WORLD TRADE  
ORGANIZATION  WT/DS296/9 
28 July 2005 
 (05-3392) 
 Original:   English 
  
 
UNITED STATES – COUNTERVAILING DUTY INVESTIGATION ON 
DYNAMIC RANDOM ACCESS MEMORY SEMICONDUCTORS (DRAMS) 
FROM KOREA 
 
Statement by Korea
 
 
  The following statement received from the delegation of Korea in relation to the adoption by the Dispute Settlement Body, at its meeting on 20 July  2005, of the reports of the Appellate Body and 
Panel in United States – Countervailing Duty Inves tigation on Dynamic Random Access Memory 
Semiconductors (DRAMs) from Korea  (WT/DS296/AB/R, WT/DS296/R), is circulated at the request 
of that delegation.  
_______________ 
 
 Introduction 
 
 Mr. Chairman, the DSB today considers the Reports in US – DRAMS  (DS296).  This dispute 
arises from a countervailing duty order imposed by the Unites States on certain semiconductors 
imported from Hynix of Korea.  The US Departme nt of Commerce ("the DOC") claimed that the 
Government of Korea subsidized Hynix through a se ries of financial contributions from September of 
2000 through October 2001.  The key issue in the DOC investigation was whether or not certain private financial institutions had been entrusted or directed by the Government of Korea to make such 
financial contributions.  In a t horough and detailed review, the Pane l found that, with one exception, 
an objective and unbiased investigating authority coul d not have reached the conclusions in the DOC's 
determination.  The legal and factual findings by th e Panel that led them to this conclusion were the 
subject of appeal by the United States.  Korea cros s-appealed on one issue where the Panel found that 
there had been entrustment or direction with r espect to one Korean bank when that bank never 
actually carried out the act it was supposedly directed to do.     The US International Trade Commission ("the IT C") also found that the allegedly subsidized 
imports had caused material injury.  The Panel f ound that the ITC had not offered any explanation as 
to how it had reached its conclusion that the impact  of factors other than the allegedly subsidized 
imports was not attributed to such imports.  Therefor e, the United States is not in conformity with its 
obligations under Article 15.5 of the SCM Agreement.  There were no appeals on the injury issues.  
Thus, the US measure was found to be inconsistent  with its obligations under Article 15.5 of the 
SCM Agreement and the United States should act imme diately to bring its measure into conformity.  
As for the inconsistencies that th e Panel found with respect to the DOC 's subsidy determination, it is 
important to note that, as the Appellate Body expressl y stated in its Report, its ruling reversing these 
findings does not mean it actually upheld the US countervailing duty order as being in conformity 
with the SCM Agreement.    
 Mr. Chairman, first of all, Korea would like to offer its thanks to all involved for their hard 
work.  In Korea's view, with one relatively na rrow exception, the Panel Report was a thorough and WT/DS296/9 
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 acceptable review of the facts and law, even though Korea certainly does not agree with a number of 
the conclusions reached by the Panel.  Howeve r, Mr. Chairman, Korea has grave reservations 
regarding the Appellate Body Report.  While there were some issues of legal review, this Appellate 
Body Report is, unfortunately, not confined to su ch issues as required by the clear mandate of 
Article 17.6 of the DSU which prescribes that an appeal should be limited to issues of law covered in 
the panel report and legal interpreta tions developed by the panel.  Instead, it is a clear example of 
unwarranted fact-finding by the Appellate Body.    Mr. Chairman, Korea asks the indulgence of this Body to take a few moments to discuss the issues of the scope and nature of the Appellate Body's Report in greater depth. Obviously, Korea 
cannot deal with each aspect of the Appellate Body's analysis even in extended remarks, but the most 
salient examples need to be brought to Members' attention.   Among the legal matters before the 
Appellate Body, we will review the issues of the lega l interpretation of the term "entrusts or directs," 
Korea's cross-appeal on the question of whether a priv ate body can be found to have been entrusted or 
directed to carry out a governmental function when it actually never carries it out, the question of the 
evidentiary standards applied by the Panel and the Appellate Body's extraordinary legal interpretation 
of the reporting requirements of Article 22.5 of the SC M Agreement.  Finally, we will look at some of 
the most salient and unfortunate examples of de novo  fact-finding engaged in by the Appellate Body 
because Korea considers that this case represents a break-down in the process of appellate review that 
raises serious concerns.    The Interpretation of "Entrusts or Directs" 
 
 First, some legal issues must be noted in orde r for the overall dispute to be understood.  There 
were arguably three legal issues before the Appella te Body, although the parties differed on how to 
characterize some of these matters.  The first clearly legal issue was the question of the definition of 
the terms "entrusts or directs" in Article 1.1(a)(1 )(iv) of the SCM Agreement.  The United States had 
argued that the Panel had imposed too stringent a sta ndard in interpreting this.  The Panel had stated 
that the term was based on the notion of "delega tion or command".  The Appellate Body modified the 
Panel's interpretation as being too strict to the ex tent it relied just on the terms "delegation" or 
"command".  In reality, and as the Appellate Body see med to agree, this was more of a clarification 
than a modification of the Panel's rulings.  In eith er case, Korea accepts this ruling of the Appellate 
Body.  It is clearly within the confines of Article 17.6 of the DSU. 
 
Korea's Cross-Appeal 
 
 The Appellate Body rejected Korea's cross-appeal  on the issue of "entrustment or direction".  
Korea noted to the Appellate Body that the Panel had actually upheld the DOC's findings with respect 
to the alleged direction of Korea First Bank, or KF B.  This finding by the Panel was based on a single 
piece of hearsay, circumstantial evidence in a newspa per article relating to a single transaction among 
the four alleged financial contri butions.  However, KFB never undertook the transaction that was the 
sole issue of this newspaper article.  In Korea's view it was impossible that a private body could be 
entrusted or directed "to carry out" a governmental financial contribution if, in fact, the private body 
did not carry it out.  Indeed, the United States agreed  and considered this point "axiomatic."  In a 
startling departure from the whole rest of its argument against the Panel Report, the United States argued that the Panel made this finding as part of  a broader context, based on a totality of the 
evidence.  This argument that the Panel was actua lly not limiting its conclusions to the subject of the 
newspaper article, but, instead, was taking it as ev idence of broader entrustment or direction was 
directly contrary to the US arguments underlying the main portion of its own appeal to the effect that 
the Panel had looked at each piece of evidence in isola tion.  Indeed, highlighting this contradiction in 
the US argument was one of the reasons Korea brought the cross-appeal.  Even though this contradiction did not seem to be an  overly subtle point, the Appellate Body seems to have completely 
missed it in its own analysis.    WT/DS296/9 
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 But this issue of whether the Panel examined matters in a broader context will come up again 
later; at the moment the point here is that the A ppellate Body did not agree with the parties and found 
that there could be entrustment or direction when there was no action taken by the private body.  Apparently, the very next phrase in Article 1.1(a )(1)(iv) – "to carry out" – was not considered 
sufficiently important context for the Appellate Body to take note of it.  Moreover, to say that there 
can be entrustment or direction in some sort of void where there is no financial contribution is an 
academic exercise of the most sterile sort.  The overa ll legal issue is whether Article 1.1(a)(1)(iv) has 
been correctly applied, not just a small piece of it vi ewed in isolation.  This part of the Appellate 
Body's textual analysis can be characterized as dicta  and would have been better left out of its 
analysis.  
 
The Evidentiary Standard Applied by the Panel 
  The next legal issue was whether the Panel had imposed too strict an evidentiary standard on 
the US by stating that the evidence proving entrustment or direction had to be "probative and compelling".  The Appellate Body upheld the Panel' s description of the evidentiary standard and the 
manner in which it was applied.  Importantly, the A ppellate Body rejected the US characterization of 
the terms probative and compelling and found that  the Panel had not actually applied such an 
improper standard.  The Appellate Body stated:   
 
It appears to us, on balance, that the Panel did not apply the term "compelling" in the manner suggested by the United States; had it done so, it would have erroneously 
imposed a qualitative standard higher than that contemplated by the 
SCM Agreement .
1 
 This is an important point because, as Korea pointed out to the Appellate Body, this very 
improper standard of "compelling evidence" was act ually imposed by the DOC against Korea during 
the investigative process.  At the preliminary dete rmination stage, the DOC created a presumption of 
guilt against the Korean respondents based on histor ical findings involving other producers and other 
banks.  Then, in the final determination, the US DOC stated that Korea had failed to rebut this 
presumption with "compelling evidence".  Korea has to mention this point here because, 
unbelievably, the Appellate Body Repor t is absolutely silent in this regard.  It is as if Korea never 
made the argument.  And it will be of critical impor tance when we get to the issue of whether the 
Appellate Body should have "completed the analys is" after reversing parts of the Panel's findings. 
 
Article 22.5 of the SCM Agreement and Ex Post Facto Arguments 
 
 The last of the legal issues was the interpre tation of Article 22.5 of the SCM Agreement.  
Among other things, Article 22.5 requires that investigating authorities issue a public report that contains " all relevant information on the matters of f act and law and reasons" for an affirmative 
determination.  On this and other bases, the Pane l rejected some evidence proffered by the US as 
ex post facto  rationalizations, because it was not contained or referenced in the report of the DOC's 
determination and there was no indication that th e DOC had actually taken such information into 
consideration.     In Korea's view, the Panel was absolutely correct.  It would be improper to subject respondents to such double jeopardy.  First, respond ents would have to make their arguments before 
the investigating authority.  Then, as a second step , they would have to address wholly new assertions 
                                                     
 
1 Appellate Body Report at para. 139 (emphasis added). WT/DS296/9 
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 about factual issues concocted by the other side's lawy ers after the fact in front of the Panel.  This 
double jeopardy is inconsistent with the cl ear requirements of the SCM Agreement.   
  As part of its arguments, Korea brought to the Appellate Body's attention the language from 
the old GATT Subsidies Code.  However, this is not mentioned in the Appellate Body Report; it is not 
even referenced.  This is puzzling indeed, give n the importance Korea placed on this issue.  The 
Appellate Body certainly may disagree with an im portant argument presented by a party; it is 
improper to simply ignore it.    Since the Appellate Body did not bother to re view the language, Korea will provide it here for 
the DSB record.  Article 2.15 of the GATT Subsidies Code reads as follows: 
 
In the case of an affirmative finding each su ch notice shall set forth the findings and 
conclusions reached on all issues of fact and law  considered material by the 
investigating authorities. 
 As can be seen, the word "all" appears in a very different place in the SCM Agreement 
compared to the GATT Subsidies Code.  It is no l onger sufficient that a report merely set out "all 
issues of fact and law".  It is now required that "all relevant information" supporting the conclusions 
of such matters of fact and law be presented.  Article 22.5 of the SCM Agreement was a major step forward in the requirements for transparency of  the administrative processes, as well as a protection 
against just the sort of ex post facto  arguments that the Panel was confronted with in this dispute.   
 
 Or, at least, that was the requirement before th is dispute.  In an astounding case of legislation 
by judicial decision, the Appellate Body has simp ly written the key element of Article 22.5 out of 
existence.  The Appellate Body seems to consider  it too burdensome on investigating authorities to 
require that they provide "all" of their relevant s upporting information in their reports.  Note, it is not 
"all information";  it is "all relevant  information" that supports the ad ministrative determination.  This 
is not a great burden.  It is simple transparency and fairness.   Thus, as of today, "all" no longer means "all".  So what does it mean?  Does it mean "none" or does it mean "some"?  Korea presume s that the Appellate Body will ev entually rule that "all" will 
mean "some," but we will not know the parameters of  the new definition of Article 22.5 until there is 
further litigation, and it is now certain that there will be further litigation on this issue. 
  It is not up to the Appellate Body to throw out treaty terms simply because it considers them 
inconvenient.  And why should the Members be s itting here speculating on how the Appellate Body 
will rule in the future?  We already negotiated the st andard once.  It was very clear.  "All" relevant 
information" was to be provided.   
  The United States routinely demands that Member s agree to rules for mo re transparency in 
dispute settlement.  Yet, here we have an instance where there was a very clear rule already negotiated 
regarding transparency in domestic trade remedies  investigations.  However, the United States has 
petitioned to strip that requirement of all meaning,  obtained its wishes and now celebrates this huge 
step backwards in transparency.  Mr. Chairman, actions have consequences.  It is difficult to see how 
the United States can have any expectation that Me mbers will agree to new transparency requirements 
when those already agreed to are su mmarily discarded in this fashion. 
 
The Appellate Body's De Novo Fact-Finding 
 
 Now, we must turn to the even more  troub ling aspect of this Appellate Body Report; namely, 
the Appellate Body's de novo  review of the facts in a manner in consistent with Ar ticle 17.6 of the 
DSU.  As Members are aware, pursuant to Article 17.6 of the DSU, only issues of law are subject to  WT/DS296/9 
 Page 5 
 
 
 appeal.  There is a spurious attempt to deal with this limitation by a passing comment in footnote 277 
of the Appellate Body Report to the effect that the Panel was applying the law to the facts.  This is 
disingenuous at best and would strip DSU Article 17.6 of any meaning.  That is precisely what panels do and it is all that they do.  There is no such thing as a weighing of facts in a vacuum.  It must be 
done in light of the law.  By this standard, there is simply nothing at all that is not subject to appellate 
review.  This is not what the negotiators intended when they drafted the eminently clear language of 
Article 17.6.     The key to understanding the issue here is to first note the method of analysis pursued by the 
investigating authority, the DOC.  The DOC took two particularly important steps.  It relied upon a 
"totality-of-the-evidence" approach and linked sever al distinct transactions together in a "single 
program" to support the approach.   As noted earlier, the DOC created a presumption of entrustment or direction on the part of the Government of Korea based on previous dete rminations by the DOC.  But these previous 
determinations had nothing  to do with Hynix nor the large major ity of financial institutions involved 
here.  Moreover, even the DOC recognized that the s ituation arising out of th e Asian financial crisis 
was qualitatively different.  The IMF was closely i nvolved in the recapitalization of the financial 
sector that was necessary to keep  the Korean economy from collapsing.  Due to illiquidity that 
threatened to paralyze the whole country, the Government of Korea ended up with temporary 
ownership stakes in a number of banks that it ha d never been affiliated with before.  The IMF 
confirmed on a number of occasions that Korea engaged in this process of working through 
insolvencies based on market principles.   It was these banks with some degree of govern ment ownership that the DOC focused on in its 
findings and for which it created the presumption of guilt.  Of course, it must first be noted that the 
SCM Agreement does not provide for such presumptions.  It requires that findings be made on 
"positive evidence".     Having created this presumption of guilt, the DOC stated that it was relying on the "totality of 
the evidence" in finding that the Korean respondents had not sufficiently rebutted this presumption.  
In its totality of the evidence appro ach, the DOC lumped together four distinct financial contributions.  
It developed a supporting theory that this was all part of a so-called "single program" to subsidize 
Hynix.  However, as the DOC explicitly recognized, at least the fourth alleged financial contribution 
had no factual nexus with the other three.  The fi rst three arose out of the financial difficulties in 
which Hynix found itself beginning in September of  2000 following the Asian financial crisis.  The 
fourth came about in the summer and autumn of 2001 and was specific to the semiconductor industry.  
It arose from a dramatic and unexpected general downturn in the sector. 
  The Panel looked at a number of critical pi eces of evidence upon whic h the DOC relied.  
There were approximately 10 such pieces of evidence although the parties, the Panel and the Appellate Body all examined and counted them in somewhat different ways.  
 The Panel found that 9 of these 10 were impugned in various ways.  Some were not probative 
in that they went to prove a different point other than establishing that there was an affirmative action 
taken by the Government of Korea to entrust or di rect the banks to make financial contributions.  
Some were factually inaccurate.  Some were incomp lete  in that the DOC jumped to a conclusion 
without  reviewing all of the relevant facts regard ing such evidence.  Some had combinations of these 
flaws.   
  The one piece of evidence that  was left standing was the supposed entrustment or direction of 
KFB by a single official.  This was based on the contested evidence represented in a single newspaper 
article, as noted previously.  However, even with that one piece of affirmed evidence of entrustment WT/DS296/9 
Page 6  
 
 or direction, the Panel overturned the DOC's s ubsidy determination.  Taken individually or 
collectively, the Panel found the evidence was not compelling and that an objective and unbiased investigating authority could not have reached an af firmative conclusion on that basis.  Indeed, that 
had to be the case.  The DOC built an undifferentiate d affirmative determination based on ten legs.  
When nine were knocked out, it was simply impossibl e to find that the DOC's determination could be 
supported by the one remaining leg.   
  The US appealed on this issue of whether the Panel had properly examined the facts on a 
"totality of the evidence" basis or had improperly found that each and every individual piece of evidence had to demonstrate entrustment or direction in and of itself.  It was a most remarkable 
appeal, because the Panel demonstrably did not do wh at the United States said it did.  Indeed, a good 
deal of Korea's very lengthy submission to the A ppellate Body was juxtaposing the actual language of 
the Panel Report with the chopped-up and twiste d "quotations" submitted by the United States. 
  Unfortunately, the Appellate Body also ignor ed the plain language of the Panel Report and 
reversed the Panel's factual findings.  Oddly, the Appellate Body seems to have implicitly recognized 
that it was not examining all of the Panel Report.  In paragraph 146 of the analytical section of the 
Report, the Appellate Body refers to the Panel "o ften appearing" to examine whether each piece of 
evidence resulted in entrustment or direction.  Sim ilarly, in paragraph 158, the Appellate Body argues 
that the Panel did this with "many" pieces of evid ence.   Yet, in paragraph 209(b)(ii)(B) of its 
Findings and Conclusions, it reaches a generalized conclusion about what it admitted was less than 
the whole of the Panel's analysis.  
  Of the ten legs holding up the DOC's totality -of-the-evidence determination, the Appellate 
Body only examined four, not "many".  Moreover, it only examined the four where the language of the Panel was most tilted in the direction of the Appellate Body's conclusion.   
 
 In Korea's view a fair reading of the Panel' s language even in the so-called examples did not 
support the US arguments.  One cannot simply lift language out of its context and then twist its 
meaning in this fashion.  Just as the Vienna Conve ntion requires that treaty language be read in its 
proper context, so Report language must be read in  context and not lifted out in convenient isolated 
portions.  This is simply a matter of logic, common sense and fairness. 
 
 Ironically, as noted previously, the Appellate Bo dy upheld the Panel's finding with respect to 
the entrustment or direction of KFB even though, in order to do so, it had to agree with the US that the 
Panel had not limited itself to the alleged instance of  coercion cited in the newspaper article.  Instead, 
the Appellate Body found that in this one conve nient instance the Panel had actually looked at the 
evidence in a broader context.  This was, indeed, a highly selective review of the Panel's decision   
  The Appellate Body did not even bother to ex amine the other five instances of evidentiary 
examination engaged in by the Panel.  Since the Appellate Body did not c ite any language that was 
inconvenient to its conclusions, Korea will offer an example so that at least the DSB record will be 
more complete.  For instance, with respect to th e implications of a meeting of Korea's Economic 
Ministers, the Panel stated:   
 
Thus, even if the US argument regarding signaling was correct, that alone was not 
sufficient for the DOC to properly treat the circumstances surrounding the Economic 
Ministers' meetings as evidence of government entrustment or direction. 
 That is, because it was not probative of legally re levant points, it could not be considered as 
part of  the evidence of entrustment or direction, not that it alone  had to prove entrustment or 
direction.  This was an important issue, indeed c onsidered one of the most important by the DOC in  WT/DS296/9 
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 its determination.  It is difficult to understand how the Appellate Body could reach a generalized 
conclusion without even mentioning it, much less addressing it.   Korea would like to further recall the point re garding the so-called "single program" approach 
of the DOC.  That is, in making its totality of  the evidence analysis, the DOC linked all of the 
financial contributions together even though ther e was a qualitative difference between, at least, the 
first three and the last one.  That is, factual circ umstances changed in the summer of 2001 in a manner 
that no one could have contemplated previously.  Th e Panel found this to be critically important and 
Korea argued that it was a keystone upholding the whole edifice of the DOC determination.  However, the Appellate Body did not even bother to a ddress this critical issue.  It only mentioned it in 
the breeziest of manners when it came to the post-conclusion stage of "completing the analysis", but 
that is an overt fact-finding done to a different le gal standard than the primary review of the Panel's 
determination pursuant to Article 11 of the DSU.     Why was the Appellate Body analysis done this wa y?  In its partial approach to the evidence, 
the Appellate Body examined only a few instances – not "many" as it purported to do – and then only 
focused on the weakest language of the Panel.  If the Appellate Body is going to engage in this sort of 
in-depth factual analysis it must do so in a comp rehensive manner.  It cannot look at a few instances 
and simply stop there and draw a generalized conclusion.     What is striking, Mr. Chairman, is how clo sely this approach resembles the way litigation 
briefs are often written.  They stress the opponent 's weaknesses and extrapolate conclusions from 
them while sidestepping the strongest counter-argum ents.  But why is this Appellate Body Report 
written like a litigant's submission?    Mr. Chairman, Korea must also bring to this Body's attention some of the more remarkable 
individual instances of de novo  fact-finding contained in the Appellate Body's Report.  In one 
example, the Appellate Body discusses certain statem ents made by Kookmin Bank in its prospectus 
filed with the US Securities and Exchange Commission.   Rather than going through a full recitation of 
the Appellate Body's troubling de novo  review of the evidence on this issue, Korea would like to draw 
Members' attention to a statement in paragraph 156 of the Appellate Body Report to the effect that 
"Kookmin Bank ... acknowledged making loans in pursu it of government policy".  This is a factually 
inaccurate statement.  This is not what the prosp ectus stated;  it was not even what the DOC found, 
nor what the United States argued before the Panel and Appellate Body.  Rather, the prospectus made 
conditional statements about what  might happen in the future.  There was no such acknowledgement 
by Kookmin Bank with respect to past actions.  This  is raw fact-finding by the Appellate Body that 
not only ignored the thrust of the Panel's factual weighing and analysis, but flatly misstates a critical 
fact. 
  It is possible that this statement by the Appellate Body was referring back to an earlier 
analysis of Kookmin Bank's participation in the Syndicated Loan, although there is no footnote indicating this.  But even then, such a reference would highlight another problem with the Appellate 
Body's analysis.  In paragraph 148 of its Report, the Appellate Body quotes the Panel's reference to 
Kookmin Bank acting in response to a "government  policy request".  The Appellate Body then 
reverses the results of the explicit weighing of the facts done by the Panel and says this one factor out 
of the nine listed in Kookmin Bank's statement is determinative regardless of the other eight 
commercial reasons provided by the bank.    
 Not only was this an improper reweighing of th e evidence by the Appellate Body, it reflects a 
breakdown in basic practices of appellate review.  This reference to "government policy" was a 
contested translation.  The proper translation was " public policy considerations".  These are the very 
sort of broad concerns that corporations often ta ke into consideration.  For instance, BP, once known 
as British Petroleum, has spent huge sums of mone y arguing that it should be thought of as "Beyond WT/DS296/9 
Page 8  
 
 Petroleum" based on its new environmentally friendl y focus.  Virtually every large company takes 
these sorts of public policy issues into account.  Th is is very different from following "government 
policy" directives.     The Panel, however, used this term "govern ment policy" because it was construing the facts 
in the manner most favourable to the United States be fore reaching a conclusion contrary to the US 
argument.  In contrast, the Appellate Body made this fact-finding in the manner most unfavourable to 
Korea and then ruled for the United States on the facts.   Mr. Chairman, this is simply improper.  The 
Appellate Body should not be in the business of fact-finding in the first place, but if it is going to do so, it must follow the most basic principles of appe llate review and not construe disputed facts in 
favour of the party it is ruling for rather than the party it is ruling against .  
  The Appellate Body repeated this fundamen tal error in its discussion of the supposed 
attendance of government officials at a meeting of H ynix's Creditors' Council.  In paragraph 147 of its 
Report, the Appellate Body makes a factual finding that the attendee was a Vice Chairman of the 
Financial Supervisory Commission, or "FSC".  The FSC is a government agency that participates in 
financial regulatory policy.  However, the actual attendee at the meeting was an official of the 
Financial Supervisory Service, or "FSS".  The FSS employees are not civil servants.  They are 
technical specialists whose main functions are ex amining and auditing financ ial institutions.  This 
distinction can make a substantial difference in wh at inferences one draws from the attendance of 
such a person at a meeting of the Creditors' Council.   
 
 The Panel, once again, did not actually make  a fact-finding resolving this disputed fact; 
instead, the Panel construed the facts in the manner most favourable to the US before ruling against 
the US.  Incredibly, the Appellate Body even acknowle dged that this was a disputed fact, but then said 
that it would continue with the assumption that it w as an FSC official "similarly" to what the Panel 
had done.  But this was not similar in any way.  Indeed, it is exactly the opposite of what the Panel 
did.  Once again, the Appellate Body construed a di sputed fact against Korea and then proceeded to 
rule for the United States.  This is simply unaccept able for the Appellate Body to engage in such 
unfair and improper fact-finding.   Mr. Chairman, Korea would like to ask the i ndulgence of Members for the examination of 
one further extreme example of improper fact-finding by the Appellate Body because it relates to a 
critical issue.  There was an important question as to  whether some of the creditor banks actually took 
part in the October 2001 restructuring that was co untervailed by the DOC.  The focal point of the 
DOC's determination with respect to the October 2001 restructuring was that creditors controlling 
Hynix's Creditors' Council were able to set the te rms for all banks.  However, despite the picture 
painted by the DOC of a web of supposed coer cion, several of the banks, including wholly 
government-owned banks, refused to participate in this  restructuring.  They exercised their appraisal 
rights and, when they were offered a deal on their Hynix debt, disagreed with the terms of the deal 
and asked for mediation.   All parties, the Panel a nd the Appellate Body know at this point that there 
is not at this time any dispute about the real situ ation.  These banks did not participate.  Thus, the 
DOC countervailed transactions that did not occur.   The only question was whether or not there was 
evidence in the record  that the DOC ignored in this regard. 
  The Panel found that there was su ch evidence in the record.  It was three-fold.  First, there 
was the overarching law, the CRPA, that provided fo r such mediation.  Second, there was a clear 
statement in the Hynix audit report that indicated  that banks exercised their rights to mediation 
pursuant to the relevant provisions of the CRPA.  Th ird, this was further corroborated by statements 
made by the DOC's own experts.   The key section of the Hynix audit report was not the least bit ambiguous.  It stated that pursuant to "this clause" the banks exercised their ri ghts.  And what was "this clause"?  The previous  WT/DS296/9 
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 sentence referred to the CRPA and the "Mediation Co mmittee" set up pursuant to it.  There was no 
ambiguity.  Korea even provided a dictionary definition of the word "this" to make clear the grammatical construction of th e paragraph in question.  
  However, once again the Panel construed the dis puted fact in favour of the United States and 
found that, even if it could be considered ambiguou s, it still put the DOC on notice that there were 
further actions by the banks in this regard.  Again,  this was standard procedure in reviewing another 
body's fact-finding.     Korea is forced to take the time here to refer to the discussion about the meaning of "this 
clause" because it was not even refe renced in the Appellate Body's analysis.  Indeed, the Appellate 
Body side-stepped it by referring to a discussion in the oral hearing about appraisal rights.  However, the discussion at the hearing, at least on Korea's part, was primar ily about the meaning of the phrase 
"this clause."  The only reason that there was talk  about the appraisal issue at all was because the 
Appellate Body skipped right over the Panel's analysis  and directed its question at the record, not how 
the Panel actually analyzed the reco rd.  This can be seen by the next step of the Appellate Body's 
analysis.     The Appellate Body rests its conclusion on the fact that the Korean respondents did not unambiguously state in their questionnaire responses that there had been mediation.  Members should review this discussion in paragraph 178 of the Appella te Body's Report.  Members should also look at 
footnotes 334 and 335.  At no point in the Appellate Body's discussion is there even a citation to, 
much less analysis of, the Panel's factual findings.  Because the Appellate Body did not make any mention of the manner in which th e Panel weighed the facts, Korea considers it only fair that the 
following at least be reflected in th e record of this DSB meeting.  In  paragraph 7.87 of its Report, the 
Panel states: 
 
Although the GOK questionnaire response should perhaps have made a reference to 
the request for mediation by three of the four option 3 creditors, we consider that 
there was in any event sufficient informati on on the record to bring into question the 
DOC's determination that creditors "contro lling" the Creditors' Council were able to 
"set the terms for all banks".  In these ci rcumstances, we do not consider that an 
objective and impartial investigating aut hority could properly have found, on the 
basis of the CRPA, that "the terms on wh ich these creditor banks terminated their 
relationship with Hynix were dictated by th e banks that mattered in this case, namely 
the large government-owned and controlled creditors".
 
 Thus, the panel explicitly took into considerati on that the questionnaire  responses should have 
been more complete, but found that, nonetheless, th e evidence was clear that the DOC determination 
was fundamentally undermined.     Korea would like to emphasize here that this was not a question of withholding information.  
The information that could have been included in the questionnaire responses would have been 
favourable to the Korean respondents.  It was simply an error that resulted from a misunderstanding 
of the focus of the inquiry which had been, up to th at time, on the issue of asking for appraisals, not 
going the extra step to mediation.  In any event, there could never be a clearer example of a Panel 
taking an adverse fact into consideration, carefu lly weighing it and then coming to a conclusion in 
light of the facts at hand.  
 Mr. Chairman, it should not be the case that Korea is forced to take the time to bring to the 
DSB's attention what the Panel said in evaluating this  factual aspect of the dispute.  Why was this 
weighing of the evidence by the Panel not even acknowledged in the Appella te Body Report, much WT/DS296/9 
Page 10  
 
 less discussed?  It is possible that  one can disagree with the Panel's conclusion.  The United States 
certainly disagrees.  But it cannot simply be ignored in a proper appellate review.     
  At this point, Mr. Chairman, it is useful to r ecall the words of the Appellate Body with respect 
to the interpretation of Article 11 of the DSU.  In 1998, the Appellate Body stated in EC – Hormones : 
 
"Disregard" and "distortion"  and "misrepresentation" of the evidence, in their 
ordinary signification in judicial and quasi -judicial processes, imply not simply an 
error of judgment in the appreciation of ev idence but rather an egregious error that 
calls into question the good faith of a panel.
2 
 Where, Mr. Chairman, is the bad faith exhibited by this Panel?  Clearly there is none.  One 
can disagree with the Panel's conclusions, but ther e was clearly a good faith effort to examine the 
evidence in great detail and with objectivity.  Obviously, in the years between this earlier 
interpretation of the language of DSU Article 11 and today, there has been a drastic change in the 
approach of the Appellate Body.  This was hinted  at in some other cases, but we have gone much 
further today.  Now we are in the situation wher e the Appellate Body has undertaken the explicit re-
examination of facts.    As has been shown, the Appellate Body cons trued disputed facts in favour of the United 
States and then ruled for the United States.  Because it violates the basic principles of appellate review 
to construe disputed facts in favour of the preva iling party, one can only conclude that the Appellate 
Body engaged in its own de novo  fact-finding.  On critical issues su ch as the question of whether there 
was evidence of mediation, the Appellate Body we nt directly into the case record and reversed the 
Panel's conclusions without the merest mention that the Panel had actually looked at those same facts 
and weighed them.  
 This is a 180 degree change in direction.  This Appellate Body Report cannot in any manner 
be squared with the jurisprudence of seven years ago.   Either the words of the treaty text mean the one 
thing or the other.  This dramatic change in the interpretation of Article 11 should not come about by 
mere judicial fiat.    Mr. Chairman, the WTO does not need a disput e settlement system where one panel reviews 
the fact-findings of another panel, which is what e ffectively has happened here.  It is a waste of time 
and resources and inevitably leads to continuing di sputes about which fact-finder was correct.  This 
undermines the integrity of the system.  The Appella te Body's Report is outside the parameters of 
Article 17.6 of the DSU and should be rejected.   
 So, what should Korea do at this point?  As th e Appellate Body stated in paragraph 198 of its 
Report, its reversal of the Pa nel's findings does not actually mean that it upheld the DOC's 
determination.  Should Korea start a new case?  It  might be interesting to let the Panel make even 
more clear what it actually said in its findings, but  that would be an expensive and time-consuming 
effort that might involve another two fact-finding exercises given the current state of affairs.  Korea 
reserves all of its rights in this regard  and will consider the matter further. 
 
 Given the recognition by the Appellate Body that it was not actually upholding the DOC's 
determination, the Appellate Body asked the parties about the issue of "completing the analysis".  The 
US declined to respond to this request except to st ate that Korea should resp ond.  This was a very 
curious answer given that the US was defending a totality-of-the-evidence analysis that was 
dependent on maintaining all ten le gs of the DOC's determination. 
 
                                                     
 
2 Appellate Body Report in EC – Hormones  at para. 133.  WT/DS296/9 
 Page 11 
 
 
  Bizarrely, the bulk of the Appellate Body's qu estioning on this issue which arose early in the 
oral hearing was directed at Korea.  Normally, one  would not ask the Appellee in such a situation to 
speculate on which one or several combinations of issues it might lose on and then propose solutions.  
There were simply too many combinations of th e three legal issues and ten factual ones to be 
addressed in detail.   
 
 However, Korea did offer two suggestions for how the analysis could be completed by the 
Appellate Body. The first relates to the DOC's "s ingle program" theory.  As Korea pointed out, the 
DOC's totality of the evidence determination relie d on this single program theory as a keystone.  
Without the single program, there would be more than  one set of totality of the evidence to examine 
and the DOC clearly did not do that.  The Appellate  Body declined to follow this suggestion in a 
breezy discussion which leaves it unclear if they read either the Panel's or the DOC's findings in this 
regard.   The second suggestion offered by Korea was the "compelling evidence" standard.  As 
discussed previously, the Appellate Body found th at the US definition of "compelling evidence" 
would be inconsistent with the requirements of th e SCM Agreement.  As Korea also pointed out, the 
DOC determination was based on a rejection of th e Korean respondents' arguments to rebut the 
presumption the DOC had built.  The DOC stated that the Korean respondents had not rebutted the presumption with "compelling evidence".  As the US  definition of this term was rejected by the 
Appellate Body, it necessarily follows that the DOC's determination is inconsistent with the terms of 
the SCM Agreement.  But Members will find no refere nce to this issue whatever in the Appellate 
Body Report   Of course, assuming the legality of the ability of the Appellate Body to "complete the analysis," Korea agrees that it is a discretionary matter.   However, what is inexplicable is why, having 
raised the issue at length, gotten two suggestions from Korea, the Appellate Body simply ignored one 
of the suggestions. It is even more puzzling when  the suggestion ignored did not require any fact-
finding at all.  It was purely an issue of law and l ogic.  If ever there was a time to exercise discretion 
as a matter of fairness and complete the analysis, this was it.  
Conclusion 
 
 Mr. Chairman, Korea has concluded that it cannot support the flawed findings of the 
Appellate Body.  The Appellate Body's analysis was outside the bounds of Article 17.6 of the DSU 
and, as such, was ultra vires .  Korea commends the Panel Report to the Members for adoption. 
 
 In any event, at the very least, the US c ountervailing duty order has been found inconsistent 
with the US's obligations under Article 15.5 of the SCM Agreement and should be brought into 
conformity without delay.   
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