had 
properly established that the GOK directed the Ko rea Exchange Bank (KEB) to participate in 
the loan and that this constituted a financial c ontribution via entrustment or direction of KEB 
in accordance with Article 1.1(a) of the SCM Ag reement. The Panel also found that the Korea 
Development Bank (KDB) provided a direct financ ial contribution through its participation in 
the syndicated loan, and, becau se the KDB was a public body, the EC was not required to 
make a finding of entrustment or direction.
11 However, the Panel found that the EC failed to 
establish the existence of a benefit from the fi nancial contribution provided by the KDB and 
the KEB within the meaning of Article 1(b) of the SCM Agreement.12 Specifically, the Panel 
stated that the EC had not examined whether there were comparable commercial loans that 
could actually have been obtained by Hynix on the market and stated that the EC had ignored 
the other participants in the synd icated loans as possible benchmarks.13 
 (17) In the view of the Commission, the particip ation by the other banks in the syndicated loan 
cannot serve as a proper benchmark for determining the existence of a benefit. As the Panel 
itself noted, in determining the existence of a commercial benchmark, authorities must 
                                                     
 
8 Panel report, paragraph 7.110. 
9 Panel report, paragraph 7.109. 
10 Based on the Panel's findings, the purchase of CBs by the public bodies involved in the May 2001 
restructuring programme remains a countervailable subsidy. However, no further action is required on this point, as any benefit has already been accounted for in the subsidy found to be conferred by the October 2001 
restructuring progra mme (see recital 65 et seq. ).   
11 Panel report, paragraph 7.69. 
12 Panel report, paragraph 7.186. 
13 Panel report, paragraph 7.184. WT/DS299/9 
Page 6  
 
  examine whether such loans were  so influenced by the alleged government intervention that 
they do not represent loans that could actually be obtained on the market.
14 The Commission 
has conducted a thorough re-examination of th e extensive record in this case and has 
employed the type of analysis discussed by th e Panel. On this basis, the Commission has 
determined that the loans from the other banks participating in the syndicated loan could not 
serve as a proper benchmark.  
 (18) First, bearing in mind the financial condition of  Hynix at the time that the syndicated loan was 
arranged, as noted in recital 19 of the definitive Regulation, at the time the loan was agreed 
to, at the end of 2000, Hynix was in severe fi nancial distress. It had over USD 9,46 billion in 
liabilities at the end of 2000, which was over twice its net worth and over four times the 
market capitalisation of the company. It suffered a loss in 2000, a year in which other large DRAM producers registered profits and which was generally considered to have been a very 
good year in the DRAM industry. The majority of Hynix liabilities were coming due in 2001 and the company was facing intense liquidity problems. Many independent analysts and 
brokerage houses were saying at that time that  the company would not be able to generate 
sufficient cash flow or asset disposals to pay off its maturing liabilities. Under such 
circumstances, profit maximising banks opera ting under normal commercial conditions would 
not voluntarily participate in loans with such enormous risk of default.
15  
 (19) Second, there is ample evidence on the record that other participants in the syndicated loan 
were pressured to participate in the overall re structuring of Hynix's debt. For example, the 
record contains evidence that one of the par ticipants, Kookmin Bank, was required to lend 
directly to 'troubled corporate borrowers'. Speci fically, in a statemen t to the Securities and 
Exchange Commission of the United States, Kookmin stated:  
 
 'The Korean government has promoted, and, as a matter of policy, may continue to promote 
lending to certain types of borrowers. It generally has done this by requesting banks to 
participate in remedial programs for troubled bo rrowers (such as Hynix) and by identifying 
sectors of the economy it wishes to promote and making low interest loans available to 
banks and financial institutions who lend to borrowers in these sectors . The government has 
in this manner promoted low-income mortgage  lending and lending to technology companies. 
We expect that all loans made pursuant to  government policies will be reviewed in 
accordance with our credit review policies. However, government policies may influence us 
to lend to certain sectors or in a manner in wh ich we otherwise would not in the absence of 
government policy .'
16  
 
 It is clear that Kookmin refers to Hynix in mentioning 'troubled borrowers', because the 
bank's 2001 annual report lists Hynix as the si ngle largest financially troubled borrower.17 
Further, Kookmin, as a GOK-inv ested enterprise, was subject to  audit and inspection by the 
GOK Board of Audit and Inspection and as such  was under pressure to comply with GOK 
policy. 
 
                                                      
14 Panel report paragraph 7.184. See also footnote 171, where the Panel states that the examination of 
other participants is important, but that 'we emphasise that we do not wish to imply that it is necessarily the end-
point of such an analysis, as it will need to be determined whether the behaviour of these market players is so 
distorted by the government's intervention that they can no longer serve as the benchmark against which to measure the alleged government distortion'. 
15 Definitive Regulation, recital 19. 
16 Kookmin Bank Prospectus, Offering of American Depositary Shares (18 June 2002) (attachment 67 
to Micron Technology Italia's 14 May 2003 submission on the provisional Regulation) (emphasis added). 
17 Kookmin Bank, Annual Report (2001), page 58.    WT/DS299/9 
 Page 7 
 
 
  (20) Other participants in the syndicated loan  were also under pressure from the GOK to assist 
Hynix. In this respect, recital 55 of the de finitive Regulation provides extensive information 
regarding the extent to which the GOK put pr essure on Korea First Bank (KFB) to provide 
ongoing financing to Hynix. In a high-level ec onomic ministerial meeting in November 2000 
the GOK took steps to 'alleviate Hynix's cash crunch' and waived statutory credit limits for 
KFB, KEB and KDB. The Panel did not examine the evidence in relati on to KFB, because the 
Commission concluded its involvement to be neg ligible. However, given that the Panel found 
that the same GOK tactics employed in relati on to KEB amounted to direction and that the 
GOK owns 49 % of KFB, it is reasonable to conclude that the GOK was in a position to and did exert influence over KFB in relation to its d ecision to participate in the syndicated loan. 
KDB is a public body and KEB was found by the Panel to have been directed by the GOK. 
The participation of these banks in the syndicat ed loan is thus not a reliable commercial 
benchmark. Other banks that were part of the syndicated loan were also subject to similar 
pressure from the GOK. The GOK put very direct pressure on both Shinhan and KorAm banks regarding the extension of the export cred it arrangements, which was made at the same 
time as the syndicated loan. These banks had conc luded that they were already overexposed 
to Hynix and reversed their earlier decision to  increase the export credit ceiling available to 
Hynix. In response, an FSS official criticised their move as 'unthinkable'.
18 The GOK held 
18,3 % of Shinhan and was its larg est shareholder, thus able to  exert considerable influence 
over the bank. It is clear that Shinhan was not  acting commercially given that it increased its 
loan loss reserves for Hynix even as it continued to assist the company and that it offered no 
legitimate credit risk analysis for assisting it.  KorAM Bank again faced GOK threats when the 
bank refused to purchase Hynix CBs, because it decided that doing so was not financially 
sound. In response to the bank's decision not to purchase the bonds, an FSS official rebuked KorAm, using language uncharacteristic of a government apparently uninvolved in credit 
decisions. The official stated : 'If KorAm does not honour the agreement, we will not forgive 
the bank'.
19 He further stated that the FSS would take stern measures against the bank, such as 
disapproving new financial instruments and subjecting the bank to a tighter audit.20 As a 
result of these threats, KorAm Bank capitulated and reversed its decision21, while at the same 
time increasing its loan loss reserves for Hynix and offering no legitimate credit analysis for 
providing such financial assistance. Of the re maining banks which participated in the 
syndicated loan, Chohung Bank, Woori Bank, the NACF, Seoul Bank, Kwangju Bank, Peace 
Bank, Kyongnam Bank and the Industrial Bank of Korea are all GOK-owned and thus their 
credit decisions are tainted by GOK policy. Th e Housing and Commercial Bank, of which the 
GOK has a 20 % share, admitted government direction in its credit decisions in a sworn statement to the US SEC.
22 Finally, although Pusan Bank had no GOK ownership, it was 
nevertheless ordered by the FSS in 1999 to fi re or replace its executives and to increase its 
paid-in capital by USD 86,2 million before the end of March 200023, to 'slash their manpower, 
the number of branches and organisations, while disposing of ailing subsidiaries'24 and, in 
2000, the FSS sanctioned its former and current officials for mismanagement.25 Given this 
degree of GOK control over Pusan Bank, the bank' s decision to participate in the syndicated 
loan cannot be considered to be a safe commercial benchmark.  
                                                      
18 'Banks Under Fire for Reducing Export Credit Ceilings for HEI', Korea Herald, 27 January 2001. 
19 'KorAm Reluctantly Continues Financial Support for Hynix', Korea Times, 21 June 2001. 
20 See footnote 1. 
21 See 'Koran Bks Complete Purchase of KRW1T Hynix Conn Bond,' Dow Jones International News, 
20 June 2001 ('KorAm Bank's reversal of its board's decision comes after the Financial Supervisory Service 
warned of a possible sanction for KorAm for threatening to break the earlier rescue pact for Hynix.'). 
22 Kookmin/H&CB Prospectus, 10 September 2001 (Micron Italia post hearing submission, 
14 February 2003 at Exhibit 9). 
23 'Pusan, Kyongnam Banks Receive Conditional Appr oval from FSS', Korea Herald 18 January 1999. 
24 See footnote 1. 
25 'Officials of NFLC, Pusan Bank Punished for Mismanagement', Korea He rald, 29 April 2000. WT/DS299/9 
Page 8  
 
   
(21) Third, it would clearly not be appropriate to  use Citibank Seoul as a benchmark to determine 
the commercial reasonableness of participating in  the syndicated loan, for the reasons set 
forth in recitals 130 to 133 of the definitive Regulation. First, Citibank Seoul failed to 
cooperate in this investigation, thus forc ing the Commission to rely on facts available 
regarding the participation of Citibank Seoul. Second, the evidence on the record discussed in 
recital 133 of the definitive Regulation reflect s an unusually close relationship between the 
GOK and Citibank that calls into question the im partiality of Citibank in  lending to Hynix. 
Third, Citibank itself was a financial advisor to Hynix regarding its restructuring and thus had 
an inherent conflict with respect to participation in new lending to Hynix.
26 It had not given 
financing to Hynix prior to becoming Hynix's financial advisor. Fourth, the Panel itself 
recognised that Citibank cannot serve as a basis for determining whether any of the loans to 
Hynix were made on the basis of commercial considerations.27  
 (22) Finally, it is important to note that Hynix defaulted on its interest payments on the syndicated 
loan almost as soon as the loan was given. As noted in recital 87 of the definitive Regulation, 
Hynix had not been servicing the syndicated  loan that it received in January 2001. 
 (23) Based on the foregoing, it may be concluded that none of the other seven participants in the 
syndicated loan can serve as an appropria te benchmark for measuring the commercial 
reasonableness or the amount of benefit to Hynix from the portions of the loan provided by 
KEB and KDB. 
 (24) On this basis, the participation of KE B and KDB in the syndicated loan may still be 
considered to be a countervailable subsidy that  provides a benefit to Hynix. However, as set 
out in recital 37 of the definitive Regulation,  no subsidy amount has been countervailed under 
the syndicated loan in order to avoid double-counting, as the syndicated loan amount was 
subsequently rolled-over into the October 20 01 measures. Thus, no amendment of the 
findings is necessary with regard to this measure.  
  1.4. Calculation of the amount of benefit 
 
(25) The Panel found, at para. 7.215 of its report, that the calculation of the amount of the benefit 
conferred by each of the financial contributions was inconsistent with Articles 1.1(b) and 14 
of the SCM Agreement. The GOK did not raise any claims challenging 'as such' provisions of the basic Regulation or the Guidelines
28 relating to the calculation of the amount of the 
benefit. Thus, the Panel report only addressed  how the EC applied these provisions and 
calculated the amount of the benefit with respect  to the measures at issue in this proceeding 
(the definitive Regulation). 
 (26) In particular, the Panel considered that the EC  acted inconsistently with  Article 1.1(b) and 14 
of the SCM Agreement by taking as a starting point  that the amount of the benefit conferred 
                                                     
 
26 Provisional Regulation, recital 87. 
27 Panel report, footnote 185:  
'While it is certainly true that Citibank, and its s ubsidiary SSB, are not government owned at all, we 
consider that the EC sufficiently demonstrated that the close relationship with the government and the specific 
role as financial advisor to Hynix throughout the restructuring make Citibank particularly inapt to serve as an 
appropriate market benchmark for assessing whether the government's financial contribution was in line with the normal market conditions, or whether it, on the contrary, conferred a benefit to Hynix. This is especially so 
given the very small participation in Hynix by Citibank, whose share of the total Hynix loans in October 2001 
was 1,3 %. (Preliminary Deterimantion, paragraph 93).' 
28 Guidelines for the calculation of the amount of subsidy in coun tervailing duty inves tigations (Official 
Journal of the European Communities C 394, 17.12.1998, p. 6) (the Guidelines).  WT/DS299/9 
 Page 9 
 
 
  by each of the financial contributions, which were  generally in the form of loans, guarantees 
or equity, was to be calculated as if those fina ncial contributions had been grants, irrespective 
of their terms and conditions. The Panel reasone d that the calculation of the amount of the 
benefit should be based on the benefit to the reci pient, not the cost to the provider. It further 
reasoned that the provision in this case of funds to Hynix in the form of loans, guarantees and 
equity may have been of less benefit to Hynix th an if the funds had been provided in the form 
of grants. In particular, the Panel reasoned th at the funds would appear as debt in Hynix's 
balance sheet or would have given rise to the dilution of the ownership claims of existing 
shareholders in Hynix.29  
 
(27) The Panel considered that, as a matter of WT O law, the correct starting point for the EC in 
this case must be the search for an alternativ e benchmark as a base for the calculation of the 
amount of benefit. The Panel particularly re ferred, at para. 7.213 of its report, to 'a 
comparable commercial loan which the firm  could actually obtain on the market' 
(Article 14(b) SCM Agreement) and 'a comp arable commercial loan absent the government 
guarantee' (Article 14(a) SCM Agreement). The Panel also referred, by way of example, to 
so-called 'junk bonds' or 'vulture funds'.30 
 (28) The Panel observed that there may be circ umstances in which there is an absence of any 
comparable benchmark, and that the inv estigating authority was and is entitled to 
considerable leeway in adopting a reasonabl e approach to calculating the amount of the 
benefit to Hynix.
31 
 (29) In the light of the Panel's findings, for each of the relevant financia l contributions in the 
measure at issue, the Commission has re-examined all of the relevant facts and evidence on the record, taking into account all of the submissi ons of interested parties, specifically with 
respect to possible alternative benchmarks, in cluding 'junk bonds' and 'vulture funds', and, for 
each relevant financial contribution, redeterm ined the amount of the benefit to Hynix. 
 (30) The Commission has not re-examined or made  any redeterminations with respect to any 
substantive or procedural matters  confirmed by the Panel report or not found by the Panel to 
be inconsistent with the SCM Agreement, in cluding, but not limited to: Hynix's financial 
situation or worth, conditions in the DRAM ma rket, conditions in the financial markets and 
the use of facts available. The Commission has li mited itself to the specific issue that is the 
subject of the Panel's findings: the av ailability of alternative benchmarks. 
 (31) In making this redetermination, the Commiss ion has based its calculation of subsidy on a 
'benefit to the recipient' and not on a 'cost to the government' standard, as is required by 
Article 6 of the basic Regulation, consiste nt with the Panel's reasoning, with the 
determinations in the defin itive Regulation and with the Commission's established practice.
32 
In this regard, the Commission notes that one  of the key features of the SCM Agreement 
(Article 14) following the Uruguay Round was the confirmation that the 'benefit to the recipient' standard would normally prevail ove r the 'cost to the government' standard. The 
Commission further notes that the former will ge nerally lead to a higher amount of subsidy 
than the latter, because it requires a comparison with commercial, rather than governmental, 
funding. Consequently, the Commission notes that the 'cost to the government' approach 
                                                     
 
29 Panel report, paragraphs 7.211 and 7.212. 
30 Panel report, footnote 186. 
31 Panel report, paragraph 7.213. 
32 The Panel refers to the cost to the 'provider of the financial contribution', that is, the Government of 
Korea and the private banks which it directs. WT/DS299/9 
Page 10  
 
  would not generally be expected to lead to a higher amount of subsidy than the 'benefit to the 
recipient' approach.  
 (32) Thus, consistent with the Panel's reas oning, the Commission has examined the financial 
contributions 'from the perspective of the reci pient'. The Commission has done this by means 
of an objective examination of the informati on on the record of the case. The Commission has 
not enquired into what might have been the s ubjective state of mind of one or more Hynix 
executives at the time. Rather, it has enquired into what, objectively, the amount of the benefit would have been for a company in exactly Hy nix's situation at the time. Calculating the 
amount of the benefit from the perspective of the recipient does not entail switching from an 
objective to a subjective basis of enquiry. 
  1.5. KEIC guarantee for export credits (D/A extension) in the amount of USD 600 million 
 (33) The Panel summarised the facts concerning the KEIC guarantee in the following terms:  
 
 '7.85 The second action which was found to be a subsidy was the extension of a guarantee 
by the Korea Export Insurance Corporation (KEIC)  which is the official export credit agency 
of Korea. The KEIC provides export insurance and guarantees to manage the risk associated 
with overseas transactions. In January 2001, 14 Hynix creditor banks increased the ceiling of 
the export credit facility for D/A's (documents  against acceptance) provided to Hynix from 
USD 800 million to USD 1,4 billion, an increase of USD 600 million, The KEIC granted the 
short-term export credit insurance for the extended D/A limit as regards the transaction 
between Hynix and its overseas subsidiaries. In other words, Hynix collects the foreseen payment for the export transaction from the banks  concerned, which hold the D/A documents. 
The affiliated importer in the country of des tination then makes the payments for the goods 
concerned directly to the banks against th e D/A. Hynix pays KEIC a premium for the 
guarantee and pays interest to the banks c oncerned for the D/A amounts withdrawn until the 
importer makes the final payment. The KEIC in surance covers the amounts due to the banks 
which cannot be collected due to the bankruptcy  of either the exporter or the importer.'
33 
 (34) The Panel found that the EC reached a reasona ble and reasoned conclusion on the basis of the 
record before it that the KEIC Guarantee conferred a benefit to Hynix.
34 In doing so, it 
recalled that the KEIC itself was hesitant to pr ovide the guarantee on Hynix's debt and needed 
its own guarantee from the GOK.35 However, as regards the amount of the benefit, the Panel 
report indicates that the EC should, as a matter of WTO law, re-examine the question of the 
availability of alternative benchmarks  for calculating the benefit to Hynix.36  
 
(35) As the Panel observed, the question of be nefit in the case of a government guarantee can be 
examined from more than one angle.37 
 (36) One reasonable method of enquiring into the amount of benefit from such a measure might be 
to compare the guarantee provided by the govern ment with a comparable guarantee provided 
by the market.
38  
 
                                                      
33 Panel report, paragraph 7.85. 
34 Panel report, paragraphs 7.189 to 7.192. 
35 Panel report, paragraph 7.189. 
36 Panel report, paragraph 7.213. 
37 Panel report, paragraph 7.189. 
38 Panel report, paragraph 7.189.  WT/DS299/9 
 Page 11 
 
 
  (37) A second reasonable method is indicated by Article 6(b) of the basic Regulation (which 
generally corresponds to Article 14(b) of the SCM Agreement), which refers to government 
loans; and Article 6(c) of the basic Regulati on (which generally corresponds to Article 14(c) 
of the SCM Agreement), which refers to a loan guarantee by a government.39 In this case, the 
'loan guaranteed by the government' is the revol ving amount of debt outstanding at any time 
owed by the Hynix group, via its affiliated importers in vari ous countries of export, to the 
banks, in respect of export transactions where payment has yet to be made, but funds have 
already been advanced by the banks to Hynix.  The financial contribution under consideration 
related to the extension of the facility by USD 600 million. However, the facility itself had an 
overall ceiling of USD 1,4 billion. 
 
(38) The Commission has re-examined the extensiv e record in this case and considered whether 
there is any relevant benchmark against which the amount of the benefit could be calculated. 
First, the Commission considered whether Hynix had received new loans at the time that the 
USD 600 million increase had been granted. The record demonstrates, however, that no new 
commercially comparable lending had been provided. Second, the Commission looked for 
verified evidence regarding the cost and term s of a comparable commercial guarantee or a 
'comparable commercial loan absent the government  guarantee' that Hynix or another firm in 
a situation comparable to Hynix concluded at  the relevant time. A comparable commercial 
loan would ideally be one of approximately th e same size, would related to the same or a 
similar sector of economic activity, would involve a comparable type of activity, such as 
export credit insurance, and would have been c oncluded at approximately the same time. It 
could not involve any government guarantee, expr ess or implied, and would need to involve a 
firm in a comparable financial situation to that of Hynix. 
 (39) Having conducted this re-e xamination, the Commission has determined that there is no 
reliable information on the record regardi ng these matters. The Commission has not found 
any such benchmark as regards Hynix itself. The loans provided to Hynix were generally either provided by the GOK or by banks that we re entrusted and directed by the GOK, and the 
rate on the syndicated loan would also be an in appropriate benchmark for the reasons stated in 
recitals 17 to 20 above. Lending fro m Citibank Seoul is also not an appropriate benchmark for 
the reasons stated in recital 21 above. Citibank' s participation was insu fficiently significant, 
was influenced by the participation of othe r lenders and the GOK and was distorted by both 
its interest, together with SSB, as Hynix's fina ncial advisor and its long- term relationship with 
the GOK. In any event, Citibank did not cooperate in the investigation.  
 (40) Given Hynix's financial condition, there are no Hynix-specific benchmarks that can be used 
and there is no data on the record regarding loans to companies in a similar financial 
condition to Hynix. Moreover, the available info rmation indicates that Hynix did not obtain, 
and would not have been able to obtai n, the relevant funds in the market.
40 The KEIC export 
credit guarantee programme and the KDB debent ure programme were in effect throughout 
2001. During this period, Hynix was, by all meas ures, uncreditworthy. Hynix's already dismal 
financial condition worsened markedly in 2000, when the company suffered a net loss of over 
KRW 2 trillion. At year-end 2000, Hynix's total indebtedness was KRW 8 trillion, and 
Hynix's current ratio, which measures the degree to which a firm's current assets cover current 
liabilities, was 0,33.41 Hynix's net profit margin fell from 2,08 % in 1999 to minus 24,03 % in 
                                                      
39 Panel report, paragraph 7.189. 
40 Definitive Regulation, recitals 87 and 101 to 112. 
41 The 'target ratio' for healthy firms is 2 or better, and a ratio below 1 'signals a firm in extreme 
financial distress.' Expert report of Anthony Saunders, p. 12. The Commission notes that although Hynix's 
current ratio improved somewhat to 0,65 in 2001, this improvement was solely attributable to the October 2001 WT/DS299/9 
Page 12  
 
  2000 (when the DRAM industry as a whole performed well) and minus 93,83 % in 2001.
42 
Clearly, during 2000 and 2001, Hynix was unable to generate adequate cash flow to cover its 
existing debt, much less new debt.  
 (41) Market analysts agreed that Hynix was not creditworthy during this period. Hynix's Standard 
& Poor's rating was B- in March 2001, CCC+ in August 2001 and 'selective default' in 
October 2001. In January 2001, UBS Warburg explained that Hynix's 'debt refinancing 
agreement with KDB … merely puts off the evil day but does not solve (Hynix's) core 
problem, that it is not profitable and is not payi ng off debt at a sufficiently fast rate from 
internal cash flow or asset disposals'.
43 UBS Warburg subsequently stated that Hynix's lack of 
product diversity was a concern and that Hynix's excessive focus on commodity DRAMs 
would contribute to its 'deteriorating funda mentals' throughout the first half of 2001.44 
Similarly, in February 2001, Deutsche Ba nk posited the cash flow problem bluntly: 'We 
believe the most critical concern for (Hynix) is  its ongoing cash flow concerns. In our view, it 
is unlikely that the Korean Government woul d be willing to give up on the company yet … . 
We believe (Hynix's) financial crisis will continue to carry a heavy burden on its ability to 
recover, as the DRAM sector is perhaps the most capital-intensive sector within semiconductors, with a constant requi rement to upgrade technology processes'.
45 
 (42) In February 2001, in an article in the Korea Herald
46, another market expert stated that: 'Given 
the fact that credit risk is still pronounced and haunting investors, I don't think fluent capital 
will flow into corporate bonds rated below BBB+'. This coincides with the early period of the 
KEIC Guarantee and KDB Debenture Programme. The article goes on to point out the yield 
difference between investment grade bonds and junk bonds, concluding that 'this indicates that investors continue to shun low-grade corporate bonds, expanding the spread between high-credited bonds and the so- called junk bonds to their widest margin'. A press report in 
June 2001 stated that 'Investors have started g azing down the Asian credit curve, but they still 
lack the nerve to eye corporates with ratings below the bottom rung of investment grade at 
BBB-minus. Only companies with strong cash flows, ability to service debt and growth prospects are likely to make them look.'
47 Another report stated that 'Especially in the latter 
half of last year, it was nearly impossible for a company to issue junk bonds based on its own credit and the junk bonds market existed th rough primary collateralised bond obligations, 
collateral loan obligations and a govern ment-initiated bond-refinancing plan.'
48  
 (43) Thus, the Commission confirms its original finding that Hynix fell short of the investment 
grade required by investors for the junk bond market; and that, during the IP, the type of capital markets referred to by the Panel were inaccessible to companies with prospects as 
weak as those of Hynix. Accordingly, such in formation as is on the record does not permit the 
establishment of a reliable benchmark with respect to such markets. 
 
                                                                                                                                                                    
 
restructuring, which enabled Hynix to drastically reduce the current portion of its long-term debt and, thus, its 
current liabilities. See footnote 2. 
42 Saunders Report, p. 18. 
43 'Korea Daily Comment: Hyundai Electronics,' UBS Warburg, 4 January 2001, p. 2 (Micron Italia, 14 
February 2003, post-hearing submission, Exhibit 64). 
44 'Hyundai Electronics,' UBS Warburg, 8 January 2001, p. 7 (Micron Italia, 14 February 2003, post-
hearing submission, Exhibit 19). 
45 'Hyundai Electronics Inc. Digging a Deeper Hole,' Deutsche Bank, 23 February 2001, p. 8 (Micron 
Italia, 14 February 2003, post-hearing submission, Exhibit 66). 
46 The Korea Herald, 15 February 2001. 
47 Reuters News, 21 June 2001. 
48 The Korea Herald, 13 June 2001.  WT/DS299/9 
 Page 13 
 
 
  (44) The Commission would therefore be in a pos ition to reasonably and objectively conclude that 
no alternative commercial benchmark would actua lly be available in this case. Accordingly, 
in these circumstances, the Commission finds that the amount of the benefit to Hynix could not exceed the full amount of the loan, plus compound interest and the costs of recovery or attempted recovery in the event of default. Because there is also no reliable information on 
the record regarding these latter additional cost s, the Commission has confined itself to the 
full amount of the loan. The Commission believes that this conclusion is fully supported by 
its (unchanged) determinations regarding the fi nancial situation and worth of Hynix, and the 
situation in the DRAMs market and the financial markets, and that it is consistent with the 
basic Regulation and the Guidelines.  
 
(45) However, mindful of the WTO Panel's reas oning, the Commission has, exceptionally and for 
this reason only, also considered whether or not, even absent any relevant benchmarks, there 
is anything that might serve as the basis for a proxy benchmark, adjusted where necessary to 
take account of the particular circumstances of th is case. Such a proxy could, for example, be 
based on a commercial interest rate, with the add ition of a risk premium, reflecting the default 
rates of companies exhibiting comparable risk. Such a calculation would take into account the term of the loan, a benchmark interest rate that would be paid by a creditworthy company, the probability of default by an uncreditwothy comp any within a specified period of time and the 
probability of default by a creditworthy compan y within the same specified period of time. 
This approach is premised on the commonly understood notion that when a lender makes a 
loan to a company that is cons idered to be uncreditworthy, the lender faces higher probability 
that the borrower will default on repayment of the loan. As a consequence of this higher 
default probability, the lender will charge a hi gher rate of interest, and one that is in 
proportion to the increased probability of defa ult. Essentially, this would entail taking an 
interest rate available in the market to cred itworthy borrowers and adding a 'risk premium' to 
it in order to account for the increased risk associ ated with lending to a company that is not 
creditworthy. 
 (46) For purposes of implementing the Panel's re port in this case, the Commission has used the 
following formula to calculate an appropriate  uncreditworthy benchm ark interest rate:  
 
 ib= [(1-qn)(1+if)n/(1-pn)]1/n -1  
  Where:   n = the term of the loan 
 
 ib = the benchmark interest rate  for an uncreditworthy borrower  
  if = the long-term interest rate that would be paid by a creditworthy company   pn = the probability of default by an uncreditworthy company within n years  
 
 qn = the probability of default by a creditworthy company within n years.  (47) For the purposes of this implementation,  the Commission has used as the creditworthy (or 
commercial) rate for USD loan s the average USD lending interest rate for 2001, which, 
according to the IMF International Financial Statistics Service, was 6,922 %. Although the 
credit received by Hynix by virtue of the guarantee was short term, the measure under consideration, i.e., the guarantee itself, was in fact a form of rolling credit. The Commission used data from Moody's Investor Service to obtain default rates for creditworthy and uncreditworthy companies. For the uncreditwor thy rate, the Commission used the likelihood WT/DS299/9 
Page 14  
 
  of default for companies with a credit rating of  Caa to C during the term of the relevant 
measure (i.e., one year for the KEIC guarantee) . Similarly, the Commission used the default 
rate for a creditworthy company during the term of the measure in question, calculated based 
on a cumulation of data for investment grad e companies. The rate of default of an 
uncreditworthy company in 2001 within one y ear was, according to Moody's, 34,34 %. The 
rate of default of a creditworthy company in 2001 within one year was 0,13 %. This led to 
total interest rate of 62,70 %. In contrast, the interest rate payable by Hynix on the USD loans in question was 8,33 %, i.e., a total interest differential of 54,37 %. 
 (48) The Commission recalls that, normally, having dete rmined that the benefit is equivalent to the 
full amount of the financial contribution (in this case, a loan or loan guarantee), the 
Commission treats it as a 'non-recurring' subs idy and allocates it over a period of time 
corresponding to the normal depreciation of fi xed assets in the industry concerned. The 
Commission uses a straight-line allocation and does not increase the total amount of benefit by using the 'time value of money' method; it merely adds interest to each annual allocated 
portion. In this case, the allocation period was five years and no additional costs were added 
to the full amount of the loan as explained in recital 44 above, which means that 20 % of the 
financial contribution was allocated to each year.  
 (49) Had the Commission used an interest rate comp arison as described in recitals 45 to 47 above, 
the benefit (i.e., the difference between the be nchmark and the actual interest rate) would 
have been considered as a recurring subsidy. The amount of subsidy allocated to each year 
would have been the interest rate differentia l multiplied by the fact amount of the loan. 
Therefore, depending on the size of the interest  rate differential, the terms and conditions of 
the loan, and the length of the depreciation period, the annual benefit obtained by making an interest rate comparison may be bigger or smaller than that which results from the application 
of the Commission's original approach.  
 (50) In this case, the Commission's original approach  would result in an allocated annual benefit of 
20 % of the financial contribution. Depending on th e exact terms of the loan, i.e., whether the 
beneficiary repays interest and capital or in terest only each year, this amount would be 
reached with an interest rate differential of  no less than 20 % and no more than about 35 % 
per year. The actual interest differential in th is case is 54,37 %. This means that a strict 
application of this method would result in a much higher rate of countervailable subsidy 
allocated on turnover, in fact 12,8 % instead of the 5,1 % originally calculated by the Commission.  
 
(51) Consequently, the Commission considers that its original approach was and is reasonable in 
this case. Indeed, it is only in extreme cases that the Commission will determine the amount 
of the benefit to be equivalent to the full amount  of a loan (i.e., when there is no realistic 
possibility of repayment) and in such circumstanc es it is usual that the benchmark interest rate 
will be extremely high. Therefore, the interest rate differential will of ten give a higher amount 
of benefit than a simple allocation of the face amount of the loan over time. In these 
circumstances, the Commission has used the more  conservative of the two options in order to 
be sure that it has not exaggerated the amount of the subsidy, and will treat the face amount of 
the loan as the basis for a cap on the maximum amount of the benefit.  
 (52) On the above basis, the amount of benefit conferred by the KEIC guarantee ad valorem of 
export turnover was 5,1 %.  
  WT/DS299/9 
 Page 15 
 
 
   1.6. KDB debenture programme 
 
(53) The Panel summarised the facts concerning the KDB debenture programme in the following 
terms:  
 
 '7.88 A third programme found to constitute a subsidy by Korea was the KDB debenture 
programme to which Hynix was admitted on 4 January 2001. This was a programme which 
essentially lasted for one year (2001) and was set up by the government in response to financial instability in Korea caused by the fact that a large amount of bonds issued by a few 
companies (including Hynix) were due to ma ture simultaneously. Under this programme, 
maturing debt was rolled-over and re-packaged fo r investors. A participating company repaid 
on its own 20 % of its corporate bonds falling due and the KDB assumed the remaining 80 %. This constituted the first phase of the progra mme. Of the 80 % originally assumed by the 
KDB, 20 % of the bonds was then sold to the co mpany's creditor banks in proportion to their 
debt exposure to the company; 70 % was re-p ackaged for sale to inv estors as collateralised 
bond obligations (CBOs) and/or collateralised loan obligations (CLOs), guaranteed by the 
Korea Credit Guarantee Fund (KCGF) (*); and the KDB retained the remaining 10 %. The 
participating company had to repurchase at least 3 % of any CBOs and 5 % of any CLOs (**).  
  7.89 We note that companies were placed in the programme upon nomination by the main 
creditor bank, and needed the approval by th e Creditors Financial Institutions Council 
(CFIC), based on an assessment of the company's financial future. The CFIC consisted of 
representatives of the KCGF, the KDB and 17 other creditor banks (***). The CFIC ultimately decided on participation in the progr amme. If banks holding 75 % of the loans of 
the company agreed to the participation of  the company in the programme, the CFIC 
considered the decision unanimous. To be placed in the programme, companies had to be able 
to repay 20 % of their maturing bonds; normalise business operations through a rescue plan; 
have credit ratings below A but higher than BB; and agree to any change in majority 
shareholdings requested by their creditor banks, or  to the replacement of management in case 
of insolvency. Hynix was admitted to the pr ogramme on 4 January 2001 with a credit rating 
of BBB-. In total six companies were admitted, four of which, including Hynix, belonged to 
the Hyundai group (****). The EC found that the bond purchase by the KDB as part of this 
programme constituted a financia l contribution by the government  which conferred a benefit 
on Hynix.  
 
 ___________ 
  (*) The CBO's and CLO's are asset-backed se curities that are sold to investment 
trusts.  
  (**) Preliminary Determina tion, paragraphs 47 and 48.  
  (***) Preliminary Determ ination, paragraph 49.  
  (****) Preliminary Determination, paragr aphs 49 to 52. The EC states that the budget 
for the programme was KRW 6,2 trillion, of which KRW 2,9 trillion was earmarked for Hynix, eventual expenditure being KRW 2,9 trillion, of which KRW 1,2 trillion (41 %) was 
for Hynix and 38 % was used for the other three Hyundai companies.
49' 
 (54) The Panel found that the EC reached a reasona ble and reasoned conclusion on the basis of the 
record before it that the KDB debenture progr amme conferred a benefit on Hynix. In doing 
so, it recalled that the KDB debenture programme was itself set up and effectively guaranteed 
by the GOK.
50 However, as regards the amount of the benefit, the Panel report indicates that 
                                                      
49 Panel report, paragraphs 7.88 and 7.89. 
50 Panel report, paragraphs 7.194 to 7.199. WT/DS299/9 
Page 16  
 
  the Commission should, as a matter of WTO law,  re-examine the question of the availability 
of alternative benchmarks.  
 (55) As the Panel observed, the question of benefit,  at least in the case of a government guarantee, 
can be examined from more than one angle
51, and in applying the guidelines contained in 
Article 14 of the SCM Agreement, an investig ating authority is entitled to considerable 
leeway52. The KDB debenture programme, for example, exhibits some of the characteristics 
of a guarantee, insofar as the entire measure wa s set up, sponsored and effectively guaranteed 
by the GOK or a GOK public body. Thus, one reasonable method of enquiring into the amount of benefit of such a measure might be to compare the guarantee provided by the 
government with a comparable guarantee provided by the market. The KDB debenture 
programme might also be considered in the light of Article 6(b) of the basic Regulation (which generally corresponds to Article 14(b)  of the SCM Agreement), which refers to 
government loans, and Article 6(c) of the b asic Regulation (which generally corresponds to 
Article 14(c) of the SCM Agreement), which refe rs to a loan guarantee by a government.  
 
(56) The Commission has re-examined the record to consider whether there is any relevant 
benchmark against which the amount of the bene fit could be calculated. It has looked for 
verified evidence about a comparable governme nt guarantee or 'a comparable commercial 
loan' or 'a comparable commercial loan ab sent the government guarantee' that Hynix or 
another firm in a situation comparable to Hyni x concluded at the relevant time. A comparable 
commercial loan would ideally be  one of approximately the same size, would relate to the 
same or a similar sector of economic activity, would involve a comparable type of activity, 
and would have been concluded at approximate ly the same time. It could not involve any 
government guarantee, express or implied, and would need to involve a firm in a comparable financial situation to that of Hynix.  
 
(57) Having conducted this re-e xamination, the Commission has determined that a commercial 
benchmark meeting these criteria was not availabl e in this case. Hynix itself did not sell any 
corporate bonds into the commercial market at the time it participated in the KDB debenture 
programme. In fact, one of the threshold crite ria for participation in the KDB debenture 
programme was that the company in question could not obtain loans or sell bonds on the 
normal commercial market. Moreover, as noted in recital 53 of the definitive Regulation, 
Hynix provided no evidence on the record that it tried to access foreign debt markets during this period. In addition, the fact that the in ternational ratings agency Standard and Poor's 
downgraded Hynix's debt to a speculative rati ng of 'B-' makes it unlikely that Hynix would 
have been able to access foreign bond or loan ma rkets, even if it had tried to do so. Even the 
Korean government itself noted in January 2001 that Hynix was 'in a state of technical 
insolvency.'
53 
 (58) Moreover, other lending to Hynix during the period that the KDB rolled over Hynix's 
maturing bonds cannot serve as a basis for measuri ng whether a benefit to Hynix exists. For 
the reasons noted in recitals 17 to 22 above, the loans provided as part of the syndicated loan 
cannot serve as an appropriate basis of comp arison. The lending made pursuant to the 
syndicated loan was so distorted by the governme nt's intervention in that loan that it cannot 
serve as a reasonable commercial benchmark by  which to measure whether a benefit has 
                                                     
 
51 Panel report, paragraph 7.189. 
52 Panel report, paragraph 7.213. 
53 See 'Direct Intervention by the Government in Supporting Hynix,' Korea Economic Daily, 28 August 
2001 (reporting on the discovery by the Korean Natio nal Assembly of correspond ence between the Korean 
Economic Ministers and the KEIC directing the KEIC to  provide assistance to Hyni x) (Attachment 1 to Micron 
Italia's 14 May 2003 submission on the provisional Regulation).  WT/DS299/9 
 Page 17 
 
 
  occurred or the amount of that benefit. In this regard, the Commission recalls that the 
syndicated loan itself was made possible by the GOK waiving the lending limits for three key 
participants in that loan. Without the participa tion of these three banks in the syndicate, it is 
unclear whether the loan would have been able to  go forward at all, given that it would have 
been significantly undersubscribed.54  
 
(59) Further, the convertible bonds purchased  by private bodies as part of the May 2001 
restructuring programme cannot serve as a benchmark because, although the evidence on record did not rise to the level sufficient for a fi nding of entrustment or direction, it indicates 
a level of government involvement that makes the participation by private creditors an 
inappropriate measure of the commercial reasonableness of the CB purchases: the creditor 
banks themselves acknowledged in the 7 May 2 001 creditor financial institution resolution 
that Hynix was unable to service its debts in May 2001
55 and the GOK was clearly heavily 
involved in overseeing the completion of the May 2001 CB offering, going as far as having a high level FSS official attend the March 2001 meeting of the creditor council.
56 Further, a 
comparable commercial loan which could serve as a benchmark is one which is concluded at 
approximately the same period of time; the CB offering took place five months after the KDB debenture programme, when both Hynix's financ ial situation and the state of the DRAMs 
market were markedly different.  
 (60) As already indicated above
57, no other comparable commercial benchmark was actually 
available in the market. On the contrary, the available information indicates Hynix would not 
have obtained the relevant funds in the market. 
 (61) The Commission would therefore be in a pos ition to reasonably and objectively conclude that 
no alternative commercial benchmark would actua lly be available in this case. Accordingly, 
under these circumstances, the Commission finds that the amount of the benefit to Hynix 
could not exceed the full amount of the funds obtained by Hynix as a result of the operation of the KDB debenture programme, plus compound  interest and the costs of recovery or 
attempted recovery in the event of default. Because there is also no reliable information on 
the record regarding these latter additional cost s, the Commission has confined itself to the 
full amount of the funds. The Commission believes that this conclusion is fully supported by 
its (unchanged) determinations regarding the fi nancial situation and worth of Hynix, and the 
situation in the DRAMs market and the financial markets, and that it is consistent with the 
basic Regulation and the Guidelines.  
 (62) However, mindful of the WTO Panel's re asoning, the Commission has also considered 
whether or not, even without the availabilit y of any appropriate commercial benchmarks, 
there is anything that might serve as the b asis for a proxy benchmark, adjusted where 
necessary to take account of the particular circ umstances of this case. Such a proxy could, for 
example, be calculated along the lines already indicated above in recitals 45 and 46 with 
respect to the KEIC Guarantee.  
 
(63) For the purposes of this calculation, and as suggested by GOK, the Commission has used as 
the creditworthy rate for KRW loans the IMF In ternational Financial St atistics rate on short-
                                                     
 
54 As stated in recital 53 of the definitive Regulation, Hynix had originally requested a syndicated loan 
of KRW 1 trillion, but was only able to raise KRW 800  billion. If the three ba nks which accounted for KRW 
300 billion of the KRW 800 billion total were unable to participate without the GOK's specific permission, it is 
highly speculative that the remaining banks would have gone forward with the loan.   
55 Panel report, paragraph 7.104. 
56 Panel report, paragraph 7.97. 
57 Recitals 17 to 22, 56 and 57. WT/DS299/9 
Page 18  
 
  term KRW denominated-lending, which was 7,7 %. The default rates for both creditworthy 
and uncreditworthy companies for the term of  the measure in question were taken from 
Moody's Investor Services (0,13 % and 34,37 % resp ectively). This led to a total interest rate 
of 63,89 %. In contrast, the average interest rate payable by Hynix on the KDB debentures in question was 12,7 %, i.e., a total inte rest rate differential of 51,19 %. 
 
(64) Viewing the financial contribution as a recurring subsidy, rather than as a non-recurring 
subsidy to be allocated over time, and applying  this model to the calculation of the amount of 
the benefit in the financial contribution under consideration, would lead to an amount of 
benefit of KRW 626,9 billion, resulting in a c ountervailable subsidy allocated on turnover of 
11,8 %, instead of the 4,9 % originally cal culated by the Commission. Consequently, the 
Commission considers that its original approach  was and is reasonable in this case, as the 
interest rate differential would give a much hi gher amount of benefit than a simple allocation 
of the face amount of the loan over time. In  these circumstances, the Commission has used 
the more conservative of the two options in orde r to be sure that it has not exaggerated the 
amount of the subsidy and will treat the face am ount of the loan as the basis for a cap on the 
maximum amount of the benefit.  
 (65) Taking the amount of the funds obtained by Hynix as a result of the operation of the KDB 
debenture programme as a cap on the maximum am ount of the benefit, the Commission finds 
that the amount of benefit to Hynix in the financial contribution at issue ad valorem of 
turnover was 4,9 %. 
  1.7. October 2001 rescue package, consisting of debt-toequity swap, second roll-over of 
debt and provision of new loan of KRW 658 billion 
 
(66) The Panel summarised the f acts concerning the October 2001 r estructuring programme in the 
following terms:  
  '7.111 The fifth and final programme consider ed to constitute a subsidy was the October 
2001 restructuring programme. On 4 October 2001, a second Hynix CFIC was set up in accordance with the provisions of the Corporat e Restructuring Promotion Act (CRPA). The 
CRPA was enacted in August 2001 and its purpose wa s to facilitate corporate restructuring, 
which before was based on agreements between  creditor banks and the companies concerned. 
The CFIC consisted of 110 financial instituti ons including 17 banks and 15 investment trust 
companies. The decisions of the CFIC were  taken by a 75 % majority. The votes were 
allocated in proportion of each institution's exposur e to the total loans to Hynix. Any financial 
institution exercising its dissenter's rights by disagreeing with a CFIC resolution would be 
excluded from the CFIC permanently. In its seco nd meeting held on 31 October 2001, the 
CFIC decided on a 'second restructuring packag e' for Hynix. The following measures were 
proposed:  
  (a) provision of a new loan of KRW 1 trillion to Hynix with an interest rate of 7 %; 
 
 (b) debt-to-equity swap by provisi on of bonds convertible into shares; 
  (c) extending the maturities of existing lo ans until 31 December 2004, converting the 
maturing corporate bonds into corporate bonds with a three-year maturity and an 
interest rate of 6,5 % and adjusting the inte rest rate of the remaining loans in Korean 
currency to 6 %. 
  7.112 The financial institutions were given three options by the CFIC in the 31 October 
meeting. The first option was to agree w ith the proposals by extending new credit and  WT/DS299/9 
 Page 19 
 
 
  participating in a debt-to-equity swap (Option 1). Secondly, the banks which did not want to 
participate in the new loan were  obliged to swap 28,5 % of thei r loans into equity and waive 
the rest of the Hynix debt (Option 2). Thirdly,  the CFIC also decided that those banks which 
objected to the measures and used their dissen ter's rights would have their loans purchased 
back at the liquidation value as establishe d by Arthur Andersen, the firm that was 
commissioned to conduct a study on the financia l situation of Hynix at the time (Option 3).  
  7.113 Nevertheless, only six banks agreed to extend new credit, which amounted to KRW 
658 billion instead of the planned KRW 1 tr illion. These banks swapped a considerable 
amount of their loans into equity. These so-c alled Option 1 banks were the KEB, Woori 
Bank, Chohung Bank, KDB, NACF and Citibank (*). Eight banks refused to extend new 
loans, so they swapped approximately one-third of their loans into equity and wrote-off the 
rest as a loss. The remaining banks objected to  the restructuring and elected to receive the 
liquidation value of their loans, and had to write  the remaining debt off as a loss. The loans 
remaining with the banks of the first category were  subject to maturity extensions and interest 
rate cuts as explained above (**). The EC consid ered that the participation by the six Option 1 
banks in the October 2001 restructuring programme  constituted a financial contribution by the 
government which conferred a benefit on Hynix. The rate of subsidisation for this October 
2001 restructuring programme was calculated to be 19,4 %. 
 
 ___________ 
  (*) Preliminary Determination, paragraph 77.  The KDB did not participate in the new 
loan of KRW 658 billion. 
  (**) Preliminary Determina tion, paragraphs 69 to 71.'  
 (67) The Panel found that the EC reached a reasona ble and reasoned conclusion on the basis of the 
record before it that the October 2001 rest ructuring programme conferred a benefit on 
Hynix.
58 However, as regards the amount of the benefi t, the Panel report indicates that the EC 
should, as a matter of WTO law, re-examine th e question of the availability of alternative 
benchmarks.  
  (i) Debt-to-equity swap 
 
(68) As the Panel indicated, in approaching the question of benefit in the case of the government 
provision of equity capital and in applying th e guidelines contained in Article 14 of the 
SCM Agreement, an investigating author ity is entitled to considerable leeway.
59 The 
Commission considers that the debt-to-equity swap in the October 2001 restructuring 
programme may be considered in the light of Article 6(1) of the basic Regulation (which 
generally corresponds to Article 14(a) of the SCM Agreement), which refers to government 
provision of equity capital inconsistent with th e usual investment practice, including for the 
provision of risk capital, or private investors in the territory of the relevant Member. The Commission notes that, unlike subparagraphs (b) and (c), subparagraph (a) contains no final 
sentence providing further guidance on how the amo unt of the benefit is to be calculated.  
 
(69) The Commission has re-examined the record to consider whether there is any relevant 
benchmark against which the amount of the bene fit could be calculated. It has looked for 
verified evidence about a comparable private provi sion of equity capital that Hynix or another 
firm in a situation comparable to Hynix concluded at the relevant time. A comparable 
provision of equity ideally would be one of a pproximately the same size, would relate to the 
same or a similar sector of economic activity, would involve a comparable type of activity 
                                                     
 
58 Panel report, paragraphs 7.204 to 7.210. 
59 Panel report, paragraph 7.213.    WT/DS299/9 
Page 20  
 
  and would have been concluded at approximate ly the same time. It could not involve any 
government guarantee, express or implied, and would need to involve a firm in a comparable financial situation to that of Hynix.  
 (70) Having conducted this re-e xamination, the Commission has determined that there is no 
verified information on the record regarding these matters. The Commission has not found 
any such benchmark as regards Hynix itself. The equity provided to Hynix was generally 
either provided by the GOK or by banks that were entrusted or directed by the GOK. 
 (71) Moreover, no other comparable commercial benchmark was actually available in the market. 
On the contrary, the available information indicated Hynix would not have obtained the 
relevant funds in the market. As noted in rec ital 103 of the definitive Regulation, in October 
2001 Hynix's credit rating from Standard & Poor's  was 'SD' (selective default). Hynix went 
into default of interest payments on the sy ndicated loan in May 2001 and several creditor 
banks raised their loan-loss provisions as regards Hynix already in May 2001 and again in 
October 2001, before the measures under consid eration were put in place. The six banks 
concerned by the October 2001 measures rated Hynix internally from 'precautionary' to 
'doubtful' and the Option 2 banks involved in the debt-to-equity swap were given very little 
choice: they either took the shares or they effectively wrote off Hynix's debts completely. The GOK suggestion that the difference between the sw ap price paid and the market price should 
serve as the amount of benefit ignores the realities of Hynix's abysmal financial situation; no-
one would invest in a company with an SD rating. The conclusions set out in recitals 101 to 
112 of the definitive Regulation supporting the fi nding that no comparable equity financing 
that might serve as a benchmark was available to Hynix on the commercial market are hereby confirmed. 
 
(72) The Commission would therefore be in a pos ition to reasonably and objectively conclude that 
no alternative commercial benchmark would actua lly be available in this case. Accordingly, 
under these circumstances, the Commission finds that the amount of the benefit to Hynix 
could not exceed the full amount of the funds obtained by Hynix as a result of the operation of the debt to equity swap in the October 2001 restructuring programme. The Commission believes that this conclusion is fully supported by its (unchanged) dete rminations regarding 
the financial situation and worth of Hynix, and the situation in the DRAMs market and the 
financial markets, and that it is consistent with the basic Regulation and the Guidelines. 
 (73) However, mindful of the WTO Panel's re asoning, the Commission has also considered 
whether or not, even without any relevant be nchmarks, there is any other method by which 
the amount of the benefit might be adjusted to take into account the particular circumstances 
of this case. The Commission considers that the uncreditworthy analysis conducted with 
respect to debt cannot provide an appropriate  basis for comparison, precisely because this 
particular financial contribution is concerned with equity, whic h is a fundamentally different 
type of measure from debt.  
 
(74) The Commission has taken into considera tion the possibility that, in the particular 
circumstances of the present reassessment, the co st to the recipient of receiving the financial 
contribution should be taken into account. The Commission notes that, in order to examine 
the cost, if any, of the swap from the point of view of the recipient, the obligations imposed 
on a company when issuing new equity would have to be considered. The Commission notes 
in this respect that injections of ordinary share capital do not generally impose particular 
obligations on a company, as there is neither a fixed rate of return which the company must 
achieve nor, in fact, do any payments need to be made. However, the company has at least a 
theoretical obligation to distribute its profits or part thereof to its shareholders; the return on 
equity ratio (ROE) could provide some indica tion of the level of return the company is  WT/DS299/9 
 Page 21 
 
 
  expected to provide to its shareholders and c ould be used in the calculation of the amount of 
the benefit to Hynix. However, the ROE of Hynix for 2001 was minus 96,75 %, as calculated 
by reference to its financial statements for th e year. Therefore, on the basis of an objective 
evaluation of Hynix's financial standing at the time of the debt-toequity swap, it is unreasonable to expect that Hynix would be in a pos ition to distribute any sort of return to its 
shareholders for the relevant year. Hence, using the ROE as a benchmark, it would still be 
concluded that the entire amount of the debt-t o-equity swap is a countervailable subsidy.
    
 (75) The Commission has also examined whether th ere are costs to Hynix associated with having 
to surrender ownership shares as a result of the swap or the cost to Hynix from potential 
dilution of the share price resulting from the issuance of new shares.
60 Based on its review of 
the record evidence, the Commission does not believe  that the net benefit to Hynix of the full 
debt-to-equity swap is diminished as a result of the issuance of new shares. In this regard, the 
Commission believes it is essential to recognise the impact that the debt-to-equity swap had 
on Hynix's financial situation 
 
(76) As a threshold matter, it is key to recognise that this was not a straight equity infusion. The 
fundamental benefit to Hynix resulted from the massive amount of debt that was extinguished 
as a result of the swap, namely KRW 2,483 b illion. This effectively absolved Hynix from 
having to repay any of this principal amount and from having to pay interest. Instead, this 
massive amount of debt was replaced with equi ty shares issued to the Option 1 creditor banks. 
However, there was no real quantifiable cost to  Hynix of issuing the new shares. While the 
existing share values were diluted as a result of the issuance, this had absolutely no balance 
sheet impact on Hynix. It did not result in any cash outlays (apart from the expense associated 
with the issuance of the new shares) and did not  obligate Hynix to any sort of cash payments 
in the future, as would have been the case with debt instruments. 
 
(77) Consequently, in light of all these consider ations and since Hynix did not report any costs 
associated with the issuance of equity, the appr opriate approach to measuring the benefit from 
the debt-to-equity swap is to take the full amount of the swap. This results in an overall 
benefit to Hynix of KRW 358,2 billion and a c ountervailable subsidy allocated on turnover of 
9,6 %.  
 
 (ii) Debt roll-over and new loan  (78) The Commission considers that the debt roll-over and new loan in the October 2001 
restructuring programme may be considered in the light of Article 6(b) of the basic 
Regulation (which generally corresponds to Article 14(b) of the SCM Agreement), which 
refers to the amount which the firm would pay on a comparable commercial loan that the firm 
could actually obtain on the market.  
 (79) The Commission has re-examined the record to consider whether there is any relevant 
benchmark against which the amount of the bene fit could be calculated. It has looked for 
verified evidence about a comparable commercia l loan that Hynix or another firm in a 
situation comparable to Hynix concluded at th e relevant time. A comparable commercial loan 
ideally would be one of approximately the same size, would relate to the same or a similar 
sector of economic activity, would involve a co mparable type of activity, and would have 
been concluded at approximately the same time. It could not involve any government 
                                                     
 
60 See Panel report paragraphs 7.212 and 7.213 which discuss the Panel's opinion that the full amount 
of the debt-to-equity swap may not reflect the full amount swapped because of the obligation placed on Hynix, 
in the form of surrendering ownership shares or in dilution of the shares to existing shareholders. WT/DS299/9 
Page 22  
 
  guarantee, express or implied, and would need to  involve a firm in a comparable financial 
situation to that of Hynix. 
 (80) The bonds purchased as part of the May 2001 restructuring programme cannot serve as a 
basis for determining the commercial reasonablen ess of the new loan and the debt roll-over, 
as Hynix's financial situation deteriorated substantially between May and October 2001. 
Therefore, the two situations cannot be considered to be comparable.  
 (81) Having conducted this re-e xamination, the Commission has determined that there is no 
verified information on the record regarding these matters. The Commission has not found 
any such benchmark as regards Hynix itself. The loans provided to Hynix were generally 
either provided by the GOK or by banks that were entrusted or directed by the GOK.  
 (82) As already indicated above
61, no other comparable commercial benchmark was actually 
available in the market. On the contrary, the available information indicates Hynix could not 
have obtained the relevant funds in the market.  
 (83) The Commission would therefore be in a pos ition to reasonably and objectively conclude that 
no alternative commercial benchmark would actua lly be available in this case. Accordingly, 
under these circumstances, the Commission finds that the amount of the benefit to Hynix 
could not exceed the full amount of the funds obtained by Hynix as a result of the operation 
of the debt roll-over and new loan in th e October 2001 restructuring programme. The 
Commission believes that this conclusion is full y supported by its (unc hanged) determinations 
regarding the financial situation and worth of Hynix, and the situation in the DRAMs market 
and the financial markets, and that it is consistent with the basic Regulation and the 
Guidelines.  
 
(84) However, mindful of the WTO Panel's re asoning, the Commission has also considered 
whether or not, even in the absence of any rele vant benchmarks, there is any other method by 
which the amount of the benefit might be adju sted to take into account the particular 
circumstances of this case. In this respect, the same me thodology as the one outlined in 
recitals 45 and 46 was used to calculate th e amount of the benefit received by Hynix from 
these two measures. 
 (85) For the purposes of this calculation, the Commission has used as the creditworthy rate for 
KRW loans the average Bank of Korea interest rate on investment grade corporate bonds in 2001, which was 11,38 %. The default rates for both creditworthy and uncreditworthy 
companies for the term of the measures in question were taken from Moody's Investor 
Services. The rate of default of an uncreditw orthy company in 2001 within three years (the 
term of the new loan and of the roll-over) w as 57,97 %, whereas the rate of default of a 
creditworthy company within three years in 2001 wa s 0,94 %. This led to a total interest rate 
of 48,22 %. In contrast, the interest rate payable by Hynix on the new loan was 7 % and on the roll-over 6,5 %, i.e., an interest rate di fferential of 41,2 % and 41,7 % respectively. 
 
(86) Viewing the financial contributions as r ecurring subsidies, rather than as non-recurring 
subsidies to be allocated over time, and applying this model to the calculation of the amount of the benefit in the financial contributions unde r consideration, would lead to an amount of 
benefit of KRW 271,5 billion for the new loan and KRW 761,4 billion for the roll-over. This 
would result in countervailable subsidies allocat ed on turnover of 6,8 % for the new loan and 
19,1 % for the roll-over, compared to 3,5 % and 9,8 % respectively, as originally calculated by the Commission. Consequently, the Commission  considers that its original approach was 
                                                     
 
61 Recitals 17 to 22 and 57 to 59.  WT/DS299/9 
 Page 23 
 
 
  and is reasonable in this case, as the interest  rate differential would give a much higher 
amount of benefit than a simple allocation of the face amount of the loans over time. In these circumstances, the Commission has used the more  conservative of the two options in order to 
be sure that it has not exaggerated the amount of the subsidy and will treat the face amount of 
the loans as the basis for a cap on the maximum amount of the benefit. On the basis of these 
considerations, the Commission had determined  that the amount of the benefit to Hynix 
ad valorem of turnover is, for both measures, 13,3 %. 
 (87) It is noted that, in relation to the debt ro ll-over, contrary to recital 166 of the definitive 
Regulation, the amount of CBs purchased by Option 1 banks has not been deducted, as the 
May 2001 measures are no longer countervailed. 
  (iii) Total subsidy of October 2001 rescue package  (88) The subsidy amount thus calculated for the debt-to-equity swap, the debt roll-over and the 
new loan was considered to confer a large non -recurring benefit and was spread across a five-
year period corresponding to the normal depreciation period of assets in the DRAMs industry. The resulting amount was then allocated on Hynix' s turnover during the IP and interest based 
on the average commercial rate applicable in Korea during the IP was added. The revised amount expressed ad valorem is 22,9 %.  
 
 1.8. Total subsidy amount 
 
(89) In summary, the calculation of the total amount of the subsidy has thus been revised on the 
basis of the Panel's recommendations and is now as follows:  
 
Type of 
subsidy D/A 
extension KDB 
debenture 
programme May 2001 
CB  
purchase, 
debt 
rollover October  
2001 
rescue 
package Total 
– 5,1 % 4,9 % 0 % 22,9 % 32,9 % 
 
 2. Injury 
 
 2.1. Introduction 
 
(90) This part sets out the reassessed finding s based on the recommendation of the Panel report 
concerning the evaluation of the factor 'wages' as a relevant factor affecting the state of the Community industry within the meaning of Article 8(5) of the basic Regulation (which generally corresponds to Article 15.4 of the SCM Agreement).  
 (91) All other findings concerning injury remain as established in the original investigation and set 
out in the provisional Regulation and the definitive Regulation.  
  2.2. Wages 
 
(92) In the original investigation the EC had c onsidered and evaluated the wages factor, but found 
wages to be irrelevant to its injury dete rmination. However, the Panel found that:     
 
 'without a written record of the analytical pr ocess undertaken by the investigating authority to 
evaluate "wages", we cannot examine whether an  adequate and reasoned explanation has been WT/DS299/9 
Page 24  
 
  provided of how the facts support the injury determination made by the EC and, 
consequently, whether that determination was consistent with Article 15.4. Without that 
written record, we would be forced to embark on post hoc speculation about the thought 
process by which the investigating authority arri ved at its ultimate conclusions. We consider 
that the standard of review in Article 11 of  the DSU prevents us from embarking upon this 
exercise.'
62  
  Consequently, the Panel concluded that the EC acted inconsistently with Article 15.4 of the 
SCM Agreement in not evaluating the 'wages' factor when examining the impact of the 
subsidised imports on the state of the domestic industry.
63  
 
(93) In the light of the Panel's finding, the Commission, having again reviewed the information on 
the record concerning Community wages, both in isolation and together with the other injury 
factors set out in Article 8(5) of the basic Regulation, provides herein a written record of its evaluation of the wages factor. 
 
(94) The Commission examined the average co st of wages per employee for the Community 
industry during the IP, and in the three prior years. The indexed results are shown in the following table.
64 
  
Average cost for wages per 
employee 1998 1999 2000 2001 
(IP) 
Index 100 99 115 109 
 (95) The table shows that the average cost of  the Community industry for wages and salaries 
during the period under consideration varied, decreasing and increasing over time. In 2000, it 
increased by 15 %. In 2001, compared to 1998, it had increased by 9 %. Overall, the increase 
was lower than the increase of the total hourly labour costs in the euro area during this 
period.
65 Thus, there were no unusual developments in wages during the relevant period, and 
any developments only had very limited effect s on the financial situation of the domestic 
industry as a whole.66 
 
                                                      
62 Panel report, paragraph 7.360. 
63 Panel report, paragraph 7.362. 
64 Data obtained from the confidential version of  the questionnaire responses and the financial 
statements of the Community producers. 
65 The total hourly labour costs in the euro area for the whole economy (excluding agriculture, public 
administration, education, health and other services) increased between 1998 and 2001 by 10,5 % (see ECB 
Monthly Bulletin for Decembe r 2001 and May 2002). 
66 However, there were adverse wage and benefit e ffects suffered by at least one Community DRAM 
manufacturer, Micron, due to financial losses caused by substantial volumes of subsidised Hynix imports sold at 
prices that caused substantial DRAM price depression. In October 2001, Micron suspended all wage and cost-
of-living increases. In addition, Micron executives to ok a 20 % reduction in pay. Micron's employee profit 
sharing programme, whereby 10 % of each  quarterly profit is shared with Micron employees, was suspended, 
and senior staff took a 10 % reduction in pay. In addition, in December 2001 all employees were placed on 
mandatory leave for two to three weeks which, for employees who had already exhausted their annual vacation allowance, was unpaid (Micron post-hearing submission, 18  February 2003, p. 62). In addition to these wage 
and benefit reductions, in February 2003 Micron was compelled to lay off 10 % (more than 1 850) of its 
company-wide workforce (see Micron post-hearing submission), and Infineon 'was obliged to reduce the 
number of employees in the fourth quarter of 2001 as a result of the losses related to subsidised imports from 
Korea.' (Infineon post-hearing submission, 14 March 2003, p. 36).  WT/DS299/9 
 Page 25 
 
 
  (96) Furthermore, the Commission recalls that DRAMs are capital intensive products and, thus, 
labour may only have a limited contribution to their cost of production (see also recital 41 
above). Consequently, this relatively small incr ease in wages had hardly any effect on the 
overall financial situation of the Community industry.  
 
(97) Given its negligible impact, consideration of the wages factor together with the other factors 
referred to in Article 8(5) of the basic Regulation is not such as to alter the conclusion that the 
Community industry suffered material injury.67  
  2.3. Conclusion  
 
(98) Based on the foregoing, the conclusion set out in recital 188 of the definitive Regulation that 
the Community industry suffered material injury within the meaning of Article 8 of the basic 
Regulation is hereby confirmed.  
  3. Causation  
 
 3.1. Introduction  
 (99) This part sets out the reassessed findings based on the recommendations of the Panel report 
concerning the non-attribution to the subsidised imports of any injury caused by other factors 
(in particular, decline in demand, overcapacity and other, non-subsidised imports) within the 
meaning of Article 8(7) of the basic Regulation. The Panel's de termination in paragraph 7.437 
of its report does not preclude a conclusion of  a causal relationship between subsidised 
imports and the material injury suffered by  the Community industry, but added that a 
satisfactory explanation of the nature and extent of the injurious effects of those other factors, 
preferably with quantitative analysis, as dis tinguished from the effects of the subsidised 
imports, is required.  
  3.2. Decline (contraction) in demand and economic downturn  
 (100) Article 8(7) of the basic Regulation (which  generally corresponds to Article 15.5 of the 
SCM Agreement) requires examination of any k nown factors other than subsidised imports 
which at the same time are injuring the Comm unity industry, and not to attribute injury 
caused by these other factors to subsidised im ports. One of the factors referred to is 
'contraction in demand'. 
 
(101) The Panel found in paragraph 8. 1(e) of its report that the EC had failed to make sure that the 
injury caused by 'decline in demand' was not attributed to the subsidised imports. This 
conclusion was reached in the light of the Pane l's findings in paragra phs 7.411 to 7.414 of its 
report, which treat a 'decline in demand' as sy nonymous with a 'general economic downturn'. 
 
EC 
consumption 1998 1999 2000 2001 (IP) 
DRAMs in 
'000 Mbits 16 593 400 28 961 100 45 873 600 68 967 600
Index 100 175 276 416
                                                      
67 Article 8(5) of the basic Regulation states that '[t]his list [of relevant economic factors having a 
bearing on the state of the industry] is not exhaustive, nor can one or seve ral of these factors necessarily give 
decisive guidance.'   WT/DS299/9 
Page 26  
 
   
(102) The Commission recalls that, all other thi ngs being equal, demand (i.e., the willingness and 
ability to obtain an amount of a particular good) may generally be consider ed to be equivalent 
to consumption (i.e., the actual physical pro cess of using a good irrespective of the level of 
trade). The above table sets out EC consumption during the relevant peri od in terms of Mbits. 
The use of this unit of measurement was not di sputed before the Panel. It appears from the 
above table that because the actual consump tion in the Community for DRAMs increased 
constantly and significantly during the period under consideration, it is incorrect to allege that 
the level of demand for DRAMs in the Community  declined during the same period. Thus, all 
of the relevant argumentation concerning the impact of the 'decline in demand' on the 
injurious situation of the Comm unity industry (in particular its  prices) raised by the GOK and 
Hynix is irrelevant, because, as shown above, the level of demand increased. With respect to 
the claim by the GOK and Hynix that the allege d decline in demand affected the Community 
industry's prices, this is unfounded in light of the fact that there was no decline in the level of demand. On the contrary, the subsidised imports had a significant impact on the prices of the 
Community industry and, thus, on its injuri ous condition (see recitals 191 and 192 of the 
definitive Regulation).  
 (103) Hynix and the GOK noted that worldwide demand for DRAMs grew in 2001 by only 59 % 
compared to the average year on year growth rate  of 75 %, apparently contending that in 2000 
to 2001 there was a huge slowdown in the grow th rate of demand (see recital 193 of the 
definitive Regulation). The Commission does not  agree. Hynix and the GOK correctly point 
out that the DRAMs market is cyclical ( see recital 193 of the definitive Regulation). 
However, in cyclical markets, demand growth rates vary sharply from one year to another, 
and it would be unreasonable to expect the growth  rate of demand in a particular year to 
reflect the average growth rate of demand for an entire business cycle. A reasonable way to 
assess whether demand growth slowed significantly in 2000 to 2001, taking into account the 
cyclical nature of the market, would be to compare the growth rate of demand in 2000 to 
2001, which was a cyclical trough, with the average growth of demand during troughs in previous cycles. Neither Hynix nor the GOK ma de any arguments nor submitted any data in 
support of such a comparison. Accordingly, r ecord evidence does not support the conclusion 
that in 2000 to 2001 the growth rate of de mand slowed down significantly, considering the 
cyclical nature of the DRAMs market.
    
 (104) It was also considered whether the growth rate of demand in the Community slowed down in 
2000 to 2001 as compared to the actual growth rates observed in previous years. The demand for DRAMs in the Community, measured in term s of EC consumption, increased by 75 % in 
1998 to 1999, 58 % in 1999 to 2000 and 51 % in 2000 to 2001. Thus, while there was a 
constant increase in demand during the period u nder consideration, this increase followed a 
declining trend. Nevertheless, demand growth ra te remained significant in the IP (51 %).  
 (105) The declining trend in demand growth was more pronounced between 1999 and 2000 (where 
demand growth declined by 17 percentage poi nts) than between 2000 and the IP (where 
demand growth declined by 8 percentage points) . This evolution of demand growth has to be 
assessed by comparison with the evolution of the sales prices of the Community industry, the primary cause of injury to the Community industry during the period under consideration (see recital 188 of the definitive Regulation). In particular, in 1999 to 2000, demand growth 
declined by a sizable 23 %, but the average sales price of the Community industry dropped by 
only 5 %. Conversely, between 2000 and the IP  demand growth declined moderately by 
12 %, but the average sales price of the Commun ity industry plummeted by 77 % (see recital 
128 and the relevant table of the provisional Re gulation). If slowing demand growth had been 
a cause of injury, one would have expected th e sales prices of the Co mmunity industry to 
decline more sharply in the period when demand growth declined more steeply. Record  WT/DS299/9 
 Page 27 
 
 
  evidence shows no such relationship between trends  in demand growth and trends in the sales 
prices of the Community industry. It is theref ore concluded that ther e is no apparent link 
between demand growth and the sales prices of the Community industry which could indicate 
that slowing demand growth contributed to the injury suffered by the Community industry. 
 
(106) This approach is consistent with the findi ngs of recent WTO panels reviewing determinations 
in respect of non-attribution. In particular, WTO panels have upheld non-attribution findings 
where record evidence showed th at the factor concerned could not have caused injury because 
trends in such factor were independent from tre nds in key indicators of the domestic industry. 
Specifically, in US-Steel, the Panel noted that the facts appeared to support the investigating 
authority's finding, in respect of hot-rolled bar,  that cost increases had not caused injury 
because trends in operating margin (a key measure of profitability) were unr elated to trends in 
the cost of goods sold (COGS).68 Similarly, while the Panel concluded that the investigating 
authority's finding, in respect of stainless stee l bar, concerning demand as a factor of injury, 
did not satisfy the non-attribution requirement, th e Panel noted that the investigating authority 
could have met this requirement, through a 'rea soned and adequate explanation', simply by 
showing that trends in demand ha d no connection with trends in a key variable attesting to the 
condition of the domestic industry.69  
 (107) Accordingly, the Commission is of the vi ew that its redetermin ation satisfies the non-
attribution requirement under Article 8(7) of the basic Regulation (which generally 
corresponds to Article 15.5 of the SCM Agreemen t) in respect of demand growth by showing 
that, during the period under consideration, tren ds in demand growth were independent from 
trends in the sales prices of the Community indus try. The Commission is also of the view that 
its redetermination satisfies the non-attribution requirement in respect of declines in the level 
of demand by showing that during the period under consideration no such demand declines 
took place.  
  3.3. Overcapacity 
 
(108) The Panel noted in paragraph 7.421 of its  report that the question of separating and 
distinguishing the effects of overcapacity in  driving prices down should be addressed, 
irrespective of who is to blame for such overcapacity.  
 (109) The Commission notes that 'overcapacity' is not  expressly referred to in Article 8(7) of the 
basic Regulation (which generally corresponds to Article 15.5 of the SCM Agreement). The 
concept is discussed in the provisional and defi nitive Regulations insofar as it is invoked by 
                                                     
 
68 '[T]he Panel does consider that the USITC was probably correct in concluding that changes in input 
costs were not a cause of serious inju ry. If, indeed, COGS played a significant role in [the] situation of the 
domestic industry, one would have expected operating profits to increase while COGS was decreasing … 
However, as can be seen from the graph below, which has been generated using USITC data, the trends in 
operating margin appear to be independent of trends in COGS.' Report of the Panel, United States — Definitive 
safeguard measures on imports of certain steel products, WT/DS248/R, WT/DS249/R, WT/DS251/R, 
WT/DS252/R, WT/DS253/R, WT/DS254/R, WT/DS258/R , WT/DS259/R, adopted December 10, 2003, as 
modified by the Appellate Body report (on other grounds), paragraphs 10.440 and 10.443. 
69 In particular, the Panel stated: 'While … reluctant to prescribe what may amount to a reasoned and 
adequate explanation, the Panel considers that the USIT C could have, for example, demonstrated that there was 
no linkage between demand declines during the period of investigation and injury suffered in this particular 
case. More particularly, the USITC could have explained that operating margin, perhaps the most relevant injury 
factor in this regard, declined irrespective of demand trends. This analysis could have been bolstered by an 
explanation that declines in operating margin coincide d with increases in imports rather than declines in 
demand' (emphasis added). Report of the Panel, United States — Definitive safeguard measures on imports of 
certain steel products, paragraph 10.558. WT/DS299/9 
Page 28  
 
  certain of the interested parties. It is a rela tive concept, insofar as it depends on how much 
capacity is available and how much capacity is being used – that is, on the level of demand. 
'Overcapacity' may thus arise either beca use capacity is increased, or demand falls. 
 (110) 'Overcapacity' as a possible factor of injury  can be examined in the context of the world 
market or in the context of the Community market. The Commission considers both situations 
below.  
 (111) As set out in recital 153 of the provisi onal Regulation and recital 197 of the definitive 
Regulation, some overcapacity existed worldwide during a number of years including the 
period under consideration. No major change in this overcapacity situation has been observed 
during the period under consideration and in particular at the end of this period leading to the 
IP. This worldwide overcapacity may have asserted pressure on prices during the period under consideration, which may have contribut ed to the injury suffered by the Community 
industry. This finding has not been disputed by any party concerned.  
 
(112) However, as set out in recital 147 of the provisional Regulation, the worldwide overcapacity 
was estimated to be approximately 20 % of the market. Hynix accounted for around 17 % of worldwide production during the IP. Given that Hynix was virtually bankrupt during the IP and remained afloat only through the subsidies provided by the GOK, it can be concluded that 
the worldwide overcapacity situation has b een artificially maintained through the 
subsidisation of Hynix. Thus, the effect of worldwide overcapacity on the injurious situation 
of the Community industry was channelled thro ugh Hynix's subsidised imports. This effect 
has been analysed in recitals 144 to 149 of  the provisional Regulation and recitals 191 and 
192 of the definitive Regulation. In this respect , the effect of worldwide overcapacity created 
by Hynix cannot be considered as a factor separat e from the effects of th e subsidised imports.  
 
(113) In any event, even if the effect of worl dwide overcapacity could be considered separately 
from the effect of subsidised imports, the fo llowing can be observed. Information from the 
questionnaire responses of the four producers of DRAMs cooperating with the original investigation (i.e., Samsung, Hynix, Infineon and Micron, which together represented around 
80 % of the worldwide DRAMs market) shows that  their total capacity in Mbits increased by 
129 % between 1999 and 2000 and by  85 % between 2000 and the IP. Their total production 
in Mbits increased in line by 124 % between 1999 and 2000 and by 81 % between 2000 and the IP. In other words, the capacity and the pr oduction of the four major worldwide producers 
increased significantly more between 1999 an d 2000, the good year during which the 
Community industry maintained some price stability and made profits, than between 2000 
and the IP (2001), during which the Community  industry suffered significant losses because 
of the collapse of prices (see recitals 128 a nd 131 and relevant tables of the provisional 
Regulation). Consequently, the existing worl dwide overcapacity throughout the period under 
consideration did not, in the Commission's vi ew, contribute significantly to the collapse of 
prices and the material injury suffered by the Community industry in the IP. 
 
(114) In addition, record eviden ce shows that Community overcapacity was not a factor of injury. 
During 1999 to 2000, Community capacity more than tripled (increasing by 252 %), and from 2000 to 2001 it nearly doubled (increasing by 92 %). These additions to Community capacity 
were accompanied by increases in Community pr oduction. While capacity utilisation in the 
Community did drop by 28 % from 1999 to 2000, it recovered by 4 % from 2000 to 2001 (see 
recital 125 and relevant table of  the provisional Regulation). 
 (115) Trends in Community overcapacity (defined as the inverse of Community capacity utilisation) 
show little or no correlation with trends in th e sales prices of the Community industry. In 
particular, during 1999 to 2000, Community overcapacity rose by 28 %, but the sales prices  WT/DS299/9 
 Page 29 
 
 
  of the Community industry fell by only 5 %. Further, from 2000 to 2001, Community 
overcapacity went down by 4 % but the sales prices of the Community industry plummeted by 77 % (see recitals 125 and 128 and relevant  tables of the provisional Regulation). It may 
be concluded that, if rising overcapacity were correlated to falling price levels, the significant 
increase in overcapacity over 1999 to 2000 would have resulted in severe price depression, 
whereas the contraction in overcapacity in 2000 to  2001 would have led to rising prices, or at 
least to some degree of price stability. R ecord evidence shows the opposite. Over 1999 to 
2000, there was very mild price depression, d espite the significant increase in overcapacity, 
while from 2000 to 2001, there was substantial price depression, despite the contraction in 
overcapacity. This stands in sharp contrast with  the close correlation between trends in the 
prices of the subsidised imports and trends in the sales prices of the Community industry. In 
fact, during 2000 to 2001 the trend in the sales prices of the Community industry mirrored almost perfectly the trend in the prices of the subsidised imports: over this period, the former 
dropped by 74 % and the latter did so by 77 % (see recitals 119 and 128 of the provisional 
Regulation). 
 
(116) Record evidence also shows that trends in  Community overcapacity bear no correlation with 
trends in other key indicators of the conditio n of the Community industry. In particular, 
during 1999 to 2000, the profitability of the Community industry was rising, and returns on 
investment and cash flow were positive, in spite of the significant increase in Community 
overcapacity. In contrast, in 2001 the Commun ity industry suffered h eavy losses, and returns 
on investment and cash flow were negative, in spite of the contraction in Community 
overcapacity during 2000 and 2001. The performance of the Community industry over 2000 to 2001 in terms of profitability, returns on in vestment and cash flow is correlated instead 
with the trend in the prices of the subsidised imports over that period. As noted, in 2000 to 
2001, as the Community industry suffered heavy lo sses and negative cash flow and return on 
investment, the prices of the subsid ised imports decreased by 74 %. 
 (117) Hynix claimed that Community overcapacity was another known factor contributing to 
material injury during the period under cons ideration. However, trends in Community 
overcapacity show no or only negligible corre lation with trends in the condition of the 
Community industry. The Commission therefor e concludes that Community overcapacity 
cannot be considered as a factor of material injury to the Community industry. Given that 
Community overcapacity did not adversely aff ect the condition of the Community industry, 
there is no need to distinguish any alleged in jury caused by capacity  from the injury caused 
by Hynix's imports. The Commission believes this finding is consistent with the findings of recent WTO Panels reviewing determinations in respect of non-attribution described in recital 
106 above. 
 (118) As reviewed, there is no demonstrated cau sal relationship between overcapacity and either 
price declines or injury to the Community industry. In contrast, the Community industry 
suffered severe declines during 2001, which is the same period when subject import prices 
plummeted and when subject import volumes r eached peak penetration in the Community 
market. This contrast establishes that subject import volumes and price effects are a separate 
and distinguishable cause of material injury  to the Community industry as compared with 
overcapacity.  
  3.4. Other non-subsidised imports  
 
(119) The Panel noted in paragraph 7.426 of its re port that there is no requirement to consider non-
subsidised imports on a country-per-country basi s. The Panel also noted in paragraph 7.435 
that a satisfactory explanation of the nature  and extent of the injurious effects of 
non-subsidised imports, as distinguished from the injurious effects of the subsidised imports, WT/DS299/9 
Page 30  
 
  should be provided. Accordingly, the effects of non-subsidised imports were examined by 
considering jointly imports from countries other than Korea (e.g. the United States, Japan, and 
Taiwan) and imports from Samsung. Recital 151 of  the provisional Regulation and recitals 
194 and 200 of the definitive Regulation provide  the growth rates of import volume, market 
share, and average prices of non-subsidised imports during the period under consideration. 
These data are re-stated below in aggregated index form.
70 Given the very limited number of 
players in the DRAMs market, for reasons of confidentiality, indices are used to show the 
evolution of trends. 
 
 1998 1999 2000 2001 
(IP) 
Non-subsidised imports in '000 Mbits 100 142 166 233 
Market share of 
non-subsidised imports 100 81 60 56 
Average price of 
non-subsidised imports 100 89 104 48 
 
 
(120) During the period under consideration, non-s ubsidised imports increased significantly less 
than did subsidised imports, i.e., by 133 % as  opposed to 361 % (see recital 177 and relevant 
table of the definitive Regulation). It is noted that during the same period Community consumption increased by 316 %. Hence, whereas  the rate of growth in non-subsidised 
imports was only a fraction of the rate of gr owth of Community consumption, subsidised 
imports increased well in excess of Community cons umption. Accordingly, during the period 
under consideration, the market share of non-s ubsidised imports contracted by 44 % whilst 
the market share of subsidised imports expande d by 20 % (see recita l 185 and relevant table 
of the definitive Regulation). If the market sh are of non-subsidised imports heavily declined 
during the period under consideration, as shown by  the above facts, it can be concluded that 
non-subject imports did not injure the Community industry by reason of their volume effects.  
 
(121) Record evidence also indicates that non-subject imports did not injure the Community 
industry by reason of their price effects. During the IP, the prices of non-subsidised imports exceeded not only the prices of subsidised imports  but also the sales prices of the Community 
industry. In particular, during the IP the average price of non-subsidised imports was 19 % 
higher than the average price of subsidised im ports and 24 % higher than the average sales 
price of the Community industry. In addition, during the period under consideration, the prices of non-subsidised imports fell, but not anywhere as much as the prices of subsidised imports and the Community industry. In partic ular, during the period under consideration the 
average price of non-subsidised imports decreased  by 52 %. In contrast, over such period, the 
average price of subsidised imports decreased by  80 % (see recital 178 and relevant table of 
definitive Regulation) and the average sales pric e of the Community industry by 79 % (see 
recital 128 and relevant table of the provisional Re gulation). On the basis of these facts, it can 
be concluded that the prices of non-subsidised  imports did not affect adversely the sales 
prices of the Community industry. 
 
                                                     
 
70 They derived from the confidential questionnaire responses of companies cooperating with the 
original investigation, as verified, and publicly available external sources like Gartner Dataquest and In-Stat 
MDR.    WT/DS299/9 
 Page 31 
 
 
  (122) As is the case with overcapacity, there is no demonstrated causal relationship between non-
subject imports and price declines or injury to the Community industry. There is, at the same 
time, a clear deterioration in Community i ndustry performance while subject import volumes 
steadily increased and while subject import pr ices undercut the Community like product. This 
contrast establishes that subject import volumes and price effects are a separate and 
distinguishable cause of material injury to  the Community industry as compared with non-
subject imports.  
 (123) Therefore, the Commission is of the view th at its redetermination sa tisfies the non-attribution 
requirement under Article 8(7) of the basic Regulation (which generally corresponds to 
Article 15.5 of the SCM Agreement) in resp ect of non-subject imports by separating and 
distinguishing this other factor from subsidised imports and showing that, during the period under consideration, non-subject imports did not cause material injury to the Community industry, either in terms of their volume e ffects or in terms of their price effects. 
 
 3.5. Conclusion  
 (124) Having separated, where appropriate, and analysed further the effects, if any, of the decline in 
demand, overcapacity and other non-subsidised im ports, it is considered that no injury caused 
by any of these factors has been attributed to the subsidised imports within the meaning of 
Article 8(7) of the basic Regulation. Furthermor e, it is confirmed that the subsidised imports 
through the effects set out in recitals 144 to 149 of the provisional Regulation and recitals 191 
and 192 of the definitive Regula tion have caused material injury to the Community industry 
within the meaning of Article 8(6) of the basic Regulation. 
 
 4. Community interest  
 (125) The contents and conclusions reached in recitals 206 to 209 of the definitive Regulation 
remain unaffected by the Panel report.  
 
D.  REVISED MEASURES 
 
(126) The Panel report and the reassessed findings do not concern Samsung which was not found to 
be subsidised and thus was attributed a 0 % duty rate in the original investigation. The revised 
subsidy amount for Hynix was found to be lower than the injury elimination level established 
during the original investigation and, thus, the revised countervailing duty rate should be 
based on the revised subsidy amount expressed ad valorem , i.e. 32,9 %.  
 
(127) It is noted that the revised duty rate for Hynix should apply on the duty as specified by 
Regulation (EC) No 2116/2005. 
 (128) The GOK, Hynix and the Community producers Infineon and Micron received disclosure of 
the reassessed findings and were given an opportuni ty to comment and to be heard. They each 
submitted comments.
71 
 (129) The GOK generally submits that the revised  findings do not reasonably address the Panel's 
recommendations. The Commission does not agree, for the reasons set out in this Regulation. The Commission does not agree that the revised  duty must necessarily be lower than the 
original duty, and notes that in any event it is. The GOK specifically submits that the 
                                                     
 
71 GOK letter dated 13 February 2006; Hynix letter dated 14 February 2006; Infineon letter dated 13 
February 2006; Micron letter dated 13 February 2006, with exhibits 1 to 27, including an Expert Report from 
Professor J. Hausman dated 13 February 2006.   WT/DS299/9 
Page 32  
 
  Commission should have used seven banks in the syndicated loan as a benchmark. The 
Commission disagrees, particularly for the reas ons set out in recitals 16 to 24 above. The 
GOK also submits that the Commission shoul d have made its benchmark calculations 
differently. In the light of the GOK's comment s the Commission has made some adjustments 
to its calculations, as reflected in this Regulati on. For the reasons set out in this Regulation, 
the other aspects of the calculations remain unchanged. Finally, the GOK submits that the 
Commission's injury redetermination does not separate and distinguish the effects of other known factors, particularly with respect to economic downturn, overcapacity and other non-subsidised imports. The Commission disagrees, particularly for the reasons set out in recitals 100 to 123 above.  
 
(130) Hynix aligns itself with the submissions of the GOK, discussed in the preceding recital. In 
addition, Hynix submits that the period of ti me during which duties should be imposed should 
have been terminated on 1 January 2006. This is  not a matter that was the subject of dispute 
or recommendations by the WTO Panel; and is not therefore part of the 'measure taken to 
comply' with the Panel's recommendations which is  encapsulated within this Regulation. This 
Regulation does not alter the impending expiry da te of the definitive Regulation. The question 
of an early termination of the measure rather falls within the ambit of  an eventual interim 
review, not within the ambit of implementation of the Panel report. Hynix also submits that 
the revised rate of duty must apply retroactiv ely from the date on which measures were first 
imposed. The Commission similarly considers that this issue is not part of the 'measure taken 
to comply' and in any event does not agree. No thing in the relevant legal rules obliges the 
Commission to apply the revised duty retroactively, the Panel limiting itself to recommending that the measure be brought in conformity, which is achieved by the present Regulation. 
 (131) Infineon substantially agrees with the re determination. However, it submits that the 
Commission should impose a higher duty based on a proxy benchmark and the original injury 
determination, rather than the lower duty set  out in this Regulation. The Commission has 
carefully considered that request. However, for the reasons set out in this Regulation and due 
to the specific purpose of this Regulation, notably as an implementation of the Panel's 
recommendations, the Commission has not altere d its initial determination on this point.  
 
(132) Micron also substantially agrees with the redete rmination, referring in th is respect to facts and 
evidence that tend to confirm and corroborate the Commission's conclusions, including an 
expert report prepared by Professor J. Hausman. Therefore, Micron's comments do not necessitate any modification of those conclusions as such. Micron further submits that the Commission should reaffirm, based on current WTO precedent, that the GOK entrusted or 
directed the banks in the May 2001 restructuring programme and should countervail the 
subsidies provided by the public bodies. The Commission has carefully considered this submission which, in principle, has merit. Ho wever, as noted in this Regulation, the May 
2001 restructuring programme would not in any ev ent be countervailed, given that the largest 
proportion of the benefit would have been accounted for in the October 2001 measures. 
Mainly for this reason, the Commission has d ecided not to return to these issues in this 
implementing Regulation.  
 (133) Thus, all comments submitted by the interest ed parties were considered and taken into 
account where appropriate. However, certain comments were outside the scope of this 
Regulation which is only intended to impl ement the DSB recommendations. Thus, such 
comments have not resulted in any changes to this Regulation,  
  WT/DS299/9 
 Page 33 
 
 
  HAS ADOPTED THIS REGULATION:  
 
Article 1 
 
Council Regulation (EC) No 1480/2003 is hereby amended as follows:  
 
1. Article 1(2) and (3) shall be replaced by the following:  
  '2. The rate of the definitive countervailing duty applicable to the net free-at-
Community-frontier price, before duty, shall be as follows:  
 
Korean producers Rate of 
duty 
(%) TARIC 
additional 
code 
Samsung Electronics Co., Ltd (Samsung) 24th Fl., Samsung Main Bldg 250, 2-Ga, Taepyeong-Ro  Jung-Gu, Seoul 0 % A437 
Hynix Semiconductor Inc.  
891, Daechidong 
Kangnamgu, Seoul 32,9 % A693 
All other companies 32,9 % A999 
 
  3. Upon presentation to the Member State's customs authorities of the customs 
declaration for release into free circulation of multi-combinational forms of DRAMs, the 
declarant shall indicate in box 44 of the Singl e Administrative Document (SAD) the reference 
number corresponding to the below product/origi n descriptions indicated in the following 
table. The rate of the definitive countervailing duty applicable to the net-free-at-Community-
frontier price, before duty, shall be as follows:  
 
 
No Product/origin description Reference 
number Rate of 
duty (%) 
1 Multi-combinational forms of DRAMs originating 
in countries other than the Republic of Korea, incorporating DRAM chips and/or mounted DRAMs originating in countries other than the 
Republic of Korea or originating in the Republic of 
Korea and manufactured by Samsung D010 0 % 
2 Multi-combinational forms of DRAMs originating 
in countries other than the Republic of Korea, incorporating DRAM chips and/or mounted DRAMs originating in the Republic of Korea and manufactured by all companies other than Samsung 
and representing less than 10 % of the net free-at- 
Community-frontier price of the multi-combinational form of DRAM D011 0 % WT/DS299/9 
Page 34  
 
  No Product/origin description Reference 
number Rate of 
duty (%) 
3 Multi-combinational forms of DRAMs originating 
in countries other than the Republic of Korea, incorporating DRAM chips and/or mounted DRAMs originating in the Republic of Korea and 
manufactured by all companies other than Samsung 
and representing 10 % or more but less than 20 % of the net free-at-Community-frontier price of the multi-combinational form of DRAM D012 3,2 % 
4 Multi-combinational forms of DRAMs originating 
in countries other than the Republic of Korea, incorporating DRAM chips and/or mounted DRAMs originating in the Republic of Korea and 
manufactured by all companies other than Samsung 
and representing 20 % or more but less than 30 % of the net free-at-Community-frontier price of the multi-combinational form of DRAM D013 6,5 % 
5 Multi-combinational forms of DRAMs originating 
in countries other than the Republic of Korea, incorporating DRAM chips and/or mounted 
DRAMs originating in the Republic of Korea and 
manufactured by all companies other than Samsung and representing 30 % or more but less than 40 % of the net free-at-Community-frontier price of the multi-combinational form of DRAM D014 9,8 % 
6 Multi-combinational forms of DRAMs originating 
in countries other than the Republic of Korea, 
incorporating DRAM chips and/or mounted 
DRAMs originating in the Republic of Korea and manufactured by all companies other than Samsung and representing 40 % or more but less than 50 % of the net free-at-Community-frontier price of the 
multi-combinational form of DRAM D015 13,1 % 
7 Multi-combinational forms of DRAMs originating 
in countries other than the Republic of Korea, 
incorporating DRAM chips and/or mounted DRAMs originating in the Republic of Korea and manufactured by all companies other than Samsung and representing 50 % or more of the net free-at-Community-frontier price of the multi-
combinational form of DRAM D016 16,4 %'; 
 
 
2. Article 1(5) shall be re placed by the following:  
  '5. In the case of no indication of any reference number in the SAD, as foreseen in 
paragraph 3, or if the customs declaration is not accompanied by any statement in the cases required in paragraph 4, the multi-combinational form of DRAM shall – unless the contrary is  WT/DS299/9 
 Page 35 
 
 
  proved – be considered as originating in the Republic of Korea and as having been 
manufactured by all companies other than Samsung, and the countervailing duty rate of 32,9 % shall apply.  
  In cases where some of the DRAM chips and/ or mounted DRAMs incorporated in multi-
combinational forms of DRAMs are not clearly marked and their manufacturers are not 
clearly identifiable from the statement required in paragraph 4, such DRAM chips and/or mounted DRAMs shall – unless the contrary is pr oved – be considered as originating in the 
Republic of Korea and as having been manufactured by companies subject to the countervailing duty. In such cases, the c ountervailing duty rate applicable to multi-
combinational forms of DRAMs shall be calcula ted on the basis of the percentage represented 
by the net free-at- Community-frontier price of the DRAM chips and/or mounted DRAMs 
originating in the Republic of Korea out of the net free-at-Community-frontier price of the 
multi-combinational forms of DRAM, as establishe d in the table contained in paragraph 3, 
numbers 2 to 7. Should, however, the value of the aforementioned DRAM chips and/or 
mounted DRAMs be such to determine that the multi-combinational forms of DRAMs in 
which they are incorporated becomes of Korean origin, the countervailing duty rate of 32,9 % 
shall apply to the multi-combinational forms of DRAMs.' 
 
Article 2 
 This Regulation shall enter into force on the day following its publication in the Official Journal of 
the European Union .  
   
 
This Regulation shall be binding in its entirety and directly applicable in all Member States. 
 Done at Brussels, 10 April 2006.     For the Council   The President   
  U. PLASSNIK
 
 
 
__________